As filed with the Securities and Exchange Commission on February 10, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
TUESDAY MORNING CORPORATION
DELAWARE 6749 75-2398532
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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14621 INWOOD ROAD
DALLAS, TX 75244
TELEPHONE: (972) 387-3562
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Copy to:
MARK E. JARVIS JAMES S. ROWE
TUESDAY MORNING CORPORATION KIRKLAND & ELLIS
14621 INWOOD ROAD 200 EAST RANDOLPH DRIVE
DALLAS, TX 75244 CHICAGO, ILLINOIS 60601
TELEPHONE: (972) 387-3562 (312) 861-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.[_]
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.[_]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Registered Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Price Per Unit (1) Aggregate Offering Price (1) Registration Fee
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13 1/4% Series B Senior $25,000,000 100% $25,000,000 $7,375
Exchangeable Preferred
Stock due 2009............
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13 1/4% Exchange Debentures -- -- -- --
due 2009 (2)..............
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2) The Registration Statement covers the Company's 13 1/4% Exchange Debentures
due 2009 (the "Exchange Debentures") to be issued and delivered to the
holders of Series B Senior Exchangeable Preferred Stock when and if the
Company exchanges the Exchange Debentures for the Series B Senior
Exchangeable Preferred Stock and such indeterminable number of Exchange
Debentures as may be paid in lieu of cash interest on the Exchange
Debentures. Pursuant to Rule 457(i), no registration fee is required with
respect to the Exchange
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover
Cover Pages of Prospectus..... Page
3. Risk Factors, Ratio of
Earnings to Fixed Charges and Prospectus Summary; Unaudited Pro Forma
Other Information............. Financial Statements; Selected Consolidated
Financial Data
4. Terms of the Transaction...... Outside Front Cover Page; Prospectus
Summary; Description of the Units; The
Preferred Stock Exchange Offer; Certain
Federal Income Tax Consequences
5. Pro Forma Financial
Information................... Unaudited Pro Forma Financial Statements
6. Material Contracts with the
Company Being Acquired........ Certain Transactions
7. Additional Information
Required...................... Inapplicable
8. Interests of Named Experts and
Counsel....................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Inapplicable
10. Information with Respect to S-
3 Registrants................. Inapplicable
11. Incorporation of Certain
Information by Reference...... Inapplicable
12. Information with Respect to S-
3 or S-2 Registrants.......... Inapplicable
13. Incorporation of Certain
Information by Reference...... Inapplicable
14. Information with Respect to
Registrants other than S-3 or Outside Front Cover Page; Prospectus
S-2 Registrants............... Summary; Risk Factors; Use of Proceeds;
Capitalization; Unaudited Pro Forma
Financial Statements; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Management;
Certain Transactions; Principal
Shareholders; Description of the Senior
Credit Facility
15. Information with Respect to S-
3 Companies................... Inapplicable
16. Information with Respect to S-
3 or S-2 Companies............ Inapplicable
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17. Information with Respect to
Companies Other than S-3 or S-2
Companies...................... Inapplicable
18. Information if Proxies,
Consents or Authorizations are
to be Solicited................ Inapplicable
19. Information if Proxies,
Consents or Authorizations are
not to be Solicited or in an Management; Principal Shareholders; Certain
Exchange Offer................. Transactions
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A + +registration statement relating to these securities has been filed with the + +Securities and Exchange Commission. These securities may not be sold nor may + +offers to buy be accepted prior to the time the registration statement becomes+ +effective. This prospectus shall not constitute an offer to sell or the + +solicitation of an offer to buy nor shall there be any sale of these + +securities in any State in which such offer, solicitation or sale would be + |
+unlawful prior to the registration or qualification under the securities laws +
+of any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
, 1998
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TUESDAY MORNING CORPORATION
OFFER TO EXCHANGE ITS 13 1/4% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2009 FOR ANY AND ALL OF ITS OUTSTANDING 13 1/4% SERIES A
SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
THE SENIOR PREFERRED STOCK EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
Tuesday Morning Corporation, a Delaware corporation (the "Company"), hereby offers (the "Preferred Stock Exchange Offer"), upon the terms and conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $100 liquidation preference of its Series B 13 1/4% Senior Exchangeable Preferred Stock due 2009 (the "New Senior Exchangeable Preferred Stock"), registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for each $100 liquidation preference of its outstanding 13 1/4% Senior Exchangeable Preferred Stock due 2009 (the "Old Senior Exchangeable Preferred Stock"), of which $25,000,000 liquidation preference is outstanding. The form and terms of the New Senior Exchangeable Preferred Stock are the same as the form and term of the Old Senior Exchangeable Preferred Stock (which they replace), except that the New Senior Exchangeable Preferred Stock will bear a Series B designation and will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions relating to liquidated damages which were included in the terms of the Old Senior Exchangeable Preferred Stock in certain circumstances relating to the timing of the Preferred Stock Exchange Offer. The New Senior Exchangeable Preferred Stock will evidence the same equity as the Old Senior Exchangeable Preferred Stock (which they replace) and will be issued under and be entitled to the benefits of a Certificate of Designation (the "Certificate of Designation"). The Old Senior Exchangeable Preferred Stock and the New Senior Exchangeable Preferred Stock are sometimes referred to herein collectively as the "Senior Exchangeable Preferred Stock." See "The Preferred Stock Exchange Offer" and "Description of Securities--Senior Exchangeable Preferred Stock."
Each share of New Senior Exchangeable Preferred Stock will have, as the Old Senior Exchangeable Preferred Stock (which they replace) has, a liquidation preference of $100 per share. Dividends on the Senior Exchangeable Preferred Stock will accrue in each period ending on March 15, June 15, September 15 and December 15 of each year at a rate of 13.25% per annum of the liquidation preference. On or prior to December 15, 2002, the Company may, at its option, pay dividends either in cash or in additional fully paid and non-assessable shares of Senior Exchangeable Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. After December 15, 2002, dividends may be paid in cash only.
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 Senior Exchangeable Preferred Stock then outstanding for the Company's 13 1/4% Subordinated Exchange Debentures due 2009 (the "Exchange Debentures"). See "Description of the Units--New Senior Exchangeable Preferred Stock-- Exchange." The Exchange Debentures will bear interest at a rate of 13.25% per annum, payable quarterly in arrears on each March 15, June 15, September 15 and December 15, commencing with the first such date to occur after the date of exchange. On or before December 15, 2002, the Company may, at its option, pay interest in cash or in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest. After December 15, 2002, interest may be paid in cash only.
The Senior Exchangeable Preferred Stock and the Exchange Debentures will be redeemable at the option of the Company, in whole or in part, at any time or from time to time, on or after December 15, 2002, at the redemption prices set forth herein, plus, in the case of the Senior Exchangeable Preferred Stock, accumulated and unpaid dividends thereon to the date of redemption, or in the case of the Exchange Debentures, accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to December 15, 2001, the Company may redeem for cash all, but not less than all, of the outstanding Senior Exchangeable Preferred Stock or the Exchange Debentures within 20 days of a Public Equity Offering (as defined) with the net proceeds of the offering at a redemption price equal to, in the case of the Senior Exchangeable Preferred Stock, 113.25% of the aggregate liquidation preference thereon, plus accumulated and unpaid dividends thereon to the date of redemption, or in the case of the Exchange Debentures, 113.25% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption.
(Cover continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
(Cover page continued)
Upon the occurrence of a Change in Control, each holder of Senior Exchangeable Preferred Stock and the Exchange Debentures may require the Company to purchase all or any part of such holder's Senior Exchangeable Preferred Stock or Exchange Debentures at a purchase price in cash equal to 101% of the original liquidation preference or aggregate principal amount (as the case may be) thereof, plus, in the case of the Senior Exchangeable Preferred Stock, accumulated and unpaid dividends per share to the date of purchase, or in the case of the Exchange Debentures, accrued and unpaid interest, if any, to the date of purchase. In the event of a Change in Control, there can be no assurance that the Company will have, or will have access to, sufficient funds to repurchase the Senior Exchangeable Preferred Stock or the Exchange Debentures or to pay the holders of the Senior Exchangeable Preferred Stock or the Exchange Debentures. See "Risk Factors--Subordination of the New Senior Exchangeable Preferred Stock and Exchange Debentures," "Risk Factors--Change in Control," "Description of the Units--New Senior Exchangeable Preferred Stock--Certain Provisions" and "Description of the Units--The Exchange Debentures--Certain Covenants."
The Company will accept for exchange any and all Old Senior Exchangeable Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New York City time on 1998, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Old Senior Exchangeable Preferred Stock may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Preferred Stock Exchange Offer is subject to certain customary conditions. The Old Senior Exchangeable Preferred Stock were sold by the Company on December 29, 1997 to the Initial Purchaser (as defined herein) in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act (the "Initial Unit Offering"). The Initial Purchaser subsequently placed the Old Senior Exchangeable Preferred Stock with qualified institutional buyers in reliance upon Rule 144A under the Securities Act. Accordingly, the Old Senior Exchangeable Preferred Stock may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The New Senior Exchangeable Preferred Stock are being offered hereunder in order to satisfy the obligations of the Company under the Preferred Stock Registration Rights Agreement (as defined herein) entered into by the Company and the Initial Purchaser in connection with the Initial Unit Offering. See "The Preferred Stock Exchange Offer."
Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes that the New Senior Exchangeable Preferred Stock issued pursuant to the Preferred Stock Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Senior Exchangeable Preferred Stock are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Senior Exchangeable Preferred Stock. See "The Preferred Stock Exchange Offer--Resale of the New Senior Exchangeable Preferred Stock." Each broker-dealer (a "Participating Broker-Dealer") that receives New Senior Exchangeable Preferred Stock for its own account pursuant to the Preferred Stock Exchange Offer must acknowledge that it will deliver a Prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Senior Exchangeable Preferred Stock received in exchange for Old Senior Exchangeable Preferred Stock where such Old Senior Exchangeable Preferred Stock were acquired by such Participating Broker-Dealer as a result of marketmaking activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution."
Holders of Old Senior Exchangeable Preferred Stock not tendered and accepted in the Preferred Stock Exchange Offer will continue to hold such Old Senior Exchangeable Preferred Stock and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Certificate of Designation and with respect to transfer under the Securities Act. The Company will pay all the expenses incurred by it incident to the Preferred Stock Exchange Offer. See "The Preferred Stock Exchange Offer."
There has not previously been any public market for the Old Senior Exchangeable Preferred Stock or the New Senior Exchangeable Preferred Stock. The Company does not intend to list the New Senior Exchangeable Preferred Stock on any securities exchange or to seek approval for quotation through any automated quotation system. The Old Senior Exchangeable Preferred Stock are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. However, there can be no assurance that an active market for the New Senior Exchangeable Preferred Stock will develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect the Value of Senior Exchangeable Preferred Stock." Moreover, to the extent that Old Senior Exchangeable Preferred Stock are tendered and accepted in the Preferred Stock Exchange Offer, the trading market for untendered and tendered but unaccepted Old Senior Exchangeable Preferred Stock could be adversely affected.
Concurrent with the Initial Unit Offering, the Company sold $100,000,000 aggregate principal amount of its 11% Senior Subordinated Notes due 2007 (the "Old Notes") (the "Initial Offering" and, together with the Initial Unit Offering, the "Initial Offerings").
(Cover page continued)
Concurrent with the Preferred Stock Exchange Offer, the Company is offering (the "Exchange Offer") to exchange $100 principal amount of its Series B 11% Senior Subordinated Notes (the "Exchange Notes") for each $100 principal amount of its outstanding Old Notes. The Exchange Notes and the Old Notes are sometimes referred to herein collectively as the "Notes." The Exchange Offer and the Preferred Stock Exchange Offer are sometimes referred to herein collectively as the "Exchange Offers." See "Summary--Concurrent Exchange Offer." The Old Notes, the Exchange Notes, the New Senior Exchangeable Preferred Stock, the Old Senior Exchangeable Preferred Stock and the Exchange Debentures are sometimes referred to herein collectively as the "Securities."
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS PROSPECTUS MAY CONSTITUTE FORWARD- LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS AND PERFORMANCE OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. CAUTIONARY STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." CERTAIN OF SUCH RISKS AND UNCERTAINTIES RELATE TO THE HIGHLY LEVERAGED NATURE OF THE COMPANY, THE RESTRICTIONS IMPOSED ON THE COMPANY BY CERTAIN INDEBTEDNESS, THE SENSITIVITY OF THE COMPANY TO ADVERSE TRENDS IN THE GENERAL ECONOMY, THE HIGH DEGREE OF COMPETITION IN THE COMPANY'S INDUSTRY, THE VARIABILITY OF THE COMPANY'S QUARTERLY RESULTS AND THE COMPANY'S SEASONALITY, THE ABILITY OF THE COMPANY TO IDENTIFY, LOCATE AND PROCURE MERCHANDISE AT SUITABLE PRICES, THE ABILITY OF THE COMPANY TO CONTINUE ITS EXPANSION, THE CONTROL OF THE COMPANY BY MADISON DEARBORN CAPITAL PARTNERS II, L.P. AND THE DEPENDENCE OF THE COMPANY ON KEY PERSONNEL, AMONG OTHERS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form S-4
(the "The Preferred Stock Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the New Senior Exchangeable Preferred Stock being offered
hereby. This Prospectus does not contain all the information set forth in the
Preferred Stock Exchange Offer Registration Statement. For further information
with respect to the Company and the Preferred Stock Exchange Offer, reference is
made to the Preferred Stock Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Preferred Stock
Exchange Offer Registration Statement, reference is made to the exhibit for a
more complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. In
addition, the Company files periodic reporting and other information
requirements of the Exchange Act. The Preferred Stock Exchange Offer
Registration Statement, including the exhibits thereto, and periodic reports and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such site is
http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Senior Exchangeable Preferred Stock remain outstanding, it will furnish to the holders of the Senior Exchangeable Preferred Stock and, to the extent permitted by applicable law or regulation, file with the Commission (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company was required to file such Forms, including for each a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereof by the Company's independent certified public accountants and (ii) all reports that would be required to be filed on Form 8-K if it were required to file such reports. In addition, for so long as any of the Senior Exchangeable Preferred Stock remain outstanding, the Company has agreed to make available to any prospective purchaser of the Senior Exchangeable Preferred Stock or beneficial owner of the Senior Exchangeable Preferred Stock, in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act.
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this Prospectus. The following summary information is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and Consolidated Financial Statements (including the notes thereto) included elsewhere in this Prospectus. Unless otherwise indicated, references to the "Company" or "Tuesday Morning" are to Tuesday Morning Corporation and its subsidiaries. The pro forma consolidated statement of operations for the periods presented gives effect to the Transactions as if they were consummated on January 1, 1996. The pro forma consolidated balance sheet gives effect to the Transactions as if they had occurred on September 30, 1997. See "--The Transactions."
THE COMPANY
Tuesday Morning is the largest closeout retailer of upscale gift and home furnishings merchandise in the United States, with 315 stores in 33 states. The Company operates its stores during seven annual "sales events" that last from four to seven weeks, while closing them for the remaining weeks of the year. Tuesday Morning does not sell seconds, irregulars or factory rejects, but rather specializes in first quality, brand name merchandise such as Ralph Lauren bed linens, Waterman pens, Limoges hand-decorated boxes, Mikasa dishes, Farberware cookware, Daum French crystal, Martex bath towels, Fisher-Price toys, Samsonite luggage and Spode china. The Company purchases its merchandise at closeout and sells it at prices that are 50% to 80% below those generally charged by department and specialty stores. The Company believes that its event-based selling strategy, combined with high quality, reasonably priced merchandise, attracts upscale "bargain hunters" with strong loyalty to the Company.
The Company was formed and opened its first store in 1974. Since its initial public offering in 1986, the Company has increased its number of stores from 63 to 315, and has achieved compound annual growth rates for sales and EBITDA of 16.1% and 16.6%, respectively. During the twelve months ended September 30, 1997, the Company generated comparable store sales growth of 18% and net sales and EBITDA of $297.3 million and $34.1 million, respectively. This represents an increase of 27.8% and 72.5%, respectively, over sales and EBITDA for the twelve months ended September 30, 1996.
BUSINESS STRENGTHS
The Company's success has been largely based on the following strengths:
Unique Event-Based Format. The Company distinguishes itself from other retailers with a unique "event-based" selling strategy, creating the equivalent of seven "grand openings" each year. The Company believes that the closing and reopening of its stores heightens customers' expectations of finding new, undiscovered merchandise and intensifies their sense of urgency to buy the Company's products, which are available only in limited quantities. Consistent with this approach, the Company typically realizes approximately 40% of an event's total sales in the first four or five days of the event (Wednesday or Thursday to Sunday).
Strong Merchandising Capabilities. The Company employs a talented and experienced buying team, which has grown from 10 buyers in 1993 to 22 buyers in 1997, with an average of nearly 20 years of retail experience. The Company's buyers and its reputation as a preferred, reliable purchaser have enabled it to establish excellent, long-term relationships with a diverse group of top-of-the- line vendors. The Company obtains its merchandise primarily by purchasing from manufacturers their end-of-line products which did not meet their sales expectations, or merchandise left over from cancellations of orders placed by other retailers. Merchandise is also obtained by contracting for production from manufacturers during periods of lower production. Through its approximately 1,000 vendor relationships, the Company has become one of the largest retailers for certain categories of luxury brand merchandise, such as European handmade crystal and fine quality Oriental rugs from China and India. The Company believes that certain top-of-the-line vendors such as Rosenthal and Samsonite prefer to liquidate a majority of their excess inventory
through the Company because of its access to an upscale customer base and its ability to dispose of high-end, closeout merchandise quickly and without disruption to their normal retail channels.
Dedicated, Upscale Customer Base. Tuesday Morning has an upscale, loyal customer following. The Company has developed and maintains a proprietary preferred customer mailing list of over 4,000,000 customers who have visited its stores and requested to receive mailings in advance of the Company's sales events. Customer loyalty is evidenced by the fact that the Company derives approximately 31% of its sales during the first two or three days of each sales event, which is advertised only by a mailing to those individuals on the list. The Company believes, based on its internal research, that its customers are primarily female from households headed by professionals, typically ranging in age from 25 to 54 and having a median family income of approximately $55,000. In addition, the Company believes its customers are knowledgeable shoppers who frequent five or more national department stores and are able to recognize the Company's favorable pricing on first quality, name brand merchandise.
Strong Financial Characteristics. Tuesday Morning has demonstrated an ability to consistently grow sales while generating strong cash flow. For the twelve months ended September 30, 1997, Tuesday Morning generated EBITDA of $34.1 million, a 72.5% increase over the comparable period in 1996. During this same period, capital expenditures were $6.1 million. The Company has consistently grown its EBITDA since 1993 due to the improved profitability of its existing store base, while requiring only modest capital expenditures to fund growth.
Flexible, Low Cost Real Estate Approach. The Company's stores are destination-oriented, and can therefore be located in secondary locations of major suburban markets, such as strip malls and warehouse zones, in close proximity to their target customers. As a result, the Company's real estate costs are significantly lower than those of many other retailers, averaging approximately $8 per square foot. In addition, virtually all new leases contain a "kick" clause that gives the Company the ability to terminate the lease without penalty for up to 18 months after lease inception. These kick clauses provide the Company with significant downside protection in opening new stores by allowing it to vacate a site that initially proves unprofitable. The Company is able to obtain kick clauses because it seldom requires significant build out of a lease site and because it is able to make productive use of challenging space.
Integrated Management Information Systems and Inventory Controls. The Company believes its management information systems are among the most advanced in the retailing industry. These systems enable the Company to manage its flow of almost 80,000 SKUs from approximately 1,000 vendors on a real-time basis in order to make timely and accurate purchasing, distribution and merchandising decisions. The Company's proprietary merchandising and inventory control systems, point of sale system and state-of-the-art distribution management system are integrated with its financial reporting systems, providing the Company's buyers with a significant degree of control over inventory acquisition, distribution and sales performance. The Company's buyers can review, at the SKU level and on a real-time basis, the status of every open purchase order, inbound shipment, warehouse receipt, process shipment and item of store inventory. These systems further allow management to target merchandise for markdowns in an effective and systematic manner. At September 30, 1997, less than 5% of the Company's inventory was more than one year old.
BUSINESS STRATEGY
The Company's objective is to sustain its current growth and to enhance its productivity and operating performance by continuing to build on its existing, proven strengths. The Company intends to achieve this objective by pursuing the following existing strategies:
Continue New Store Openings. The Company opened 31 new stores in 1997 and plans to increase its store base, in new and existing markets, by approximately 32 to 35 stores per year for the foreseeable future. The Company's "no-frills" approach enables it to open this number of stores for an aggregate cost of only $2 million per year, or approximately $60,000 per store excluding inventory. The Company intends to profitably increase its penetration of existing markets, capitalize on the success it has enjoyed in smaller single-store markets, where there are often no other
retailers offering the Company's first quality products, and prudently expand into new major metropolitan markets that will provide the basis for long-term expansion.
Enhance Sales Productivity. The Company has achieved average comparable store sales growth of approximately 6% per year since its initial public offering in 1986 and 19% for the first nine months of 1997. The growth has resulted from increases in (i) the number of customer transactions, (ii) the average number of items purchased per customer visit and (iii) the average price of such items. The average number of customer transactions has increased as a result of the increased frequency of stocking its stores during a sales event. The average number of items purchased by customers has increased as a result of the introduction of additional impulse-oriented merchandise, and the average price of items purchased has increased due to a greater mix of higher priced items. The Company intends to continue implementing these merchandising strategies to further enhance sales productivity.
Capitalize on Favorable Industry Dynamics and Competitive Positioning. The Company is benefiting from several trends in the retailing industry. The increase in the application of just-in-time inventory management techniques and the increase in retailer consolidations have both resulted in a shift of inventory risk from retailers to manufacturers. In addition, in order to maintain market share in an increasingly competitive environment, manufacturers are introducing new products and new packaging more frequently. All of these factors have contributed to a broad and consistent supply of closeout merchandise for the Company.
The Company believes it is the only retailer in the closeout industry that focuses on first quality gift and home furnishings merchandise, in contrast with most closeout retailers, which are general merchandisers or which focus on apparel. In addition, the Company caters to upscale customers, while the rest of the industry generally focuses on lower to middle income consumers. Finally, unlike other closeout retailers which operate on a year-round basis, Tuesday Morning operates on an event sale basis. The Company believes that its periodic schedule of openings causes its customers to plan their visits to the Company's stores to a greater extent than customers of conventional retailers whose product offerings are more predictable and store hours more extensive.
Leverage Workforce and Technology. The Company believes that its investments in information systems and inventory control technology and in doubling its staff of experienced, specialized buyers over the last four years will bolster future growth in the breadth of its product offerings and will provide the support necessary for new store openings for the foreseeable future. The Company's existing systems technology is scalable, enabling the Company to expand or to upgrade its systems without significant additional expenditures in the near term. The Company's corporate infrastructure will also allow for future growth of the Company without significant expenditures beyond the marginal cost of hiring additional buyers.
THE TRANSACTIONS
On December 29, 1997, Madison Dearborn Capital Partners II, L.P. ("Madison Dearborn"), certain members of management and investors in the Units acquired (the "Acquisition") all of the outstanding capital stock of the Company for an equity investment of $117.9 million (the "Equity Investment"). The Equity Investment consisted of (i) an $85.4 million investment by Madison Dearborn (comprised of $4.6 million of Common Stock and $80.8 million of junior preferred stock of the Company), (ii) a $7.5 million of investment by certain members of management of the Company (comprised of $0.4 million in Common Stock and $7.1 million in junior preferred stock) and (iii) the proceeds from the Initial Unit Offering. The Company used the proceeds from the Equity Investment and approximately $223.4 million of aggregate proceeds from the financings described below (the "Financings") (i) to pay $323.0 million as Acquisition consideration, and (ii) to pay $18.3 million in transaction fees and expenses. See "Description of the Units" and "Description of the Capital Stock."
The Financings consisted of (i) a $200.0 million credit facility (the "Senior Credit Facility"), comprised of a $110.0 million term loan facility, consisting of $40.0 million in Term Loan A loans and $70.0 million in Term Loan B
loans (collectively, the "Term Loans"), and a $90.0 million revolving credit facility which, subject to certain conditions, can be increased up to $115.0 million (the "Revolving Credit Facility"), of which approximately $13.4 million was drawn in January 1998 in connection with the Transaction and (ii) the proceeds of the Old Notes offered in the Initial Offering. See "Description of the Senior Credit Facility" and "Description of the Exchange Notes."
The closing of the Initial Unit Offering (the "Closing") was conditioned upon the simultaneous consummation of the Acquisition, the Financings, the other components of the Equity Investment and the repayment of the Old Credit Facility. The Initial Offering, the Acquisition, the other Financings, the Equity Investment and the repayment of the Old Credit Facility are collectively referred to herein as the "Transactions."
The sources and uses of funds related to the Transactions, if they had occurred on November 30, 1997, are set forth in the following table:
AMOUNT
---------------
(IN THOUSANDS)
SOURCES OF FUNDS:
Senior Credit Facility ($13,388 drawn in January 1998).. $ 123,388
Old Notes............................................... 100,000
Old Senior Exchangeable Preferred Stock................. 25,000
Junior Redeemable Preferred Stock (a)................... 86,010
Junior Perpetual Preferred Stock........................ 1,918
Common Stock (b)........................................ 5,000
----------
Total.............................................. $ 341,316
==========
USES OF FUNDS:
Acquisition consideration............................... $ 323,016
Fees and expenses....................................... 18,300
----------
Total.............................................. $ 341,316
==========
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(a) Consists of approximately $80.8 million from Madison Dearborn and
approximately $5.2 million from management. See "Description of the Capital
Stock--Junior Redeemable Preferred Stock."
(b) Consists of approximately $4.6 million from Madison Dearborn and
approximately $0.4 million from management.
THE INVESTORS
Madison Dearborn is a $925 million investment fund managed by Madison Dearborn Partners, Inc. ("MDP"), a private equity investment firm. Since 1980, the principals of MDP have directed equity investments of over $1.2 billion in more than 100 transactions where MDP or its predecessor, First Chicago Venture Capital, acted as a leading investor. Currently, MDP has approximately $2.2 billion of funds under management. MDP is comprised of five investment teams, each focused on a particular sector: consumer (including retailing), industrial, communications, natural resources, and healthcare services. Since 1984, MDP's consumer team has made lead investments in over 10 portfolio companies, including The Sports Authority, Inc., Consolidated Stores Corporation, Sterling Merchandise Company, Beverages & More, Inc., The Cornerstone Investment Group, Inc., Carrols Corporation, Peter Piper, Inc. and Bizmart, Inc.
RECENT DEVELOPMENTS - UNAUDITED
The Transaction was consummated December 29, 1997. Net sales for the year ended December 31, 1997 increased $70.5 million, or 27.5%, to $327.3 million from $256.8 million for the comparable period in 1996. Average store sales for 1997 were approximately $1,066,000, as compared to $925,000 for 1996. During the year ended December 31, 1997, the Company generated comparable store sales growth of 18% and EBITDA before Transaction expenses of $41.6 million as compared to EBITDA of $25.9 million for the comparable period in 1996. Operating income decreased $18.5 million from $20.4 million in 1996 to $1.9 million in 1997. Compensation paid in lieu of options of $25 million and non-debt fees and expenses of $9.4 million are included in operating income for the year ended December 31, 1997. In addition, net current assets at December 31, 1997 decreased by $39.8 million from September 30, 1997, due to the sell down of inventory during the holiday season. All amounts are unaudited. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Seasonality."
The Company was incorporated in Delaware in 1974. The Company's principal executive offices are located at 14621 Inwood Road, Dallas, Texas 75244 and its telephone number is (972) 387-3562.
THE INITIAL UNIT OFFERING
Old Senior Exchangeable Preferred The Old Senior Exchangeable Preferred
Stock................................ Stock was sold by the Company on
December 29, 1997 to Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch,"
the "Initial Purchaser") pursuant to
a Purchase Agreement, dated December
15, 1997 (the "Units Purchase
Agreement"). The Initial Purchaser
subsequently resold the Old Senior
Exchangeable Preferred Stock to
qualified institutional buyers
pursuant to Rule 144A under the
Securities Act.
Concurrent Initial Offering.......... Concurrent with the Initial Unit
Offering, the Company sold
$100,000,000 aggregate principal
amount of its 11% Senior Subordinated
Notes due 2007, on December 29, 1997
to Merrill Lynch and Goldman, Sachs &
Co., pursuant to a Purchase
Agreement, dated December 15, 1997.
Preferred Stock Registration Rights Pursuant to the Units Purchase
Agreement............................ Agreement, the Company and the
Initial Purchaser entered into a
Registration Rights Agreement, dated
as of December 29, 1997 (the
"Preferred Stock Registration Rights
Agreement"), which grants the holders
of the Old Senior Exchangeable
Preferred Stock certain exchange and
registration rights. The Preferred
Stock Exchange Offer is intended to
satisfy such exchange rights which
terminate upon the consummation of
the Preferred Stock Exchange Offer.
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THE PREFERRED STOCK EXCHANGE OFFER
Securities Offered................... $25,000,000 aggregate liquidation
preference of 13 1/4% Series B Senior
Exchangeable Preferred Stock due 2009
of the Company (the "New Senior
Exchangeable Preferred Stock").
The Exchange Offer................... $100 liquidation preference of New
Senior Exchangeable Preferred Stock
in exchange for each $100
liquidation preference of Old Senior
Exchangeable Preferred Stock. As of
the date hereof, $25,000,000
aggregate liquidation preference of
Old Senior Exchangeable Preferred
Stock is outstanding. The Company
will issue the New Senior
Exchangeable Preferred Stock to
holders on or promptly after the
Expiration Date.
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Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that New Senior Exchangeable Preferred Stock issued pursuant to the Preferred Stock Exchange Offer in exchange for Old Senior Exchangeable Preferred Stock may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Senior Exchangeable Preferred Stock is acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Senior Exchangeable Preferred Stock. Each holder accepting the Preferred Stock Exchange Offer is required to represent to the Company in the Letter of Transmittal that, among other things, the New Senior Exchangeable Preferred Stock will be acquired by the holder in the ordinary course of business and the holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Senior Exchangeable Preferred Stock.
Any Participating Broker-Dealer that acquired Old Senior Exchangeable Preferred Stock for its own account as a result of market-making activities or other trading activities may be a statutory underwriter. Each Participating Broker-Dealer that receives New Senior Exchangeable Preferred Stock for its own account pursuant to the Preferred Stock Exchange Offer must acknowledge that it will deliver a Prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock. The Letter of Transmittal states that by so acknowledging and by delivering a Prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resale of New Senior Exchangeable Preferred Stock received in exchange for Old Senior Exchangeable Preferred Stock where such Old Senior Exchangeable Preferred Stock was acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale.
See "Plan of Distribution."
Any holder who tenders in the
Preferred Stock Exchange Offer with
the intention to participate, or for
the purpose of participating, in a
distribution of the New Senior
Exchangeable Preferred Stock could
not rely on the position of the staff
of the Commission enunciated in
no-action letters and, in the absence
of an exemption therefrom, must
comply with the registration and
prospectus delivery requirements of
the Securities Act in connection with
any resale transaction. Failure to
comply with such requirements in such
instance may result in such holder
incurring liability under the
Securities Act for which the holder
is not indemnified by the Company.
Expiration Date...................... 5:00 p.m., New York City time, on
, 1998 unless the Preferred Stock
Exchange Offer is extended, in which
case the term "Expiration Date" means
the latest date and time to which the
Preferred Stock Exchange Offer is
extended.
Accrued Dividends on the New Senior
Exchangeable Preferred Stock and the
Old Senior Exchangeable Preferred Each Share of New Senior Exchangeable
Stock................................ Preferred Stock will accrue dividends
from its issuance date. Holders of
Old Senior Exchangeable Preferred
Stock that are accepted for exchange
will receive accrued dividends
thereon to, but not including, the
issuance date of the New Senior
Exchangeable Preferred Stock.
Dividends on the Old Senior
Exchangeable Preferred Stock accepted
for exchange will cease to accrue
upon issuance of the New Senior
Exchangeable Preferred Stock.
Conditions to the Exchange
Offer................................ The Preferred Stock Exchange Offer is
subject to certain customary
conditions, which may be waived by
the Company. See "The Preferred
Stock Exchange Offer--Conditions."
Procedures for Tendering Old Senior
Exchangeable Preferred Stock......... Each holder of Old Senior
Exchangeable Preferred Stock wishing
to accept the Preferred Stock
Exchange Offer must complete, sign
and date the accompanying Letter of
Transmittal, or a facsimile thereof
in accordance with the instructions
contained herein and therein, and
mail or otherwise deliver such Letter
of Transmittal or such facsimile,
together with the Old Senior
Exchangeable Preferred Stock and any
other required documentation to the
Exchange Agent (as defined herein) at
the address set forth herein. By
executing the Letter of Transmittal,
each holder will represent to the
Company that, among other things, the
New Senior Exchangeable Preferred
Stock acquired pursuant to the
Preferred Stock Exchange Offer is
being obtained in the ordinary course
of business of the person receiving
such New Senior Exchangeable
Preferred Stock, whether or not such
person is the holder, that neither
the holder nor any such other person
(i) has any arrangement or
understanding with any person to
participate in the distribution of
such New Senior Exchangeable
Preferred Stock, (ii) is engaging or
intends to engage in the distribution
of such New Preferred Stock, or (iii)
is an "affiliate," as defined under
Rule 405 of the Securities Act, of
the Company. See "The Preferred
Stock Exchange Offer--Purpose and
Effect of the Preferred Stock
Exchange Offer" and "The Preferred
Stock Exchange Offer--Procedures for
Tendering."
Untendered Old Senior Exchangeable
Preferred Stock...................... Following the consummation of the
Preferred Stock Exchange Offer,
holders of Old Senior Exchangeable
Preferred Stock eligible to
participate but who do not tender
their Old Senior Exchangeable
Preferred Stock will not have any
further exchange rights and such Old
Senior Exchangeable Preferred Stock
will continue to be subject to
certain restrictions on transfer.
Accordingly, the liquidity of the
market for such Old Senior
Exchangeable Preferred Stock could be
adversely affected.
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Consequences of Failure to
Exchange............................. The Old Senior Exchangeable Preferred
Stock that is not exchanged pursuant
to the Preferred Stock Exchange Offer
will remain restricted securities.
Accordingly, such Old Senior
Exchangeable Preferred Stock may be
resold only (i) to the Company, (ii)
pursuant to Rule 144A or Rule 144
under the Securities Act or pursuant
to some other exemption under the
Securities Act, (iii) outside the
United States to a foreign person
pursuant to the requirements of Rule
904 under the Securities Act, or (iv)
pursuant to an effective registration
statement under the Securities Act.
See "The Preferred Stock Exchange
Offer--Consequences of Failure to
Exchange."
Shelf Registration Statement......... If any holder of the Old Senior
Exchangeable Preferred Stock (other
than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the
Securities Act) is not eligible under
applicable securities laws to
participate in the Preferred Stock
Exchange Offer, and such holder has
provided information regarding such
holder and the distribution of such
holder's Old Senior Exchangeable
Preferred Stock to the Company for
use therein, the Company has agreed
to register the Old Senior
Exchangeable Preferred Stock on a
shelf registration statement (the
"Shelf Registration Statement") and
use its best efforts to cause it to
be declared effective by the
Commission as promptly as practical
on or after the consummation of the
Preferred Stock Exchange Offer. The
Company has agreed to maintain the
effectiveness of the Shelf
Registration Statement for, under
certain circumstances, a maximum of
two years, to cover resales of the
Old Senior Exchangeable Preferred
Stock held by any such holders.
Special Procedures for Beneficial
Owners............................... Any beneficial owner whose Old Senior
Exchangeable Preferred Stock is
registered in the name of a broker,
dealer, commercial bank, trust
company or other nominee and who
wishes to tender should contact such
registered holder promptly and
instruct such registered holder to
tender on such beneficial owner's
behalf. If such beneficial owner
wishes to tender on such owner's own
behalf, such owner must, prior to
completing and executing the Letter
of Transmittal and delivering its Old
Senior Exchangeable Preferred Stock,
either make appropriate arrangements
to register ownership of the Old
Senior Exchangeable Preferred Stock
in such owner's name or obtain a
properly completed stock power from
the registered holder. The transfer
of registered ownership may take
considerable time. The Company will
keep the Preferred Stock Exchange
Offer open for not less than 30 days
in order to provide for the transfer
of registered ownership.
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Guaranteed Delivery
Procedures............................ Holders of Old Senior Exchangeable
Preferred Stock who wish to tender
their Old Senior Exchangeable
Preferred Stock and whose Old Senior
Exchangeable Preferred Stock is not
immediately available or who cannot
deliver their Old Senior Exchangeable
Preferred Stock, the Letter of
Transmittal or any other documents
required by the Letter of Transmittal
to the Exchange Agent (or comply with
the procedures for book-entry
transfer) prior to the Expiration
Date must tender their Old Senior
Exchangeable Preferred Stock
according to the guaranteed delivery
procedures set forth in "The
Preferred Stock Exchange
Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights..................... Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City
time, on the Expiration Date.
Acceptance of Old Senior Exchangeable
Preferred Stock and Delivery of New The Company will accept for exchange
Preferred Stock....................... any and all Old Senior Exchangeable
Preferred Stock which is properly
tendered in the Preferred Stock
Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration
Date. The New Senior Exchangeable
Preferred Stock issued pursuant to
the Preferred Stock Exchange Offer
will be delivered promptly following
the Expiration Date. See "The
Preferred Stock Exchange Offer--Terms
of the Preferred Stock Exchange
Offer."
Use of Proceeds....................... There will be no cash proceeds to the
Company from the exchange pursuant to
the Preferred Stock Exchange Offer.
Exchange Agent........................ United States Trust Company of New
York.
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THE NEW SENIOR EXCHANGEABLE PREFERRED STOCK
General............................... The form and terms of the New Senior
Exchangeable Preferred Stock are the
same as the form and terms of the Old
Senior Exchangeable Preferred Stock
(which they replace) except that (i) the
New Senior Exchangeable Preferred Stock
bears a Series B designation, (ii) the
New Senior Exchangeable Preferred Stock
has been registered under the Securities
Act and, therefore, will not bear
legends restricting the transfer
thereof, and (iii) the holders of New
Senior Exchangeable Preferred Stock will
not be entitled to certain rights under
the Preferred Stock Registration Rights
Agreement, including the provisions
providing for an increase in the
dividend rate on the Old Senior
Exchangeable Preferred Stock in certain
circumstances relating to the timing of
the Preferred Stock Exchange Offer,
which rights will terminate when the
Preferred Stock Exchange Offer is
consummated. See "The Preferred Stock
Exchange Offer--Purpose and Effect of
the Preferred Stock Exchange Offer." The
New Senior Exchangeable Preferred Stock
will evidence the same equity as the Old
Senior Exchangeable Preferred Stock and
will be entitled to the benefits of the
Certificate of Designation. See
"Description of the Units--New Senior
Exchangeable Preferred Stock."
Liquidation Preference................ $100.00 per share, plus accumulated and
unpaid dividends.
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Optional Redemption.................. The New Senior Exchangeable Preferred
Stock will be redeemable at the option
of the Company, in whole or in part, at
any time or from time to time, on or
after December 15, 2002, at the
redemption prices set forth herein, plus
accumulated and unpaid dividends thereon
to the date of redemption. In addition,
at any time on or prior to December 15,
2001, the Company may redeem for cash
all, but not less than all, of the
outstanding New Senior Exchangeable
Preferred Stock within 20 days of a
Public Equity Offering with the net
proceeds of the offering at a redemption
price equal to 113.25% of the aggregate
liquidation preference thereon, plus
accumulated and unpaid dividends thereon
to the date of redemption. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Optional
Redemption."
Mandatory Redemption................. The Company is required to redeem all of
the New Senior Exchangeable Preferred
Stock outstanding on December 15, 2009
(subject to legal availability of funds
therefor) at a redemption price equal to
the liquidation preference thereof, plus
accumulated and unpaid dividends thereon
to the date of redemption. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Mandatory
Redemption."
Dividends............................ Dividends on the New Senior Exchangeable
Preferred Stock will be payable at a
rate equal to 13.25% per annum of the
liquidation preference per share.
Dividends will be cumulative and, when
declared, payable quarterly beginning
March 15, 1998 and accumulating from the
date of issuance (the "Issuance Date").
On any dividend payment date occurring
on or before December 15, 2002, the
Company, at its option, may pay
dividends either in cash or in
additional fully paid and nonassessable
shares of New Senior Exchangeable
Preferred Stock with an aggregate
liquidation preference equal to the
amount of such dividends. After December
15, 2002, dividends may only be paid in
cash. See "Description of the Units--New
Senior Exchangeable Preferred Stock--
Dividends."
Dividend Payment Dates............... March 15, June 15, September 15 and
December 15 of each year, commencing
March 15, 1998.
Voting............................... The New Senior Exchangeable Preferred
Stock will be non-voting, except as
otherwise required by law and except in
certain circumstances described herein,
including amending certain rights of the
holders of the New Senior Exchangeable
Preferred Stock. In addition, if the
Company (i) fails to pay dividends (and
if after December 15, 2002, such
dividends are not paid in cash) in
respect of six quarterly periods
(whether or not consecutive), (ii) fails
to make a mandatory redemption or
otherwise discharge any redemption
obligations, (iii) fails to make a
Change in Control Offer (as defined) or
(iv) fails to comply with certain
provisions or make certain payments on
its Indebtedness, or a Restricted
Subsidiary fails to make certain
payments on its Indebtedness, holders of
a majority of the outstanding shares of
New Senior Exchangeable Preferred Stock,
voting as a class, will be entitled to
elect the lesser of two directors or at
least 25% of the Board of Directors. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Voting
Rights."
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Ranking.............................. The New Senior Exchangeable Preferred
Stock will rank, with respect to
dividend rights and distributions upon
liquidation, winding-up and dissolution
of the Company, senior to all other
classes of equity securities of the
Company outstanding upon consummation of
the Preferred Stock Exchange Offer. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Ranking."
Change in Control.................... Upon the occurrence of a Change in
Control, each holder of the New Senior
Exchangeable Preferred Stock may require
the Company to purchase all or any
portion of such holder's New Senior
Exchangeable Preferred Stock at a
purchase price equal to 101% of the
original liquidation preference thereof,
plus accumulated and unpaid dividends
per share to the date of purchase. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Change in
Control."
Certain Provisions................... The Certificate of Designation relating
to the New Senior Exchangeable Preferred
Stock contains certain restrictive
provisions, including, but not limited
to, provisions with respect to the
following matters: (i) limitation on
additional indebtedness, (ii) limitation
on restricted payments, (iii) limitation
on issuances and sales of capital stock
of Restricted Subsidiaries, and (iv)
limitation on merger, consolidation and
sale of substantially all assets. See
"Description of the Units--New Senior
Exchangeable Preferred Stock--Certain
Provisions."
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THE EXCHANGE DEBENTURES
Issue................................ 13 1/4% Subordinated Exchange Debentures
due 2009 issuable in exchange for the
Senior Exchangeable Preferred Stock in
an aggregate principal amount equal to
the aggregate liquidation preference of
the Senior Exchangeable Preferred Stock,
plus accumulated and unpaid dividends to
the date fixed for the exchange thereof
(the "Exchange Date"), plus any
additional Exchange Debentures issued in
lieu of cash interest.
Maturity............................. December 15, 2009.
Interest Payment Dates............... Interest on the Exchange Debentures will
be payable quarterly in cash (or, at the
option of the Company, on or prior to
December 15, 2002, in additional
Exchange Debentures) in arrears on each
March 15, June 15, September 15 and
December 15, commencing with the first
such date after the Exchange Date.
Optional Redemption.................. The Exchange Debentures will be
redeemable at the option of the Company,
in whole or in part, at any time or from
time to time, on or after December 15,
2002, at the redemption prices set forth
herein, plus accrued and unpaid
interest, if any, to the date of
redemption. In addition, at any time on
or prior to December 15, 2001, the
Company may redeem all, but not less
than all, of the outstanding Exchange
Debentures within 20 days of a Public
Equity Offering with the net proceeds of
the offering, at a redemption price
equal to 113.25% of the aggregate
principal amount thereof, plus accrued
and unpaid interest, if any, to the date
of redemption. See "Description of the
Units--Exchange Debentures--Optional
Redemption."
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Change in Control.................... Upon the occurrence of a Change in
Control, each holder of the Exchange
Debentures may require the Company to
purchase all or any portion of such
holder's Exchange Debentures at a
purchase price equal to 101% of the
principal amount thereof, together with
accrued and unpaid interest, if any, to
the date of purchase. See "Description
of the Units--Exchange Debentures--
Change in Control."
Ranking.............................. The Exchange Debentures will be
unsecured junior subordinated
obligations of the Company and, as such,
will be subordinated to all existing and
future Senior Indebtedness (as defined)
and Senior Subordinated Indebtedness (as
defined) of the Company, including
indebtedness under the Senior Credit
Facility and the Notes, with respect to
principal, premium, if any, and
interest. By reason of such
subordination, holders of Senior
Indebtedness and Senior Subordinated
Indebtedness must be paid in full before
holders of the Exchange Debentures may
be paid in the event of a liquidation,
dissolution or other winding up of the
Company, whether voluntary or
involuntary and whether or not involving
insolvency or bankruptcy. At September
30, 1997, on a pro forma basis after
giving effect to the Transactions and
the application of the net proceeds
therefrom, the Company would have had
approximately $176.5 million of Senior
Indebtedness (all of which would
represent Indebtedness under the Senior
Credit Facility) and $100.0 million of
Senior Subordinated Indebtedness (all of
which would represent Indebtedness under
the Notes) outstanding and the Company
would have had additional availability
of $16.1 million for borrowings under
the Senior Credit Facility, all of which
would be Senior Indebtedness, if
borrowed. See "Unaudited Pro Forma
Financial Statements." Additional Senior
Indebtedness and Senior Subordinated
Indebtedness may be incurred by the
Company from time to time, subject to
certain restrictions. See "Description
of the Units--Exchange Debentures--
Subordination."
The Exchange Debentures will be
guaranteed by all domestic subsidiaries
of the Company. Each Debenture Guarantee
(as defined) will be subordinated in
right of payment to the prior payment in
full of all Debenture Guarantor Senior
Indebtedness (as defined) and Debenture
Guarantor Senior Subordinated
Indebtedness (as defined) of the
Debenture Guarantor. See "Description of
the Units--Exchange Debentures--
Subordination."
Certain Covenants.................... The indenture under which the Exchange
Debentures will be offered (the
"Exchange Indenture") contains
covenants, including, but not limited
to, covenants with respect to the
following matters: (i) limitation on
additional indebtedness; (ii) limitation
on restricted payments; (iii) limitation
on issuances and sales of capital stock
of Restricted Subsidiaries; (iv)
limitation on transaction with
affiliates; (v) limitation on liens;
(vi) limitation on sale of assets; (vii)
limitation on merger, consolidation and
sale of substantially all assets; (viii)
limitations on guarantees of
indebtedness by Restricted Subsidiaries;
(ix) limitation on dividend and other
payment restrictions affecting
Restricted Subsidiaries; (x) limitation
on investment in Unrestricted
Subsidiaries; (xi) limitation on sale
and leaseback transactions; (xii)
limitations on other Subordinated
Indebtedness. See "Description of the
Units--Exchange Debentures--Certain
Covenants."
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Exchange Offer; Exchange
Debenture Registration
Rights............................... In the event the Exchange Date occurs
prior to the issuance of the New
Exchangeable Preferred Stock, the
provisions of the Preferred Stock
Registration Rights Agreement will apply
to the registration of the Exchange
Debentures, provided that changes in
dividend rate shall result in
corresponding changes in the interest
rate applicable to the Exchange
Debentures. See "The Preferred Stock
Exchange Offer."
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THE COMMON STOCK
Terms................................ 250,000 shares of Common Stock of the
Company, representing 6.0% of the
Company's Common Stock as of the Closing
on a fully diluted basis was offered
pursuant to the Initial Unit Offering.
Registration Rights.................. Under the terms of the Common Stock
Registration Rights Agreement (as
defined), (i) the holders of the Common
Stock offered pursuant to the Initial
Unit Offering are entitled, subject to
certain limitations, to include their
shares of Common Stock in any
registration of shares of Common Stock
initiated by the Company under the
Securities Act in which the proceeds to
the Company are at least $30 million and
in any other registration of Common
Stock initiated by the Company
thereafter, and (ii) after the first
registered secondary offering of shares
of Common Stock by Madison Dearborn or
its affiliates, the holders of 25% or
more of the Common Stock offered
pursuant to the Initial Unit Offering
will have the right, subject to certain
limitations, to require the Company to
effect a Demand Registration (as
defined) of all or any part of such
holders' shares of Common Stock under
the Securities Act. See "Description of
the Capital Stock--Common Stock
Registration Rights Agreement."
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RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be considered before tendering the Old Senior Exchangeable Preferred Stock in exchange for the New Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer. These risk factors are generally applicable to the Old Senior Exchangeable Preferred Stock as well as to the New Senior Exchangeable Preferred Stock.
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The summary historical financial data presented below for, and as of the end of, each of the fiscal years in the three-year period ended December 31, 1996 is derived from the audited consolidated financial statements of the Company. In the opinion of the Company, the unaudited financial information presented for the nine months ended September 30, 1996 and September 30, 1997 contains all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial information included therein. Results for interim periods are not necessarily indicative of results for the full year. The summary unaudited pro forma statement of operations and other financial data for the year ended December 31, 1996 and the nine months ended September 30, 1997 gives effect to the Transactions as if they had occurred on January 1, 1996. The summary unaudited pro forma balance sheet data at September 30, 1997 gives effect to the Transactions as if they had occurred on such date. The pro forma data is not necessarily indicative of the results that actually would have been achieved had the Transactions occurred on such date or that may be achieved in the future. This summary information should be read in conjunction with the consolidated financial statements and unaudited pro forma financial statements of the Company and the notes thereto and "Capitalization," "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.
Pro Forma Pro Forma
Twelve Months Nine Months
Nine Months Ended Ended Ended
Year Ended December 31, September 30, December 31, September 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997 1996 1997
--------- --------- ---------- --------- ---------- ------------ -------------
(dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales............................ $190,081 $210,265 $256,756 $138,563 $179,058 $ 256,756 $ 179,058
Cost of sales........................ 126,931 137,427 165,189 88,199 112,620 165,189 112,620
-------- -------- -------- -------- -------- --------- ---------
Gross profit......................... 63,150 72,838 91,567 50,364 66,438 91,567 66,438
Selling, general and administrative
expenses............................ 57,523 63,040 71,167 48,134 56,193 71,517 56,456
-------- -------- -------- -------- -------- --------- ---------
Operating Income..................... 5,627 9,798 20,400 2,230 10,245 20,050 9,982
Net interest income (expenses) and
other income........................ (1,611) (2,534) (1,892) (1,518) (1,660) (24,225) (18,261)
-------- -------- -------- -------- -------- --------- ---------
Earnings before income
taxes............................... 4,016 7,264 18,508 712 8,585 (4,175) (8,279)
Net earnings......................... $ 2,651 $ 4,773 $ 11,516 $ 456 $ 5,366 $ (2,661) $ (5,174)
BALANCE SHEET DATA (END OF PERIOD):
Working capital...................... $ 32,593 $ 39,115 $ 49,568 $ 80,367 $109,205 $ 46,863 $ 63,921
Total assets......................... 89,403 94,243 121,757 151,668 199,215 127,387 209,719
Total debt........................... 10,127 8,398 6,622 48,851 61,409 218,631 281,768
Senior Exchangeable
Preferred Stock..................... -- -- -- -- -- 24,643 24,643
Junior Redeemable
Preferred Stock..................... -- -- -- -- -- 86,010 86,010
Total shareholders' equity
(deficit)........................... 58,630 63,648 75,528 64,103 81,213 (241,746) (234,113)
OTHER FINANCIAL DATA:
EBITDAR (a).......................... $ 21,920 $ 27,550 $ 39,874 $ 16,499 $ 26,322 $ 39,524 $ 26,059
Rental expense....................... 11,782 12,577 13,967 10,253 11,953 13,967 11,953
-------- -------- -------- -------- -------- --------- --------
EBITDA (a)........................... $ 10,138 $ 14,973 $ 25,907 $ 6,246 $ 14,369 $ 25,557 $ 14,106
======== ======== ======== ======== ======== ========= ========
Cash Flows provided by (used in):
Operating activities............ $ 12,056 $ 6,329 $ 10,592 $(42,789) $(57,703) $ (10,409) $(73,305)
Investing activities............ (7,992) (3,104) (4,701) (3,341) (5,129) (4,701) (5,129)
Financing activities............ (1,257) (1,484) (1,413) 40,453 55,110 207,298 52,350
Capital expenditures................. 5,693 2,692 4,233 2,935 4,756 4,233 4,756
Gross margin......................... 33.2% 34.6% 35.7% 36.4% 37.1% 35.7% 37.1%
S,G&A as a % of net sales............ 30.3% 30.0% 27.7% 34.7% 31.4% 27.9% 31.5%
EBITDA margin........................ 5.3% 7.1% 10.1% 4.5% 8.0% 10.0% 7.9%
Ratio of EBITDA to net
interest expense.................... -- -- -- -- -- 1.1x .8x
Ratio of long-term debt to
EBITDA (b).......................... -- -- -- -- -- 8.5x 16.1x
Ratio of earnings to fixed
charges (c)......................... 1.6x 2.0x 3.5x 1.1x 2.4x -- --
Deficiency of earnings to
cover fixed charges................. -- -- -- -- -- 4,175 8,279
Ratio of earnings to combined fixed
charges and preferred stock
dividends........................... 1.6x 2.0x 3.5x 1.1x 2.4x -- --
Deficiency of earnings to cover
combined fixed charges and
preferred stock dividends........... -- -- -- -- -- 15,208 16,554
STORE DATA:
Comparable store sales
increases........................... 4.2% 6.4% 14.0% 11.7% 18.6% 14.0% 18.6%
Average sales per store.............. $ 792 $ 829 $ 925 $ 512 $ 600 $ 925 $ 600
STORES:
Beginning of period.................. 235 246 260 260 286 260 286
Opened............................... 22 32 33 23 20 33 20
Closed............................... (11) (18) (7) (7) (2) (7) (2)
-------- -------- -------- -------- -------- ------- -------
End of period........................ 246 260 286 276 304 286 304
======== ======== ======== ======== ======== ======= =======
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(a) EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDAR represents EBITDA plus rental expense. While EBITDA and EBITDAR should not be construed as substitutes for operating income or as better measures of liquidity than cash flows from operating activities, which are determined in accordance with generally accepted accounting principles, they are included to provide additional information with respect to the ability of the Company to meet future debt service, capital expenditure and working capital requirements.
(b) Total long-term debt excludes the outstanding balance under the Revolving Credit Facility.
(c) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of income before provision for income taxes and cumulative effect of accounting changes plus fixed charges. "Fixed charges" consist of interest expense, amortization of deferred financing costs and the portion of rental expense assumed to represent interest.
RISKS FACTORS
Prospective investors should carefully consider the factors set forth below, as well as the other information contained in this Prospectus, before tendering the Old Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer. The risk factors set forth below are generally applicable to the Old Senior Exchangeable Preferred Stock as well as the New Senior Exchangeable Preferred Stock.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE; RESTRICTIONS ON INDEBTEDNESS
As a result of the Transactions, the Company became highly leveraged, and the Company's aggregate indebtedness for borrowed money and interest expense increased and its shareholders' equity decreased. On a pro forma basis after giving effect to the Transactions, the Company would have had total indebtedness of $281.8 million and shareholders' deficit of approximately $234.1 million as of September 30, 1997. In addition, subject to the restrictions contained in the instruments governing its indebtedness, the Company may incur additional debt from time to time to finance working capital, capital expenditures, acquisitions or for other purposes. After December 15, 2002, the Company will be required to pay dividends on the New Senior Exchangeable Preferred Stock in cash. Furthermore, subject to certain conditions, the Company's New Senior Exchangeable Preferred Stock will be exchangeable, at the Company's option, for Exchange Debentures.
The Company's debt service and dividend obligations could have important consequences to the holders of the New Senior Exchangeable Preferred Stock and Exchange Debentures, including the following: (i) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be limited or impaired; (ii) a substantial portion of the Company's cash flow from operations will be dedicated to the payment of principal and interest on its indebtedness and dividends on the New Senior Exchangeable Preferred Stock, thereby reducing the funds available to the Company; (iii) the Company's operating flexibility with respect to certain matters will be limited by covenants contained in the Certificate of Designation, the Exchange Indenture, the Indenture (as defined) and the Senior Credit Facility which will limit the ability of the Company and certain of its subsidiaries to incur additional indebtedness, grant or create liens upon assets, pay dividends, redeem capital stock or prepay certain subordinated indebtedness and enter into sale and leaseback transactions or other loans, investments or guarantees; (iv) the Company's degree of leverage may make it more vulnerable to economic downturns, may reduce its flexibility in responding to changing business and economic conditions and may limit its ability to pursue other business opportunities, to finance its future operations or capital needs, and to implement its business strategy; and (v) all of the indebtedness incurred under the Senior Credit Facility and with respect to the Notes will become due prior to the mandatory redemption date of the New Senior Exchangeable Preferred Stock or the time the principal payments on the Exchange Debentures will become due. See "Business--Strategy."
Required payments of principal and interest on the Company's indebtedness and scheduled dividend payments on the New Senior Exchangeable Preferred Stock are expected to be financed from its cash flow from operations. The Company's ability to make scheduled dividend payments on the New Senior Exchangeable Preferred Stock, to redeem the New Senior Exchangeable Preferred Stock and to make scheduled payments of the principal of, or to pay interest on, or to refinance its indebtedness (including the Notes and the Exchange Debentures, if any) depends on the future performance of the Company's businesses, which will in turn be subject to financial, business, economic and other factors affecting the business and operations of the Company, including factors beyond its control, such as prevailing economic conditions. There can be no assurance that cash flow from operations will be sufficient to enable the Company to service its debt and preferred stock obligations and meet its other obligations. If such cash flow is insufficient, the Company may be required to refinance all or a portion of its existing debt and all or a portion of the New Senior Exchangeable Preferred Stock, to sell assets or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any such sales of assets or additional financing could be achieved.
The Certificate of Designation, the Exchange Indenture, the Indenture and the Senior Credit Facility contain numerous financial and operating covenants that limit the discretion of the Company's management with respect to certain business matters. These covenants place significant restrictions on, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, grant or create liens upon assets, pay dividends, redeem capital stock or prepay certain subordinated indebtedness or enter into sale leaseback transactions or other loans, investments or guarantees. See "Description of the Units--New Senior Exchangeable Preferred Stock," "Description of the Units--Exchange Debentures," "Description of the Exchange Notes" and "Description of the Senior Credit Facility." The Senior Credit Facility also requires the Company to meet certain financial ratios and tests. A failure to comply with the obligations contained in the Senior Credit Facility, the Indenture or the Exchange Indenture could result in an event of default under either the Senior Credit Facility, the Indenture or the Exchange Indenture, which could result in acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain cross-acceleration or cross-default provisions. Since the New Senior Exchangeable Preferred Stock will be junior in right of payment to all liabilities and obligations of the Company, in such an event, payment of dividends or the redemption price with respect to the New Senior Exchangeable Preferred Stock would be subordinated to the prior payment of such indebtedness. If, as a result thereof, a default occurs with respect to Senior Indebtedness, the subordination provisions in the Exchange Indenture would likely restrict payments to the holders of the Exchange Debentures, if issued.
The Senior Credit Facility limits the Company's ability to pay dividends on the New Senior Exchangeable Preferred Stock in cash and the Senior Credit Facility and the Indenture also limit the Company's ability to exchange the New Senior Exchangeable Preferred Stock into Exchange Debentures. See "Description of the Exchange Notes" and "Description of Senior Credit Facility." The Company's ability to pay cash dividends on the New Senior Exchangeable Preferred Stock and the exchange of the New Senior Exchangeable Preferred Stock may also be restricted by future indebtedness or agreements.
SUBORDINATION OF THE NEW SENIOR EXCHANGEABLE PREFERRED STOCK AND EXCHANGE DEBENTURES
The New Senior Exchangeable Preferred Stock is junior in right of payment to all existing and future liabilities and obligations (whether or not for borrowed money) of the Company (other than Common Stock and any preferred stock which by its terms is on parity with or junior to the New Senior Exchangeable Preferred Stock). Accordingly, in the event of a liquidation, dissolution or winding up of the Company, lenders to and other creditors of the Company would be entitled to payment in full before the holders of New Senior Exchangeable Preferred Stock. The Company's obligations under the Exchange Debentures are subordinate and junior in right of payment to all existing and future Senior Indebtedness and Senior Subordinated Indebtedness of the Company. As of September 30, 1997, on a pro forma basis after giving effect to the Transactions, the Company would have had approximately $176.5 million of Senior Indebtedness (excluding unused commitments of approximately $16.1 million under the Senior Credit Facility), all of it representing Indebtedness under the Senior Credit Facility, and $100.0 million of Senior Subordinated Indebtedness, all of it representing Indebtedness under the Notes, and the Subsidiary Debenture Guarantors would have had approximately $181.8 of Debenture Guarantor Senior Indebtedness, $176.5 million of which would have represented guarantees of Indebtedness under the Senior Credit Facility, and $100.0 million of Debenture Guarantor Senior Subordinated Indebtedness. Additional Senior Indebtedness and Senior Subordinated Indebtedness and Debenture Guarantor Senior Indebtedness may be incurred by the Company and the Subsidiary Debenture Guarantors from time to time subject to certain restrictions contained in the Certificate of Designation, the Exchange Indenture, the Senior Credit Facility and the Indenture. In the event of bankruptcy, liquidation or reorganization of the Company or the Subsidiary Debenture Guarantors, the assets of the Company or the Subsidiary Debenture Guarantors will be available to pay obligations on the Exchange Debentures only after all Senior Indebtedness or Debenture Guarantor Senior Indebtedness, as the case may be, has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the Exchange Debentures then outstanding. In addition, under certain circumstances, no payments may be made with respect to the Exchange Debentures if a default exists with respect to certain Senior Indebtedness or Senior Subordinated Indebtedness. Indebtedness outstanding under the Senior Credit Facility is also secured by substantially all of the assets of the Company and its subsidiaries. See "Encumbrances on Assets to Secure Senior Credit Facility." Claims in respect of the Exchange Debentures are effectively subordinated to all liabilities (including trade payables) of any subsidiary of the Company that is not a Subsidiary Debenture Guarantor. See "Description of the Units--Exchange Debentures--Subordination," "Description of the Senior Credit Facility" and "Description of the Exchange Notes."
ENCUMBRANCES ON ASSETS TO SECURE SENIOR CREDIT FACILITY
In addition to being subordinated to all existing and future Senior Indebtedness and Senior Subordinated Indebtedness of the Company (and with respect to the New Senior Exchangeable Preferred Stock, all other liabilities of the Company), the New Senior Exchangeable Preferred Stock and the Exchange Debentures will not be secured by any of the Company's assets. The Company's obligations under the Senior Credit Facility are secured by the Company's inventory, tangible personal property and intangibles and a second mortgage on owned real estate. If the Company becomes insolvent or is liquidated, or if payment under the Senior Credit Facility is accelerated, the lenders under the Senior Credit Facility are entitled to exercise the remedies available to a secured lender under applicable law pursuant to the Senior Credit Facility. Accordingly, such lenders will have a prior claim with respect to such assets and there may not be sufficient assets remaining to pay amounts due on the New Senior Exchangeable Preferred Stock and the Exchange Debentures then outstanding. See "Description of the Senior Credit Facility."
IMPACT OF GENERAL ECONOMIC CONDITIONS
The retailing industry is sensitive to adverse trends in the general economy. The success of the Company's operations depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions (and perceptions of such conditions by consumers) affecting disposable consumer income such as employment, wages and salaries, business conditions, interest rates, availability of credit and taxation, for the economy as a whole and in regional and local markets where the Company operates.
COMPETITION
The retailing business is highly competitive. The Company competes in the sale of merchandise with a variety of other retail merchandisers, including department, discount and specialty stores, many of which have locations nationwide, are larger and have greater financial resources than the Company. In addition, at various times throughout the year, department, discount and specialty stores also offer merchandise at reduced prices similar to that sold by the Company.
VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
The Company's business is highly seasonal, with a significant portion of its net sales and most or all of its EBITDA generated during the fourth quarter, which includes the Christmas season. Net sales in the fourth quarter accounted for over 40% of net sales for each of the last three fiscal years, and EBITDA for the fourth quarters of 1996 and 1995 accounted for approximately 76% and 90%, respectively, of EBITDA for such years. Because a significant percentage of the Company's net sales and EBITDA for a year results from operations in the fourth quarter, the Company has limited ability to compensate for shortfalls in fourth quarter sales or earnings by changes in its operations or strategies in other quarters. A significant shortfall in results for the fourth quarter of any year can thus be expected to have a material adverse effect on the Company's annual results of operations. The Company's quarterly results of operations also may fluctuate significantly as a result of a variety of factors, including the timing of new store openings, net sales contributed by new stores, increases or decreases in comparable store sales, timing of certain holidays, changes in the Company's merchandise, general economic, industry and weather conditions that affect consumer spending and actions of competitors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Seasonality."
MERCHANDISE SUPPLY AND INVENTORY
The success of the Company's closeout business depends upon its ability to identify, locate, select and purchase quality merchandise at attractive prices in order to maintain a balance of product in certain core merchandising categories along with a changing mix of merchandise. The Company has no continuing contracts for the purchase of closeout merchandise and relies on buying opportunities from both existing and new sources, for which it competes with other closeout merchandisers and wholesalers. Although the Company believes that its management has longstanding relationships
with its suppliers and is competitively positioned to continue to seek new sources, there can be no assurance that the Company will be successful in maintaining an adequate continuing supply of quality merchandise at attractive prices.
EXPANSION PROGRAM
The growth of the Company's net sales and net earnings will depend, to a significant extent, on the Company's ability to expand its operations through the opening of new stores in existing and new markets and to operate those stores profitably. The Company operates 315 stores in 33 states and plans to open approximately 32 new stores during 1998. Achieving the Company's expansion goals will depend on a number of factors, including the Company's ability to identify and secure suitable locations on acceptable terms, open new stores in a timely manner, hire and train additional store and supervisory personnel, integrate new stores into its operations on a profitable basis and extend its information systems. There can be no assurance that the Company will be able to achieve its expansion goals on a timely or profitable basis. See "Business-- Business Strategy."
Management believes that cash flow from operating activities and borrowings under the Senior Credit Facility will provide adequate funds to finance the Company's expansion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." However, if these sources of funds are inadequate to finance the Company's expansion, it may require capital from additional sources. There can be no assurance as to the future availability of additional financing or the terms thereof, and failure to obtain such financing on acceptable terms could require the Company to alter its expansion plans or otherwise adversely affect the Company.
CONTROL BY MADISON DEARBORN
Upon consummation of the Transactions, the Company became controlled by Madison Dearborn, which owned approximately 85.8% of the Company's Common Stock outstanding immediately after the Acquisition (approximately 77.2% on a fully diluted basis). Madison Dearborn has the power to elect all of the Company's board of directors, appoint new management and approve any action requiring the approval of the Company's shareholders, including adopting amendments to the Company's Certificate of Incorporation and approving acquisitions or sales of substantially all of the Company's assets. The directors elected by Madison Dearborn have the authority to make decisions affecting the capital structure of the Company, including the issuance of additional indebtedness and the declaration of dividends. There can be no assurance that the interests of Madison Dearborn will not conflict with the interests of holders of the New Senior Exchangeable Preferred Stock, the Exchange Debentures and the Common Stock. See "Management," "Principal Shareholders" and "Certain Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company's future performance will depend, in part, upon the efforts and abilities of the Company's senior management and other key employees, including its buyers. The loss of service of certain of these persons could have a material adverse effect on the Company's business and development. Upon consummation of the Transactions, Lloyd L. Ross, the Company's founder, reduced the amount of time he spends on the Company's affairs. While he continues to serve as Chairman of the Company's Board of Directors, he resigned from his position as Chief Executive Officer and entered into a two-year consulting agreement with the Company. Pursuant to a three-year employment agreement dated December 29, 1997, Jerry M. Smith continues as President and a director and succeeded Mr. Ross as Chief Executive Officer of the Company. Mr. Smith has, however, announced his intention to retire after the expiration of his employment agreement. See "Management--Consulting and Employment Agreements."
CHANGE IN CONTROL
A Change in Control (as defined) could require the Company to refinance substantial amounts of indebtedness, including indebtedness under the Notes, the Senior Credit Facility and the Exchange Debentures, if issued. Upon the occurrence of a Change in Control, each holder of the New Senior Exchangeable Preferred Stock and the Exchange
Debentures would be entitled to require the Company to repurchase the New Senior Exchangeable Preferred Stock or the Exchange Debentures, as the case may be, in whole or in part, at a purchase price equal to, in the case of New Senior Exchangeable Preferred Stock, 101% of the liquidation preference, together with accumulated and unpaid dividends, and in the case of the Exchange Debentures, 101% of the aggregate principal amount thereof, together with accrued and unpaid interest, in each case to the date of purchase. However, there can be no assurance that sufficient funds will be available at the time of any Change in Control to make any required purchases of the New Senior Exchangeable Preferred Stock or the Exchange Debentures, as the case may be, tendered. In addition, the Senior Credit Facility will prohibit the repayment of indebtedness on the Notes, repurchase of the New Senior Exchangeable Preferred Stock or the repayment of indebtedness on the Exchange Debentures by the Company upon a Change in Control, unless and until such time as the indebtedness under the Senior Credit Facility is repaid in full or the lenders under the Senior Credit Facility consent to such repayment or repurchase, as the case may be. The Company's failure to make such repayments or repurchases, as the case may be, in such instances would result in a default under the Certificate of Designation, the Exchange Indenture, the Indenture and the Senior Credit Facility. Future indebtedness of the Company may also contain restrictions or repayment requirements with respect to certain events or transactions that would constitute a Change in Control. The source of funds for any such repayment of the New Senior Exchangeable Preferred Stock, the Exchange Debentures, the Notes or the Senior Credit Facility would be the Company's available cash or cash generated from operating or other sources, including borrowings, sales of equity or funds provided by a new controlling person. In the event of a Change in Control, there can be no assurance that the Company would have sufficient cash to satisfy all of its obligations under the New Senior Exchangeable Preferred Stock, the Exchange Debentures, the Notes and the Senior Credit Facility. The effect of such requirements may make it more difficult or delay attempts by others to obtain control of the Company. See "Description of the Units--New Senior Exchangeable Preferred Stock--Change in Control" and "--The Exchange Debentures--Purchase of Exchange Debentures upon a Change in Control," "Description of the Exchange Notes--Change in Control" and "Description of the Senior Credit Facility."
FRAUDULENT CONVEYANCE AND PREFERENCE CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent conveyance law, if, among other things, the Company or any of the Subsidiary Debenture Guarantors, at the time it incurred the indebtedness evidenced by the Exchange Debentures or its Subsidiary Debenture Guarantee, as the case may be, (i)(a) was or is insolvent or rendered insolvent by reason of such occurrence or (b) was or is engaged in a business transaction of which the assets remaining with the Company or such Subsidiary Debenture Guarantor were unreasonably small or constitute unreasonably small capital or (c) intended or intends to incur, or believed, believes or should have believed that it would incur, debts beyond its ability to repay such debts as they mature and (ii) the Company or such Debenture Subsidiary Guarantor received or receives less than the reasonably equivalent value or fair consideration for the incurrence of such indebtedness, the Exchange Debentures and the Subsidiary Debenture Guarantees could be invalidated or subordinated to all other debts of the Company or such Subsidiary Debenture Guarantors, as the case may be. The Exchange Debentures or Subsidiary Debenture Guarantees could also be invalidated or subordinated if it were found that the Company or the Subsidiary Debenture Guarantor party thereto, as the case may be, incurred indebtedness in connection with the Exchange Debentures or its Subsidiary Debenture Guarantees with the intent of hindering, delaying or defrauding current or future creditors of the Company or such Subsidiary Debenture Guarantor, as the case may be. In addition, the payment of interest and principal by the Company pursuant to the Exchange Debentures or the payment of amounts by a Subsidiary Debenture Guarantor pursuant to a Subsidiary Debenture Guarantee could be voided and required to be returned to the person making such payment, or to a fund for the benefit of the creditors of the Company or such Subsidiary Debenture Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, the Company or a Subsidiary Debenture Guarantor would be considered insolvent if (i) the sum of its debts, including contingent liabilities, were greater than the sum of all of its assets at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature or (ii) it could not pay its debts as they become due.
Additionally, under federal bankruptcy or applicable state insolvency law, if certain bankruptcy or insolvency proceedings were initiated by or against the Company or any Subsidiary Debenture Guarantor within 90 days after any payment by the Company or such Subsidiary Debenture Guarantor with respect to the Exchange Debentures or a Subsidiary Debenture Guarantee, respectively, or after the issuance of a Subsidiary Debenture Guarantee, or if the Company or such Subsidiary Debenture Guarantor anticipated becoming insolvent at the time of such payment or issuance, all or a portion of such payment of such Subsidiary Debenture Guarantee could be avoided as a preferential transfer, and the recipient of any such payment could be required to return such payment.
To the extent any Subsidiary Debenture Guarantees were voided as a fraudulent conveyance or held unenforceable for any other reason, holders of Exchange Debentures would cease to have any claim in respect of such Subsidiary Debenture Guarantor and would be creditors solely of the Company and any Subsidiary Debenture Guarantor, whose Subsidiary Debenture Guarantee was not avoided or held unenforceable. In such event, the claims of holders of Exchange Debentures against the issuer of an invalid Guarantee would be subject to the prior payment of all liabilities and preferred stock claims of such Subsidiary Debenture Guarantor. There can be no assurance that, after providing for all prior claims and preferred stock interests, if any, there would be sufficient assets to satisfy the claims of holders of Exchange Debentures relating to any voided portions of any Subsidiary Debenture Guarantees.
On the basis of its historical financial information, recent operating history and projected financial data, as discussed in "Prospectus Summary," "Unaudited Pro Forma Financial Statements," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company believes that, after giving effect to the indebtedness incurred in connection with the Transactions, it will not be insolvent, will not have unreasonably small assets or capital for the business in which it is engaged and will not incur debts beyond its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE SENIOR EXCHANGEABLE PREFERRED STOCK
The Old Senior Exchangeable Preferred Stock was issued to, and the Company believes is currently owned by, a relatively small number of beneficial owners. Prior to the Preferred Stock Exchange Offer, there has not been any public market for the Old Senior Exchangeable Preferred Stock. The Old Senior Exchangeable Preferred Stock has not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that it is not exchanged for New Senior Exchangeable Preferred Stock by holders who are entitled to participate in this Preferred Stock Exchange Offer. The holders of Old Senior Exchangeable Preferred Stock (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Preferred Stock Exchange Offer are entitled to certain registration rights, and the Company is required to file a Shelf Registration Statement with respect to such Old Senior Exchangeable Preferred Stock. The New Senior Exchangeable Preferred Stock will constitute a new issue of securities with no established trading market. The Company does not intend to list the New Senior Exchangeable Preferred Stock on any national securities exchange or seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchaser has advised the Company that it currently intends to make a market in the New Senior Exchangeable Preferred Stock, but they are not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Preferred Stock Exchange Offer and the pendency of the Shelf Registration Statement. Accordingly, no assurance can be given that an active public or other market will develop for the New Senior Exchangeable Preferred Stock or as to the liquidity of the trading market for the New Senior Exchangeable Preferred Stock. If a trading market does not develop or is not maintained, holders of the New Senior Exchangeable Preferred Stock may experience difficulty in reselling the New Senior Exchangeable Preferred Stock or may be unable to sell them at all. If a market for the New Senior Exchangeable Preferred Stock develops, any such market may be discontinued at any time.
If a public trading market develops for the New Senior Exchangeable Preferred Stock, future trading prices of such securities will depend on many factors including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and
other factors, including the financial condition of the Company, the New Senior Exchangeable Preferred Stock may trade at a discount from their principal amount.
FAILURE TO FOLLOW PREFERRED STOCK EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Senior Exchangeable Preferred Stock in exchange for the Old Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer will be made only after a timely receipt by the Company of such Old Senior Exchangeable Preferred Stock, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of the Old Senior Exchangeable Preferred Stock desiring to tender such Old Senior Exchangeable Preferred Stock in exchange for New Senior Exchangeable Preferred Stock should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Old Senior Exchangeable Preferred Stock for exchange. Old Senior Exchangeable Preferred Stock that is not tendered or is tendered but not accepted will, following the consummation of the Preferred Stock Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof, and, upon consummation of the Preferred Stock Exchange Offer, certain registration rights under the Preferred Stock Registration Rights Agreement will terminate. In addition, any holder of Old Senior Exchangeable Preferred Stock who tenders in the Preferred Stock Exchange Offer for the purpose of participating in a distribution of the New Senior Exchangeable Preferred Stock may be deemed to have received restricted securities, and if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Senior Exchangeable Preferred Stock for its own account in exchange for Old Senior Exchangeable Preferred Stock, where such Old Senior Exchangeable Preferred Stock was acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a Prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock. See "Plan of Distribution." To the extent that Old Senior Exchangeable Preferred Stock is tendered and accepted in the Preferred Stock Exchange Offer, the trading market for untendered and tendered but unaccepted Old Senior Exchangeable Preferred Stock could be adversely affected. See "The Preferred Stock Exchange Offer."
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE NEW SENIOR EXCHANGEABLE
PREFERRED STOCK AND EXCHANGE DEBENTURES; POTENTIAL FOR UNPLANNED DEEMED DIVIDEND INCOME
If the redemption price of the New Senior Exchangeable Preferred Stock exceeds its issue price by more than a de minimis amount, such excess may be treated as a constructive distribution with respect to the New Senior Exchangeable Preferred Stock of additional stock over the term of the New Senior Exchangeable Preferred Stock using a constant interest rate method similar to that used for accruing original issue discount. As a result of the allocation of a portion of the purchase price of the Units to the Common Stock, the New Senior Exchangeable Preferred Stock initially purchased by holders may have a redemption price that exceeds its issue price by more than a de minimis amount, resulting in such constructive distributions. In addition, because the issue price of the New Senior Exchangeable Preferred Stock distributed in lieu of payments of cash dividends will be equal to the fair market value of the New Senior Exchangeable Preferred Stock at the time of distribution, it is possible, depending on the fair market value at that time, that such New Senior Exchangeable Preferred Stock will be issued with a redemption premium large enough to be considered a dividend as described above. In such event, holders would be required to include such premium in income as a distribution over some period in advance of receiving the cash attributable to such income, and such additional New Senior Exchangeable Preferred Stock might trade separately from other New Senior Exchangeable Preferred Stock, which might adversely affect the liquidity of the New Senior Exchangeable Preferred Stock.
The Company may, at its option and under certain circumstances, issue Exchange Debentures in exchange for the New Senior Exchangeable Preferred Stock. Any such exchange will be a taxable event to holders of the New Senior Exchangeable Preferred Stock. Furthermore, the Exchange Debentures may in certain circumstances be treated as having been issued with original issue discount ("OID") for federal income tax purposes. In such event, holders of Exchange Debentures will be required to include such OID (as ordinary income) in income over the life of the Exchange Debentures, in advance of the receipt of the cash attributable to such income.
An Exchange Debenture may be subject to the rules for "applicable high yield discount obligations" ("AHYDOS"), in which case the Company's deduction for OID on such Exchange Debenture will be substantially deferred and a portion of such deduction may be disallowed.
For a description of certain tax consequences to purchasers of the New Senior Exchangeable Preferred Stock offered hereby, see "Certain Federal Income Tax Considerations."
USE OF PROCEEDS
The Preferred Stock Exchange Offer is intended to satisfy certain of the Company's obligations under the Preferred Stock Registration Rights Agreement. The Company will not receive any cash proceeds from the issuance of the New Senior Exchangeable Preferred Stock offered hereby. In consideration for issuing the New Senior Exchangeable Preferred Stock contemplated in this Prospectus, the Company will receive Old Senior Exchangeable Preferred Stock in like liquidation preference, the form and terms of which are the same as the form and terms of the New Senior Exchangeable Preferred Stock (which replace the Old Senior Exchangeable Preferred Stock), except as described herein. The Old Senior Exchangeable Preferred Stock surrendered in exchange for the New Senior Exchangeable Preferred Stock will be retired and canceled and cannot be reissued. Likewise, the Old Notes surrendered in exchange for the Exchange Notes will be retired and canceled and cannot be reissued. Accordingly, neither the issuance of the New Senior Exchangeable Preferred Stock nor the Exchange Notes will result in any increase or decrease in the indebtedness of the Company. As such, no effect has been given to the Preferred Stock Exchange Offer or the exchange offer of the Exchange Notes for the Old Notes in the pro forma financial data included herein.
The proceeds to the Company from the sale of the Units in the Initial Unit Offering were used, together with borrowings under the Financings and the other components of the Equity Investment, to consummate the Acquisition, to repay indebtedness of the Company under the Old Credit Facility and to pay related fees and expenses. See "Prospectus Summary--The Transactions," "Description of the Senior Credit Facility" and "Description of the Exchange Notes."
CAPITALIZATION
The following table sets forth the unaudited historical consolidated capitalization of the Company as of September 30, 1997, and as adjusted on a pro forma basis to give effect to the Transactions as if they had occurred on such date. See "Use of Proceeds." This table should be read in conjunction with the "Selected Consolidated Financial Data" and the related notes thereto, and the Company's consolidated financial statements, including the related notes thereto, included elsewhere in this Prospectus.
September 30, 1997
------------------------------
Actual Pro Forma
------------ -------------
(in thousands)
Debt:
Old Credit Facility................... $ 56,127 $ --
Revolving Credit Facility (a)......... -- 66,486
Term Loans............................ -- 110,000
Old Notes............................. -- 100,000
Mortgages and capitalized leases...... 5,282 5,282
------------ ------------
Total debt........................... 61,409 281,768
Redeemable preferred stock:
Old Senior Exchangeable Preferred Stock.. -- 24,643
Junior Redeemable Preferred Stock........ -- 86,010
------------ ------------
Total redeemable preferred stock.... -- 110,653
Junior Perpetual Preferred Stock......... -- 1,918
Common Stock............................. 17,017 5,357
Retained earnings (deficit).............. 64,196 (241,388)
------------ ------------
Total shareholders' equity (deficit). 81,213 (234,113)
------------ ------------
Total capitalization........... $142,622 $ 158,308
============ ============
|
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements (the "Pro Forma Financial Statements") have been derived by the application of pro forma adjustments to the Company's historical financial statements included elsewhere in this Prospectus. The pro forma consolidated statement of operations for the periods presented gives effect to the Transactions as if they were consummated on January 1, 1996. The pro forma consolidated balance sheet gives effect to the Transactions as if they had occurred on September 30, 1997. The adjustments, which include adjustments relating to the Transactions, are described in the accompanying notes. The Pro Forma Financial Statements should not be considered indicative of actual results that would have been achieved had the Transactions been consummated on the date or for the periods indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period. The Pro Forma Financial Statements should be read in conjunction with the Company's historical financial statements and the notes thereto included elsewhere in this Prospectus.
The Acquisition has been accounted for as a recapitalization and, as such, has no impact on the historical basis of assets and liabilities.
TUESDAY MORNING CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro Forma
ASSETS Actual Adjustments Pro Forma
---------- ------------- -------------
Cash and cash equivalents........................ $ 3,029 $ (3,029) (a) $ --
Inventories...................................... 159,687 -- 159,687
Income tax receivable............................ -- 7,143 (b) 7,143
Other current assets............................. 1,516 (63) (c) 1,453
--------- ---------- ----------
Total current assets........................... 164,232 4,051 168,283
Net property, plant and equipment................ 31,439 -- 31,439
Other assets..................................... 3,544 (47) (c) 3,497
Debt issuance costs.............................. -- 9,381 (d) 9,381
--------- ---------- ----------
Total assets................................... $199,215 $ 13,385 $ 212,600
========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages on land, buildings and equipment....... $ 1,021 $ -- $ 1,021
Revolving Credit Facility........................ -- 51,486 (e) 51,486
Term Loans....................................... -- 1,350 (f) 1,350
Capital lease obligation......................... 213 -- 213
Accounts payable................................. 45,181 -- 45,181
Accrued expenses................................. 6,311 -- 6,311
Income taxes payable............................. 2,301 (2,301) (b) --
--------- ---------- ----------
Total current liabilities...................... 55,027 50,535 105,562
Mortgages on land, buildings and equipment....... 3,828 -- 3,828
Revolving Credit Facility........................ 56,127 (41,127) (e) 15,000
Term Loans....................................... -- 108,650 (f) 108,650
Old Notes........................................ -- 100,000 (f) 100,000
Capital lease obligation......................... 220 -- 220
Deferred income taxes............................ 2,800 -- 2,800
Redeemable preferred stock:
Old Senior Exchangeable Preferred Stock........ -- 24,643 24,643
Junior Redeemable Preferred Stock.............. -- 86,010 86,010
Junior Perpetual Preferred Stock................. -- 1,918 1,918
Common Stock..................................... 17,017 (11,660) 5,357
Retained earnings................................ 64,196 (305,584) (241,388)
--------- ---------- ----------
Total shareholders' equity (deficit)........ 81,213 (315,326) (g) (234,113)
--------- ---------- ----------
Total liabilities and shareholders' equity.. $199,215 $ 13,385 $ 212,600
========= ========== ==========
|
See accompanying notes.
TUESDAY MORNING CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) The net effect of $(3,029) represents the adjustments to the Company's cash and debt balances to account for the effects of the Acquisition and the Financings.
Total Sources:
Term Loans....................... $ 110,000
Revolving Credit Facility........ 66,486
Old Notes........................ 100,000
Units............................ 25,000
Junior preferred stock issuance.. 87,928
Common Stock issuance............ 5,000
-----------
$ 394,414
-----------
Total Uses:
Acquisition consideration........ $ 323,016
Old Credit Facility.............. 56,127
Fees and expenses................ 18,300
-----------
$ 397,443
-----------
Net.............................. $ (3,029)
===========
|
(b) The total of the income tax payable and income tax receivable adjustments $(9,444) is primarily the tax benefit from recognizing the compensation expense created by payments to management for their stock options.
(c) These adjustments write off the remaining balance of financing fees related to the Old Credit Facility.
(d) The pro forma adjustment to debt issuance costs is to reflect fees and expenses related to the Senior Credit Facility and the Initial Offering.
(e) Up to $90,000 is available under the Revolving Credit Facility for working capital and general corporate purposes, subject to certain borrowing base limitations. Had the Acquisition occurred on September 30, 1997, $66,486 would have been drawn in connection with the Acquisition, which would be $10,359 more than amounts drawn on the Old Credit Facility. The Revolving Credit Facility contains a $15,000 "cleandown" provision for 30 consecutive days. The amount in excess of the $15,000 is considered to be a current liability.
(f) Reflects the following:
Expected Term Current Long Term Totals
------------- -------- ----------- --------
Senior Credit Facility:
Term Loan A.................................. 5 years $ 1,000 $ 39,000 $ 40,000
Term Loan B.................................. 7 years 350 69,650 70,000
Notes............................................ 10 years -- 100,000 100,000
--------- --------- ---------
Total................................ $ 1,350 $ 208,650 $ 210,000
========= ========= =========
|
(g) The following represents the net change in shareholders' equity as a result of the Transactions.
Stock:
------
Issuance of Junior Perpetual Preferred
Stock.......................................................... $ 1,918
---------
Issuance of Common Stock............................................ $ 5,357
Redemption of existing common stock(1).............................. (17,017)
---------
$ (11,660)
---------
Retained Earnings:
------------------
Payments to previous shareholders at $25 per share
in excess of common stock redemption(1)........................... $(280,925)
Acquisition fees (non-debt) and expenses............................ (8,919)
Compensation expense from payments to
management for stock options (after-tax)(2)....................... (15,671)
Financing fees from Old Credit Facility
(after-tax)....................................................... (69)
---------
$(305,584)
---------
Net.......................................................... $(315,326)
=========
|
(1) The total purchase price to existing shareholders is $297,942 (11,917,681
shares at $25.00 per share). This is accounted for as a reduction to common
stock of $17,017 and retained earnings of $280,925.
(2) Represents redemption of options to purchase 1,184,863 shares of common
stock at $25.00 per share, net of applicable exercise price and tax
benefit.
TUESDAY MORNING CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Nine Months Ended
September 30, 1997
----------------------------------------------
Pro Forma
Actual Adjustments Pro Forma
----------- -------------- -------------
Net sales............................................ $179,058 $ -- $179,058
Cost of sales........................................ 112,620 -- 112,620
--------- -------- --------
Gross profit...................................... 66,438 -- 66,438
Selling, general and administrative expenses......... 56,193 263 (a) 56,456
--------- -------- --------
Operating income.................................. 10,245 (263) 9,982
Other income (expense):
Interest income. ................................. 250 -- 250
Interest expense.................................. (2,330) (16,601) (b) (18,931)
Other income...................................... 420 -- 420
--------- -------- --------
(1,660) (16,601) (18,261)
--------- -------- --------
Income (loss) before income taxes............... 8,585 (16,864) (8,279)
Income tax (benefit)................................. 3,219 (6,324) (c) (3,105)
--------- -------- --------
Net income (loss)............................... 5,366 (10,540) (5,174)
Dividends and accretion of discount on
preferred stock..................................... -- (5,296) (d) (5,296)
--------- -------- --------
Earnings (loss) applicable to
common shareholders............................ $ 5,366 $(15,836) $(10,470)
========= ======== ========
Net income (loss) per common share................... $ 0.43 $ -- $ (2.79)
Weighted average common share and share equivalents.. 12,556 -- 3,750 (e)
|
See accompanying notes.
TUESDAY MORNING CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(a) Represents prorated portion of annual fees for management and advisory services rendered by Madison Dearborn.
(b) Pro forma interest expense reflects the 11% interest rate on the Notes, the interest rates applicable to the Senior Credit Facility and amortization expense from capitalized financing fees of $999.
(c) The adjustment reflects the tax effect of the deductible adjustments at the Company's effective tax rate of 37.5%.
(d) The adjustment reflects the effect of preferred stock dividends on net earnings applicable to holders of Common Stock. The Company is restricted from paying cash dividends on junior preferred stock under the terms of the Indenture, the Senior Credit Facility, the Certificate of Designation and, if applicable, the Exchange Indenture.
(e) Represents the number of shares of Common Stock outstanding immediately after the recapitalization.
TUESDAY MORNING CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Twelve Months Ended
December 31, 1996
-------------------------------------------------
Pro Forma
Actual Adjustments (a) Pro Forma
-------------- ----------------- ------------
Net sales............................................ $ 256,756 $ -- $ 256,756
Cost of sales........................................ 165,189 -- 165,189
-------------- ---------------- ------------
Gross profit...................................... 91,567 -- 91,567
Selling, general and administrative expenses......... 71,167 350 (b) 71,517
-------------- ---------------- ------------
Operating income.................................. 20,400 (350) 20,050
Other income (expense):
Interest income................................... 275 -- 275
Interest expense.................................. (2,767) (22,333) (c) (25,100)
Other income...................................... 600 -- 600
-------------- ---------------- ------------
(1,892) (22,333) (24,225)
-------------- ---------------- ------------
Income (loss) before income taxes............... 18,508 (22,683) (4,175)
Income tax (benefit)................................. 6,992 (8,506) (d) (1,514)
-------------- ---------------- ------------
Net income (loss)................................. 11,516 (14,177) (2,661)
Dividends and accretion of discount on
preferred stock.................................... -- (7,061) (e) (7,061)
-------------- ---------------- ------------
Earnings (loss) applicable to
common shareholders................................ $ 11,516 $ (21,238) $ (9,722)
============== ================ ============
Net income (loss) per share.......................... $ 0.93 $ -- $ (2.59)
Weighted average common share and share equivalents.. 12,323 -- 3,750 (f)
|
See accompanying notes.
TUESDAY MORNING CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(a) Does not give effect to non-recurring charges of $25,074 for compensation expense from the payment to management for their stock options, $9,400 for non-debt issuance costs and $280 for writing off the financing fees related to the Old Credit Facility.
(b) Represents annual fees for management and advisory services rendered by Madison Dearborn.
(c) Pro forma interest expense reflects the 11% interest rate on the Notes, the interest rates applicable to the Senior Credit Facility and amortization expense from capitalized financing fees of $1,332.
(d) The adjustment reflects the tax effect of the deductible adjustments at the Company's effective tax rate of 37.5%.
(e) The adjustment reflects the effect of preferred stock dividends on net earnings applicable to holders of Common Stock. The Company is restricted from paying cash dividends on junior preferred stock under the terms of the Indenture, the Senior Credit Facility, the Certificate of Designation and, if applicable, the Exchange Indenture.
(f) Represents the number of shares of Common Stock outstanding immediately after the recapitalization.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial and operating data presented below for, and as of the end of, each of the fiscal years in the five-year period ended December 31, 1996 is derived from the audited consolidated financial statements of the Company. In the opinion of the Company, the unaudited financial information presented for the nine months ended September 30, 1996 and September 30, 1997 contains all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial information included therein. Results for interim periods are not necessarily indicative of results for the full year. The selected unaudited pro forma statement of operations data for the twelve months ended December 31, 1996 and the nine months ended September 30, 1997 gives effect to the Transactions as if they had occurred on January 1, 1996. The selected unaudited pro forma balance sheet data as of September 30, 1997 gives effect to the Transactions as if they had occurred on such date. The pro forma data is not necessarily indicative of the results that actually would have been achieved had the Transactions occurred on such date or that may be achieved in the future. This selected information should be read in conjunction with the Consolidated Financial Statements and the unaudited pro forma financial statements of the Company and the notes thereto and "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $160,075 $175,790 $190,081 $210,265 $256,756 $138,563 $ 179,058
Cost of sales...................... 104,581 123,148 126,931 137,427 165,189 88,199 112,620
-------- -------- -------- -------- -------- -------- ---------
Gross profit....................... 55,494 52,642 63,150 72,838 91,567 50,364 66,438
Selling, general and
administrative expenses.......... 45,315 54,895 57,523 63,040 71,167 48,134 56,193
-------- -------- -------- -------- -------- -------- ---------
Operating Income................... 10,179 (2,253) 5,627 9,798 20,400 2,230 10,245
Net interest income
(expense) and other income....... 36 (319) (1,611) (2,534) (1,892) (1,518) (1,660)
-------- -------- -------- -------- -------- -------- ---------
Earnings (loss) before income
taxes and cumulative effect
of accounting changes............ 10,215 (2,572) 4,016 7,264 18,508 712 8,585
Cumulative effect of accounting
changes (a)...................... 1,599 564 --- --- --- --- ---
Net earnings (loss)................ $ 8,171 $ (1,052) $ 2,651 $ 4,773 $ 11,516 $ 456 $ 5,366
BALANCE SHEET DATA (END OF
PERIOD):
Working capital.................... $ 48,053 $ 36,765 $ 32,593 $ 39,115 $ 49,568 $ 80,367 $ 109,205
Total assets....................... 97,175 88,967 89,403 94,243 121,757 151,668 199,215
Total debt......................... 13,697 8,997 10,127 8,398 6,622 48,851 61,409
Senior Exchangeable
Preferred Stock.................. -- -- -- -- -- -- --
Junior Redeemable Preferred
Stock............................ -- -- -- -- -- -- --
Total shareholders' equity
(deficit)........................ 64,564 55,724 58,630 63,648 75,528 64,103 81,213
OTHER FINANCIAL DATA:
EBITDAR (b)........................ $ 21 $ 12,303 $ 21,920 $ 27,550 $ 39,874 $ 16,499 $ 26,322
Rental expense..................... 8,409 10,692 11,782 12,577 13,967 10,253 11,953
-------- -------- -------- -------- -------- -------- ---------
EBITDA (b)......................... $ 12,611 $ 1,611 $ 10,138 $ 14,973 $ 25,907 $ 6,246 $ 14,369
======== ======== ======== ======== ======== ======== =========
Cash flows provided by (used in):
Operating activities............. $(18,407) $ 14,630 $ 12,056 $ 6,329 $ 10,592 $(42,789) $ (57,703)
Investing activities............. (5,166) (6,497) (7,992) (3,104) (4,701) (3,341) (5,129)
Financing activities............. 3,395 (7,932) (1,257) (1,484) (1,413) 40,453 55,110
Capital expenditures............... 5,087 4,850 5,693 2,692 4,233 2,935 4,756
Gross margin....................... 34.7% 30.0% 33.2% 34.6% 35.7% 36.4% 37.1%
S,G&A as a % of net sales.......... 28.3% 31.2% 30.3% 30.0% 27.7% 34.7% 31.4%
EBITDA margin...................... 7.9% 0.9% 5.3% 7.1% 10.1% 4.5% 8.0%
Ratio of EBITDA to net
interest expense................. -- -- -- -- -- -- --
Ratio of long-term debt to
EBITDA (c)....................... -- -- -- -- -- -- --
Ratio of earnings to fixed
charges (d)...................... 3.9x -- 1.6x 2.0x 3.5x 1.1x 2.4x
Deficiency of earnings to
cover fixed changes.............. -- 2,572 -- -- -- -- --
Ratio of earnings to
combined fixed changes and
preferred stock dividends........ 3.9x -- 1.6x 2.0x 3.5x 1.1x 2.4x
Deficiency of earnings to cover
combined fixed charges and
preferred stock dividends........ -- 2,572 -- -- -- -- --
SELECTED STORE DATA:
Comparable store sales
increases (decreases)............ 8.2% (3.0)% 4.2% 6.4% 14.0% 11.7% 18.6%
Average sales per store............ $ 873 $ 796 $ 792 $ 829 $ 925 $ 512 $ 600
STORES:
Beginning of period................ 150 190 235 246 260 260 286
Opened........................... 44 48 22 32 33 23 20
Closed........................... (4) (3) (11) (18) (7) (7) (2)
-------- -------- -------- -------- -------- -------- ---------
End of period...................... 190 235 246 260 286 276 304
======== ======== ======== ======== ======== ======== =========
Pro Forma
Twelve Pro Forma
Months Nine Months
Ended Ended
December September
31, 30,
1996 1997
--------- ---------
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 256,756 $ 179,058
Cost of sales...................... 165,189 112,620
--------- ---------
Gross profit....................... 91,567 66,438
Selling, general and
administrative expenses.......... 71,517 56,456
--------- ---------
Operating Income................... 20,050 9,982
Net interest income
(expense) and other income....... (24,225) (18,261)
--------- ---------
Earnings (loss) before income
taxes and cumulative effect
of accounting changes............ (4,175) (8,279)
Cumulative effect of accounting
changes (a)...................... -- --
Net earnings (loss)................ $ (2,661) $ (5,174)
BALANCE SHEET DATA (END OF
PERIOD):
Working capital.................... $ 46,863 $ 63,921
Total assets....................... 127,387 209,719
Total debt......................... 218,631 281,768
Senior Exchangeable
Preferred Stock.................. 24,643 24,643
Junior Redeemable Preferred
Stock............................ 86,010 86,010
Total shareholders' equity
(deficit)........................ (241,746) (234,113)
OTHER FINANCIAL DATA:
EBITDAR (b)........................ $ 39,524 $ 26,059
Rental expense..................... 13,967 11,953
--------- ---------
EBITDA (b)......................... $ 25,557 $ 14,106
========= =========
Cash flows provided by (used in):
Operating activities............. $ (10,409) $ (73,305)
Investing activities............. (4,701) (5,129)
Financing activities............. 207,298 52,350
Capital expenditures............... 4,233 4,756
Gross margin....................... 35.7% 37.1%
S,G&A as a % of net sales.......... 27.9% 31.5%
EBITDA margin...................... 10.0% 7.9%
Ratio of EBITDA to net
interest expense................. 1.1x .8x
Ratio of long-term debt to
EBITDA (c)....................... 8.5x 16.1x
Ratio of earnings to fixed
charges (d)...................... -- --
Deficiency of earnings to
cover fixed changes.............. 4,175 8,279
Deficiency of earnings to cover
combined fixed charges and
preferred stock dividends........ 15,208 16,554
SELECTED STORE DATA:
Comparable store sales
increases (decreases)............ 14.0% 18.6%
Average sales per store............ 9.25 $ 600
STORES:
Beginning of period................ 260 286
Opened........................... 33 2
Closed........................... (7) (2)
--------- ---------
End of period...................... 286 304
========= =========
|
(a) Cumulative effect of accounting changes represents changes in the method of
accounting for inventories in 1992 and for income taxes in 1993.
(b) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDAR represents EBITDA plus rental expense. While EBITDA
and EBITDAR should not be construed as substitutes for operating income or
as better measures of liquidity than cash flows from operating activities,
which are determined in accordance with generally accepted accounting
principles, they are included to provide additional information with
respect to the ability of the Company to meet future debt service, capital
expenditure and working capital requirements.
(c) Total long-term debt excludes the outstanding balance under the Revolving
Credit Facility.
(d) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income before provision for income taxes and
cumulative effect of accounting changes plus fixed charges. "Fixed charges"
consist of interest expense, amortization of deferred financing costs and
the portion of rental expense assumed to represent interest.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the consolidated historical and unaudited pro forma financial statements of the Company and the related notes thereto appearing elsewhere in this Prospectus.
RECENT DEVELOPMENTS - UNAUDITED
The Transaction was consummated on December 29, 1997. Net sales for the year December 31, 1997 increased $70.5 million, or 27.5%, to $327.3 million from $256.8 million for the comparable period in 1996. Average store sales for 1997 were approximately $1,066,000, as compared to $925,000 for 1996. During the year ended December 31, 1997, the Company generated comparable store sales growth of 18% and EBITDA before Transaction expenses of $41.6 million as compared to EBITDA of $25.9 million for the comparable period in 1996. Operating income decreased $18.5 million from $20.4 million in 1996 to $1.9 million in 1997. Compensation paid in lieu of options of $25 million and non-debt fees and expenses of $9.4 million are included in operating income for the year ended December 31, 1997. In addition, net current assets at December 31, 1997 decreased by $39.8 million from September 30, 1997, due to the sell down of inventory during the holiday season. All amounts are unaudited. See "-- Seasonality."
RESULTS OF OPERATIONS
The following table sets forth certain financial information from the Company's consolidated statements of operations expressed as a percentage of net sales. There can be no assurance that the trends in sales growth or operating results will continue in the future.
Nine Months Ended
Year Ended December 31, September 30,
----------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ----- ------ ------
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................. 66.8 65.4 64.3 63.7 63.0
------ ------ ----- ------ ------
Gross profit.................................. 33.2 34.6 35.7 36.4 37.1
Selling, general and administrative expenses.. 30.3 30.0 27.7 34.7 31.4
------ ------ ----- ------ ------
Operating income.............................. 3.0 4.7 7.9 1.6 5.7
Net interest income and other income.......... 0.9 1.2 0.7 1.1 0.9
------ ------ ----- ------ ------
Earnings before income taxes.................. 2.1 3.5 7.2 0.5 4.8
Net earnings.................................. 1.4% 2.3% 4.5% 0.3% 3.0%
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Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30, 1996
Net sales for the nine months ended September 30, 1997 increased $40.5 million, or 29.2%, to $179.1 million from $138.6 million for the comparable period in 1996. The increase in net sales for the period was the result of $13.9 million in sales from new stores open during the period and from a 19% increase in comparable store sales. The increase in comparable store sales was the result of improvements in product selection, increase in the average price of items sold and the continuing beneficial effects of the changes implemented in 1993 and 1994 with respect to the size and training of the Company's buying staff and the Company's buying and merchandising policies. The Company also benefited from increases in the frequency of shipments of merchandise to its stores and average store level inventory, which resulted in an increase in customer visits and a higher number of transactions.
Gross profit increased $16.1 million, or 31.9%, to $66.4 million from $50.4 million for the comparable period in 1996. Gross profit as a percentage of net sales increased from 36.4% to 37.1%. This increase was primarily attributable to the leveraging of the Company's distribution costs, which remain relatively fixed in relation to the increase in net sales.
Selling, general and administrative expenses increased $8.1 million, or 16.8%, to $56.2 million from $48.1 million for the comparable period in 1996. However, these expenses as a percentage of net sales declined to 31.4% from 34.7% for the comparable period in 1996. These expenses are primarily incurred at the store level and are relatively fixed, and therefore have also benefited from the increase in comparable store sales.
Operating income increased $8.1 million, or 368.2%, to $10.2 million from $2.2 million for the comparable period in 1996. Operating income as a percentage of net sales increased from 1.6% to 5.7%. These increases were the result of the factors described above.
Income tax expense increased from 36.0% of net income to 37.5% of net income due to reduced tax planning opportunities, and an increase in the Company's federal tax bracket.
Other income and expense remained relatively constant. Other income represented interest income, primarily in the form of sales tax discounts which increased as a result of the Company's increase in net sales, and rental income derived from a strip-center shopping area adjacent to the Company's headquarters. Other expense represented interest expense and remained relatively constant due to similar borrowing levels and interest rates.
For the reasons set forth above, net income for the nine months ended September 30, 1997 increased $4.9 million, to $5.4 million from $0.5 million for the comparable period in 1996.
1996 Compared to 1995
Net sales for the year ended December 31, 1996 increased $46.5 million, or 22.1%, to $256.8 million from $210.3 million for the year ended December 31, 1995. The increase in net sales was the result of $22.9 million in sales from new stores open during the period and from a 14% increase in comparable store sales. The increase in comparable store sales was comprised of a 9.3% increase in the number of transactions and a 4.1% increase in the average transaction amount. The increase was primarily the result of continued improvement in merchandise selection, pricing and mix. In 1996, the Company began to realize the full benefits of its initiative begun in 1993 to increase the staffing and training of its buying team. By year end 1996, the size of the Company's buying team had more than doubled from its size in 1993, which allowed the Company to continue to develop its strategy of increasing the number of individual products that it carries and to focus its buying activities on areas of individual buyer expertise.
Gross profit increased $18.7 million, or 25.7%, to $91.6 million from $72.8 million for the year ended December 31, 1995. Gross profit as a percentage of net sales increased to 35.7% from 34.6% in 1995. These increases were primarily achieved through the leveraging of distribution, freight and buying costs, which increased at a rate less than the increase in sales. The remainder of this improvement was due to a reduction in markdowns, offset by a slight increase in product cost.
Selling, general and administrative expenses increased $8.1 million, or 12.9%, to $71.2 million from $63.0 million in 1995. However, these expenses declined as a percentage of net sales to 27.7% from 30.0% in 1995. These expenses were primarily related to store operations. The decrease in these expenses as a percentage of net sales was the result of the leverage obtained from the significant increases in sales.
Operating income increased $10.6 million, or 108.2%, to $20.4 million from $9.8 million for 1995. Operating income as a percentage of net sales increased from 4.7% to 7.9% in 1996. These increases were due to the improvements in gross profit and selling, general and administrative expenses discussed above.
The Company's income tax rate increased both at the Federal and state levels. Federal tax rate increased from 34.0% to 35.0% due to the increase in the Company's earnings and an increase in the Company's tax bracket. The Company's state tax rate increased from 0.3% in 1995 to 2.8% in 1996, because loss carry- forwards utilized in 1995 were no longer available in 1996, because of tax rate increases and because of reduced tax planning opportunities.
Interest expense declined by approximately $0.6 million in 1996 due to reduced average borrowings during the year, which was the result of cash flow from 1995 operations and reduced interest rates negotiated during 1996.
For the reasons set forth above, net income for the year ended December 31, 1996 increased $6.7 million, or 139.6%, to $11.5 million from $4.8 million for the year ended December 31, 1995.
1995 Compared to 1994
Net sales for the year ended December 31, 1995 increased $20.2 million, or 10.6%, to $210.3 million from $190.1 million for the year ended December 31, 1994. The increase in net sales was the result of $17.7 million in sales from new stores open during the period and from a 6.4% increase in comparable store sales. The increase in comparable store sales was comprised of a 5.4% increase in the number of transactions and a 1.1% increase in the average transaction amount. These improvements came in several areas. Product selection, pricing and mix continued to improve due to the increased number and expertise of new buyers which were added in 1994 and 1995. The buyers increased their travel throughout the world to obtain better values and to eliminate middlemen. Buyers were able to focus on areas where they have significant expertise and were better able to find the bargains that allow the Company to provide value to its customers and improve product selection. As examples, the Company added buyers with expertise in rugs, sporting goods, toys, seasonal items, housewares, and lawn and garden which allowed for expansion of these categories. The point of sale system, which was installed in 1994, provided the Company with more timely information regarding the rate of sale of its products and allowed management to monitor and more accurately plan markdowns.
Gross profit increased $9.7 million, or 15.3%, to $72.8 million from $63.2 million in 1994. Gross profit as a percentage of net sales increased 1.4 percentage points in 1995, from 33.2% to 34.6%. These increases were primarily due to improvements in product cost attributable to the expertise of the buyers hired in 1994 and 1995 and to the leveraging of distribution, freight and buying costs, which increased less than the increase in sales. Gross profit in 1995 also increased due to reductions in shrink. Shrink improved in 1994 and 1995 as a result of the enhancements made in the Company's loss prevention program and the installation of electronic article surveillance equipment in the Company's stores.
Selling, general and administrative expenses increased $5.5 million, or 9.6%, to $63.0 million from $57.5 million in 1995, which was slightly less than the increase in net sales. These expenses were primarily store level expenses and were relatively fixed on a per store basis. The leverage obtained reduced these expenses as a percentage of sales from 30.3% to 30.0%.
Income tax expense increased from 34.0% to 34.3% due to an increase in state income taxes which were lower in 1994 due to loss carry forwards, some of which were fully utilized in 1994.
Interest expense increased $0.9 million, or 35%, due to increased borrowing levels and increased interest rates on the Company's revolving credit facility.
For the reasons set forth above, net income for the year ended December 31, 1995 increased $2.1 million, or 77.8%, to $4.8 million from $2.7 million for the year ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with funds generated from operating activities and borrowings under the Old Credit Facility.
Net cash provided (used) by operating activities for the fiscal years ended December 31, 1994, 1995, and 1996 and the nine months ended September 30, 1996 and 1997 was $12.1 million, $6.3 million, $10.6 million, $(42.8) million and $(57.7) million, respectively. Increases in net cash provided by operating activities for the above periods were attributable to increases in operating income, and for 1994, reduction in inventory levels. Uses of net cash by operating activities was the result of seasonal increases in inventory levels. Cash and cash equivalents as of December 31, 1994, 1995, 1996 and September 30, 1996 and 1997 were $4.5 million, $6.3 million, $10.8 million, $0.6 million and $3.0 million, respectively.
Capital expenditures, principally associated with new store openings, warehouse and system enhancements and maintenance capital expenditures, were $5.7 million, $2.7 million and $4.2 million for 1994, 1995 and 1996, respectively, and are expected to be approximately $5.1 million for 1997 and approximately $4.7 million for 1998.
As part of the Acquisition, the Company entered into the Senior Credit Facility, which is comprised of the $110.0 million Term Loans and the $90.0 million Revolving Credit Facility. Subject to compliance with the terms of the Senior Credit Facility and the Indenture, borrowings under the Revolving Credit Facility may be increased by $25.0 million to accommodate future growth and for certain other purposes. At September 30, 1997, on a pro forma basis after giving effect to the Transactions, the Company would have had outstanding $110.0 million under the Term Loans and $66.5 million under the Revolving Credit Facility and would have had remaining availability thereunder of $16.1 million. At November 30, 1997, on a pro forma basis after giving effect to the Transactions (including the payment of $18.3 million in transaction fees), the Company would have had approximately $18.4 million in remaining availability under the Revolving Credit Facility. At Closing, the Company had significantly greater availability under the Revolving Credit Facility as a result of cash generated during the fourth quarter. The Term Loan A loans and the Revolving Credit Facility loans mature on the fifth anniversary of the Closing, and the Term Loan B loans mature on the seventh anniversary of the Closing. For a consecutive 30-day period, measured from April 1 through March 31, beginning in April 1998, the aggregate principal amount of loans outstanding under the Revolving Credit Facility is not to exceed $15.0 million. See "Description of the Senior Credit Facility."
Upon consummation of the Transactions, the Company's total debt and interest charges increased significantly. Interest payments on the Notes, under the Senior Credit Facility and on the Exchange Debentures, if issued, represent significant liquidity requirements for the Company. The Notes require semi- annual interest payments, and interest on the loans under the Senior Credit Facility are due quarterly. After December 15, 2002, the Company will be required to pay dividends on the Senior Exchangeable Preferred Stock in cash. The Company anticipates that its cash flow generated from operations and borrowings under the Senior Credit Facility will be sufficient to fund the Company's working capital needs, planned capital expenditures, scheduled interest payments (including interest payments on the Notes and amounts outstanding under the Senior Credit Facility) and scheduled dividend payments on the Senior Exchangeable Preferred Stock for the foreseeable future. See, however, "Risk Factors--Substantial Leverage and Debt Service; Restrictions on Indebtedness." The Company has from time to time received expressions of interest with respect to the property on which its headquarters is located in Dallas, Texas and in the future may consider selling such property as a means of raising additional cash.
The instruments governing the Company's indebtedness, including the Certificate of Designation, the Exchange Indenture, the Senior Credit Facility and the Indenture, contain financial and other covenants that restrict, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company. Such limitations, together with the highly leveraged nature of the Company, could limit corporate and operating activities, including the Company's ability to invest in opening new stores. See "Risk Factors-- Substantial Leverage and Debt Service; Restrictions on Indebtedness."
SEASONALITY
The Company has historically experienced, and the Company expects to continue to experience, seasonal fluctuations in its business, with a significant percentage of its net sales and most or all of its EBITDA being realized in the fourth fiscal quarter, which includes the Christmas selling season. Net sales in the fourth quarter accounted for over 40% of annual net sales for each of the last three fiscal years, and EBITDA for the fourth quarters of 1996 and 1995 accounted for approximately 76% and 90%, respectively, of annual EBITDA for such years. Because a significant percentage of the Company's net sales and EBITDA for a year results from operations in the fourth quarter, the Company has limited ability to compensate for shortfalls in fourth quarter sales or earnings by changes in its operations or strategies in other quarters. A significant shortfall in results for the fourth quarter of any year can thus be expected to have a material adverse effect on the Company's annual results of operations. See "Risk Factors--Variability of Quarterly Results and Seasonality."
The following table illustrates the seasonality of the Company's net sales, EBITDA and net earnings (loss) by quarter for 1995 and 1996.
TUESDAY MORNING SEASONALITY
(Dollars in thousands)
Net Sales EBITDA Net Earnings (Loss)
----------------- ----------------- -------------------
1996
First Quarter $ 35,740 13.9% $ 532 2.0% $ (676) (5.9)%
Second Quarter 54,286 21.2 2,484 9.6 434 3.8
Third Quarter 48,537 18.9 3,230 12.5 698 6.1
Fourth Quarter 118,193 46.0 19,661 75.9 11,060 96.0
-------- ------ ------- ------ ------- ------
Total $256,756 100.0% $25,907 100.0% $11,516 100.0%
======== ====== ======= ====== ======= ======
1995
First Quarter $ 29,958 14.2% $(1,564) (10.4)% $(2,046) (42.9)%
Second Quarter 47,977 22.8 1,702 11.4 (155) (3.2)
Third Quarter 38,240 18.2 1,412 9.4 (336) (7.0)
Fourth Quarter 94,090 44.8 13,423 89.6 7,310 153.1
-------- ------ ------- ------ ------- ------
Total $210,265 100.0% $14,973 100.0% $ 4,773 100.0%
======== ====== ======= ====== ======= ======
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NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" which is effective for both interim and annual periods ending after December 15, 1997. Statement 128 requires the disclosure of basic and diluted earnings per share, which differ from the previously reported primary and fully diluted earnings per share. The Company has not yet determined the effect of this Statement on previously reported earnings per share.
INFLATION
In management's opinion, changes in net sales and net earnings that have resulted from inflation and changing prices have not been material during the periods presented. There is no assurance, however, that inflation will not materially affect the Company in the future.
BUSINESS
GENERAL
Tuesday Morning is the largest closeout retailer of upscale gift and home furnishings merchandise in the United States, with 315 stores in 33 states. The Company operates its stores during seven annual "sales events" that last from four to seven weeks, while closing them for the remaining weeks of the year. Tuesday Morning does not sell seconds, irregulars or factory rejects, but rather specializes in first quality, brand name merchandise such as Ralph Lauren bed linens, Waterman pens, Limoges hand-decorated boxes, Mikasa dishes, Farberware cookware, Daum French crystal, Martex bath towels, Fisher-Price toys, Samsonite luggage and Spode china. The Company purchases its merchandise at closeout and sells it at prices that are 50% to 80% below those generally charged by department and specialty stores. The Company believes that its event-based selling strategy, combined with high quality, reasonably priced merchandise, attracts upscale "bargain hunters" with strong loyalty to the Company.
The Company was formed and opened its first store in 1974. Since its initial public offering in 1986, the Company has increased its number of stores from 63 to 315, and has achieved compound annual growth rates for sales and EBITDA of 16.1% and 16.6%, respectively. During the twelve months ended September 30, 1997, the Company generated comparable store sales growth of 18% and net sales and EBITDA of $297.3 million and $34.1 million, respectively. This represents an increase of 27.8% and 72.5%, respectively, over sales and EBITDA for the twelve months ended September 30, 1996.
BUSINESS STRENGTHS
The Company's success has been largely based on the following strengths:
Unique Event-Based Format. The Company distinguishes itself from other retailers with a unique event-based selling strategy, creating the equivalent of seven "grand openings" each year. The Company believes that the closing and reopening of its stores heightens customers' expectations of finding new, undiscovered merchandise and intensifies their sense of urgency to buy the Company's products, which are available only in limited quantities. Consistent with this approach, the Company typically realizes approximately 40% of an event's total sales in the first four or five days of the event (Wednesday or Thursday to Sunday).
Strong Merchandising Capabilities. The Company employs a talented and experienced buying team, which has grown from 10 buyers in 1993 to 22 buyers in 1997, with an average of nearly 20 years of retail experience. The Company's buyers and its reputation as a preferred, reliable purchaser have enabled it to establish excellent, long-term relationships with a diverse group of top-of-the- line vendors. The Company obtains its merchandise primarily by purchasing from manufacturers their end-of-line merchandise, products which did not meet their sales expectations, or merchandise left over from cancellations of orders placed by other retailers. Merchandise is also obtained by contracting for production from manufacturers during periods of lower production. Through its approximately 1,000 vendor relationships, the Company has become one of the largest retailers for certain categories of luxury brand merchandise, such as European handmade crystal and fine quality Oriental rugs from China and India. The Company believes that certain top-of-the-line vendors such as Rosenthal and Samsonite prefer to liquidate a majority of their excess inventory through the Company because of its access to an upscale customer base and its ability to dispose of high-end, closeout merchandise quickly and without disruption to their normal retail channels.
Dedicated, Upscale Customer Base. Tuesday Morning has an upscale, loyal customer following. The Company has developed and maintains a proprietary preferred customer mailing list of over 4,000,000 customers who have visited its stores and requested to receive mailings in advance of the Company's sales events. Customer loyalty is evidenced by the fact that the Company derives approximately 31% of its sales during the first two or three days of each sales event, which is advertised only by a mailing to those individuals on the list. The Company believes, based on its internal research, that its customers are primarily female from households headed by professionals, typically ranging in age from 25 to 54 and
having a median family income of approximately $55,000. In addition, the Company believes its customers are knowledgeable shoppers who frequent five or more national department stores and are able to recognize the Company's favorable pricing on first quality, name brand merchandise.
Strong Financial Characteristics. Tuesday Morning has demonstrated an ability to consistently grow sales while generating strong cash flow. For the twelve months ended September 30, 1997, Tuesday Morning generated EBITDA of $34.1 million, a 72.5% increase over the comparable period in 1996. During this same period, capital expenditures were $6.1 million. The Company has consistently grown its EBITDA since 1993 due to the improved profitability of its existing store base, while requiring only modest capital expenditures to fund growth.
Flexible, Low Cost Real Estate Approach. The Company's stores are destination- oriented, and can therefore be located in secondary locations of major suburban markets, such as strip malls and warehouse zones, in close proximity to their target customers. As a result, the Company's real estate costs are significantly lower than those of many other retailers, averaging approximately $8 per square foot. In addition, virtually all new leases contain a "kick" clause that gives the Company the ability to terminate the lease without penalty for up to 18 months after lease inception. These kick clauses provide the Company with significant downside protection in opening new stores by allowing it to vacate a site that initially proves unprofitable. The Company is able to obtain kick clauses because it seldom requires significant build out of a lease site and because it is able to make productive use of challenging space.
Integrated Management Information Systems and Inventory Controls. The Company believes its management information systems are among the most advanced in the retailing industry. These systems enable the Company to manage its flow of almost 80,000 SKUs from approximately 1,000 vendors on a real-time basis in order to make timely and accurate purchasing, distribution and merchandising decisions. The Company's proprietary merchandising and inventory control systems, point of sale system and state-of-the-art distribution management system are integrated with its financial reporting systems, providing the Company's buyers with a significant degree of control over inventory acquisition, distribution and sales performance. The Company's buyers can review, at the SKU level and on a real-time basis, the status of every open purchase order, inbound shipment, warehouse receipt, process shipment and item of store inventory. These systems further allow management to target merchandise for markdowns in an effective and systematic manner. At September 30, 1997, less than 5% of the Company's inventory was more than one year old.
BUSINESS STRATEGY
The Company's objective is to sustain its current growth and to enhance its productivity and operating performance by continuing to build on its existing, proven strengths. The Company intends to achieve this objective by pursuing the following existing strategies:
Continue New Store Openings. The Company opened 31 new stores in 1997 and plans to increase its store base, in new and existing markets, by approximately 32 to 35 stores per year for the foreseeable future. The Company's "no-frills" approach enables it to open this number of stores for an aggregate cost of only $2 million per year, or approximately $60,000 per store excluding inventory. The Company intends to profitably increase its penetration of existing markets, capitalize on the success it has enjoyed in smaller single-store markets, where there are often no other retailers offering the Company's first quality products, and prudently expand into new major metropolitan markets that will provide the basis for long-term expansion.
Enhance Sales Productivity. The Company has achieved average comparable store sales growth of approximately 6% per year since its initial public offering in 1986 and 19% for the first nine months of 1997. The growth has resulted from increases in (i) the number of customer transactions, (ii) the average number of items purchased per customer visit and (iii) the average price of such items. The average number of customer transactions has increased as a result of the increased frequency of stocking its stores during a sales event. The average number of items purchased by customers has increased as a result of the introduction of additional impulse-oriented merchandise, and the average price of items purchased has
increased due to a greater mix of higher priced items. The Company intends to continue implementing these merchandising strategies to further enhance sales productivity.
Capitalize on Favorable Industry Dynamics and Competitive Positioning. The Company is benefiting from several trends in the retailing industry. The increase in the application of just-in-time inventory management techniques and the increase in retailer consolidations have both resulted in a shift of inventory risk from retailers to manufacturers. In addition, in order to maintain market share in an increasingly competitive environment, manufacturers are introducing new products and new packaging more frequently. All of these factors have contributed to a broad and consistent supply of closeout merchandise for the Company.
The Company believes it is the only retailer in the closeout industry that focuses on first quality gift and home furnishings merchandise, in contrast with most closeout retailers, which are general merchandisers or which focus on apparel. In addition, the Company caters to upscale customers, while the rest of the industry generally focuses on lower to middle income consumers. Finally, unlike other closeout retailers which operate on a year-round basis, Tuesday Morning operates on an event sale basis. The Company believes that its periodic schedule of openings causes its customers to plan their visits to the Company's stores to a greater extent than customers of conventional retailers whose product offerings are more predictable and store hours more extensive.
Leverage Workforce and Technology. The Company believes that its investments in information systems and inventory control technology and in doubling its staff of experienced, specialized buyers over the last four years will bolster future growth in the breadth of its product offerings and will provide the support necessary for new store openings for the foreseeable future. The Company's existing systems technology is scalable, enabling the Company to expand or to upgrade its systems without significant additional expenditures in the near term. The Company's corporate infrastructure will also allow for future growth of the Company without significant expenditures beyond the marginal cost of hiring additional buyers.
CLOSEOUT RETAILING INDUSTRY
The closeout retailing industry is distinguished from other retail formats by the manner in which the closeout retailer purchases its goods. Purchasing on a closeout basis enables the closeout retailer to sell goods at exceptionally low prices, often well below even the very best discount operators. In addition, the opportunistic nature of a closeout retailer's buying strategy often results in a lack of continuity of specific products. The combination of these factors creates a "treasure hunt" atmosphere for the closeout retailer's customers.
The closeout retailing industry is benefiting from several trends in the retailing industry. The increase in the application of just-in-time inventory management techniques and the increase in retailer consolidations have both resulted in a shift of inventory risk from retailers to manufacturers. Furthermore, in order to maintain market share in an increasingly competitive environment, manufacturers are introducing new products and new packaging more frequently. The Company believes that these trends have helped make the closeout retailer an integral part of manufacturers' overall distribution strategies. As a result, manufacturers are increasingly looking for larger, more sophisticated closeout retailers, such as the Company, that can purchase large and varied quantities of merchandise and control the distribution and advertising of specific products to minimize disruption to the manufacturers' traditional distribution channels.
Closeout merchandise is available to closeout retailers at low prices for a variety of reasons, including: the inability of a manufacturer or importer to dispose of merchandise through regular channels; the discontinuance of merchandise due to a change in style, color, shape or packaging; insufficient sales to justify continued production of an item; the fact that merchandise is out of season; the cancellation of orders placed by other retailers; or the termination of business by a manufacturer or wholesaler. Occasionally, the closeout retailer may be able to purchase closeout merchandise at low prices because a manufacturer may have an excess of raw material or production capacity. Most manufacturers of retail goods anticipate that they will sell a percentage of their products at substantially reduced prices. Accordingly, merchandise offered
to closeout retailers covers most categories of merchandise at all levels of quality. A closeout retailer's buyers only buy at prices that allow them to underprice other retailers.
The Company is distinguishable from its competitors within the closeout retailing industry in several respects. Most retailers in the closeout retailing industry are either general merchandisers or focus on apparel, while the Company's focus is on higher-end gift and home furnishings merchandise. In addition, most closeout retailers focus on lower and middle income consumers, while the Company generally caters to higher-income customers. Finally, unlike other closeout retailers which operate on a year-round basis, Tuesday Morning operates on an event sale basis. The Company believes that its periodic schedule of openings causes its customers to plan their visits to the Company's stores to a greater extent than customers of conventional retailers whose product offerings are more predictable and store hours more extensive.
MERCHANDISE
Tuesday Morning stores sell a wide assortment of new, high-quality, brand- name, closeout merchandise. The Company does not sell seconds, irregulars, or factory rejects. The merchandise can be generally described as gift and home furnishings merchandise and primarily consists of crystal, dinnerware, silver serving pieces, gourmet housewares, bathroom, bedroom and kitchen accessories, linens and domestics, luggage, Christmas trim, toys, stationery and silk plants.
Tuesday Morning differs from discount retailers in that it does not stock continuing lines of merchandise. Although general categories of merchandise are usually available during each sale, specific lines of merchandise frequently change, depending upon the availability of closeout merchandise at suitable prices.
Since its inception, the Company has not experienced any significant difficulty in obtaining quality closeout merchandise in adequate volumes and at suitable prices. For the year ended December 31, 1997, the Company's top ten vendors accounted for approximately 19.6% of total purchases, with no one vendor accounting for more than 3.5%.
PRICING
Tuesday Morning's pricing policy is to sell all merchandise at 50% to 80% below the retail prices generally charged by department and specialty stores. Prices are determined centrally and are uniform at all Tuesday Morning stores. Once a price is determined for a particular item, labels displaying Tuesday Morning's three-tiered pricing strategy are affixed to the product. A typical price tag displays three prices: its competitor's "regular" price, its competitor's "sale" price and finally the Tuesday Morning closeout price. Company management and buyers verify retail prices by reviewing prices published in advertisements and manufacturers' suggested retail price lists and by visiting department or specialty stores selling similar merchandise. The Company's advanced management information systems help provide the Company with excellent control over product pricing, and the availability of daily sales and inventory information enables the Company to markdown unsold merchandise on a timely and systematic basis and thereby more effectively manage inventory levels.
ADVERTISING
The Company plans and implements an event selling advertising program for each sales event. The program includes direct mail and newspaper advertising and in- store promotion banners. Prior to each sales event, the Company initiates a direct mailing to its 4,000,000 preferred customers. These direct mailings offer customers the opportunity to purchase merchandise prior to the advertising of a sales event to the general public. After the first three days of each sales event, the Company commences an advertising campaign in local newspapers in each of its markets, emphasizing the significant price reductions available to customers and the high quality of the merchandise offered.
Advertising expenses as a percentage of net sales were approximately 7.2%, 7.3% and 6.4% for the years ended December 31, 1994, 1995 and 1996, respectively, and 5.8% for the twelve months ended September 30, 1997.
STORE OPERATIONS
At December 31, 1997, the Company operated 315 Tuesday Morning stores in 33 states. During the year ended December 31, 1997, no single store accounted for more than 1.3% of the Company's net sales.
The Company does not keep its stores open throughout the year, but instead opens them seven times a year to conduct approximately four to seven week sales events during the retailing industry's peak selling seasons. These events generally occur during the last six weeks of the first quarter, the last eight weeks of the second and third quarter (which contain two events each) and the last 12 weeks of the fourth quarter (which also contains two events). To encourage new and repeat shopping visits for each sales event, the Company has increased the frequency of merchandise shipments during a sales event. During each shipment, new items are delivered, stocked and promoted in every Tuesday Morning store. Tuesday Morning stores are closed to the public between sales events, and are used in these periods only to house inventory and to restock for the next sales event.
The Company utilizes a "no-frills" approach to presenting merchandise. Stores are designed to be functional, with little emphasis placed upon fixtures and leasehold improvements. All merchandise at each store is displayed by type and size on racks or counters, and minimum inventory is maintained in stockrooms. Most merchandise is sold in its original shipping carton. Because most merchandise is sold on a self-service basis, the Company does not employ people solely to assist customers in locating merchandise or making selections.
In keeping with Tuesday Morning's advertised policy of "Satisfaction Guaranteed or Your Money Cheerfully Refunded," any merchandise purchased from Tuesday Morning stores may be returned within 90 days with proof of purchase, for any reason. Customers, if not completely satisfied, are given a choice of either a cash refund or an equivalent value in merchandise.
Operating hours during each sale are typically from 10:00 a.m. to 6:00 p.m. six days a week and until 8:00 p.m. on Thursday. The Company accepts cash, personal checks and most major credit cards.
STORE MANAGEMENT
Each store has a manager who is responsible for recruiting, training and supervising store personnel and assuring that the store is managed in accordance with Company guidelines and established procedures. Store managers are full-time employees of the Company. When sales events are not in progress, these employees review store inventory and supervise restocking activities in preparation for the next sales event. The Company employs temporary employees at each Tuesday Morning store to serve as cashiers and to assist in stocking during each sales event. These temporary employees generally return to work in subsequent sales events, reducing the need for new hiring prior to each sales event. Typically, the Company will employ more temporary employees during the first few days of a sale, when customer traffic is highest.
Company management and area managers visit selected stores while sales are in progress to review inventory levels and presentation, personnel performance, expense control, security and adherence to Company procedures. In addition, regional and area managers periodically meet with Company management to review store policies and to discuss purchasing, merchandising and advertising strategies for future sales events.
SITE SELECTION
The Company opened 31 new stores in 1997 and plans to increase its store base by approximately 32 to 35 stores in each of the next several years, both in new markets and in existing markets. The new stores are expected to be similar in size, appearance and operation to existing stores.
When selecting sites for new store locations, the Company reviews detailed demographic information for each new market area and generally limits its potential store locations to upper middle class communities. In order to reduce rental
expense, Tuesday Morning does not select prime real estate sites. The Company believes that its customers are attracted to its stores principally by event selling, advertising and direct mail marketing that emphasize the large assortment of quality merchandise and low prices, rather than by location. Tuesday Morning has generally selected sites where there is a suitable existing building requiring minimal refurbishing. Fixture costs and store improvements are not material because of the Company's "no-frills" approach to selling its merchandise.
WAREHOUSING AND DISTRIBUTION
An important aspect of Tuesday Morning's success involves its ability to warehouse and distribute merchandise quickly and efficiently. Virtually all merchandise is received by the Company at its central warehouse and distribution facilities in Dallas, Texas, where it is inspected, counted, priced, ticketed and designated for individual stores. The Company warehouses merchandise until shortly before each sale, at which time merchandise is distributed to individual Tuesday Morning stores, where it usually remains until sold at that sale or later sales. The merchandise sold by Tuesday Morning stores is generally carried by all of its stores. The amount of inventory carried by any single store varies depending upon the size and projected sales for that store. The Company does not maintain replenishment inventory in its warehouse and distribution facilities. Restocking of merchandise occurs only in successive events or in scheduled merchandise shipments during a sales event, but does not occur in response to sales activity within individual stores.
The Company has an automated warehouse processing system which includes high- speed bar code scanners and radio frequency terminals installed in the Company's forklifts which facilitate efficient sorting and loading of high merchandise volumes for immediate store delivery. With this technology, the Company can instantly locate a piece of merchandise within its 905,000 square feet of warehousing space. The Company also utilizes third party warehousing in California for forward staging of processed merchandise in order to reduce restocking lead times as well as to reduce the size of stock rooms in the areas where real estate costs are expensive and store sizes relatively small. See "-- Management Information Systems." Since 1992, total costs to process inventory through the Company's warehouse as a percentage of the total cost of inventory processed have declined 2.3 percentage points, from 10.9% to 8.6%.
The Company utilizes a leased fleet of trucks and trailers to distribute merchandise to its stores. In addition, at peak stocking periods, the Company uses common and contract carriers to distribute merchandise to stores.
PROPERTIES
The Company owns one store located adjacent to its corporate offices in Dallas, Texas. All of the Company's other stores are leased from unaffiliated parties. The leases for the stores open December 31, 1997 provide for rentals which ranged from $2.26 to $19.34 per square foot per year, with an average rental of $8.18 per square foot per year. The annual rent per store is generally below $50,000 and store rent, as a percent of net sales, was 5.1% for the twelve months ending December 31, 1997. At December 31, 1997, the remaining maturities of such leases ranged from three months to approximately 10 years, with the average term of a store lease being approximately five years. New store leases typically include "kick clauses," which allow the Company to exit the lease after 12 to 18 months if the store does not achieve sales expectations. The Company believes that the termination of any particular lease would not have a material adverse effect on the Company's operations.
The Company owns approximately 400,000 square feet of building space in Dallas, Texas. This houses its corporate offices, the main warehouse distribution facility and one store. The Company also leases 225,000 square feet of warehouse space in Dallas, Texas. The lease commenced January 1, 1993 and has been extended to June 30, 2001. In addition, the Company has entered into a five-year lease for 280,000 square feet of warehouse space which commenced in May 1997. These current distribution facilities, supplemented with short term rentals for peak times each year, are considered adequate to meet warehouse space requirements for the next several years. The Company owns approximately 51 acres of undeveloped land in the north Dallas area. This land is not currently being used for the business and is currently under contract to be sold.
MANAGEMENT INFORMATION SYSTEMS
The Company has invested over $10.5 million over the last five years in computers, bar code scanners and radio frequency terminals, software programming and related equipment, technology and training. All of the Company's hardware and software, except for one software package, are Year 2000 compliant. No significant expenditures are anticipated in the foreseeable future. The Company maintains a corporate local area network (LAN), an inventory tracking and processing system and a point of sale system which enable it to efficiently control and process its inventory. Forklifts at the Company's warehouse are equipped with bar code scanners and radio frequency terminals, and the Company has more than 1,000 POS terminals, which capture daily sales data at the SKU level. The data is polled daily by the central office and used to identify selling trends on a Company-wide basis for each sale.
TRADEMARKS AND TRADENAMES
The Company has registered the name "Tuesday Morning" as a service mark with the United States Patent and Trademark office.
COMPETITION
The Company competes in the sale of merchandise with a variety of other retail merchandisers, including department, discount and specialty stores, many of which have locations nationwide, are larger and have greater financial resources than the Company. In addition, at various times throughout the year, department, discount and specialty stores also offer merchandise similar to that sold by the Company at reduced prices.
Unlike its competitors, which primarily offer continuing lines of merchandise, the Company offers changing lines of merchandise, depending on availability at suitable prices. In addition, the Company distinguishes itself from other retailers by using an event based selling strategy. The Company believes that its periodic schedule of openings causes its customers to plan their visits to the Company's stores to a greater extent than customers of conventional retailers whose product offerings are more predictable and store hours more extensive. The Company competes with other retail establishments by offering new merchandise, all of which is sold at substantial reductions from original retail prices, and by offering a changing variety of high quality merchandise at prices which the Company believes the customer will recognize as significant values.
EMPLOYEES
At December 31, 1997, the Company employed approximately 776 persons on a full-time basis and approximately 3,416 individuals in part-time positions. The Company's employees are not represented by any union. The Company has not experienced any work stoppage due to labor disagreements and regards its employee relations as good.
LEGAL PROCEEDINGS
The Company is not aware of any legal proceedings pending or threatened against the Company that could have a material adverse effect on its financial position or results of operations.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names, ages as of January 31, 1998, and principal positions of the Company's directors, executive officers and key employees are set forth below:
Name Age Position
---- --- --------
Lloyd L. Ross............. 62 Chairman of the Board
Jerry M. Smith............ 61 President, Chief Executive Officer and Director
Mark E. Jarvis............ 46 Senior Vice President and Chief Financial Officer
G. Michael Anderson....... 45 Senior Vice President, Buying Group
Duane A. Huesers.......... 42 Vice President, Finance and Assistant Secretary
Richard Nance............. 51 Vice President, Information Systems of Tuesday
Morning, Inc.
Karen Costigan............ 48 Vice President, Real Estate of Tuesday Morning, Inc.
Andrew Paris.............. 39 Vice President, Store Operations of Tuesday
Morning, Inc.
William J. Hunckler, III.. 44 Director
Benjamin D. Chereskin..... 39 Director
Robin P. Selati........... 31 Director
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The following is a brief description of the business experience of the Company's directors, executive officers and key employees.
Lloyd L. Ross is the founder of the Company. Since 1972, Mr. Ross has devoted his full time to the organization and operation of the Company and has served as Chairman of the Board and Chief Executive Officer since its incorporation in 1974. He also served as President of the Company from 1975 to 1985 and from 1989 to 1992. On December 29, 1997, Mr. Ross stepped down as Chief Executive Officer but continues to serve as Chairman of the Board.
Jerry M. Smith joined the Company in 1984, was elected Vice President- Advertising/Public Relations and Store Operations in 1986 and was elected Senior Vice President - Advertising/Public Relations and Store Operations in 1989. He was elected Executive Vice President and appointed a director in November 1992. In September 1994, Mr. Smith was elected President and Chief Operating Officer. On December 29, 1997, Mr. Smith became the Company's Chief Executive Officer.
Mark E. Jarvis joined the Company in September 1992 as Senior Vice President and Chief Financial Officer. From 1988 to 1992, he served in several capacities (most recently as Vice President and Treasurer) for Pier 1 Imports, Inc., a specialty retailer.
G. Michael Anderson joined the Company in September 1989 as a buyer. In 1991, he was appointed Vice President, Buying, Smallwares Division. Mr. Anderson was elected Senior Vice President, Buying Group in December 1996. Prior to joining the Company, Mr. Anderson was a buyer for Affiliated Foods and Merchandise Manager for Fox-Meyer Drug Company.
Duane A. Huesers joined the Company in 1992 as Vice President, Finance. Prior to joining the Company, Mr. Huesers served as Senior Vice President and Chief Financial Officer of Bookstop, Inc., a chain of book superstores.
Richard Nance joined the Company in 1992 as Vice President, Information Systems. Prior to joining the Company, Mr. Nance was part of the information systems consulting group hired by the Company in 1991. Mr. Nance was elected Vice President, Information Systems in 1992.
Karen Costigan joined the Company in 1982 as a Regional Manager of Store Operations, and became head of the real estate division in 1988. Ms. Costigan was elected Vice President, Real Estate in 1991. Prior to joining the Company, Ms. Costigan was Assistant Managing Director of Lord & Taylor in Chicago, Oak Brook and Dallas Northpark.
Andrew Paris joined the Company in 1990 as Regional Manager of Store Operations. He was elected Vice President, Store Operations in 1996. Prior to joining the Company, Mr. Paris was Manager of Ramp Operations at People Express/Continental Airlines.
William J. Hunckler, III has served as a director of the Company since December 29, 1997. Mr. Hunckler has been a Vice President of MDP since co- founding the firm in 1993. Prior to 1993, Mr. Hunckler was with First Chicago Venture Capital for 13 years. Mr. Hunckler currently serves on the board of directors of Beverages and More, Inc., The Cornerstone Investments Group, Inc. and Peter Piper, Inc.
Benjamin D. Chereskin has served as a director of the Company since December 29, 1997. Mr. Chereskin has been a Vice President of MDP since co- founding the firm in 1993. Prior to 1993, Mr. Chereskin was with First Chicago Venture Capital for nine years. Mr. Chereskin currently serves on the board of directors of Beverages and More, Inc., The Cornerstone Investments Group, Inc. and Carrols Corporation.
Robin P. Selati has served as a director of the Company since December 29, 1997. Mr. Selati has been with MDP since 1993. His prior experience was with Alex. Brown & Sons Incorporated as a Financial Analyst in the consumer/retailing investment banking group. Mr. Selati currently serves on the board of directors of Peter Piper, Inc. and Carrols Corporation.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid or accrued by the Company during the three years ended December 31, 1997 to or for the Company's chief executive officer and the other executive officers of the Company.
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- -------------------------------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS/SAR'S COMPENSATION(a)
--------------------------- ---- ------ ------------- --------------
Lloyd L. Ross.................... 1997 $444,100 -- $8,544
Chief Executive Officer in 1996 1996 375,400 -- 5,751
1995 354,150 -- 6,769
Jerry M. Smith................... 1997 375,100 -- 9,999
President 1996 297,600 -- 9,670
1995 297,100 150,000 7,085
Mark E. Jarvis................... 1997 179,800 -- 7,245
Senior Vice President and 1996 164,600 -- 8,010
Chief Financial Officer 1995 157,950 -- 6.610
G. Michael Anderson (b).......... 1997 209,600 -- 6,170
Senior Vice President 1996 128,100 -- 4,870
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(a) The amounts indicated reflect the aggregate value of the Company's
contributions for each of the named executive officers to the Company's
401(k) defined contribution plan, group term life insurance and the
Company's stock purchase plan.
(b) Mr. Anderson was promoted to the position of Senior Vice President, Buying
Group, in December 1996.
CONSULTING AND EMPLOYMENT AGREEMENTS
On December 29, 1997, Lloyd L. Ross, the Company's founder, entered into a two-year consulting and non-competition agreement which provides that he will serve as Chairman of the Company's Board of Directors and will facilitate in the Company's relationships with third parties and suppliers. Mr. Ross's consulting agreement provides for annual compensation of $250,000 per year (along with benefits similar to those offered to him prior to the Acquisition) with an expected time commitment for Mr. Ross of 60 days per year. The consulting agreement for Mr. Ross also contains noncompete and nonsolicitation covenants and confidentiality provisions.
On December 29, 1997, Jerry M. Smith, the Company's President since 1994, entered into a three-year employment agreement which provides that he will serve as the Company's President and Chief Executive Officer, as well as a director. Mr. Smith will receive an annual base salary of $475,000 per year, subject to possible increases, and a maximum annual bonus of up to 50% of his base salary, and will continue to receive the same benefits offered to him prior to the Acquisition. Mr. Smith's employment agreement also contains noncompete and nonsolicitation covenants and confidentiality provisions. See "Risk Factors-- Dependence on Key Personnel."
INVESTMENT BY MANAGEMENT AND STOCK OPTION PLAN
In connection with the Acquisition, Messrs. Ross, Smith, Jarvis and Anderson and certain other management members of the Company acquired the equivalent of approximately 7.6% of the Company's Common Stock outstanding immediately after the Acquisition. On December 29, 1997, the Company adopted a new stock option plan under which options may be granted to key employees covering up to 10% of the Company's fully diluted common equity. Mr. Smith has been granted options under the new plan covering 3% of such common equity. See "Certain Transactions."
CERTAIN TRANSACTIONS
Since 1994, Lloyd L. Ross, an executive officer and a director of the Company, has borrowed funds from the Company from time to time. Mr. Ross's borrowings, which bore interest at the prime rate, had a balance, including accrued interest, of approximately $3,450,000 as of the Closing. In 1992, Jerry M. Smith, an executive officer and a director of the Company, received a loan for the purchase of Company stock which, including accrued interest, had a balance of approximately $189,500 as of the Closing. Mr. Smith's loan also bore interest at the prime rate. On December 29, 1997, the maturity date of each such loan was extended to the seventh anniversary of the Closing except in certain circumstances described below. In addition, the interest rate of each such loan was changed, as of the Closing, from the prime rate of interest to the mid-term applicable federal rate as defined in Internal Revenue Code Section 1274(d).
In order to effect the Acquisition, the Company entered into a merger agreement (the "Merger Agreement") with Madison Dearborn Partners II, L.P., a Delaware limited partnership ("MDP"), and its wholly owned subsidiary, Tuesday Morning Acquisition Corp. ("Merger Sub"), pursuant to which Merger Sub merged with and into the Company and the Company became the surviving corporation (the "Merger"). Prior to the Merger, MDP assigned its rights and interests under the Merger Agreement to its affiliate, Madison Dearborn.
In the Acquisition, Messrs. Ross and Smith, together with Mark E. Jarvis and G. Michael Anderson, each an executive officer of the Company, and certain other members of the Company's management (the "Management Group") invested, in the aggregate, $7.5 million in shares of junior preferred stock and Common Stock of the Company. Prior to the Merger, the Management Group contributed shares of the Company's common stock to Merger Sub in the following amounts: approximately $5.5 million in the case of Mr. Ross, approximately $1.3 million in the case of Mr. Smith and a total of approximately $0.7 million from the other members of the Management Group. Members of the Management Group exercised stock options to the extent that they did not already own shares necessary to obtain the shares to be contributed.
In the Merger, Mr. Ross's ownership position in the Merger Sub was converted into shares of the Company's Common Stock (representing approximately 5.5% of the total outstanding immediately after the Acquisition) and approximately $5.2 million liquidation value of the Company's Junior Redeemable Preferred Stock (as defined). See "Description of the Capital Stock - Junior Redeemable Preferred Stock." On December 29, 1997, Mr. Ross entered into a Term Put Agreement with the Company and Madison Dearborn which provides him with the right, 24 months after the Closing, to put his Junior Redeemable Preferred Stock to the Company or Madison Dearborn for an amount equal to liquidation value plus any accrued but unpaid dividends. In the event that Mr. Ross exercises the put, he will be required to transfer his shares of the Company's Common Stock to the Company or Madison Dearborn, as the case may be, for no additional consideration and his loan will become due and payable to the Company or Madison Dearborn, as the case may be, at such time. Mr. Ross's loan will also become due and payable at such time when the Company exercises its option to redeem his shares of the Junior Redeemable Preferred Stock.
In the Merger, Mr. Smith's ownership position in the Merger Sub was converted into shares of the Company's Common Stock (representing approximately 1.3% of the total outstanding immediately after the Acquisition) and approximately $1.2 million liquidation value of the Junior Perpetual Preferred Stock (as defined). On December 29, 1997, Mr. Smith entered into an Employment Put Agreement with the Company which provides him with the right to require the Company to repurchase approximately 76% of the shares of Common Stock and Junior Perpetual Preferred Stock held by
him (i) at any time on or after December 31, 2000 or (ii) prior to December 31, 2000 under certain circumstances, including the termination of his employment without cause and his death, permanent disability or incapacity. Under Mr. Smith's Employment Put Agreement, the Company will have the option to pay the purchase price for Mr. Smith's securities 25% in cash and 75% by the issuance of a subordinated promissory note payable in three equal annual installments, subject to corporate law restrictions and restrictions contained in the Senior Credit Facility, the Indenture, the Certificate of Designation and the Exchange Indenture.
In the Merger, the ownership position in the Merger Sub of the rest of the Management Group, including those of Messrs. Jarvis and Anderson, was converted into shares of the Company's Common Stock and Junior Perpetual Preferred Stock. The Common Stock received by such members of the Company's management represented approximately 0.7% of the total outstanding immediately after the Acquisition. They also received shares of Junior Perpetual Preferred Stock having liquidation values, in the aggregate, of $0.7 million. See "Description of the Capital Stock--Junior Preferred Stock."
As a result of the transactions described above, following the Acquisition, the Management Group owned, in the aggregate, approximately $5.2 million liquidation value of the Junior Redeemable Preferred Stock, $1.9 million liquidation value of the Junior Perpetual Preferred Stock and approximately 7.6% of the Company's Common Stock outstanding immediately after the Acquisition.
In connection with the Acquisition, Madison Dearborn acquired a number of shares representing approximately 85.8% of the Company's Common Stock outstanding immediately after the Acquisition (approximately 77.2% on a fully diluted basis) and approximately $80.8 million liquidation value of the Junior Redeemable Preferred Stock of the Company for an aggregate purchase price of $85.4 million. Madison Dearborn renders certain management and advisory services to the Company for which it receives from the Company a fee in the amount of $350,000 per year.
During 1996, the Company paid to Saunders, Lubinski and White approximately $11 million for media, advertising and production services. Mr Saunders, a director of the Company since December 1996, was an officer of Saunders, Lubinski and White. He has ceased to be affiliated with such firm since January 1, 1997.
In connection with the Acquisition, Madison Dearborn, the Management Group and the Company entered into a Stockholders Agreement which provides for, among other things, certain restrictions on the transfer of the Junior Redeemable Preferred Stock, the Junior Perpetual Stock and the Common Stock held by the Management Group (collectively, the "Management Shares"), the right of the Company to sell or cause to be sold all or a portion of the Management Shares in connection with a sale of the Company, the right of the Company to repurchase the Management Shares of any member of the Management Group upon the termination of such member for cause, certain rights by the Management Group to participate in certain sales of Common Stock by Madison Dearborn under certain circumstances, certain demand registration rights in favor of Madison Dearborn by which it may cause the Company to register all or part of the Common Stock held by it under the Securities Act, and certain "piggyback" registration rights in favor of Madison Dearborn and the Management Group.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial ownership of the Common Stock of the Company as of December 31, 1997 by each person who beneficially owns more than five percent of such Common Stock and by the directors and executive officers of the Company.
Beneficial Ownership(a)
-----------------------------------
Number of Percent of
Name of Beneficial Owner Shares Shares
------------------------ ---------- ----------
Madison Dearborn Capital Partners II, L.P.................... 3,216,482 85.8%
Three First National Plaza
Chicago, IL 60602
Lloyd L. Ross (b)............................................ 207,149 5.5%
Jerry M. Smith............................................... 56,377 1.5%
Mark E. Jarvis............................................... 5,650 *
G. Michael Anderson.......................................... 1,883 *
Benjamin D. Chereskin (c).................................... -- --
William J. Hunckler, III (c)................................. -- --
Robin P. Selati (c).......................................... -- --
All directors and executive officers as a group (7 persons).. 271,059 7.2%
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* Denotes ownership of less than 1.0%.
(a) "Beneficial ownership" generally means any person who, directly or
indirectly, has or shares voting or investment power with respect to a
security. Unless otherwise indicated, the Company believes that each
shareholder has sole voting and investment power with regard to the shares
listed as beneficially owned .
(b) The address of Mr. Lloyd is the address of the Company.
(c) Messrs. Chereskin, Hunckler and Selati are principals of Madison Dearborn
Partners, Inc., the general partner of Madison Dearborn Partners, L.P., the
general partner of Madison Dearborn Capital Partners II, L.P., and
therefore may be deemed to beneficially own the shares owned by Madison
Dearborn Capital Partners II, L.P.
DESCRIPTION OF THE SENIOR CREDIT FACILITY
As of the Closing, the Company entered into the Senior Credit Facility with the various lenders thereunder (collectively, the "Lenders"), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger and syndication agent, the Subsidiary Guarantors and Fleet National Bank, as administrative agent (the "Agent"). The following is a summary description of the principal terms of the Senior Credit Facility. The description set forth below does not purport to be complete and is qualified in its entirety by reference to the agreements setting forth the principal terms and conditions of the Senior Credit Facility, which are available upon request from the Company.
Structure. The Senior Credit Facility consists of (a) Term Loans in an aggregate principal amount of $110.0 million (consisting of $40.0 million in Term Loan A loans and $70.0 million in Term Loan B loans) and (b) a Revolving Credit Facility providing for revolving loans to the Company (including a sublimit for letters of credit) in an aggregate principal amount at any time not to exceed the lesser of: (i) $90.0 million and (ii) the Company's borrowing base described below. The Revolving Credit Facility may be increased to $115.0 million subject to certain restrictions in the Senior Credit Facility and the Indenture.
The entire amount of the Term Loans was borrowed under the Senior Credit Facility as of the Closing. No amounts were initially borrowed under the Revolving Credit Facility. The Revolving Credit Facility may be utilized to fund the Company's working capital requirements, including issuance of stand-by and trade letters of credit and for other general corporate purposes.
The borrowing base under the Revolving Credit Facility is up to 50% (60% during the months of July through October) of the Company's eligible inventory. Eligible inventory does not include obsolete inventory and certain other items.
Availability. The Revolving Credit Facility is be available at any time until the fifth anniversary of the Closing subject to the fulfillment of customary conditions precedent, including the absence of a default under the Senior Credit Facility and compliance with the borrowing base limitation described above.
Security; Guarantees. The Company's obligations under the Senior Credit Facility are guaranteed by each existing and subsequently acquired or organized subsidiary of the Company, subject to certain exceptions. The Senior Credit Facility and the guarantees thereof are secured by a perfected first priority security interest in all substantial tangible and intangible assets of the Company and the guarantors and proceeds thereof, subject to certain permitted liens.
Interest; Maturity. Borrowings under the Senior Credit Facility bear interest, payable quarterly (or at the end of each shorter interest period in the case of LIBOR loans), at a rate per annum equal (at the Company's option) to: (i) LIBOR plus an applicable margin or (ii) an alternate base rate equal to the Agent's corporate base rate plus an applicable margin. Initially, the applicable LIBOR-margin is 2.5% per annum for the Revolving Credit Facility and the Term Loan A loans and 3.0% per annum for the Term Loan B loans and 1.0% per annum less in each case for alternate base rate loans. The applicable margins vary depending upon the Company's leverage ratio. The Term Loan A loans and the Revolving Credit Facility mature on the fifth anniversary of the Closing, and the Term Loan B loans mature on the seventh anniversary. The Term Loans are required to be repaid, subject to certain exceptions, with: 75% of annual Excess Cash Flows (as defined) (such percentage to decline if a target ratio of total senior debt to EBITDA is achieved); 100% of the net proceeds of certain asset sales, insurance recoveries, debt incurrences and sale leasebacks over certain thresholds; and 50% of the net proceeds of public and private equity offerings and capital contributions.
Fees. The Company is required to pay to the Lenders, on a quarterly basis, a commitment fee equal to 1/2 of 1% per annum on the undrawn portion of the Revolving Credit Facility, and is required to pay to the Agent an annual agency fee. The commitment fee will vary depending on the Company's leverage ratio. The Company is also obligated to pay (i) a per annum letter of credit fee equal to the applicable LIBOR-margin for the Revolving Credit Facility on the aggregate undrawn
amount of outstanding letters of credit and (ii) an issuing fee for the letter of credit issuing bank equal to 1/4 of 1% per annum on the face amount of the letter of credit.
Covenants. The Senior Credit Facility contains a number of covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness, create liens and give further negative pledges, make investments or loans or enter into joint ventures, create guarantees and other contingent obligations, pay dividends on or redeem or repurchase equity interests, merge, acquire other businesses, sell subsidiary stock, make capital expenditures, enter into sale leasebacks, sell or discount receivables, engage in certain transactions with affiliates, change its business, amend the Indenture or other material agreements, create subsidiaries and prepay other debt, including the Notes. In addition, the Senior Credit Facility requires that the Company comply with specified ratios and tests, including minimum interest coverage and fixed charge coverage ratios, minimum trailing four quarter EBITDA and a maximum ratio of total debt to trailing four quarter EBITDA.
Events of Default. The Senior Credit Facility contains customary events of default, including non-payment of principal, interest or fees, material inaccuracy of representations and warranties, violation of covenants, cross- default and cross-acceleration to certain other indebtedness, certain events of bankruptcy and insolvency, certain events under the Employee Retirement Income Security Act of 1974, as amended, material judgments, actual or asserted invalidity of any guarantee or security interest and a change of control in certain circumstances as set forth therein.
DESCRIPTION OF THE UNITS
Each unit consists of one share of Senior Exchangeable Preferred Stock and
one share of Common Stock. The Senior Exchangeable Preferred Stock and the
Common Stock will become separately transferable upon the earlier to occur of
(i) June 15, 1998; (ii) the occurrence of a Change in Control; (iii) the date on
which a Preferred Stock Registration Statement is declared effective; (iv)
immediately prior to any redemption of Preferred Stock by the Company with the
proceeds of a Public Equity Offering and (v) such earlier date as determined by
Merrill Lynch in its sole discretion (the date of the occurrence of an event
specified in clauses (i) - (v) being the "Separation Date"). See "The Preferred
Stock Exchange Offer." See "Description of the Capital Stock" for further
information concerning the Common Stock offered pursuant to the Initial Unit
Offering.
NEW SENIOR EXCHANGEABLE PREFERRED STOCK
The terms of the New Senior Exchangeable Preferred Stock include those
stated in the Certificate of Designation. The form and terms of the New Senior
Exchangeable Preferred Stock are the same as the form and terms of the Old
Senior Exchangeable Preferred Stock (which they replace) except that (i) the New
Senior Exchangeable Preferred Stock bears a Series B designation, (ii) the New
Senior Exchangeable Preferred Stock has been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holders of New Senior Exchangeable Preferred Stock will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the dividend rate on the Old Senior
Exchangeable Preferred Stock in certain circumstances relating to the timing of
the Preferred Stock Exchange Offer, which rights will terminate when the
Preferred Stock Exchange Offer is consummated. The New Senior Exchangeable
Preferred Stock is subject to all such terms, and holders of the New Senior
Exchangeable Preferred Stock are referred to the Certificate of Designation for
a statement of them. The following is a summary of the material terms and
provisions of the New Senior Exchangeable Preferred Stock. This summary does not
purport to be a complete description of the New Senior Exchangeable Preferred
Stock and is subject to the detailed provisions of, and qualified in its
entirety by reference to, the New Senior Exchangeable Preferred Stock and the
Certificate of Designation (including the definitions contained therein). A copy
of the Certificate of Designation has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Definitions relating
to certain capitalized terms are set forth under "--Exchange Debentures--Certain
Definitions" and throughout this description. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Certificate of Designation and such definitions are incorporated herein by
reference. The Old Senior Exchangeable Preferred Stock and the New Senior
Exchangeable Preferred Stock are sometimes referred to herein collectively as
the "Senior Exchangeable Preferred Stock." Any descriptions of the Senior
Exchangeable Preferred Stock presented in the future tense shall refer to the
New Senior Exchangeable Preferred Stock, where appropriate.
GENERAL
The Board of Directors of the Company adopted resolutions authorizing the issuance of up to 1,000,000 shares of Senior Exchangeable Preferred Stock, which consisted of 250,000 shares of Old Senior Exchangeable Preferred Stock which were issued in the Initial Unit Offering plus 250,000 additional shares of Senior Exchangeable Preferred Stock which may be used to pay dividends on the Senior Exchangeable Preferred Stock if the Company elects to pay dividends in additional shares of Senior Exchangeable Preferred Stock, and filed a Certificate of Designation with respect thereto with the Secretary of State of the State of Delaware as required by Delaware law. The Senior Exchangeable Preferred Stock will rank junior in right of payment to all liabilities and obligations (whether or not for borrowed money) of the Company (other than Common Stock and any present and future classes of preferred stock of the Company). In addition, creditors and stockholders of the Company's subsidiaries will also have priority over the Senior Exchangeable Preferred Stock with respect to claims on the assets of such subsidiaries. The Company may, at its option, exchange the Senior Exchangeable Preferred Stock, in whole but not in part, into Exchange Debentures on any scheduled dividend payment date. See "-- Exchange." The Senior Exchangeable Preferred Stock, when issued and paid for and when issued in lieu of cash dividends, will be fully paid and non- assessable, and the holders thereof will have no subscription or preemptive rights related thereto.
RANKING
The Senior Exchangeable Preferred Stock, with respect to dividends and distributions upon the liquidation, winding-up and dissolution of the Company, will rank senior to all classes of common stock and each other class of capital stock or series of preferred stock of the Company, except as set forth in this paragraph (collectively referred to, together with all classes of common stock of the Company, as "Junior Securities"). The Certificate of Designation provides that the Company may not, without the consent of the holders of a majority of the then outstanding shares of Senior Exchangeable Preferred Stock, authorize, create (by way of reclassification or otherwise) or issue any class or series of capital stock of the Company ranking on a parity with the Senior Exchangeable Preferred Stock (collectively, the "Parity Securities") or any obligation or security convertible or exchangeable into or evidencing a right to purchase, shares of any class or series of Parity Securities. The Certificate of Designation provides that the Company may not, without the consent of the holders of at least two-thirds of the then outstanding shares of Senior Exchangeable Preferred Stock, authorize, create (by way of reclassification or otherwise) or issue any class or series of capital stock of the Company ranking senior to the Senior Exchangeable Preferred Stock (collectively, the "Senior Securities") or any obligation or security convertible or exchangeable into or evidencing a right to purchase, shares of any class or series of Senior Securities.
DIVIDENDS
Holders of Senior Exchangeable Preferred Stock will be entitled, when, as and if declared by the Board of Directors, out of funds legally available therefor, to receive dividends on each outstanding share of the Senior Exchangeable Preferred Stock, at the annual rate of 13 1/4% of the then effective liquidation preference per share of Senior Exchangeable Preferred Stock. Dividends on the Senior Exchangeable Preferred Stock are payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on March 15, 1998. The right to dividends on the Senior Exchangeable Preferred Stock will be cumulative (whether or not earned or declared), without interest, from the date of issuance of the Senior Exchangeable Preferred Stock. On and before December 15, 2002, dividends may, at the option of the Company, be paid either in cash or in additional fully paid and non-assessable shares of Senior Exchangeable Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. The issuance of such additional shares of Senior Exchangeable Preferred Stock will constitute "payment" of the related dividend for all purposes of the Certificate of Designation. After December 15, 2002, dividends may only be paid in cash.
If any dividend payable on any dividend payment date on or before December 15, 2002 is not declared or paid in full in cash on such dividend payment date, the amount payable as dividends on such dividend payment date that is not paid in cash on such dividend payment date will be added to the liquidation preference of the Senior Exchangeable Preferred Stock on such dividend payment date until such dividend is paid in additional fully paid and non-assessable shares of Senior Exchangeable Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends.
No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Securities for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the Senior Exchangeable Preferred Stock. If full dividends are not so paid, the Senior Exchangeable Preferred Stock shall share dividends pro rata with the Parity Securities. No dividends may be paid or set apart for such payment on Junior Securities (except dividends on Junior Securities in additional shares of Junior Securities), and no Junior Securities or Parity Securities may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full dividends have not been paid on the Senior Exchangeable Preferred Stock; provided, however, the Company may repurchase, redeem or otherwise acquire or retire for value the Management Stock in accordance with the provisions of "Limitation on Restricted Payments." Holders of the Senior Exchangeable Preferred Stock will not be entitled to any dividends, whether payable in cash, property or stock, in excess of the full cumulative dividends as herein described.
VOTING RIGHTS
Holders of the Senior Exchangeable Preferred Stock will have no voting rights with respect to general corporate matters except as provided by law or as set forth in the Certificate of Designation. The Certificate of Designation provides that if (a) dividends on the Senior Exchangeable Preferred Stock are in arrears and unpaid (and if with respect to dividends payable for periods beginning after December 15, 2002, such dividends are not paid in cash) for six quarterly periods (whether or not consecutive); (b) the Company fails to discharge its obligation to redeem the Senior Exchangeable Preferred Stock on the Mandatory Redemption Date or fails to otherwise discharge any redemption obligation with respect to the Senior Exchangeable Preferred Stock; (c) the Company fails to make a Change in Control Offer if such offer is required by the provisions set forth under "--Change in Control" below or fails to purchase shares of Senior Exchangeable Preferred Stock from holders who elect to have such shares purchased pursuant to the Change in Control Offer; (d) a breach or violation of any of the provisions described under the caption "--Certain Provisions" occurs and the breach or violation continues for a period of 30 days or more after the Company receives notice thereof specifying the default from the holders of at least 25% of the shares of Senior Exchangeable Preferred Stock then outstanding; or (e) the Company or any Restricted Subsidiary fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary, or the final stated maturity of any such Indebtedness is accelerated, if the aggregate principal amount of such Indebtedness in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or that has been accelerated, aggregates $10.0 million or more at any time, then the holders of the majority of the then outstanding Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect the lesser of two directors of the Board of Directors or at least 25% of the Board of Directors. Such voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the Senior Exchangeable Preferred Stock are paid in full (and with respect to dividends payable for periods beginning after December 15, 2002, paid in cash) and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of Senior Exchangeable Preferred Stock then outstanding, at which time the term of the directors elected pursuant to the provisions of this paragraph shall terminate. Each such event described in clauses (a) through (e) above is referred to herein as a "Voting Rights Triggering Event."
Any vacancy occurring in the office of the director elected by holders of the Senior Exchangeable Preferred Stock may be filled by the remaining directors elected by such holders unless and until such vacancy shall be filled by such holders.
The Certificate of Designation also provides that the Company may not amend the Certificate of Designation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of the Senior Exchangeable Preferred Stock, or authorize the issuance of any additional shares of Senior Exchangeable Preferred Stock, without the affirmative vote or consent of the holders of at least a majority of the outstanding shares of Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class. The holders of at least a majority of the outstanding shares of Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, may also waive compliance with any provision of the Certificate of Designation. In addition, as provided above under "--Ranking," the Company may not authorize, create (by way of reclassification or otherwise) or issue (i) any Parity Securities, or any obligation or security convertible into or evidencing the right to purchase any Parity Securities, without the affirmative vote or consent of the holders of a majority of the then outstanding shares of Senior Exchangeable Preferred Stock and (ii) any Senior Securities, or any obligation or security convertible into or evidencing the right to purchase Senior Securities, without the affirmative vote or consent of the Holders of at least two-thirds of the then outstanding shares of the Senior Exchangeable Preferred Stock, in each case voting as a separate class.
Under Delaware law, holders of preferred stock will be entitled to vote as a class upon a proposed amendment to the certificate of incorporation, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the par value of the shares of such class, increase or decrease the aggregate number of authorized shares of such class or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely.
REDEMPTION
Mandatory Redemption
On December 15, 2009 (the "Mandatory Redemption Date"), the Company will be required to redeem (subject to the legal availability of funds therefor) all outstanding shares of Senior Exchangeable Preferred Stock at a price equal to the liquidation preference thereof plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption. The Company will not be required to make sinking fund payments with respect to the Senior Exchangeable Preferred Stock.
Optional Redemption
The Company at its option may, but shall not be required to, redeem for cash the Senior Exchangeable Preferred Stock (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at any time on or after December 15, 2002, in whole or in part, at the redemption prices (expressed as a percentage of the liquidation preference thereof) set forth below, together with, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the date of redemption to the date of redemption), if redeemed during the twelve-month period beginning on December 15 of each of the years indicated below:
Year Percentage ---- ---------- 2002................................. 109.938% 2003................................. 106.625% 2004................................. 103.313% 2005 and thereafter.................. 100.000% |
In addition, at any time on or prior to December 15, 2001, the Company may redeem for cash all, but not less than all, of the outstanding Senior Exchangeable Preferred Stock within 20 days of a Public Equity Offering with the net proceeds of such offering at a redemption price per share equal to 113.25% of the aggregate liquidation preference thereof, together with, without duplication, an amount in cash equal to all accumulated and unpaid dividends, if any, to the date of redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the date of redemption to the date of redemption), subject to the right of holders of record on the relevant record date to receive dividends due on a dividend payment date.
No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the Senior Exchangeable Preferred Stock.
If less than all of the shares of the Senior Exchangeable Preferred Stock are to be redeemed, the shares of Senior Exchangeable Preferred Stock to be redeemed will be selected not more than 60 days prior to the redemption date by the Transfer Agent by such method as the Transfer Agent will deem fair and appropriate; provided, however, that no such partial redemption will reduce the principal amount of the shares of Senior Exchangeable Preferred Stock not redeemed to less than $100 per share. Notice of redemption will be mailed, first class postage prepaid, at least 30 but not more than 60 days before the redemption date to each holder of Senior Exchangeable Preferred Stock to be redeemed at its registered address. On or after the redemption date, dividends will cease to accumulate on the shares of Senior Exchangeable Preferred Stock called for redemption and accepted for payment.
Procedure for Redemption
On and after a redemption date, unless the Company defaults in the payment of the applicable redemption price, dividends will cease to accumulate on shares of Senior Exchangeable Preferred Stock called for redemption, and all rights of holders of such shares will terminate except for the right to receive the redemption price. The Company will send a
written notice of redemption by first class mail to each holder of record of shares of Senior Exchangeable Preferred Stock, not fewer than 30 days nor more than 60 days prior to the date fixed for such redemption.
EXCHANGE
The Company may, at its option, subject to certain conditions, on any scheduled dividend payment date, exchange the Senior Exchangeable Preferred Stock, in whole but not in part, for the Exchange Debentures; provided that (i) on the date of such exchange there are no accumulated and unpaid dividends on the Senior Exchangeable Preferred Stock (including the dividend payable on such date) or other contractual impediments to such exchange; (ii) there shall be legally available funds sufficient therefor; (iii) no Voting Rights Triggering Event has occurred and is continuing at the time of such exchange; (iv) immediately after giving effect to such exchange, no Default or Event of Default (each as defined in the Exchange Indenture) would exist under the Exchange Indenture and no default or event of default would exist under any material instrument governing Indebtedness outstanding at the time; (v) the Exchange Indenture has been qualified under the Trust Indenture Act, if such qualification is required at the time of exchange; and (vi) the Company shall have delivered to the Debenture Trustee an Opinion of Counsel reasonably satisfactory to such Debenture Trustee (as defined herein) to the effect that all conditions to be satisfied prior to such exchange have been satisfied. See "--The Exchange Debentures" below for the terms of the Exchange Debentures. Holders of Senior Exchangeable Preferred Stock so exchanged will be entitled to receive a principal amount of Exchange Debentures equal to $1.00 for each $1.00 of the liquidation preference of Senior Exchangeable Preferred Stock held by such holders at the time of exchange plus an amount per share in cash (or, on or prior to December 15, 2002, in principal amount of Exchange Debentures) equal to all accumulated but unpaid dividends to the exchange date (including an amount equal to a prorated dividend for the period from the dividend payment date immediately prior to the exchange date to the exchange date).
The Exchange Debentures will be issuable only in denominations of $1,000 and integral multiples thereof. An amount in cash will be paid to holders for any principal amount otherwise issuable which is less than $1,000. Following such exchange, all dividends on the Senior Exchangeable Preferred Stock will cease to accrue, the rights of the holders of Senior Exchangeable Preferred Stock as stockholders of the Company shall cease and the person or persons entitled to receive the Exchange Debentures issuable upon exchange shall be treated as the registered holder or holders of such Exchange Debentures. Notice of exchange will be mailed at least 30 days but not more than 60 days prior to the date of exchange to each holder of Senior Exchangeable Preferred Stock. See "--The Exchange Debentures" below.
In addition, under applicable provisions of the federal bankruptcy law or comparable provisions of state fraudulent transfer law, if at the time of the Company's payment of dividends on, redemption of or exchange of Exchange Debentures for, the Senior Exchangeable Preferred Stock (i) the Company is insolvent or rendered insolvent by reason thereof, (ii) the Company is engaged in a business or transaction for which the Company's remaining assets constitute unreasonably small capital or (iii) the Company intends to incur or believes that it would incur debts beyond its ability to pay such debts as they mature, then the relevant distribution to holders of Senior Exchangeable Preferred Stock could be avoided in whole or in part as a fraudulent conveyance and such holders could be required to return the same or equivalent amounts to or for the benefit of existing or future creditors of the Company. The measure of insolvency for purposes of the foregoing will vary depending on the law of the jurisdiction which is being applied. Generally the Company would be considered insolvent if the sum of its debts, including contingent liabilities, were greater than the fair saleable value of its assets at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, holders of Senior Exchangeable Preferred Stock will be entitled to be paid out of the assets of the Company available for distribution $100.00 per share, plus, without duplication, an amount equal in cash to all accumulated and unpaid dividends, if any, thereon (including by way of a deemed increase in liquidation value) to the date fixed for liquidation, dissolution or winding-up of the Company (including an amount equal to a prorated dividend from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any Junior Securities, including, without limitation, on any common stock of the Company. After payment of the full amount of the liquidation preferences and accumulated and unpaid dividends to which they are entitled, the holders of shares of Senior Exchangeable Preferred Stock will not be entitled to any further participation in any distribution of assets of the Company. However, neither the sale, conveyance, exchange or transfer (for cash, shares of 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 one or more corporations shall be deemed to be a liquidation, dissolution or winding-up of the Company.
The Certificate of Designation for the Senior Exchangeable Preferred Stock does not contain any provision requiring funds to be set aside to protect the liquidation preference of the Senior Exchangeable Preferred Stock, although such liquidation preference will be substantially in excess of the par value of such shares of Senior Exchangeable Preferred Stock. In addition, the Company is not aware of any provision of Delaware law or any controlling decision of the courts of the State of Delaware (the state of incorporation of the Company) that requires a restriction upon the surplus of the Company solely because the liquidation preference of the Senior Exchangeable Preferred Stock will exceed its par value. Consequently, there will be no restriction upon any surplus of the Company solely because the liquidation preference of the Senior Exchangeable Preferred Stock will exceed the par value, and there will be no remedies available to holders of the Senior Exchangeable Preferred Stock before or after the payment of any dividend, other than in connection with the liquidation of the Company, solely by reason of the fact that such dividend would reduce the surplus of the Company to an amount less than the difference between the liquidation preference of the Senior Exchangeable Preferred Stock and its par value.
At September 30, 1997, on a pro forma basis after giving effect to the Transactions and the application of the net proceeds therefrom, the Company would have had approximately $176.5 million of Senior Indebtedness (all of which would represent Indebtedness under the Senior Credit Facility), and $100.0 million of Senior Subordinated Indebtedness (all of which would represent Indebtedness under the Notes) outstanding, and the Company would have had additional availability of $16.1 million for borrowings under the Senior Credit Facility, all of which would be Senior Indebtedness, if borrowed. See "Unaudited Pro Forma Financial Statements."
CHANGE IN CONTROL
The Certificate of Designation provides that, upon the occurrence of a Change in Control, the Company will make an offer to purchase for cash all or any part of the Senior Exchangeable Preferred Stock pursuant to the offer described below (a "Change in Control Offer") at a price in cash (a "Change in Control Payment") equal to 101% of the liquidation preference thereof, plus all accumulated and unpaid dividends, if any, to the date of purchase (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the date of purchase to such date). The Certificate of Designation provides that within 30 days following any Change in Control, the Company will mail a notice to each holder of Senior Exchangeable Preferred Stock with a copy to the transfer agent, with the following information: (a) a Change in Control Offer is being made pursuant to the covenant entitled "Change in Control," and that all Senior Exchangeable Preferred Stock properly tendered pursuant to such Change in Control Offer will be accepted for payment; (b) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 75 days from the date such notice is mailed, except as may be otherwise required by applicable law (the "Change in Control Payment Date"); (c) any Senior Exchangeable Preferred Stock not properly tendered will remain outstanding and continue to accumulate dividends; (d) unless the Company defaults in the payment of the Change in Control Payment, all Senior Exchangeable Preferred Stock accepted for payment pursuant to the Change in Control Offer will cease to accumulate dividends on the Change in Control Payment Date; (e) holders electing to have any shares of Senior Exchangeable Preferred Stock purchased pursuant to a Change in Control Offer will be required to surrender such shares, properly endorsed for transfer, to the transfer agent and registrar for the Senior Exchangeable Preferred Stock at the address specified in the notice prior to the close of business on the third Business Day preceding the Change in Control Payment Date; (f) holders will be entitled to withdraw their tendered shares of Senior Exchangeable Preferred Stock and their election to require the Company to purchase such shares, provided that the transfer agent receives, not later than the close of business on the last day of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the aggregate liquidation preference of the Senior Exchangeable Preferred Stock tendered for purchase, and a statement that such holder is withdrawing his tendered shares
of Senior Exchangeable Preferred Stock and his election to have such shares of Senior Exchangeable Preferred Stock purchased; and (g) that holders whose shares of Senior Exchangeable Preferred Stock are being purchased only in part will be issued new shares of Senior Exchangeable Preferred Stock equal in aggregate liquidation preference to the unpurchased portion of the shares of Senior Exchangeable Preferred Stock surrendered, which unpurchased portion must be equal to $1,000 in aggregate liquidation preference or an integral multiple thereof.
The Certificate of Designation provides that on the Change in Control Payment Date, the Company will, to the extent permitted by law, (a) accept for payment all shares of Senior Exchangeable Preferred Stock or portions thereof properly tendered pursuant to the Change in Control Offer, (b) deposit with the transfer agent and registrar an amount in cash equal to the aggregate Change in Control Payment in respect of all shares of Senior Exchangeable Preferred Stock or portions thereof so tendered and (c) deliver, or cause to be delivered, to the transfer agent and registrar for cancellation the shares of Senior Exchangeable Preferred Stock so accepted together with an Officers' Certificate stating that such shares of Senior Exchangeable Preferred Stock or portions thereof have been tendered to and purchased by the Company. The Certificate of Designation provides that the transfer agent and registrar will promptly mail to each holder of Senior Exchangeable Preferred Stock the Change in Control Payment for such Senior Exchangeable Preferred Stock, and the transfer agent will promptly mail to each holder new shares of Senior Exchangeable Preferred Stock equal in aggregate liquidation preference to any unpurchased portion of Senior Exchangeable Preferred Stock surrendered, if any. The Company will publicly announce the results of the Change in Control Offer on or as soon as practicable after the Change in Control Payment Date.
If a Change in Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change in Control Payment for all of the Senior Exchangeable Preferred Stock that might be delivered by holders of the Senior Exchangeable Preferred Stock seeking to accept the Change in Control Offer. The failure of the Company to make or consummate the Change in Control Offer or pay the Change in Control Payment when due would result in an Event of Default and would give the Transfer Agent and the holders of the Senior Exchangeable Preferred Stock the rights described under "--Events of Default."
One of the events which constitutes a Change in Control under the Indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (which is the governing law of the Indenture) to represent a specific quantitative test. As a consequence, in the event holders of the Senior Exchangeable Preferred Stock elect to require the Company to purchase the Senior Exchangeable Preferred Stock and the Company elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to repurchase such holder's Senior Exchangeable Preferred Stock upon the occurrence of a Change in Control may deter a third party from seeking to acquire the Company in a transaction that would constitute a Change in Control.
The Company will comply with the applicable tender offer rules, including Rule 14e-l under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change in Control Offer.
The Company will not, and will not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the date of the Indenture) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Senior Exchangeable Preferred Stock or, if such Change in Control Offer is made, to pay for the Senior Exchangeable Preferred Stock tendered for purchase.
Prior to making a Change in Control Offer the Company shall be required to have terminated all commitments and repaid in full all Indebtedness under the Senior Credit Agreement and the Notes, respectively, and or to have obtained the requisite consents under the Senior Credit Agreement and the Indenture to permit the purchase of the Senior Exchangeable Preferred Stock as provided for under this covenant. Failure to mail the notice on the date specified above or to have satisfied the foregoing condition precedent by the date that the notice is required to be mailed would constitute a default under the Certificate of Designation. If, as a result thereof, a default occurs with respect to any Indebtedness, the funds
remaining after the repurchase of such Indebtedness may limit the Company's ability to repurchase the Senior Exchangeable Preferred Stock.
CERTAIN PROVISIONS
The Certificate of Designation contains the following provisions, among others:
Limitation on Indebtedness. The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness; provided, however, that the Company and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness) if at the time of such incurrence (a) no Voting Rights Triggering Event shall have occurred and be continuing or shall occur as a consequence thereof and (b) the Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness for which internal financial statements are available, taken as one period (and after giving pro forma effect to (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such four-quarter period, (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired on the first day of such four-quarter period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such four-quarter period) and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred on the first day of such four-quarter period), would have been at least equal to 2.0 to 1.0.
Limitations on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to the holders of any Parity Securities or Junior Securities (other than dividends or distributions payable solely in shares of Qualified Capital Stock (other than Senior Securities) or in options, warrants or other rights to purchase shares of Qualified Capital Stock (other than Senior Securities));
(ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Parity Securities or Junior Securities or any Capital Stock of the Company or any Affiliate of the Company or any options, warrants or other rights to acquire Parity Securities or Junior Securities or such Capital Stock (other than such options, warrants or rights owned by the Company or a wholly owned Restricted Subsidiary);
(iii) declare or pay any dividend on, or make any distribution to holders of any shares of Capital Stock of any Restricted Subsidiary (other than to the Company or any of its wholly owned Restricted Subsidiaries or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis); or
(iv) make any Investment (other than any Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from) clauses
(i) through (iv) are collectively referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a board resolution), (1) no Voting Rights
Triggering Event shall have occurred and be continuing, (2) the Company could
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Indebtedness" provision and (3) the
aggregate amount of all Restricted Payments declared or made after the Issuance
Date shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day of the Company's first fiscal quarter after the Issuance Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Qualified Capital Stock of the Company (including upon the exercise of options, warrants or rights) or warrants, options or rights to purchase shares of Qualified Capital Stock of the Company, plus
(C) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities or Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, to the extent such securities were originally sold for cash, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted Payment that was made after the Issuance Date is sold or is otherwise liquidated or repaid, an amount (to the extent not included in Consolidated Adjusted Net Income) equal to the sum of (I) the lesser of (x) the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) and (y) the initial amount of such Investment, and (II) with respect to solely any Restricted Payment to be made pursuant to clause (iv) of this paragraph (a), the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) in excess of the amount in (I), plus
(E) $5 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v) and (vi) below) at the time of and after giving effect thereto no Voting Rights Triggering Event has occurred and is continuing:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration the payment of such dividend would have complied with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock (other than Senior Securities) of the Company;
(iii) the repurchase, redemption or other acquisition or retirement for value of shares of Management Stock; provided that (1) the Company is required, by the terms of written agreements between the Company and each of Lloyd L. Ross and Jerry M. Smith as in effect on the Issuance Date, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $25.0 million in the aggregate;
(iv) the repurchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company from employees who have died (or their estates or beneficiaries) or whose employment has been terminated; provided that such payment shall not exceed $1.5 million in any twelve-month period, excluding any amounts used to repurchase, redeem, acquire or retire for value shares of Capital Stock of the Company pursuant to clause (iii) above;
(v) repurchases of Capital Stock of the Company (or warrants or options convertible into or exchangeable for such Capital Stock) deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock (or warrants or options convertible into or exchangeable for such Capital Stock) represent a portion of the exercise price of such options; and
(vi) the issuance by the Company of shares of Preferred Stock as dividends paid in kind on the Preferred Stock of the Company outstanding on the Issuance Date or on shares of Preferred Stock so issued as payment in kind dividends, such dividends made pursuant to the terms of the Certificate of Designation for such Preferred Stock as in effect on the Issuance Date.
The actions described in clauses (i), (ii), (iii), (iv) and (v) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) above, and the actions described in clause (vi) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a).
(c) Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to, pay any cash dividends on any shares of Capital Stock of the Company which shall rank junior to the Senior Exchangeable Preferred Stock until such time as the Notes have received a rating from Moody's of at least "B1" or higher.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly owned Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this provision shall not prohibit (A) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of the Certificate of Designation, (B) the ownership by other Persons of Qualified Capital Stock (other than Preferred Stock) issued prior to the time such Restricted Subsidiary became a Subsidiary of the Company that was neither issued in contemplation of such Subsidiary becoming a Subsidiary nor acquired at that time or (C) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law.
Consolidation, Merger and Sale of Assets. The Company will not, in a single transaction or through a series of transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and immediately after giving effect thereto (i) either (a) the Company will be the continuing corporation or (b) the Person (if other than the Company) formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or the Person that acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis (the "Surviving Entity") will be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) the Senior Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of the Surviving Entity having in respect of the Surviving Entity the same rights and privileges that the Senior Exchangeable Preferred Stock had immediately prior to such transaction with respect to the Company; (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis, no Voting Rights Triggering Event, and no event that after the giving of notice or lapse of time or both would become a Voting Rights Triggering Event, shall have occurred and be continuing; (iv) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the four-quarter period immediately prior to the consummation of such transaction or series of transactions with the appropriate adjustments with respect to the transaction or series of transactions being included in such
pro forma calculation), the Company (or the Surviving Entity, as the case may be) could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions described above under "Limitation on Indebtedness"; and (v) the Company shall have delivered to the Transfer Agent an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer comply with the Certificate of Designation. The Surviving Entity will file an appropriate certificate of designation with respect to the preferred stock referred to in clause (ii) above with the Secretary of State (or similar public official) of the jurisdiction under whose laws it is organized. In such event, the Company will be released from its obligations under the Certificate of Designation.
Reports and Other Information. The Company will file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company will also be required (a) to file with the Transfer Agent, and provide to each holder of Senior Exchangeable Preferred Stock, without cost to such holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required, and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective holder of Senior Exchangeable Preferred Stock promptly upon written request.
TRANSFER AGENT AND REGISTRAR
United States Trust Company of New York will be the Transfer Agent and Registrar for the Senior Exchangeable Preferred Stock.
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange Indenture dated as of December 29, 1997 (the "Exchange Indenture"), among the Company, as issuer, the Subsidiary Debenture Guarantors, as guarantors, and United States Trust Company of New York, as trustee (the "Debenture Trustee"). The Exchange Indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following summary of the material provisions of the Exchange Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions, including the definitions of certain terms contained therein and those made part of the Exchange Indenture by reference to the Trust Indenture Act. For definitions of certain capitalized terms used in the following summary, see "--Certain Definitions."
GENERAL
The Exchange Debentures will be unsecured obligations of the Company and will be limited in aggregate principal amount to the aggregate original liquidation preference of the Senior Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, on the date of exchange of the Senior Exchangeable Preferred Stock into Exchange Debentures (plus any additional Exchange Debentures issued in lieu of cash interest as described herein). The Exchange Debentures will be issued only in fully registered form without coupons, in denominations of $1,000 or any integral multiple thereof (other than with respect to additional Exchange Debentures issued in lieu of cash interest as described herein). The Exchange Debentures will be subordinated to all existing and future Senior Indebtedness and Senior Subordinated Indebtedness of the Company.
The Exchange Debentures will mature on December 15, 2009. Each Exchange Debenture will accrue interest at the dividend rate of the Senior Exchangeable Preferred Stock from the Exchange Date or from the most recent interest payment date to which interest has been paid or provided for. Interest will be payable quarterly in cash (or, on or prior to December 15, 2002, in additional Exchange Debentures having a principal amount equal to the cash interest otherwise payable, or in
a combination of cash and Exchange Debentures, at the option of the Company) in arrears on each March 15, June 15, September 15 and December 15 commencing with the first such date after the Exchange Date. Interest on the Exchange Debentures will be computed on the basis of a 360-day year comprised of twelve 30-day months and the actual number of days elapsed.
In the event that the Exchange Date occurs prior to the issuance of the New Senior Exchangeable Preferred Stock, the provisions of the Preferred Stock Registration Rights Agreement described below under "The Preferred Stock Exchange Offer" shall apply to the registration of the Exchange Debentures, except that the changes in dividend rate referred to therein shall result in corresponding changes in the interest rate on the Exchange Debentures.
Principal of and premium, if any, and interest on the Exchange Debentures will be payable, and the Exchange Debentures will be exchangeable and transferable (subject to compliance with transfer restrictions imposed by applicable securities laws for so long as the Exchange Debentures are not registered for resale under the Securities Act), at the office or agency of the Company in The City of New York (which initially will be the corporate trust office of the Trustee); provided, however, that, at the option of the Company, interest may be paid by check mailed to the address of the Person entitled thereto as such address shall appear on the security register. No service charge will be made for any registration of transfer or exchange of Exchange Debentures, but the Company may require payment in certain circumstances of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith.
DEBENTURE GUARANTEES
Payment of the principal of, premium, if any, and interest on the Exchange Debentures, when and as the same become due and payable (whether at Stated Maturity or on a redemption date, or pursuant to a Change in Control Purchase Offer or an Excess Proceeds Offer, and whether by declaration of acceleration, call for redemption or otherwise), will be guaranteed, jointly and severally, on an unsecured subordinated basis by the Subsidiary Debenture Guarantors. The Exchange Indenture will provide that the obligations of each Subsidiary Debenture Guarantor under its Debenture Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable laws.
The Exchange Indenture will require that each Restricted Subsidiary organized within the United States and certain other Restricted Subsidiaries issue a Debenture Guarantee. Under certain circumstances, the Company will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive covenants set forth in the Exchange Indenture.
The Exchange Indenture will provide further that, so long as no Default exists, the Debenture Guarantee issued by any Subsidiary Debenture Guarantor shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer to any Person that is not an Affiliate of the Company of all of the Company's and its Restricted Subsidiaries' Capital Stock in, or all or substantially all the assets of, such Subsidiary Debenture Guarantor (which transaction is otherwise in compliance with the Exchange Indenture, including, without limitation, the provisions of "--Certain Covenants-- Limitation on Sale of Assets" and "--Limitation on Issuances and Sales of Capital Stock of Subsidiaries").
RANKING
The payment of the principal of, premium, if any, and interest on the Exchange Debentures will be subordinated in right of payment, as set forth in the Exchange Indenture, to the prior payment in full in cash or cash equivalents of all Senior Indebtedness and Senior Subordinated Indebtedness whether outstanding on the date of the Exchange Indenture or thereafter incurred.
In the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company or to its assets, or any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary and whether or not involving insolvency
or bankruptcy, or any assignment for the benefit of creditors or other marshaling of assets or liabilities of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety upon the terms and conditions described under "Consolidation, Merger and Sale of Assets" below), the holders of Senior Indebtedness and Senior Subordinated Indebtedness will be entitled to receive payment in full in cash or cash equivalents of all Senior Indebtedness and Senior Subordinated Indebtedness, or provision shall be made for such payment in full, before the holders of Exchange Debentures will be entitled to receive any payment or distribution of any kind or character (other than any payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Indebtedness and Senior Subordinated Indebtedness that may at the time be outstanding to at least the same extent as the Exchange Debentures are so subordinated (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities") and any payment made pursuant to the provisions described under "-- Certain Covenants--Defeasance or Covenant Defeasance of Exchange Indenture" from monies or U.S. Government Obligations previously deposited with the Debenture Trustee) on account of principal of, or premium, if any, or interest on the Exchange Debentures; and any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities and payments made pursuant to the provisions described under "--Certain Covenants--Defeasance or Covenant Defeasance of Exchange Indenture" from monies or U.S. Government Obligations previously deposited with the Debenture Trustee), by set-off or otherwise, to which the holders of the Exchange Debentures or the Debenture Trustee would be entitled but for the provisions of the Exchange Indenture shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness and Senior Subordinated Indebtedness or their representative or representatives ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness and Senior Subordinated Indebtedness to the extent necessary to make payment in full of all Senior Indebtedness and Senior Subordinated Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness and Senior Subordinated Indebtedness.
No payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to the provisions described under "-- Certain Covenants--Defeasance or Covenant Defeasance of Exchange Indenture" from monies or U.S. Government Obligations previously deposited with the Exchange Trustee), may be made by or on behalf of the Company on account of principal of, premium, if any, or interest on the Exchange Debentures or on account of the purchase, redemption or other acquisition of Exchange Debentures upon the occurrence of any default in payment (whether at stated maturity, upon scheduled installment, by acceleration or otherwise) of principal of, premium, if any, or interest on Designated Senior Indebtedness (a "Payment Default") until such Payment Default shall have been cured or waived in writing or shall have ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full in cash or cash equivalents.
No payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to the provisions described under "-- Certain Covenants--Defeasance or Covenant Defeasance of Exchange Indenture" from monies or U.S. Government Obligations previously deposited with the Debenture Trustee), may be made by or on behalf of the Company on account of principal of, premium, if any, or interest on the Exchange Debentures or on account of the purchase, redemption or other acquisition of Exchange Debentures for the period specified below (a "Payment Blockage Period") upon the occurrence of any default or event of default with respect to any Designated Senior Indebtedness other than any Payment Default pursuant to which the maturity thereof may be accelerated (a "Non-Payment Default") and receipt by the Exchange Trustee of written notice thereof from the trustee or other representative of holders of Designated Senior Indebtedness.
The Payment Blockage Period will commence upon the date of receipt by the Debenture Trustee of written notice from the trustee or such other representative of the holders of the Designated Senior Indebtedness in respect of which the Non-Payment Default exists and shall end on the earliest of (i) 179 days thereafter (provided that any Designated Senior Indebtedness as to which notice was given shall not theretofore have been accelerated), (ii) the date on which such Non-Payment Default is cured, waived or ceases to exist or such Designated Senior Indebtedness is discharged or paid in
full in cash or cash equivalents or (iii) the date on which such Payment Blockage Period shall have been terminated by written notice to the Debenture Trustee or the Company from the trustee or such other representative initiating such Payment Blockage Period, after which the Company will resume making any and all required payments in respect of the Exchange Debentures, including any missed payments. In any event, not more than one Payment Blockage Period may be commenced during any period of 360 consecutive days. No event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period will be, or can be made, the basis for the commencement of a subsequent Payment Blockage Period, unless such default has been cured or waived for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Period.
In the event that, notwithstanding the provisions of the preceding four paragraphs, any payment shall be made to the Debenture Trustee (and not paid over to the holders of the Exchange Debentures) which is prohibited by such provisions, then and in such event such payment shall be paid over and delivered by such Debenture Trustee to the trustee and any other representative of holders of Designated Senior Indebtedness, as their interests may appear, for application to Designated Senior Indebtedness. After all Senior Indebtedness and Senior Subordinated Indebtedness is paid in full and until the Exchange Debentures are paid in full, holders of the Exchange Debentures shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Exchange Debenture) to the rights of holders of Senior Indebtedness and Senior Subordinated Indebtedness to receive distributions applicable to Senior Indebtedness and Senior Subordinated Indebtedness to the extent that distributions otherwise payable to the holders of the Exchange Debentures have been applied to the payment of Senior Indebtedness and Senior Subordinated Indebtedness.
Failure by the Company to make any required payment in respect of the Exchange Debentures when due or within any applicable grace period, whether or not occurring during a Payment Blockage Period, will result in an Event of Default and, thereafter, holders of the Exchange Debentures will have the right to accelerate the maturity thereof. See "--Events of Default."
By reason of such subordination, in the event of liquidation, receivership, reorganization or insolvency of the Company, creditors of the Company who are holders of Senior Indebtedness and Senior Subordinated Indebtedness may recover more, ratably, than the holders of the Exchange Debentures, and assets which would otherwise be available to pay obligations in respect of the Exchange Debentures will be available only after all Senior Indebtedness and Senior Subordinated Indebtedness has been paid in full in cash or cash equivalents, and there may not be sufficient assets remaining to pay amounts due on any or all of the Exchange Debentures.
Each Debenture Guarantee will, to the extent set forth in the Exchange Indenture, be subordinated in right of payment to the prior payment in full of all senior indebtedness and senior subordinated indebtedness of the Subsidiary Debenture Guarantors, upon terms substantially comparable to the subordination of the Exchange Debentures to all Senior Indebtedness and Senior Subordinated Indebtedness.
MANDATORY REDEMPTION
The Company will not be required to make mandatory redemptions or sinking fund payments prior to maturity of the Exchange Debentures.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable at the option of the Company, in whole or in part, at any time on or after December 15, 2002 at the redemption prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest, if any, to the date of redemption, if redeemed during the 12-month period beginning on December 15 of the years indicated below (subject to the right of holders of record on relevant record dates to receive interest due on an interest payment date):
Year Percentage ---- ---------- 2002................................................... 109.938% 2003................................................... 106.625% 2004................................................... 103.313% 2005 and thereafter.................................... 100.000% |
In addition, at any time prior to December 15, 2001, the Company may redeem all, but not less than all, of the outstanding Exchange Debentures originally issued under the Exchange Indenture within 20 days of a Public Equity Offering with the net proceeds of such offering at a redemption price equal to 113.25% of the principal amount thereof, together with accrued interest, if any, to the date of redemption (subject to the right of holders of record on relevant record dates to receive interest due on relevant interest payment dates).
If less than all the Exchange Debentures are to be redeemed, the particular Exchange Debentures to be redeemed will be selected not more than 60 days prior to the redemption by the Debenture Trustee by such method as the Debenture Trustee will deem fair and appropriate; provided, however, that no such partial redemption will reduce the principal amount of an Exchange Debenture not redeemed to less than $1,000. Notice of redemption will be mailed, first-class postage prepaid, at least 30 but not more than 60 days before the redemption date to each holder of Exchange Debentures to be redeemed at its registered address. On and after the redemption date, interest will cease to accrue on Exchange Debentures called for redemption and accepted for payment.
CERTAIN COVENANTS
The Exchange Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness; provided, however, that the Company and any Subsidiary Debenture Guarantor may incur Indebtedness (including Acquired Indebtedness) if at the time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness for which internal financial statements are available, taken as one period (and after giving pro forma effect to (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such four-quarter period, (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired on the first day of such four- quarter period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such four-quarter period) and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred on the first day of such four-quarter period), would have been at least equal to 2.0 to 1.0.
Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company (other than dividends or distributions payable solely in shares of its Qualified Capital Stock of the Company or in options, warrants or other rights to acquire such shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock of the Company or any Affiliate of the Company or any options, warrants or other rights to acquire such shares of
Capital Stock (other than such options, warrants or rights owned by the Company or a wholly owned Restricted Subsidiary);
(iii) declare or pay any dividend on, or make any distribution to holders of, any shares of Capital Stock of any Restricted Subsidiary to any Person (other than to the Company or any of its wholly owned Restricted Subsidiaries or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis);
(iv) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Junior Subordinated Indebtedness of the Company or any Subsidiary Debenture Guarantor; or
(v) make any Investment (other than any Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from) clauses
(i) through (v) are collectively referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a board resolution), (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Indebtedness" covenant and (3) the aggregate
amount of all Restricted Payments declared or made after the Issuance Date shall
not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day of the Company's first fiscal quarter after the Issuance Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Qualified Capital Stock of the Company (including upon the exercise of options, warrants or rights) or warrants, options or rights to purchase shares of Qualified Capital Stock of the Company, plus
(C) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities or Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, to the extent such securities were originally sold for cash, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted Payment that was made after the date of the Exchange Indenture is sold or is otherwise liquidated or repaid, an amount (to the extent not included in Consolidated Adjusted Net Income) equal to the sum of (I) the lesser of (x) the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) and (y) the initial amount of such Investment, and (II) with respect solely to any Restricted Payment to be made pursuant to clause (v) of this paragraph (a), the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) in excess of the amount in (I), plus
(E) $5 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (with respect to clauses
(ii), (iii), (iv), (v), (vi), (vii), (viii) and (ix) below) at the time of and
after giving effect thereto no Default or Event of Default shall have occurred
and be continuing:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration the payment of such dividend would have complied with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Junior Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iv) the purchase of any Indebtedness that is expressly subordinated in right of payment to the Exchange Debentures at a purchase price not greater than 101% of the principal amount thereof in the event of a Change in Control in accordance with provisions similar to the "Purchase of Exchange Debentures upon a Change in Control" covenant; provided that prior to such purchase the Company has made the Change in Control Offer as provided in such covenant with respect to the Exchange Debentures and has purchased all Exchange Debentures validly tendered for payment in connection with such Change in Control Offer;
(v) the repurchase, redemption or other acquisition or retirement for value of shares of Management Stock; provided that (1) the Company is required, by the terms of written agreements between the Company and each of Lloyd L. Ross and Jerry M. Smith as in effect on the Issuance Date, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $25.0 million in the aggregate;
(vi) the repurchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company from employees who have died (or their estates or beneficiaries) or whose employment has been terminated; provided that such payment shall not exceed $1.5 million in any twelve-month period, excluding any amounts used to repurchase, redeem, acquire or retire for value shares of Capital Stock of the Company pursuant to clause (v) above;
(vii) repurchases of Capital Stock of the Company (or warrants or options convertible into or exchangeable for such Capital Stock) deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock (or warrants or options convertible into or exchangeable for such Capital Stock) represent a portion of the exercise price of such options;
(viii) the issuance by the Company of shares of Preferred Stock as dividends payment in kind on the Preferred Stock of the Company outstanding on the Issuance Date or on shares of Preferred Stock so issued as payment in kind dividends, such dividends made pursuant to the terms of the Certificate of Designation for such Preferred Stock as in effect on the Issuance Date; and
(ix) the purchase, redemption, defeasance or other acquisition or retirement for value of any Junior Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, new Junior Subordinated Indebtedness so long as (A) the principal amount of such new Junior Subordinated Indebtedness does not exceed the principal amount (or, if such Junior Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, defeased, acquired or retired, plus either the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of such Indebtedness being refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus, in either case, the amount of reasonable expenses of the Company incurred in connection with such refinancing, (B) such new Junior Subordinated Indebtedness is pari passu or subordinated, as applicable, to the Exchange
Debentures to the same extent as such Indebtedness so purchased, redeemed, defeased, acquired or retired and (C) such new Indebtedness has an Average Life longer than the Average Life of the Exchange Debentures and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Exchange Debentures.
The actions described in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) above, and the actions described in clauses (viii) and (ix) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a).
(c) Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to, pay any cash dividends on any shares of Capital Stock of the Company which shall rank junior to the Exchange Debentures until such time as the Notes have received a rating from Moody's of at least "B1" or higher.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly owned Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this covenant shall not prohibit (A) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of the Exchange Indenture, (B) the ownership by other Persons of Qualified Capital Stock (other than Preferred Stock) issued prior to the time such Restricted Subsidiary became a Subsidiary of the Company that was neither issued in contemplation of such Subsidiary becoming a Subsidiary nor acquired at that time or (C) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
Restricted Subsidiary (other than the Company or a Restricted Subsidiary)
(collectively, "Interested Persons"), unless (i) such transaction or series of
transactions are on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than would have been able to be
obtained in an arm's-length transaction with third parties that are not
Interested Persons, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $1.0
million, the Company has delivered an Officers' Certificate to the Debenture
Trustee certifying that such transaction or series of transactions complies with
clause (i) above and (iii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $5.0
million, such transaction or series of related transactions (x) has been
approved by the Board of Directors of the Company (including a majority of the
Disinterested Directors of the Company) or (y) the Company has obtained a
written opinion from a nationally recognized investment banking or valuation
firm certifying that such transaction or series of related transactions is fair
to the Company or its Restricted Subsidiary, as the case may be, from a
financial point of view; provided, however, that this covenant will not restrict
(1) the Company from paying reasonable and customary regular compensation and
fees to directors of the Company or any Restricted Subsidiary who are not
employees of the Company or any Restricted Subsidiary, (2) the payment of
management fees to the Permitted Holders in an aggregate amount not to exceed
$500,000 per year, (3) loans and advances to officers, directors and employees
of the Company or any Restricted Subsidiary in the ordinary course of business
in accordance with the past practices of the Company or any Restricted
Subsidiary not to exceed $3.0 million in the aggregate outstanding at any time,
(4) any transactions made in compliance with the "Limitation on Restricted
Payments" covenant, (5) the issuance and sale of Qualified Capital Stock of the
Company to Persons who are stockholders of the Company at the time of such
issuance and sale and (6) the performance of any written agreement as in effect
on the date of the Exchange Indenture and as amended from time to time, provided
that any such amendment is not less favorable in any material respect to the
Company or any Restricted Subsidiary than the terms of such agreement as in
effect on the date of the Exchange Indenture.
Limitation on Liens. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Junior Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or indebtedness of any Restricted Subsidiary, whether owned at the date of the Exchange Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Company, the Exchange Debentures are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Junior Subordinated Indebtedness of the Company, the Exchange Debentures are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
(b) The Company will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Junior Subordinated Indebtedness of such Restricted Subsidiary on or with respect to any such Restricted Subsidiary's properties or assets, including any shares of stock or Indebtedness of any Subsidiary of such Restricted Subsidiary, whether owned at the date of the Exchange Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Restricted Subsidiary, such Debenture Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Junior Subordinated Indebtedness of the Restricted Subsidiary, such Debenture Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
Purchase of Exchange Debentures upon a Change in Control. If a Change in Control shall occur at any time, then each holder of Exchange Debentures will have the right to require that the Company purchase such holder's Exchange Debentures, in whole or in part in integral multiples of $1,000, at a purchase price (the "Change in Control Purchase Price") in cash in an amount equal to 101% of the principal amount thereof, plus accrued interest, if any, to the date of purchase (the "Change in Control Purchase Date"), pursuant to the offer described below (the "Change in Control Offer") and the other procedures set forth in the Exchange Indenture.
Within 30 days following any Change in Control, the Company shall notify the Debenture Trustee thereof and give written notice of such Change in Control to each holder of Exchange Debentures by first-class mail, postage prepaid, at the address of such holder appearing in the security register, stating, among other things, (i) the Change in Control Purchase Price and the Change in Control Purchase Date, which shall be a Business Day no earlier than 30 days nor later than 75 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Exchange Debenture not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Change in Control Purchase Price, any Exchange Debentures accepted for payment pursuant to the Change in Control Offer shall cease to accrue interest after the Change in Control Purchase Date; and (iv) certain procedures that a holder of Exchange Debentures must follow to accept a Change in Control Offer or to withdraw such acceptance.
If a Change in Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change in Control Purchase Price for all of the Exchange Debentures that might be delivered by holders of the Exchange Debentures seeking to accept the Change in Control Offer. The failure of the Company to make or consummate the Change in Control Offer or pay the Change in Control Purchase Price when due would result in an Event of Default and would give the Debenture Trustee and the holders of the Exchange Debentures the rights described under "--Events of Default."
One of the events which constitutes a Change in Control under the Exchange Indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (which is the governing law of the Exchange Indenture) to represent a specific quantitative test. As a consequence, in the event holders of the Exchange Debentures elect to require the Company to purchase the Exchange Debentures and the Company elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to purchase such holder's Exchange Debentures upon a Change in Control may deter a third party from acquiring the Company in a transaction that constitutes a Change in Control.
The Company will comply with the applicable tender offer rules, including Rule 14e-l under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change in Control Offer.
The Company will not, and will not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement, the Note Indenture or under Indebtedness as in effect on the Issuance Date) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Exchange Debentures or, if such Change in Control Offer is made, to pay for the Exchange Debentures tendered for purchase.
Prior to making a Change in Control Offer the Company shall be required to have terminated all commitments and repaid in full all Indebtedness under the Senior Credit Agreement and the Notes, respectively, and or to have obtained the requisite consents under the Senior Credit Agreement and the Note Indenture to permit the purchase of the Exchange Debentures as provided for under this covenant. Failure to mail the notice on the date specified above or to have satisfied the foregoing condition precedent by the date that the notice is required to be mailed would constitute an Event of Default under the Exchange Indenture. If, as a result thereof, a default occurs with respect to any Senior Indebtedness or Senior Subordinated Indebtedness, the subordination provisions in the Exchange Indenture would likely restrict payments to the holders of the Exchange Debentures.
The Company will not, and will not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the Issuance Date) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Exchange Debentures or, if such Change in Control Offer is made, to pay for the Exchange Debentures tendered for purchase.
Limitation on Sale of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) at least 75% of such consideration consists of cash or Cash Equivalents. The amount of any (I) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Debenture Guarantor or any Senior Indebtedness of the Company or any Subsidiary Debenture Guarantor that is actually assumed by the transferee in such Asset Sale and from which the Company and the Restricted Subsidiaries are fully released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries (excluding any liabilities that are incurred in connection with or in anticipation of such Asset Sale) and (II) notes or other similar obligations received by the Company or any Restricted Subsidiary from such transferee that are converted, sold or exchanged within 30 days of the related Asset Sale by the Company or the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount equal to the net cash proceeds realized upon such conversion, sale or exchange for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale, to (i) permanently repay or prepay any then outstanding Senior Indebtedness or Senior Subordinated Indebtedness of the Company or any Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto) or (ii) invest (or enter into a legally binding agreement to invest) in other properties or assets to replace the properties or assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, then the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii)
(without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall, within 30 Business Days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Exchange Debentures, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as an integral multiple of $1,000) of Exchange Debentures that may be purchased with the Excess Proceeds. The offer price as to each Exchange Debenture shall be payable in cash in an amount equal to 100% of the principal amount of such Exchange Debenture plus accrued interest, if any, to the date such Excess Proceeds Offer is consummated. To the extent that the aggregate principal amount of Exchange Debentures tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for any lawful purposes. If the aggregate principal amount of Exchange Debentures validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Exchange Debentures to be purchased will be selected on a pro rata basis. Upon completion of such Exceeds Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. (a) The Company will not permit any Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Indebtedness of the Company unless (i) (A) if such Restricted Subsidiary is not a Subsidiary Debenture Guarantor, such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture, in form satisfactory to the Debenture Trustee, providing for a guarantee of the Exchange Debentures by such Restricted Subsidiary and delivers to such Debenture Trustee an Opinion of Counsel reasonably satisfactory to such Debenture Trustee to the effect that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary and is in compliance with the terms of the Exchange Indenture and (B) with respect to any guarantee by a Restricted Subsidiary of Junior Subordinated Indebtedness of the Company, any such guarantee shall be subordinated to such Restricted Subsidiary's Debenture Guarantee at least to the same extent as such guaranteed Indebtedness is subordinated to the Exchange Debentures and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Debenture Guarantee.
(b) Notwithstanding the foregoing, any guarantee of the Exchange Debentures created pursuant to the provisions described in the foregoing paragraph (a) will provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's Capital Stock in, or all or substantially all the assets of, the applicable Subsidiary Debenture Guarantor (which sale, exchange or transfer is otherwise in compliance with the Exchange Indenture) or (ii) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Exchange Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary (other than customary restrictions on transfers of property subject to a Lien permitted under the Exchange Indenture that would not materially adversely affect the Company's ability to satisfy its obligations under the Exchange Debentures and the Exchange Indenture) or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary provisions restricting subletting or assignment of any lease or assignment of any other contract to which the Company or any Restricted Subsidiary is a party or to which any of their respective properties or assets are subject, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) encumbrances and restrictions in effect on the Issuance Date
pursuant to the Senior Credit Facility and its related documentation, (v) any
encumbrance or restriction contained in contracts for sales of assets permitted
by the "Limitation on Sale of Assets" covenant with respect to the assets to be
sold pursuant to such contract and (vi) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (iii) and
(iv); provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the Exchange
Debentures than those under or pursuant to the agreement so extended, renewed,
refinanced or replaced.
Limitation on Sale and Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction with respect to any property or assets (whether now owned or hereafter acquired), unless (i) the sale or transfer of such property or assets to be leased is treated as an Asset Sale and the Company complies with the "Limitation on Sale of Assets" covenant and (ii) the Company or such Restricted Subsidiary would be permitted to incur Indebtedness under the "Limitation on Indebtedness" covenant in the amount of the Capitalized Lease Obligations incurred in respect of such Sale and Leaseback Transaction; provided, however, that the Company and its Restricted Subsidiaries will not be required to comply with this covenant with respect to the sale and leaseback of the Headquarters Facility.
Limitation on Other Subordinated Indebtedness. Neither the Company nor any Restricted Subsidiary will incur, create, assume, guarantee or in any other manner become directly or indirectly liable with respect to or responsible for, or permit to remain outstanding, any Indebtedness, other than the Exchange Debentures, that is subordinate or junior in right of payment to any Senior Subordinated Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Exchange Debentures pursuant to subordination provisions substantially similar to those contained in the Exchange Indenture.
Limitation on Unrestricted Subsidiaries. The Company will not make, and will not permit any of its Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such Investments would exceed the amount of Restricted Payments then permitted to be made pursuant to the "Limitation on Restricted Payments" covenant. Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to this covenant (i) will be treated as the making of a Restricted Payment in calculating the amount of Restricted Payments made by the Company or a Restricted Subsidiary and (ii) may be made in cash or property.
Reports. The Company will file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company will also be required (a) to file with the Debenture Trustee, and provide to each holder of Exchange Debentures, without cost to such holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required, and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective holder of Exchange Debentures promptly upon written request.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, in a single transaction or through a series of transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and immediately after giving effect thereto (i) either (a) the Company will be the continuing corporation or (b) the Person (if other than the
Company) formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or the Person that acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis (the "Surviving Entity") (1) will be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) will expressly assume, by a supplemental indenture in form reasonably satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of, premium, if any, and interest on all the Exchange Debentures and the performance and observance of every covenant of the Exchange Indenture on the part of the Company to be performed or observed; (ii) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or any Restricted Subsidiary incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default will have occurred and be continuing; (iii) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the four- quarter period immediately prior to the consummation of such transaction or series of transactions with the appropriate adjustments with respect to the transaction or series of transactions being included in such pro forma calculation), the Company (or the Surviving Entity if the Company is not the continuing obligor under the Exchange Indenture) could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of the "Limitation on Indebtedness" covenant; (iv) each Subsidiary Debenture Guarantor, if any, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Debenture Guarantee will apply to such Person's obligations under the Exchange Indenture and the Exchange Debentures; and (v) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of the "Limitation on Liens" covenant are complied with.
In connection with any such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition, the Company or the Surviving Entity shall have delivered to the Debenture Trustee, in form and substance reasonably satisfactory to the Debenture Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with the requirements of the Exchange Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with.
Each Subsidiary Debenture Guarantor, if any (other than any Subsidiary whose Debenture Guarantee is being released pursuant to the provisions under "-- Debenture Guarantees" or "--Certain Covenants--Limitation on Issuance of Guarantees of Indebtedness by Subsidiaries" as a result of such transaction), shall not, and the Company will not permit a Subsidiary Debenture Guarantor to, in a single transaction or through a series of related transactions, merge or consolidate with or into any other corporation or other entity (other than the Company or any Subsidiary Debenture Guarantor), or sell, assign, convey, transfer, lease or otherwise dispose of its properties and assets on a consolidated basis substantially as an entirety to any entity (other than the Company or any Subsidiary Debenture Guarantor) unless (i) either (a) such Subsidiary Debenture Guarantor shall be the continuing corporation or partnership or (b) the Person (if other than such Subsidiary Debenture Guarantor) formed by such consolidation or into which such Subsidiary Debenture Guarantor is merged or the entity which acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all of the properties and assets of such Subsidiary Debenture Guarantor, as the case may be, shall be a corporation or partnership organized and validly existing under the laws of the United States, any state thereof or the District of Columbia, and shall expressly assume by an indenture supplemental to the Exchange Indenture, executed and delivered to the Debenture Trustee, in form satisfactory to the Debenture Trustee, all the obligations of such Subsidiary Debenture Guarantor under the Exchange Debentures and the Exchange Indenture; (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; and (iii) such Subsidiary Debenture Guarantor shall have delivered to the Debenture Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or disposition and such supplemental indenture comply with the Exchange Indenture.
Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company or any Subsidiary Debenture Guarantor in accordance with the
immediately preceding paragraphs, the successor Person formed by such consolidation or into which the Company or such Subsidiary Debenture Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Subsidiary Debenture Guarantor, as the case may be, under the Exchange Indenture and/or the Debenture Guarantees, as the case may be, with the same effect as if such successor had been named as the Company or such Subsidiary Debenture Guarantor, as the case may be, therein and/or in the Debenture Guarantees, as the case may be. When a successor assumes all the obligations of its predecessor under the Exchange Indenture, the Exchange Debentures or a Debenture Guarantee, as the case may be, the predecessor shall be released from those obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal and interest on the Exchange Debentures or a Debenture Guarantee, as the case may be.
EVENTS OF DEFAULT AND REMEDIES
The following will be "Events of Default" under the Exchange Indenture:
(i) default in the payment of any interest on any Exchange Debenture when it becomes due and payable and continuance of such default for a period of 30 days;
(ii) default in the payment of the principal of or premium, if any, on any Exchange Debenture at its Maturity (upon acceleration, optional redemption, required purchase or otherwise);
(iii) default in the performance, or breach, of the provisions described in "Consolidation, Merger and Sale of Assets," the failure to make or consummate a Change in Control Offer in accordance with the provisions of the "Purchase of Exchange Debentures Upon a Change in Control" covenant or the failure to make or consummate an Excess Proceeds Offer in accordance with the provisions of the "Limitation on Sale of Assets" covenant;
(iv) default in the performance, or breach, of any covenant or warranty of the Company or any Subsidiary Debenture Guarantor contained in the Exchange Indenture or any Debenture Guarantee (other than a default in the performance, or breach, of a covenant or warranty which is specifically dealt with in clause (i), (ii) or (iii) above) and continuance of such default or breach for a period of 30 days after written notice shall have been given to the Company by the Trustee or to the Company and the Debenture Trustee by the holders of at least 25% in aggregate principal amount of the Exchange Debentures then outstanding;
(v) (A) one or more defaults in the payment of principal of or premium, if any, on Indebtedness of the Company or any Restricted Subsidiary aggregating $10.0 million or more, when the same becomes due and payable at the stated maturity thereof, and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived or (B) Indebtedness of the Company or any Restricted Subsidiary aggregating $10.0 million or more shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment) prior to the stated maturity thereof;
(vi) one or more final judgments or orders shall be rendered against the Company or any Restricted Subsidiary for the payment of money, either individually or in an aggregate amount, in excess of $10.0 million and shall not be discharged and either (A) an enforcement proceeding shall have been commenced by any creditor upon such judgment or order or (B) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, was not in effect;
(vii) any Debenture Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Debenture Guarantor denies that it has any further liability under any Debenture Guarantee, or gives notice to such effect (other than by reason of the termination of the Exchange Indenture or the release of any such Debenture Guarantee in accordance with the Exchange Indenture); or
(viii) the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (viii) above) shall occur and be continuing, the Debenture Trustee, by written notice to the Company, or the holders of not less than 25% in aggregate principal amount of the Exchange Debentures then outstanding, by written notice to the Company, may, and the Debenture Trustee, upon the written request of such holders, shall declare the principal of, premium, if any, and accrued interest on all of the outstanding Exchange Debentures immediately due and payable; provided that so long as the Senior Credit Agreement shall be in full force and effect, if an Event of Default shall have occurred and be continuing (other than as specified in clause (viii) above with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (x) five Business Days following delivery of a written notice of such acceleration of the Exchange Debentures to the agent under the Senior Credit Agreement and (y) the acceleration of any Indebtedness under the Senior Credit Agreement. Upon any such declaration all such amounts payable in respect of the Exchange Debentures shall become immediately due and payable. If an Event of Default specified in clause (viii) above occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the outstanding Exchange Debentures shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Debenture Trustee or any holder of Exchange Debentures.
At any time after a declaration of acceleration under the Exchange
Indenture, but before a judgment or decree for payment of the money due has been
obtained by the Debenture Trustee, the holders of a majority in aggregate
principal amount of the outstanding Exchange Debentures, by written notice to
the Company and the Debenture Trustee, may rescind such declaration and its
consequences if (a) the Company has paid or deposited with the Debenture Trustee
a sum sufficient to pay (i) all overdue interest on all outstanding Exchange
Debentures, (ii) all unpaid principal of and premium, if any, on any outstanding
Exchange Debentures that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Exchange Debentures,
(iii) to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the Exchange
Debentures, (iv) all sums paid or advanced by the Debenture Trustee under the
Exchange Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee, its agents and counsel; and (b) all Events of
Default, other than the non-payment of amounts of principal of, premium, if any,
or interest on the Exchange Debentures that has become due solely by such
declaration of acceleration, have been cured or waived. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of the outstanding Exchange Debentures may, on behalf of the holders of all the Exchange Debentures, waive any past defaults under the Exchange Indenture, except a default in the payment of the principal of, premium, if any, or interest on any Exchange Debenture, or in respect of a covenant or provision which under the Exchange Indenture cannot be modified or amended without the consent of the holder of each Exchange Debenture outstanding.
If a Default or an Event of Default occurs and is continuing and is known to the Debenture Trustee, the Debenture Trustee will mail to each holder of the Exchange Debentures notice of the Default or Event of Default within 10 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of, premium, if any, or interest on any Exchange Debentures, the Debenture Trustee may withhold the notice to the holders of such Exchange Debentures if a committee of its trust officers in good faith determines that withholding the notice is in the interests of the holders of the Exchange Debentures.
The Company is required to furnish to the Debenture Trustee annual and quarterly statements as to the performance by the Company and the Subsidiary Debenture Guarantors of their respective obligations under the Exchange Indenture and as to any default in such performance. The Company is also required to notify the Debenture Trustee within five Business Days of the occurrence of any Default or Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF EXCHANGE INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, and any Subsidiary Debenture Guarantor upon the
outstanding Exchange Debentures discharged ("defeasance"). Such defeasance means
that the Company will be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Exchange Debentures and to have
satisfied all of its other obligations under such Exchange Debentures and the
Exchange Indenture insofar as such Exchange Debentures are concerned, except for
(i) the rights of holders of outstanding Exchange Debentures to receive payments
in respect of the principal of, premium, if any, and interest on such Exchange
Debentures when such payments are due, (ii) the Company's obligations to issue
temporary Exchange Debentures, register the transfer or exchange of any Exchange
Debentures, replace mutilated, destroyed, lost or stolen Exchange Debentures,
maintain an office or agency for payments in respect of the Exchange Debentures
and segregate and hold such payments in trust, (iii) the rights, powers, trusts,
duties and immunities of the Debenture Trustee and (iv) the defeasance
provisions of the Exchange Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and any
Subsidiary Debenture Guarantor released with respect to certain covenants set
forth in the Exchange Indenture, and any omission to comply with such
obligations will not constitute a Default or an Event of Default with respect to
the Exchange Debentures ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance,
(i) the Company must irrevocably deposit or cause to be deposited with the Debenture Trustee, as trust funds in trust, for the benefit of the holders of the Exchange Debentures, money in an amount, or U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the outstanding Exchange Debentures on the stated maturity date or on the applicable redemption date, as the case may be, of such principal, premium, if any, or interest on the outstanding Exchange Debentures;
(ii) no Default or Event of Default will have occurred and be continuing on the date of such deposit or, insofar as an event of bankruptcy under clause (viii) of "Events of Default" above is concerned, at any time during the period ending on the 91st day after the date of such deposit;
(iii) such defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, the Exchange Indenture or any material agreement or instrument to which the Company or any Subsidiary Debenture Guarantor is a party or by which it is bound;
(iv) in the case of defeasance, the Company shall have delivered to the Debenture Trustee an Opinion of Counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date of the final Prospectus, there has been a change in applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the holders of the outstanding Exchange Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred;
(v) in the case of covenant defeasance, the Company shall have delivered to the Debenture Trustee an Opinion of Counsel to the effect that the holders of the Exchange Debentures outstanding will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;
(vi) in the case of defeasance or covenant defeasance, the Company shall have delivered to the Debenture Trustee an Opinion of Counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Senior Indebtedness or Senior Subordinated Indebtedness under the subordination provisions of the Exchange
Indenture and (B) after the 91st day following the deposit or after the date such opinion is delivered, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally;
(vii) the Company shall have delivered to the Debenture Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Exchange Debentures or any Debenture Guarantee over the other creditors of either the Company or any Subsidiary Debenture Guarantor with the intent of hindering, delaying or defrauding creditors of either the Company or any Subsidiary Debenture Guarantor; and
(viii) the Company shall have delivered to the Debenture Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Exchange Indenture will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Exchange
Debentures as expressly provided for in the Exchange Indenture) and the
Debenture Trustee, at the expense of the Company, will execute proper
instruments acknowledging satisfaction and discharge of the Exchange Indenture
when (a) either (i) all the Exchange Debentures theretofore authenticated and
delivered (other than destroyed, lost or stolen Exchange Debentures which have
been replaced or paid and Exchange Debentures for whose payment money has been
deposited in trust with the Debenture Trustee or any paying agent or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust as provided for in the Exchange Indenture) have been
delivered to the Debenture Trustee for cancellation or (ii) all Exchange
Debentures not theretofore delivered to the Debenture Trustee for cancellation
(x) have become due and payable, (y) will become due and payable at Stated
Maturity within one year or (z) are to be called for redemption within one year
under arrangements satisfactory to the Debenture Trustee for the giving of
notice of redemption by the Debenture Trustee in the name, and at the expense,
of the Company, and the Company has irrevocably deposited or caused to be
deposited with the Debenture Trustee as trust funds in trust for such purpose an
amount sufficient to pay and discharge the entire Indebtedness on the Exchange
Debentures not theretofore delivered to the Debenture Trustee for cancellation,
for principal of, premium, if any, and interest on the Exchange Debentures to
the date of such deposit (in the case of Exchange Debentures which have become
due and payable) or to the Stated Maturity or redemption date, as the case may
be; (b) the Company has paid or caused to be paid all sums payable under the
Exchange Indenture by the Company; and (c) the Company has delivered to the
Debenture Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided in the Exchange Indenture
relating to the satisfaction and discharge of the Exchange Indenture have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
With certain exceptions, modifications and amendments of the Exchange Indenture may be made by a supplemental indenture entered into by the Company, the Subsidiary Debenture Guarantors and the Debenture Trustee with the consent of the holders of a majority in aggregate outstanding principal amount of the Exchange Debentures then outstanding; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Exchange Debenture affected thereby: (i) change the Stated Maturity of the principal of, or any installment of interest on, any Exchange Debenture, or reduce the principal amount thereof, or premium, if any, or the rate of interest thereon or change the coin or currency in which the principal of any Exchange Debenture or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); (ii) amend, change or modify the obligation of the Company to make and consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance with the "Limitation on Sale of Assets" covenant or the obligation of the Company to make and consummate a Change in Control Offer in the event of a Change in Control in accordance with the "Purchase of Exchange Debentures Upon a Change in Control" covenant, including, in each case, amending, changing or modifying any definition relating thereto in any manner materially adverse to the holders of the Exchange Debentures affected thereby; (iii) reduce the percentage in principal amount of outstanding Exchange
Debentures, the consent of whose holders is required for any such supplemental indenture or the consent of whose holders is required for any waiver of compliance with certain provisions of the Exchange Indenture; (iv) modify any of the provisions relating to supplemental indentures requiring the consent of holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase the percentage of outstanding Exchange Debentures required for such actions or to provide that certain other provisions of the Exchange Indenture cannot be modified or waived without the consent of the holder of each Exchange Debenture affected thereby; (v) except as otherwise permitted under "Consolidation, Merger and Sale of Assets," consent to the assignment or transfer by the Company or any Debenture Guarantor of any of their rights or obligations under the Subsidiary Indenture; or (vi) amend or modify any of the provisions of the Exchange Indenture relating to any Debenture Guarantee in any manner adverse to the holders of the Exchange Debentures.
Notwithstanding the foregoing, without the consent of any holder of the Exchange Debentures, the Company, any Subsidiary Debenture Guarantor and the Debenture Trustee may modify or amend the Exchange Indenture: (a) to evidence the succession of another Person to the Company, any Subsidiary Debenture Guarantor or any other obligor on the Exchange Debentures, and the assumption by any such successor of the covenants of the Company or such obligor or Subsidiary Debenture Guarantor in the Exchange Indenture and in the Exchange Debentures and in any Debenture Guarantee in accordance with "--Consolidation, Merger and Sale of Assets;" (b) to add to the covenants of the Company, any Subsidiary Debenture Guarantor or any other obligor upon the Exchange Debentures for the benefit of the holders of the Exchange Debentures or to surrender any right or power conferred upon the Company or any other obligor upon the Exchange Debentures, as applicable, in the Exchange Indenture, in the Exchange Debentures or in any Debenture Guarantee; (c) to cure any ambiguity, or to correct or supplement any provision in the Exchange Indenture, the Exchange Debentures or any Debenture Guarantee which may be defective or inconsistent with any other provision in the Exchange Indenture, the Exchange Debentures or any Debenture Guarantee or make any other provisions with respect to matters or questions arising under the Exchange Indenture, the Exchange Debentures or any Debenture Guarantee; provided that, in each case, such provisions shall not adversely affect the interest of the holders of the Exchange Debentures; (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of the Exchange Indenture under the Trust Indenture Act; (e) to add a Subsidiary Debenture Guarantor under the Exchange Indenture; (f) to evidence and provide the acceptance of the appointment of a successor Debenture Trustee under the Exchange Indenture; or (g) to mortgage, pledge, hypothecate or grant a security interest in favor of the Debenture Trustee for the benefit of the holders of the Exchange Debentures as additional security for the payment and performance of the Company's and any Subsidiary Debenture Guarantor's obligations under the Exchange Indenture, in any property, or assets, including any of which are required to be mortgaged, pledged or hypothecated, or in which a security interest is required to be granted to the Debenture Trustee pursuant to the Exchange Indenture or otherwise.
The holders of a majority in aggregate principal amount of the Exchange Debentures outstanding may waive compliance with certain restrictive covenants and provisions of the Exchange Indenture.
CONCERNING THE DEBENTURE TRUSTEE
The Exchange Indenture provides that, except during the continuance of an Event of Default, the Debenture Trustee will perform only such duties as are specifically set forth in the Exchange Indenture. If an Event of Default has occurred and is continuing, the Debenture Trustee will exercise such rights and powers vested in it under the Exchange Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise under the circumstances in the conduct of such Person's own affairs.
The Exchange Indenture and provisions of the Trust Indenture Act incorporated by reference therein contain limitations on the rights of the Trustee thereunder, should it become a creditor of the Company or any Subsidiary Debenture Guarantor, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Debenture Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest (as defined) it must eliminate such conflicting interest or resign.
GOVERNING LAW
The Exchange Indenture, the Debentures and the Debenture Guarantees are governed by, and construed in accordance with, the laws of the State of New York.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Certificate of Designation and in the Exchange Indenture. Reference is made to the Certificate of Designation and the Exchange Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. For purposes of the Exchange Indenture, unless otherwise specifically indicated, the term "consolidated" with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.
"Affiliate" means, with respect to any specified Person, (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (b) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or (c) any executive officer or director of any such specified Person or other Person or (d) with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (a) any Capital Stock
of any Restricted Subsidiary; (b) all or substantially all of the properties and
assets of the Company or its Restricted Subsidiaries; or (c) any other
properties or assets of any division or line of business of the Company or any
Restricted Subsidiary, other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (i) that is governed by the provisions of the
Exchange Indenture described under "--Consolidation, Merger and Sale of Assets,"
(ii) between or among the Company and Restricted Subsidiaries in accordance with
the terms of the Exchange Indenture, (iii) that consist of accounts receivable
transferred to third parties that are not Affiliates of the Company or any
Subsidiary of the Company in the ordinary course of business, including by way
of the securitization of such receivables, (iv) of the Company or any Restricted
Subsidiary in exchange for properties or assets of substantially equal value of
another Person to be used in the same line of business being conducted by the
Company or any Restricted Subsidiary at the time of such transfer having a Fair
Market Value of less than $1.0 million in any given fiscal year, (v) to an
Unrestricted Subsidiary in compliance with the "Limitation on Restricted
Payments" covenant, (vi) consisting of the Headquarters Facility to third
parties that are not Affiliates of the Company or any Subsidiary of the Company
or (vii) having a Fair Market Value of less than $1.0 million in any given
fiscal year.
"Average Life" means, as of the date of determination with respect to any Indebtedness or Senior Exchangeable Preferred Stock, as the case may be, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness or liquidation value payment of the Senior Exchangeable Preferred Stock multiplied by (ii) the amount of each such principal payment by (b) the sum of all such principal or liquidation value payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee of such board.
"Capital Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the date of the Exchange Indenture.
"Capitalized Lease Obligation" means, with respect to any Person, any obligation of such Person under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Exchange Indenture or the Certificate of Designation, as the case may be, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (b) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (c) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or any successor rating agency or at least P-l by Moody's or any successor rating agency; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) demand and time deposits with a domestic commercial bank that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million.
"Change in Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than 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
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding Voting Stock of the
Company and either (x) the Permitted Holders beneficially own, directly or
indirectly, in the aggregate Voting Stock of the Company that represents a
lesser percentage of the aggregate ordinary voting power of all classes of the
Voting Stock of the Company, voting together as a single class, than such other
person or group and are not entitled (by voting power, contract or otherwise) to
elect directors of the Company having a majority of the total voting power of
the Board of Directors, or (y) such other person or group is entitled to elect
directors of the Company having a majority of the total voting power of the
Board of Directors; (b) the Company consolidates with, or merges with or into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and cash, securities
and other property (other than Capital Stock of the surviving or transferee
corporation) in an amount that could be paid by the Company as a Restricted
Payment as described under the "Limitation on Restricted Payments" covenant and
(ii) immediately after such transaction, no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, is 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total outstanding Voting Stock of the surviving or transferee corporation and either (x) the Permitted Holders beneficially own, directly or indirectly, in the aggregate Voting Stock of the surviving or transferee corporation that represents a lesser percentage of the aggregate ordinary voting power of all classes of the Voting Stock of the surviving or transferee corporation, voting together as a single class, than such other person or group and are not entitled (by voting power, contract or otherwise) to elect directors of the Surviving Entity having a majority of the total voting power of the Board of Directors, or (y) such other person or group is entitled to elect directors of the surviving or transferee having a majority of the total voting power of the elected Board of Directors; or (c) during any consecutive two year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 66 2/3% of the directors 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 (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under "Consolidation, Merger and Sale of Assets."
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business, (c) the portion of net income (or loss)
of any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has
an ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any Restricted Subsidiary in cash
dividends or distributions during such period, (d) the net income (or loss) of
any Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to the date of combination,
(e) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary or its stockholders, and (f) for
purposes of calculating Consolidated Adjusted Net Income under the "Limitation
on Restricted Payment" covenant, any net income (or loss) from any Restricted
Subsidiary while it was an Unrestricted Subsidiary at any time during such
period other than any amounts actually received from such Restricted Subsidiary
during such period.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the extent deducted in computing Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges, in each case, for such period to (b) the Consolidated Interest Expense for such period.
"Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and all Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
(1) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of Interest Rate Agreements (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation and (iv) amortization of debt issuance costs, plus (b) the interest
component of Capitalized Lease Obligations of the Company and its Restricted
Subsidiaries during such period, plus (c) cash dividends due (whether or not
declared) on Preferred Stock by the Company and any Restricted Subsidiary, plus
(d) cash dividends due (whether or not declared) on Redeemable Capital Stock by
the Company and any Restricted Subsidiary, in each case as determined on a
consolidated basis in accordance with GAAP, less (2) interest on the Exchange
Debentures outstanding on the Exchange
Date paid in kind with Exchange Debentures and on Exchange Debentures so issued as payment in kind interest, all in accordance with the Exchange Indenture as in effect on the Issuance Date; provided that (x) the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying at the option of the Company, either the fixed or floating rate, and (y) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness 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 applicable period; provided further that, notwithstanding the foregoing, the interest rate with respect to any Indebtedness covered by any Interest Rate Agreement shall be deemed to be the effective interest rate with respect to such Indebtedness after taking into account such Interest Rate Agreement.
"Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization, depletion and other non-cash expenses of the Company and any Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period).
"Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates.
"Debenture Guarantee" means any guarantee of the obligations of the Company under the Exchange Indenture and the Exchange Debentures by any Restricted Subsidiary in accordance with the provisions of the Exchange Indenture.
"Debenture Guarantor Senior Indebtedness" of a Subsidiary Debenture
Guarantor means Indebtedness of such Subsidiary Debenture Guarantor consisting
of (i) a guarantee of any Senior Indebtedness under the Senior Credit Agreement
or any other Senior Indebtedness and (ii) the principal of, premium, if any, and
interest on all other Indebtedness of such Subsidiary Debenture Guarantor (other
than the Debenture Guarantee issued by such Subsidiary Debenture Guarantor),
whether outstanding on the Issuance Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to such Note Guarantee. Notwithstanding the foregoing, "Debenture
Guarantor Senior Indebtedness" of a Subsidiary Debenture Guarantor shall not
include (i) Indebtedness evidenced by the Debenture Guarantee of such Subsidiary
Debenture Guarantor, (ii) Indebtedness of such Subsidiary Debenture Guarantor
that is expressly subordinated in right of payment to any Debenture Guarantor
Senior Indebtedness of such Subsidiary Debenture Guarantor, (iii) Indebtedness
of such Subsidiary Debenture Guarantor that by operation of law is subordinate
to any general unsecured obligations of such Subsidiary Debenture Guarantor,
(iv) Indebtedness of such Subsidiary Debenture Guarantor to the extent incurred
in violation of any covenant of the Exchange Indenture, (v) any liability for
federal, state or local taxes or other taxes, owed or owing by such Subsidiary
Debenture Guarantor, (vi) trade account payables owed or owing by such
Subsidiary Debenture Guarantor, (vii) amounts owed by such Subsidiary Debenture
Guarantor for compensation to employees or for services rendered to such
Subsidiary Debenture Guarantor, (viii) Indebtedness of such Subsidiary Debenture
Guarantor to any Affiliate of the Company, (ix) Redeemable Capital Stock of such
Subsidiary Debenture Guarantor and (x) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 of the United
States Code is without recourse to such Subsidiary Debenture Guarantor.
"Debenture Guarantor Senior Subordinated Indebtedness" of a Subsidiary Debenture Guarantor means Indebtedness of such Subsidiary Debenture Guarantor consisting of (i) a guarantee of any Senior Subordinated Indebtedness under the Indenture or any other Senior Subordinated Indebtedness and (ii) the principal of, premium, if any, and interest on all other Indebtedness of such Subsidiary Debenture Guarantor (other than the Debenture Guarantee issued by such Subsidiary Debenture Guarantor), whether outstanding on the date of the Exchange Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant
to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to such Debenture Guarantee. Notwithstanding the foregoing, "Debenture Guarantor Senior Subordinated Indebtedness" of a Subsidiary Debenture Guarantor shall not include (i) Indebtedness evidenced by the Debenture Guarantee of such Subsidiary Debenture Guarantor, (ii) Indebtedness of such Subsidiary Debenture Guarantor that is expressly subordinated in right of payment to any Debenture Guarantor Senior Subordinated Indebtedness of such Subsidiary Debenture Guarantor, (iii) Indebtedness of such Subsidiary Debenture Guarantor that by operation of law is subordinate to any general unsecured obligations of such Subsidiary Debenture Guarantor, (iv) Indebtedness of such Subsidiary Debenture Guarantor to the extent incurred in violation of any covenant of the Exchange Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by such Subsidiary Debenture Guarantor, (vi) trade account payables owed or owing by such Subsidiary Debenture Guarantor, (vii) amounts owed by such Subsidiary Debenture Guarantor for compensation to employees or for services rendered to such Subsidiary Debenture Guarantor, (viii) Indebtedness of such Subsidiary Debenture Guarantor to any Affiliate of the Company, (ix) Redeemable Capital Stock of such Subsidiary Debenture Guarantor and (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to such Subsidiary Debenture Guarantor.
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) Indebtedness under the Senior Credit Agreement and (ii) any other Senior Indebtedness permitted under the Exchange Indenture the principal amount of which is $25 million or more and that has been designated by the Company as Designated Senior Indebtedness.
"Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under the Exchange Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Issuance Date.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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.
"Headquarters Facility" means the headquarters facility and warehouse of the Company as of the Issuance Date located in Dallas, Texas.
"Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (c) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business, (d) all Capitalized Lease Obligations of such
Person, (e) all obligations of such Person under or in respect of Interest Rate
Agreements or Currency Agreements, (f) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person and
(h) all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock was purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Certificate of Designation or
the Exchange Indenture, as the case may be, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) designed to protect against or manage exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect advance, loan, guarantee or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued or owned by, any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. In addition, the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices.
"Issuance Date" means the date on which the Old Senior Exchangeable Preferred Stock was originally issued under the Certificate of Designation.
"Junior Subordinated Indebtedness" means Indebtedness of the Company or a Subsidiary Debenture Guarantor that is subordinated in right of payment to the Exchange Debentures or the Debenture Guarantee of such Subsidiary Debenture Guarantor, as the case may be.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.
"Management Stock" means the Capital Stock of the Company and the options to acquire Capital Stock of the Company owned by Lloyd L. Ross and Jerry M. Smith as of the Issuance Date together with Preferred Stock issued as payment in kind dividends on such Capital Stock that is Preferred Stock and any shares of Preferred Stock issued as payment in kind dividends thereon, and such dividends made pursuant to the terms of the certificate of designation for such Preferred Stock or the certificate of incorporation of the Company, as the case may be, as in effect on the Issuance Date.
"Maturity" means, with respect to any Exchange Debenture, the date on which any principal of such Exchange Debenture becomes due and payable provided in such Exchange Debenture or in the Exchange Indenture, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after 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 Officers' Certificate delivered to the Debenture Trustee.
"Pari Passu Indebtedness" means (a) with respect to the Exchange Debentures, Indebtedness that ranks pari passu in right of payment to the Exchange Debentures and (b) with respect to any Debenture Guarantee, Indebtedness that ranks pari passu in right of payment to such Debenture Guarantee.
"Permitted Holders" means, as of the date of determination, Madison Dearborn Capital Partners II, L.P. and its Affiliates.
"Permitted Indebtedness" means any of the following:
(a) (i) Indebtedness of the Company under the Senior Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (A) $110 million less the amount of any permanent reductions made by the Company in respect of any term loans under the Senior Credit Agreement and (B) with respect to revolving borrowings, the greater of (1) $115 million and (2) 60% of the Eligible Inventory (as defined in the Senior Credit Agreement on the Issuance Date) of the Company and the Restricted Subsidiaries and (ii) any guarantee by a Subsidiary Debenture Guarantor of Indebtedness incurred under this clause (i);
(b) Indebtedness of the Company pursuant to the Notes or of any Restricted Subsidiary pursuant to a Note Guarantee;
(c) Indebtedness of the Company pursuant to the Exchange Debentures or of any Restricted Subsidiary pursuant to a Debenture Guarantee;
(d) Indebtedness of the Company or any Restricted Subsidiary outstanding on the date of the Exchange Indenture and listed on a schedule thereto;
(e) Indebtedness of the Company owing to any wholly owned Restricted Subsidiary; provided that any Indebtedness of the Company owing to any such Restricted Subsidiary is subordinated in right of payment from and after such time as the Exchange Debentures shall become due and payable (whether at Stated Maturity, acceleration or otherwise) to the payment and performance of the Company's obligations under the Exchange Debentures; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge
or transfer to the Company or another wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (e);
(f) Indebtedness of a Restricted Subsidiary owing to the Company or to another wholly owned Restricted Subsidiary; provided that any such Indebtedness of any Subsidiary Debenture Guarantor is subordinated in right of payment to the Debenture Guarantee of such Subsidiary Debenture Guarantor; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or a wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary not permitted by this clause (f);
(g) guarantees of any Restricted Subsidiary made in accordance with the provisions of the "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries" covenant;
(h) obligations of the Company or any Subsidiary Debenture Guarantor entered into in the ordinary course of business (i) pursuant to Interest Rate Agreements designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Restricted Subsidiary, which obligations do not exceed the aggregate principal amount of such Indebtedness and (ii) pursuant to Currency Agreements entered into by the Company or any of its Restricted Subsidiaries in respect of its (x) assets or (y) obligations, as the case may be, denominated in a foreign currency;
(i) Indebtedness of the Company or any Subsidiary Debenture Guarantor in respect of Purchase Money Obligations and Capitalized Lease Obligations of the Company or any Subsidiary Debenture Guarantor in an aggregate amount which does not exceed $15.0 million at any one time outstanding;
(j) Indebtedness of the Company or any Subsidiary Debenture Guarantor consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries;
(k) Indebtedness of the Company or any Subsidiary Debenture Guarantor represented by (x) letters of credit for the account of the Company or any Restricted Subsidiary or (y) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers' compensation claims, payment obligations in connection with self-insurance or other similar requirements in the ordinary course of business;
(l) Acquired Indebtedness of any Restricted Subsidiary that is organized outside of the United States of America in an aggregate amount which, together with any Indebtedness permitted to be incurred pursuant to this clause (l) and refinanced pursuant to clause (q) below, does not exceed $10.0 million at any one time outstanding;
(m) Indebtedness of the Company owing to Jerry M. Smith under a note issued pursuant to an agreement between the Company and Jerry M. Smith as in effect on the Issuance Date, in consideration for the repurchase of Common Stock of the Company owned by Jerry M. Smith at his retirement, in an aggregate amount not to exceed $15.0 million outstanding at any time;
(n) Preferred Stock issued as payment in kind dividends on Preferred Stock and any shares of Preferred Stock issued as payment in kind dividends thereon, such dividends made pursuant to the terms of the certificate of designation for such Preferred Stock or the certificate of incorporation of the Company, as the case may be, as in effect on the Issuance Date;
(o) Indebtedness of the Company or a Subsidiary Debenture Guarantor incurred in connection with the Company's Headquarters Facility or the purchase or construction of a new headquarters facility, in each case, as permitted under the Senior Credit Agreement as in effect on the Issuance Date;
(p) Indebtedness of the Company or any Subsidiary Debenture Guarantor not otherwise permitted by the foregoing clauses (a) through (o) in an aggregate principal amount not in excess of $20.0 million at any one time outstanding; and
(q) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness, referred to in clauses (b), (c), (d) and (l) of this definition, including any successive refinancings, so long as (i) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced, plus the lesser of the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined as necessary to accomplish such refinancing, (ii) with respect to the Exchange Indenture, in the case of any refinancing by the Company of Pari Passu Indebtedness or Junior Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Exchange Debentures at least to the same extent as the Indebtedness being refinanced, (iii) with respect to the Exchange Indenture, in the case of any refinancing by any Subsidiary Debenture Guarantor of Pari Passu Indebtedness or Junior Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Debenture Guarantee of such Subsidiary Debenture Guarantor at least to the same extent as the Indebtedness being refinanced, (iv) such new Indebtedness has an Average Life longer than the Average Life of the Exchange Debentures or the Senior Exchangeable Preferred Stock, as the case may be, and a final Stated Maturity later than the final Stated Maturity of the Exchange Debentures or the Mandatory Redemption Date, as the case may be, and (v) Indebtedness o f the Company or a Subsidiary Debenture Guarantor may only be refinanced with Indebtedness of the Company or a Subsidiary Debenture Guarantor and Indebtedness of a Restricted Subsidiary may only be refinanced with Indebtedness of a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary that is not a Subsidiary Debenture Guarantor may only be refinanced with Indebtedness of such Restricted Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clauses
(e) or (f) of the definition of "Permitted Indebtedness";
(d) Investments in an amount not to exceed $10.0 million at any one time outstanding;
(e) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a wholly owned Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly owned Restricted Subsidiary;
(f) bonds, notes, debentures and other securities received as consideration for Assets Sales to the extent permitted under the "Limitation of Sale of Assets" covenant;
(g) negotiable instruments held for deposit or collection in the ordinary course of business, except to the extent they would constitute Investments in Affiliates; or
(h) Investments in the form of the sale (on a "true-sale" non-recourse basis) or the servicing of receivables transferred from the Company or any Restricted Subsidiary.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Issuance Date, and including, without limitation, all classes and series of preferred or preference stock of such Person.
"Public Equity Offering" means an offer and sale of Common Stock (which is Qualified Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).
"Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Exchange Debentures or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc., and its successors.
"Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing of such property or asset to the seller or transferor.
"Senior Credit Agreement" means the credit agreement dated as of December 29, 1997, among the Company, the several lenders parties thereto, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger and syndication agent, and Fleet National Bank, as administrative agent, as such agreement may be amended, renewed, extended, substituted, restated, refinanced, restructured, supplemented, increased or otherwise modified from time to time (including, without limitation, any successive amendments, renewals, extensions, substitutions, restatements, refinancings, restructurings, supplements or other modifications of the foregoing); provided that with respect to any agreement providing for the refinancing of Indebtedness under the Senior Credit Agreement, such agreement shall be the Senior Credit Agreement under the Exchange Indenture only if a notice to that effect is delivered by the Company to the Debenture Trustee and there shall be at any time only one instrument that is the Senior Credit Agreement under the Exchange Indenture.
"Senior Indebtedness" means (i) all obligations of the Company, now or hereafter existing, under or in respect of the Senior Credit Agreement, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under Bankruptcy Law, whether or not such interest is allowed as a claim after such filing in any proceeding under such law) and other amounts due in connection therewith (including any fees, premiums, expenses and indemnities) and (ii) the principal of, premium, if any, and interest on all other Indebtedness of the Company, whether outstanding on the date of the Exchange Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Senior Subordinated Indebtedness. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Exchange Debentures, (ii) Indebtedness evidenced by the Notes, (iii) Indebtedness of the Company that is expressly subordinated in right of payment to any Senior Indebtedness of the Company, (iv) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations
of the Company, (v) Indebtedness of the Company to the extent incurred in violation of any covenant prohibiting the incurrence of Indebtedness under the Exchange Indenture, (vi) any liability for federal, state or local taxes or other taxes, owed or owing by the Company, (vii) trade account payables owed or owing by the Company, (viii) amounts owed by the Company for compensation to employees or for services rendered to the Company, (ix) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (x) Redeemable Capital Stock of the Company and (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary.
"Senior Subordinated Indebtedness" means (i) all obligations of the Company, now or hereafter existing, under or in respect of the Notes, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under Bankruptcy Law, whether or not such interest is allowed as a claim after such filing in any proceeding under such law) and (ii) the principal of, premium, if any, and interest on all other Indebtedness of the Company (other than the Exchange Debentures), whether outstanding on the date of the Exchange Indenture or thereafter created, incurred or assumed, for which, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness will be subordinate in right of payment to any Senior Indebtedness or other general unsecured obligations of the Company, unless, such instrument expressly provides that such Indebtedness will be subordinate in right of payment to the Notes or any Indebtedness that is pari passu in right of payment to the Notes. Notwithstanding the foregoing, "Senior Subordinated Indebtedness" shall not include (i) Indebtedness evidenced by the Exchange Debentures, (ii) Indebtedness of the Company that is expressly subordinated in right of payment to any Senior Subordinated Indebtedness of the Company or the Notes, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company to the extent incurred in violation of any covenant prohibiting the incurrence of Indebtedness under the Certificate of Designation or the Exchange Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company, (vi) trade account payables owed or owing by the Company, (vii) amounts owed by the Company for compensation to employees or for services rendered to the Company, (viii) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (ix) Redeemable Capital Stock of the Company and (xi) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year.
"Stated Maturity" means, when used with respect to any Exchange Debenture or any installment of interest thereon, the date specified in such Exchange Debenture as the fixed date on which the principal of such Exchange Debenture or such installment of interest is due and payable, and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means (a) with respect to Indebtedness of the Company, Indebtedness of the Company that is expressly subordinate in right of payment to any Senior Indebtedness or other general unsecured obligations of the Company and to any Senior Subordinated Indebtedness, unless such instrument expressly provides that such Indebtedness will be subordinate in right of payment to the Exchange Debentures or any Indebtedness that is pari passu in right of payment with the Exchange Debentures and (b) with respect to Indebtedness of a Debenture Guarantor, Indebtedness of such Subsidiary Debenture Guarantor that is expressly subordinate in right of payment to any Debenture Guarantor Senior Indebtedness or other general unsecured obligations of the Debenture Guarantor and to any Debenture Guarantor Senior Subordinated Indebtedness, unless such instrument expressly provides that such Indebtedness will be subordinate in right
of payment to the Debenture Guarantees or any Indebtedness that is pari passu in right of payment with the Debenture Guarantees.
"Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries.
"Subsidiary Debenture Guarantor" means TMI Holdings Inc., Tuesday Morning Inc., Friday Morning, Inc. and TMIL Corporation and any Restricted Subsidiary that incurs, or would be required to incur a Debenture Guarantee pursuant to the Exchange Indenture; provided that upon the release and discharge of any Person from its Debenture Guarantee in accordance with the Exchange Indenture, such Person shall cease to be a Subsidiary Debenture Guarantor.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Company, as provided below) and (b) any Subsidiary of an
Unrestricted Subsidiary; provided, however, that in no event shall any
Subsidiary Debenture Guarantor be an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as
(i) neither the Company nor any Restricted Subsidiary is directly or indirectly
liable for any Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the "Limitation on
Unrestricted Subsidiaries" covenant, (iv) neither the Company nor any Restricted
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from Persons who are not Affiliates of the
Company, and (v) neither the Company nor any Restricted Subsidiary has any
obligation (1) to subscribe for additional shares of Capital Stock or other
equity interest in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Company shall be evidenced to the Debenture Trustee by filing a board
resolution with the Debenture Trustee giving effect to such designation. The
Board of Directors of the Company may designate any Unrestricted Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such designation,
there would be no Default or Event of Default under the Exchange Indenture or,
in the case of the Certificate of Designations, there would be no Voting Rights
Triggering Event, and the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant.
"U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt.
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
THE PREFERRED STOCK EXCHANGE OFFER
PURPOSE AND EFFECT OF THE PREFERRED STOCK EXCHANGE OFFER
The Old Senior Exchangeable Preferred Stock was originally sold by the Company on December 29, 1997 to the Initial Purchaser pursuant to the Units Purchase Agreement. The Initial Purchaser subsequently resold the Old Senior Exchangeable Preferred Stock to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the Units Purchase Agreement, the Company entered into the Preferred Stock Registration Rights Agreement with the Initial Purchaser pursuant to which the Company has agreed, for the benefit of the holders of the Old Senior Exchangeable Preferred Stock, at the Company's cost, to use its best efforts to (i) file the Preferred Stock Exchange Offer Registration Statement within 45 days after the date of the original issue of the Old Senior Exchangeable Preferred Stock with the Commission with respect to the Preferred Stock Exchange Offer for the New Senior Exchangeable Preferred Stock; (ii) use its best efforts to cause the Preferred Stock Exchange Offer Registration Statement to be declared effective under the Securities Act within 120 days after the date of the original issuance of the Old Senior Exchangeable Preferred Stock and (iii) unless the Preferred Stock Exchange Offer would not be permitted by applicable law or Commission policy, commence the Preferred Stock Exchange Offer and use its best efforts to issue the New Senior Exchangeable Preferred Stock in exchange for the Old Senior Exchangeable Preferred Stock on or prior to 150 days after the date of the original issuance of the Old Senior Exchangeable Preferred Stock. Upon the Preferred Stock Exchange Offer Registration Statement being declared effective, the Company will offer the New Senior Exchangeable Preferred Stock in exchange for surrender of the Old Senior Exchangeable Preferred Stock. The Company will keep the Preferred Stock Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date on which notice of the Preferred Stock Exchange Offer is mailed to the holders of the Old Senior Exchangeable Preferred Stock. For each Old Senior Exchangeable Preferred Stock surrendered to the Company pursuant to the Preferred Stock Exchange Offer, the holder of such Old Senior Exchangeable Preferred Stock will receive a New Senior Exchangeable Preferred Stock having a liquidation preference equal to that of the surrendered Old Senior Exchangeable Preferred Stock. Dividends on each Old Senior Exchangeable Preferred Stock will accrue from the date of its original issue. Dividends on each New Senior Exchangeable Preferred Stock will accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in certain no-action letters to third parties, the New Senior Exchangeable Preferred Stock will, in general, be freely tradeable after the Preferred Stock Exchange Offer without further registration under the Securities Act. However, any purchaser of Old Senior Exchangeable Preferred Stock who is an "affiliate" of the Company or who intends to participate in the Preferred Stock Exchange Offer for the purpose of distributing the New Senior Exchangeable Preferred Stock (i) will not be able to rely on the interpretation of the staff of the Commission, (ii) will not be able to tender its Old Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Old Senior Exchangeable Preferred Stock, unless such sale or transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Senior Exchangeable Preferred Stock (other than certain specified holders) who wishes to exchange Old Senior Exchangeable Preferred Stock for New Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer will be required to represent to the Company in the Letter of Transmittal that (i) any New Senior Exchangeable Preferred Stock to be received by it was acquired in the ordinary course of its business, (ii) at the time of commencement of the Preferred Stock Exchange Offer, it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Senior Exchangeable Preferred Stock, (iii) it is not an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable and (iv) it is not acting on behalf of any person who could not truthfully make the foregoing representations. In addition, in connection with any resales of New Senior Exchangeable Preferred Stock, any Participating Broker Dealer who acquired the Senior Exchangeable Preferred Stock for its own account as a result of market making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker- Dealers may fulfill their prospectus delivery requirements with respect to the New Senior Exchangeable Preferred Stock
(other than a resale of an unsold allotment from the original sale of the Old Senior Exchangeable Preferred Stock) with the prospectus contained in the Preferred Stock Exchange Offer Registration Statement. Under the Preferred Stock Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the Preferred Stock Exchange Offer Registration Statement in connection with the resale of such New Senior Exchangeable Preferred Stock.
In the event that (i) any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Preferred Stock Exchange Offer, (ii) for any other reason the Preferred Stock Exchange Offer is not consummated within 150 days after the Issuance Date, (iii) under certain circumstances, if the Initial Purchaser shall so request or (iv) any holder of Old Senior Exchangeable Preferred Stock (other than the Initial Purchaser) is not eligible to participate in the Preferred Stock Exchange Offer, the Company will, at its expense, (a) as promptly as practicable, file with the Commission the Preferred Stock Shelf Registration Statement covering resales of the Old Senior Exchangeable Preferred Stock, (b) use its best efforts to cause the Preferred Stock Shelf Registration Statement to be declared effective under the Securities Act on or prior to 150 days after the Issuance Date and (c) use its best efforts to keep effective the Preferred Stock Shelf Registration Statement until the earlier of two years after its effective date or such shorter period ending when all Old Senior Exchangeable Preferred Stock covered by the Preferred Stock Shelf Registration Statement have been sold in the manner set forth and as contemplated in the Preferred Stock Shelf Registration Statement or when the Old Senior Exchangeable Preferred Stock become eligible for resale pursuant to Rule 144 under the Securities Act without volume restrictions, if any. The Company, will, in the event of the filing of the Preferred Stock Shelf Registration Statement, provide to each holder of the Old Senior Exchangeable Preferred Stock copies of the prospectus which is a part of the Preferred Stock Shelf Registration Statement, notify each such holder when the Preferred Stock Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Old Senior Exchangeable Preferred Stock. A holder of Old Senior Exchangeable Preferred Stock that sells its Old Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Shelf Registration Statement generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Preferred Stock Registration Rights Agreement that are applicable to such a holder (including certain indemnification rights and obligations thereunder). In addition, each holder of the Old Senior Exchangeable Preferred Stock will be required to deliver information to be used in connection with the Preferred Stock Shelf Registration Statement and to provide comments on the Preferred Stock Shelf Registration Statement within the time periods set forth in the Preferred Stock Registration Rights Agreement in order to have its Old Senior Exchangeable Preferred Stock included in the Preferred Stock Shelf Registration Statement and to benefit from the provisions regarding liquidated damages set forth in the following paragraph.
Although the Company intends to file the registration statements described
above, as required, there can be no assurance that such registration statements
will be filed, or, if filed, that they will become effective. In the event that
either (a) the Preferred Stock Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 45th calendar day following the
Issuance Date, (b) the Preferred Stock Exchange Offer Registration Statement has
not been declared effective on or prior to the 120th calendar day following the
Issuance Date or (c) the Preferred Stock Exchange Offer is not consummated or a
Preferred Stock Shelf Registration Statement is not declared effective on or
prior to the 150th calendar day following the Issuance Date, the dividend rate
borne by the Old Senior Exchangeable Preferred Stock shall be increased by one-
quarter of one percent per annum following such 45-day period in the case of
clause (a) above, following such 120-day period in the case of clause (b) above
or following such 150-day period in the case of clause (c) above, which rate
will be increased by an additional one-quarter of one percent per annum for each
90-day period that any additional dividends continue to accumulate; provided
that the aggregate increase in such annual dividend rate may in no event exceed
one percent. Upon (x) the filing of the Preferred Stock Exchange Offer
Registration Statement after the 45-day period described in clause (a) above,
(y) the effectiveness of the Preferred Stock Exchange Offer Registration
Statement after the 120-day period described in clause (b) above or (z) the
consummation of the Preferred Stock Exchange Offer or the effectiveness of a
Preferred Stock Shelf Registration Statement, as the case may be, after the 150-
day period described in clause (c) above, the dividend rate borne by the Old
Senior Exchangeable Preferred Stock from the date of such filing, effectiveness
or consummation, as the case may be, will be reduced to the original dividend
rate if the Company is otherwise in compliance with this paragraph; provided,
however, that if, after any such reduction in dividend rate, a different event
specified in clause (a), (b) or (c) above occurs, the dividend rate may again be increased pursuant to the foregoing provisions. Pending the announcement of a material corporate transaction, if the Company issues a notice that the Shelf Registration Statement is unusable, or such a notice is required under applicable securities laws to be issued by the Company, and the aggregate number of days in any consecutive twelve-month period for which all such notices are issued or required to be issued exceeds 30 days per occurrence or more than 60 days in the aggregate in a calendar year, then the interest rate borne by the Old Senior Exchangeable Preferred Stock will be increased by one-quarter of one percent per annum following the date that such Shelf Registration Statement ceases to be usable for a period of time in excess of the period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum at the beginning of each subsequent 90-day period; provided that the aggregate increase in such annual dividend rate may in no event exceed one percent per annum. Upon the Company declaring that the Shelf Registration Statement is usable after the period of time described in the preceding sentence, the dividend rate borne by the Old Senior Exchangeable Preferred Stock will be reduced to the original dividend rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in dividend rate a different event of the kind described in the preceding event occurs, the dividend rate may again be increased pursuant to the foregoing provisions.
In the event that the Exchange Debentures are issued prior to the issuance of the New Senior Exchangeable Preferred Stock, the provisions of the Preferred Stock Registration Rights Agreement will apply equally in respect of the registration of any Exchange Debentures provided that changes in the dividend rate as provided for in the Preferred Stock Registration Rights Agreement shall result in corresponding changes in the interest rate applicable to the Exchange Debentures.
The summary herein of certain provisions of the Preferred Stock Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Preferred Stock Registration Rights Agreement, a copy of which will be made available upon request to the Company and which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part.
Following the consummation of the Preferred Stock Exchange Offer, holders of the Old Senior Exchangeable Preferred Stock who were eligible to participate in the Preferred Stock Exchange Offer but who did not tender their Old Senior Exchangeable Preferred Stock will not have any further registration rights and such Old Senior Exchangeable Preferred Stock will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Senior Exchangeable Preferred Stock could be adversely affected.
TERMS OF THE PREFERRED STOCK EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Senior
Exchangeable Preferred Stock validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue $100
liquidation preference of New Senior Exchangeable Preferred Stock in exchange
for each $100 liquidation preference of outstanding Old Senior Exchangeable
Preferred Stock accepted in the Preferred Stock Exchange Offer. Holders may
tender some or all of their Old Senior Exchangeable Preferred Stock pursuant to
the Preferred Stock Exchange Offer. However, Old Senior Exchangeable Preferred
Stock may be tendered only in integral multiples of $100.
The form and terms of the New Senior Exchangeable Preferred Stock are the same as the form and terms of the Old Senior Exchangeable Preferred Stock except that (i) the New Senior Exchangeable Preferred Stock bears a Series B designation and a different CUSIP Number from the Old Senior Exchangeable Preferred Stock, (ii) the New Senior Exchangeable Preferred Stock has been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the New Senior Exchangeable Preferred Stock will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the dividend rate on the Old Senior Exchangeable Preferred Stock in certain circumstances relating to the timing of the Preferred Stock Exchange Offer, all of which rights will terminate when the Preferred Stock Exchange Offer is terminated. The New Senior Exchangeable Preferred Stock will evidence the same equity as the Old Senior Exchangeable Preferred Stock and will be entitled to the benefits of the Certificate of Designation.
As of the date of this Prospectus, $25,000,000 aggregate liquidation preference of Old Senior Exchangeable Preferred Stock was outstanding. The Company has fixed the close of business on , 1998 as the record date for the Preferred Stock Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially.
Holders of Old Senior Exchangeable Preferred Stock do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the Certificate of Designation in connection with the Preferred Stock Exchange Offer. The Company intends to conduct the Preferred Stock Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Senior Exchangeable Preferred Stock when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Senior Exchangeable Preferred Stock from the Company.
If any tendered Old Senior Exchangeable Preferred Stock is not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Old Senior Exchangeable Preferred Stock will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Preferred Stock Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Preferred Stock Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Preferred Stock Exchange Offer is extended.
In order to extend the Preferred Stock Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay accepting any Old Senior Exchangeable Preferred Stock, to extend the Preferred Stock Exchange Offer or to terminate the Preferred Stock Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Preferred Stock Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders.
DIVIDENDS ON THE NEW SENIOR EXCHANGEABLE PREFERRED STOCK
The New Senior Exchangeable Preferred Stock will accrue dividends from their date of issuance. Holders of Old Senior Exchangeable Preferred Stock that are accepted for exchange will accrue dividends thereon to, but not including, the date of issuance of the New Senior Exchangeable Preferred Stock. Accrual of dividends on the Old Senior Exchangeable Preferred Stock accepted for exchange will cease to accrue upon issuance of the New Senior Exchangeable Preferred Stock.
Dividends accrue in each period ending on March 15, June 15, September 15 and December 15 of each year.
PROCEDURES FOR TENDERING
Only a holder of Old Senior Exchangeable Preferred Stock may tender such Old Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer. To tender in the Preferred Stock Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Senior Exchangeable Preferred Stock and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered effectively, the Old Senior Exchangeable Preferred Stock, Letter of Transmittal and other required documents must be completed and received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old Senior Exchangeable Preferred Stock may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Company the representations set forth above in the third paragraph under the heading "--Purpose and Effect of the Preferred Stock Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD SENIOR EXCHANGEABLE PREFERRED STOCK AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD SENIOR EXCHANGEABLE PREFERRED STOCK SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Senior Exchangeable Preferred Stock is registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Old Senior Exchangeable Preferred Stock tendered pursuant thereto is tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered holder of any Old Senior Exchangeable Preferred Stock listed therein, such Old Senior Exchangeable Preferred Stock must be endorsed or accompanied by a properly completed stock power, signed by such registered holder as such registered holder's name appears on such Old Senior Exchangeable Preferred Stock with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Senior Exchangeable Preferred Stock or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, offices of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Old Senior Exchangeable Preferred Stock at the book-entry transfer facility, The Depositary Trust Company (the "Book-Entry Transfer Facility) for the purpose of facilitating the Preferred Stock Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Old Senior Exchangeable Preferred Stock by causing such Book-Entry Transfer Facility to transfer such Old Senior Exchangeable Preferred Stock into the Exchange Agent's account with respect to the Old Senior Exchangeable Preferred Stock in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Old Senior Exchangeable Preferred Stock may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Senior Exchangeable Preferred Stock and withdrawal of tendered Old Senior Exchangeable Preferred Stock will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Senior Exchangeable Preferred Stock not properly tendered or any Old Senior Exchangeable Preferred Stock the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Old Senior Exchangeable Preferred Stock. The Company's interpretation of the terms and conditions of the Preferred Stock Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Senior Exchangeable Preferred Stock must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Senior Exchangeable Preferred Stock, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Senior Exchangeable Preferred Stock will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Senior Exchangeable Preferred Stock received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Senior Exchangeable Preferred Stock and (i) whose Old Senior Exchangeable Preferred Stock is not immediately available, (ii) who cannot deliver their Old Senior Exchangeable Preferred Stock, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Old Senior Exchangeable Preferred Stock and the liquidation preference of Old Senior Exchangeable Preferred Stock tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Senior Exchangeable Preferred Stock (or a confirmation of book-entry transfer of such Preferred Stock into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of facsimile thereof), as well as the certificate(s) representing all tendered Old Senior Exchangeable Preferred Stock in proper form for transfer (or a confirmation of book-entry transfer of such Old Senior Exchangeable Preferred Stock into the Exchange Agent's account at the Book-Entry Transfer Facility), and all other documents required by the Letter of Transmittal are received by the Exchange Agent upon five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Senior Exchangeable Preferred Stock according to the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Senior Exchangeable Preferred Stock may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Senior Exchangeable Preferred Stock to be withdrawn (the "Depositor"), (ii) identify the Old Senior Exchangeable Preferred Stock to be withdrawn (including the certificate number(s) and liquidation preference of such Old Senior Exchangeable Preferred Stock, or, in the case of Old Senior Exchangeable Preferred Stock transferred by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Senior Exchangeable Preferred Stock was tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Senior Exchangeable Preferred Stock register the transfer of such Old Senior Exchangeable Preferred Stock into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Senior Exchangeable Preferred Stock is to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Senior Exchangeable Preferred Stock so withdrawn will be deemed not to have been validly tendered for purposes of the Preferred Stock Exchange Offer and no New Senior Exchangeable Preferred Stock will be issued with respect thereto unless the Old Senior Exchangeable Preferred Stock so withdrawn are validly retendered. Any Old Senior Exchangeable Preferred Stock which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Preferred Stock Exchange Offer. Properly withdrawn Old Senior Exchangeable Preferred Stock may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Preferred Stock Exchange Offer, the Company shall not be required to accept for exchange, or exchange New Senior Exchangeable Preferred Stock for, any Old Senior Exchangeable Preferred Stock, and may terminate or amend the Preferred Stock Exchange Offer as provided herein before the acceptance of such Old Senior Exchangeable Preferred Stock, if:
(a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Preferred Stock Exchange Offer which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Preferred Stock Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed
with the Preferred Stock Exchange Offer or materially impair the contemplated benefits of the Preferred Stock Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Preferred Stock Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may (i) refuse to accept any Old Senior Exchangeable Preferred Stock and return all tendered Old Senior Exchangeable Preferred Stock to the tendering holders, (ii) extend the Preferred Stock Exchange Offer and retain all Old Senior Exchangeable Preferred Stock tendered prior to the expiration of the Preferred Stock Exchange Offer, subject, however, to the rights of holders to withdraw such Old Senior Exchangeable Preferred Stock (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Preferred Stock Exchange Offer and accept all properly tendered Old Senior Exchangeable Preferred Stock which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent for the Preferred Stock Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows:
By Mail: By Overnight Courier and By Hand
after 4:30 p.m.:
United States Trust Company of New
York United States Trust Company of New
P.O. Box 844 Cooper Station York
New York, New York 10276-0844 770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
(registered or certified mail Attention: Corporate Trust Operations
recommended)
By Hand up to 4:30 p.m.:
United States Trust Company of New
York
111 Broadway Facsimile Transmission: (212) 780-0592
New York, New York 10006
Confirm by Telephone: (800) 548-6565
Attention: Lower Level Corporate
Trust Window
|
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telecopy, telephone or in person by officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the Preferred Stock Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Preferred Stock Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Preferred Stock Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Senior Exchangeable Preferred Stock will be recorded at the same carrying value as the Old Senior Exchangeable Preferred Stock, which is face value, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Preferred Stock Exchange Offer will be expensed at closing.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Senior Exchangeable Preferred Stock that is not exchanged for New Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer will remain restricted securities. Accordingly, such Old Senior Exchangeable Preferred Stock may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Old Senior Exchangeable Preferred Stock is eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States.
RESALE OF THE NEW SENIOR EXCHANGEABLE PREFERRED STOCK
With respect to resales of New Senior Exchangeable Preferred Stock, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives New Senior Exchangeable Preferred Stock, whether or not such person is the holder (other than a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives New Senior Exchangeable Preferred Stock in exchange for Old Senior Exchangeable Preferred Stock in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Senior Exchangeable Preferred Stock, will be allowed to resell the New Senior Exchangeable Preferred Stock to the public without further registration under the Securities Act and without delivering to the purchasers of the New Senior Exchangeable Preferred Stock a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires New Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer for the purpose of distributing or participating in a distribution of the New Senior Exchangeable Preferred Stock, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker-Dealer that receives New Senior Exchangeable Preferred Stock for its own account in exchange for Old Senior Exchangeable Preferred Stock, where such Old Senior Exchangeable Preferred Stock was acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock.
As contemplated by these no-action letters and the Preferred Stock Registration Rights Agreement, each holder of the Old Senior Exchangeable Preferred Stock (other than certain specified holders) who wishes to exchange Old Senior Exchangeable Preferred Stock for New Senior Exchangeable Preferred Stock in the Preferred Stock Exchange Offer will be required to represent to the Company in the Letter of Transmittal that (i) any New Senior Exchangeable Preferred Stock to be received by it was acquired in the ordinary course of its business, (ii) at the time of commencement of the Preferred
Stock Exchange Offer, it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Senior Exchangeable Preferred Stock, (iii) it is not an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company or, if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable and (iv) it is not acting on behalf of any person who could not truthfully make the foregoing representations. As indicated above, each Participating Broker-Dealer that receives a New Senior Exchangeable Preferred Stock for its own account in exchange for Old Senior Exchangeable Preferred Stock must acknowledge that it will deliver a prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock. For a description of the procedures for such resales by Participating Broker-Dealers, see "Plan of Distribution."
DESCRIPTION OF THE CAPITAL STOCK
In connection with the Merger, the Company amended its Certificate of Incorporation to change its authorized share capital to 10,000,000 shares of Common Stock, 1,000,000 shares of Senior Exchangeable Preferred Stock, 150,000 shares of cumulative junior redeemable preferred stock, par value $.01 per share (the "Junior Redeemable Preferred Stock") and 2,500 shares of cumulative junior non-redeemable preferred stock, par value $.01 per share (the "Junior Perpetual Preferred Stock"). Immediately after consummation of the Transactions, the Company had outstanding 3,749,994 shares of Common Stock (including the shares of Common Stock offered pursuant to the Initial Unit Offering), 250,000 shares of Senior Exchangeable Preferred Stock, 86,009.590 shares of Junior Redeemable Preferred Stock and 1,918.408 shares of Junior Perpetual Preferred Stock.
The following summary description of certain provisions of the Company's amended and restated Certificate of Incorporation and By-laws does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Certificate of Incorporation and the By-laws, which are filed as exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share for each share held of record on all matters submitted to a vote of shareholders. Subject to preferential rights with respect to any series of preferred stock, holders of Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors on the Common Stock out of funds legally available therefore. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Company, the holders of Common Stock are entitled to share equally and ratably in all remaining assets and funds of the Company. The holders of Common Stock have no preemptive, subscription, conversion or cumulative voting rights and are not subject to future calls or assessments by the Company. All outstanding shares of Common Stock are fully paid and nonassessable. United States Trust Company of New York is the Transfer Agent and Registrar for the Common Stock issued in the Initial Unit Offering.
JUNIOR REDEEMABLE PREFERRED STOCK
Ranking. The Junior Redeemable Preferred Stock, with respect to dividends and distributions upon the liquidation, winding-up and dissolution of the Company, ranks senior to all classes of common stock of the Company, pari passu with the Junior Perpetual Preferred Stock and junior to the Senior Exchangeable Preferred Stock and all other liabilities and obligations of the Company, whether or not for borrowed money.
Dividends. Holders of Junior Redeemable Preferred Stock are entitled, when, as and if declared by the Board of Directors, out of funds legally available therefor, to receive dividends on each outstanding share of the Junior Redeemable Preferred Stock, at the annual rate of 8.0% of the liquidation value per share thereof. Dividends on the Junior Redeemable Preferred Stock are payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. Dividends will compound to the extent not paid on any quarterly dividend payment date. The right to dividends on the Junior Redeemable Preferred Stock are cumulative (whether or not earned or declared), without interest, from the date of issuance of the Junior Redeemable Preferred Stock.
Voting Rights. Holders of the Junior Redeemable Preferred Stock have no voting rights with respect to general corporate matters except as provided by law or as set forth in the Certificate of Incorporation.
Redemption. The Company has the option to redeem the Junior Redeemable Preferred Stock in whole or in part (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at any time without premium or penalty. The Company is required to redeem the Junior Redeemable Preferred Stock upon the earlier of (i) 13th anniversary of the Closing and (ii) a Sale of the Company (as defined in the Certificate of Incorporation).
Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, holders of Junior Redeemable Preferred Stock are entitled to be paid out of the assets of the Company available for distribution $1,000.00 per share, plus an amount equal in cash to all accumulated and unpaid dividends, if any, thereon, prior to any distribution on any securities of the Company ranking junior to the Junior Redeemable Preferred Stock, including, without limitation, on any common stock of the Company.
Covenants. The Certificate of Incorporation provides restrictions on the redemption of securities of the Company ranking junior to the Junior Redeemable Preferred Stock (other than repurchases of securities from employees of the Company) and the payment of dividends on such securities and certain amendments to the Certificate of Incorporation.
Upon redemption, shares of Junior Redeemable Preferred Stock shall be canceled. Holders of Junior Redeemable Preferred Stock have no preemptive or other rights to subscribe for or purchase any proportionate part of any new or additional issues of shares of any class or of securities convertible into shares of any class.
JUNIOR PERPETUAL PREFERRED STOCK
Ranking. The Junior Perpetual Preferred Stock, with respect to dividends and distributions upon the liquidation, winding-up and dissolution of the Company, ranks senior to all classes of common stock of the Company, pari passu with the Junior Redeemable Preferred Stock and junior to the Senior Exchangeable Preferred Stock and all other liabilities and obligations of the Company, whether or not for borrowed money.
Dividends. Holders of Junior Perpetual Preferred Stock are entitled, when, as and if declared by the Board of Directors, out of funds legally available therefor, to receive dividends on each outstanding share of the Junior Perpetual Preferred Stock, at the annual rate of 8.0% of the liquidation value per share thereof through the 12th anniversary of the Closing, and at the annual rate of 12.0% of the liquidation value per share thereof thereafter if, but only if, the Company has not offered to redeem such shares prior to such time. Dividends on the Junior Perpetual Preferred Stock are payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. Dividends compound to the extent not paid on any quarterly dividend payment date. The right to dividends on the Junior Perpetual Preferred Stock is cumulative (whether or not earned or declared), without interest, from the date of issuance of the Junior Perpetual Preferred Stock.
Voting Rights. Holders of the Junior Perpetual Preferred Stock have no voting rights with respect to general corporate matters except as provided by law or as set forth in the Certificate of Incorporation.
Redemption. The Company has the option, but is not required, to redeem the Junior Perpetual Preferred Stock in whole or in part (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at any time without premium or penalty.
Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, holders of Junior Perpetual Preferred Stock are entitled to be paid out of the assets of the Company available for distribution $1,000.00 per share, plus an amount equal in cash to all accumulated and unpaid dividends, if any, thereon, prior to any distribution on any securities of the Company ranking junior to the Junior Perpetual Preferred Stock, including, without limitation, on any common stock of the Company.
Covenants. The Certificate of Incorporation provides restrictions on the redemption of securities of the Company ranking junior to the Junior Perpetual Preferred Stock (other than repurchases of securities from employees of the Company) and the payment of dividends on such securities and certain amendments to the Certificate of Incorporation.
Upon redemption, shares of Junior Perpetual Preferred Stock shall be canceled. Holders of Junior Perpetual Preferred Stock have no preemptive or other rights to subscribe for or purchase any proportionate part of any new or additional issues of shares of any class or of securities convertible into shares of any class.
SHAREHOLDERS AGREEMENT
In connection with the Acquisition, Madison Dearborn, the Management Group and the Company entered into a Stockholders Agreement which provides for, among other things, certain restrictions on the transfer of the Management Shares, the right of the Company to sell or cause to be sold all or a portion of the Management Shares in connection with a sale of the Company, the right of the Company to repurchase the Management Shares of any member of the Management Group upon the termination of such member for cause, certain rights by the Management Group to participate in certain sales of Common Stock by Madison Dearborn under certain circumstances, certain demand registration rights in favor of Madison Dearborn by which it may cause the Company to register all or part of the Common Stock held by it under the Securities Act, and certain "piggyback" registration rights in favor of Madison Dearborn and the Management Group.
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
Pursuant to the Registration Rights Agreement entered into between the Company and the Initial Purchaser on December 29, 1997 (the "Common Stock Registration Rights Agreement"), the holders of Common Stock offered pursuant to the Initial Unit Offering are entitled, and the Company will be required, subject to certain limitations, to include their shares of Common Stock in a registration of shares of Common Stock initiated by the Company under the Securities Act wherein the aggregate net proceeds to the Company are at least $30 million and any other registration of Common Stock initiated by the Company thereafter. In addition, after the first registered secondary offering by Madison Dearborn or its Affiliates, the holders of 25% or more of the Common Stock, subject to the Common Stock Registration Rights Agreement, will have the right to require the Company to effect a demand registration of all or any part of such holders' shares of Common Stock under the Securities Act (a "Demand Registration"). In the event the aggregate number of shares of Common Stock which the holders of the Common Stock offered pursuant to the Initial Unit Offering request the Company to include in any such registration, together, in the case of a registration initiated by the Company, with the shares of Common Stock of the Company to be included in such registration, exceeds the number which in the opinion of the managing underwriter can be sold in such offering without materially affecting the offering price of such shares, the number of shares of each holder to be included in such registration will be reduced pro rata based on the aggregate number of shares of Common Stock for which registration has been so requested.
The Company, at its option, may delay the filing of a registration statement required pursuant to the Demand Registration for up to 60 days if it is in possession of material information that it reasonably deems advisable not be disclosed in a registration statement. The Company's right to delay the filing of a registration statement if it possesses information that it deems advisable not to disclose does not obviate any disclosure obligations which the Company may have under the Exchange Act, or other applicable laws; it merely permits the Company to avoid filing a registration statement if management believes that such a filing would require the disclosure of information which otherwise is not required to be disclosed and disclosure of which management believes is premature or otherwise inadvisable.
The Common Stock Registration Rights Agreement contains customary provisions whereby the Company and the holders of the Common Stock offered pursuant to the Initial Unit Offering indemnify and agree to contribute to the other with regard to losses caused by the misstatement of any information or omission of any information required to be provided in a registration statement filed under the Securities Act. The Common Stock Registration Rights Agreement requires the Company to pay the expenses associated with any registration, other than sales discounts, commissions, transfer taxes and amounts to be paid by underwriters or as otherwise required by law.
The summary herein of certain provisions of the Common Stock Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by references to, all of the provisions of the Common Stock Registration Rights Agreement, a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an Indenture, dated as of December 29, 1997 (the "Indenture"), among the Company, as issuer, certain subsidiaries of the Company, as guarantors (the "Subsidiary Guarantors"), and Harris Trust and Savings Bank, as trustee (the "Trustee"). The terms of the Exchange Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") as in effect on the date of the Indenture. The form and terms of the Exchange Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The Exchange Notes are subject to all such terms, and holders of the Exchange Notes are referred to the Indenture and the Trust Indenture Act for a statement of them. The following is a summary of the material terms and provisions of the Exchange Notes. This summary does not purport to be a complete description of the Exchange Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Exchange Notes and the Indenture (including the definitions contained therein). A copy of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Old Notes and the Exchange Notes are sometimes referred to herein collectively as the "Notes." Any descriptions of the Notes presented in the future tense shall refer to the Exchange Notes, where appropriate.
General. The Notes will mature on December 15, 2007, will be limited to $100,000,000 aggregate principal amount and will be unsecured senior subordinated obligations of the Company. Each Note will bear interest at a rate of 11% from December 29, 1997 or from the most recent interest payment date to which interest has been paid or duly provided for, payable on June 15, 1998 and semiannually thereafter on June 15 and December 15 in each year until the principal thereof is paid or duly provided for to the Person in whose name the Note (or any predecessor Note) is registered at the close of business on the June 1 or December 1 next preceding such interest payment date.
Note Guarantees. Payment of the principal of, premium, if any, and interest on the Notes, when and as the same become due and payable, will be guaranteed, jointly and severally, on an unsecured senior subordinated basis by the Subsidiary Guarantors.
Optional Redemption. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after December 15, 2002 at certain redemption prices (expressed as percentages of principal amount) declining ratably, together with accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on relevant record dates to receive interest due on an interest payment date). In addition, at any time on or prior to December 15, 2000, the Company may redeem up to 35% of the aggregate principal amount of the Notes within 20 days of one or more Public Equity Offerings with the net proceeds of such offering at a redemption price equal to 111% of the aggregate principal amount thereof, together with accrued and unpaid interest thereon, if any, to the date of redemption; provided that, after giving effect to any such redemption, at least $65 million aggregate principal amount of the Notes remains outstanding.
Change in Control. Upon the occurrence of a Change in Control, each holder of the Notes shall have the right to require the Company to purchase all or any portion of such holder's Notes at a purchase price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase.
Ranking. The Notes will be unsecured senior subordinated obligations of the Company and, as such, will be subordinated to all existing and future senior indebtedness (including indebtedness under the Senior Credit Facility) of the Company, with respect to principal, premium, if any, and interest. The Notes will rank pari passu with all other existing and future senior subordinated indebtedness, if any, of the Company and will rank senior to subordinated indebtedness, if any, of the Company. By reason of such subordination, holders of senior indebtedness must be paid in full before holders of the Notes may be paid in the event of a liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy.
Each Note Guarantee will be an unsecured senior subordinated obligation of the Subsidiary Guarantor issuing such Note Guarantee, ranking pari passu with all other existing and future senior subordinated indebtedness of such Subsidiary Guarantor, if any. The Indebtedness evidenced by each Note Guarantee will be subordinated on the same basis to Subsidiary Guarantor senior indebtedness as the Notes are subordinated to senior indebtedness.
Certain Covenants. The Indenture contains covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on issuances and sales of capital stock of Restricted Subsidiaries; (iv) limitation on transactions with affiliates; (v) limitation on liens; (vi) limitation on sale of assets; (vii) limitation on merger, consolidation and sale of substantially all assets; (viii) limitations on guarantees of indebtedness by Restricted Subsidiaries; (ix) limitation on dividend and other payment restrictions affecting Restricted Subsidiaries; (x) limitation on investment in Unrestricted Subsidiaries; (xi) limitation on sale and leaseback transactions; and (xii) limitations on other senior subordinated indebtedness. The covenants in the Indenture are substantially similar to the covenants in the Exchange Indenture, except that the Exchange Debentures are subordinated to the Notes. See "Description of the Units--Exchange Debentures--Certain Covenants."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "Service") will not take a contrary view, and no ruling from the Service has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax advisor as to the particular tax consequences of exchanging such holder's Old Senior Exchangeable Preferred Stock for New Senior Exchangeable Preferred Stock, including the applicability and effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Senior Exchangeable Preferred Stock for New Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the New Senior Exchangeable Preferred Stock will not be considered to differ materially in kind or extent from the Old Senior Exchangeable Preferred Stock. Rather, the New Senior Exchangeable Preferred Stock received by a holder will be treated as a continuation of the Old Senior Exchangeable Preferred Stock in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging Old Senior Exchangeable Preferred Stock for New Senior Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Senior Exchangeable Preferred Stock for its own account pursuant to the Preferred Stock Exchange Offer must acknowledge that it will deliver a Prospectus in connection with any resale of such New Senior Exchangeable Preferred Stock. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Senior Exchangeable Preferred Stock received in exchange for Old Senior Exchangeable Preferred Stock where such Old Senior Exchangeable Preferred Stock was acquired as a result of market- making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until , 1998 (90 days after the commencement of the Preferred Stock Exchange Offer), all dealers effecting transactions in the New Senior Exchangeable Preferred Stock may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Senior Exchangeable Preferred Stock by Participating Broker-Dealers. New Senior Exchangeable Preferred Stock received by Participating Broker-Dealers for their own accounts pursuant to the Preferred Stock Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Senior Exchangeable Preferred Stock or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such New Senior Exchangeable Preferred Stock. Any Participating Broker-Dealer that resells the New Senior Exchangeable Preferred Stock that were received by it for its own account pursuant to the Preferred Stock Exchange Offer and any broker or dealer that participates in a distribution of such New Senior Exchangeable Preferred Stock may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Senior Exchangeable Preferred Stock and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the issuance of the New Senior Exchangeable Preferred Stock will be passed upon for the Company by Kirkland & Ellis, Chicago, Illinois (a partnership which includes professional corporations).
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995 and 1996, and for each of the years in the three-year period ended December 31, 1996, included herein have been included herein and in the Registration Statement of which this Prospectus is a part in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and in the Registration Statement of which this Prospectus is a part and upon the authority of said firm as experts in accounting and auditing.
TUESDAY MORNING CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
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Report of KPMG Peat Marwick LLP, Independent Auditors................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995.......... F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994.................................................. F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994..................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.................................................. F-6
Notes to Consolidated Financial Statements for the years ended Decem-
ber 31, 1996, 1995 and 1994.......................................... F-7
Consolidated Balance Sheets (unaudited) as of September 30, 1997 and
1996 and December 31, 1996........................................... F-16
Consolidated Statements of Operations (unaudited) for the three months
ended September 30, 1997 and 1996 and nine months ended September 30,
1997 and 1996........................................................ F-17
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1997 and 1996.................................... F-18
Notes to Consolidated Financial Statements (unaudited)................ F-19
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Separate financial statements of the Subsidiary Guarantors are not presented herein because the parent company has no operations or assets separate from its investment in the Subsidiary Guarantors, the Subsidiary Guarantors are wholly owned and represent all of the direct and/or indirect subsidiaries of the parent company and the guarantees of the Subsidiary Guarantors are full and unconditional and joint and several with the other Subsidiary Guarantors.
INDEPENDENT AUDITORS' REPORT
The Board Of Directors and Shareholders
Tuesday Morning Corporation:
We have audited the accompanying consolidated balance sheets of Tuesday Morning Corporation and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tuesday Morning Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles.
kpmg peat marwick llp
Dallas, Texas
February 21, 1997
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
1996 1995
-------- -------
ASSETS
------
Current assets:
Cash and cash equivalents................................. $ 10,754 $ 6,276
Inventories............................................... 75,493 52,367
Prepaid expenses.......................................... 1,048 993
Other current assets...................................... 726 458
-------- -------
Total current assets.................................. 88,021 60,094
-------- -------
Property, plant and equipment (notes 5 and 6):
Land...................................................... 8,356 8,356
Buildings................................................. 13,926 12,989
Furniture and fixtures.................................... 17,658 15,584
Equipment................................................. 14,469 13,433
Leasehold improvements.................................... 2,082 1,967
-------- -------
56,491 52,329
Less accumulated depreciation and amortization............ (26,104) (21,267)
-------- -------
Net property, plant and equipment......................... 30,387 31,062
-------- -------
Due from Officer (note 2)................................... 2,679 2,211
Other assets (note 2)....................................... 670 876
-------- -------
Total Assets.......................................... $121,757 $94,243
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current installments of mortgage (note 5)................. $ 1,021 $ 1,021
Current installments of capital lease obligation (note
6)....................................................... 625 755
Accounts payable.......................................... 22,543 12,707
Accrued expenses:
Sales tax............................................... 2,105 1,662
Other................................................... 5,637 2,467
Deferred income taxes (note 8)............................ 57 231
Income taxes payable (note 8)............................. 6,465 2,136
-------- -------
Total current liabilities............................. 38,453 20,979
-------- -------
Mortgage on land, buildings and equipment, excluding current
installments (note 5)...................................... 4,594 5,615
Capital lease obligations, excluding current installments
(note 6)................................................... 382 1,007
Deferred income taxes (note 8).............................. 2,800 2,994
Shareholders' equity (note 7):
Preferred stock of $1 par value per share Authorized
2,000,000 shares, none issued............................ -- --
Common stock of $.01 par value per share Authorized
20,000,000 shares; issued 8,181,036 shares at December
31, 1996 and 8,143,586 shares at December 31, 1995....... 82 81
Additional paid-in capital................................ 18,640 18,277
Retained earnings......................................... 58,834 47,318
Less: treasury stock (274,500 shares in 1996 and in
1995).................................................... (2,028) (2,028)
-------- -------
Total shareholders' equity............................ 75,528 63,648
-------- -------
Commitments and contingencies (notes 3, 10 and 12)
Total Liabilities and Shareholders' Equity............ $121,757 $94,243
======== =======
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See accompanying notes to consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 1995 1994
-------- ------- -------
Net sales............................................ $256,756 210,265 190,081
Cost of sales........................................ 165,189 137,427 126,931
-------- ------- -------
Gross profit..................................... 91,567 72,838 63,150
Selling, general and administrative expenses......... 71,167 63,040 57,523
-------- ------- -------
Operating income................................. 20,400 9,798 5,627
Other income (expense):
Interest income.................................... 275 204 198
Interest expense................................... (2,767) (3,330) (2,458)
Other, net......................................... 600 592 649
-------- ------- -------
(1,892) (2,534) (1,611)
-------- ------- -------
Earnings before income taxes..................... 18,508 7,264 4,016
Income tax expense (note 8)............................. 6,992 2,491 1,365
-------- ------- -------
Net earnings..................................... $ 11,516 4,773 2,651
======== ======= =======
Net earnings per share and share equivalents .... $ 1.40 0.60 0.34
======== ======= =======
|
See accompanying notes to consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------- PAID-IN RETAINED -------------- SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------ ------ ---------- -------- ------ ------- -------------
Balance at December 31,
1993..................... 8,060 $81 $18,091 $39,894 (330) $(2,342) $55,724
Net earnings............. -- -- -- 2,651 -- -- 2,651
Shares issued in connec-
tion with employee stock
option plan (note 7).... 40 -- 140 -- -- -- 140
Treasury shares sold to
employee stock purchase
plan (note 7)........... -- -- (60) -- 30 175 115
----- --- ------- ------- ---- ------- -------
Balance at December 31,
1994..................... 8,100 81 18,171 42,545 (300) (2,167) 58,630
Net earnings............. -- -- -- 4,773 -- -- 4,773
Shares issued in connec-
tion with employee stock
option plan (note 7).... 44 -- 162 -- -- -- 162
Treasury shares sold to
employee stock purchase
plan (note 7)..............-- -- (56) -- 25 139 83
----- --- ------- ------- ---- ------- -------
Balance at December 31,
1995..................... 8,144 81 18,277 47,318 (275) (2,028) 63,648
Net earnings............. -- -- -- 11,516 -- -- 11,516
Shares issued in connec-
tion with employee stock
option plan (note 7).... 37 1 382 -- -- -- 383
Treasury shares sold to
employee stock purchase
plan (note 7)........... -- -- (19) -- -- -- (19)
----- --- ------- ------- ---- ------- -------
Balance at December 31,
1996..................... 8,181 $82 $18,640 $58,834 (275) $(2,028) $75,528
===== === ======= ======= ==== ======= =======
|
See accompanying notes to consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1996 1995 1994
--------- --------- ---------
Cash flows from operating activities:
Cash received from customers................ $ 256,756 $ 210,265 $ 190,081
Cash paid to suppliers and employees........ (240,814) (199,448) (177,676)
Interest received........................... 275 204 198
Interest paid............................... (2,767) (3,330) (2,458)
Income taxes (paid) refunded................ (2,858) (1,362) 1,911
--------- --------- ---------
Net cash provided by operating activities
(note 9)................................. 10,592 6,329 12,056
--------- --------- ---------
Cash flows from investing activities:
Loans to officer (note 2)................... (742) (497) (2,605)
Payments from officer (note 2).............. 274 85 207
Proceeds from sale of property, plant and
equipment.................................. -- -- 99
Capital expenditures........................ (4,233) (2,692) (5,693)
--------- --------- ---------
Net cash used by investing activities..... (4,701) (3,104) (7,992)
--------- --------- ---------
Cash flows from financing activities:
Payment of mortgages........................ (1,021) (1,063) (1,298)
Principal payments under capital lease obli-
gation..................................... (754) (666) (214)
Proceeds from exercise of common stock
options/stock purchase plan................ 362 245 255
--------- --------- ---------
Net cash used by financing activities..... (1,413) (1,484) (1,257)
--------- --------- ---------
Net increase in cash and cash equivalents..... 4,478 1,741 2,807
Cash and cash equivalents at beginning of pe-
riod......................................... 6,276 4,535 1,728
--------- --------- ---------
Cash and cash equivalents at end of period.... $ 10,754 $ 6,276 $ 4,535
========= ========= =========
|
See accompanying notes to consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation--The consolidated financial statements include the accounts of Tuesday Morning Corporation and its wholly-owned subsidiaries: TMI Holdings, Inc., TMIL Corporation, Tuesday Morning, Inc. and Friday Morning, Inc. (collectively "the Company"). All significant intercompany balances and transactions have been eliminated in consolidation.
The Company owned and operated 286 deep discount retail stores in 33 states at December 31, 1996 (260 and 246 stores at December 31, 1995 and 1994, respectively). The Company sells closeout housewares and related gift merchandise, which it purchases at prices below wholesale prices. Company stores are open for four sales events each year.
(b) Cash and Cash Equivalents--The Company's policy is to invest cash in excess of operating requirements in income producing investments. Cash equivalents of $8,352,000 in 1996 and $4,707,000 in 1995 are investments in money market funds. The Company considers all short-term investments with original maturities of three months or less to be cash equivalents.
(c) Inventories--Inventories are stated at the lower of average cost or market using the retail inventory method for the stores' inventory and the cost method for warehouse inventory. Buying, distribution and freight costs are capitalized as part of inventory.
(d) Property, Plant and Equipment--Property, plant and equipment are stated at cost. Buildings, furniture and fixtures, and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
DEPRECIABLE LIVES
-----------------
Buildings.................................................. 30 years
Furniture and fixtures..................................... 7 years
Equipment.................................................. 5 to 7 years
|
Improvements to leased premises are amortized on a straight-line basis over the shorter of their useful lives or the expected term of the related lease.
(e) Income Taxes--Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(f) Earnings (loss) per Common Share and Share Equivalent--Earnings (loss) per common share is based on the weighted average number of common shares, and when dilutive, share equivalents (note 7) outstanding during the period. The weighted average number of common shares and share equivalents outstanding for 1996, 1995 and 1994 were 8,215,000, 7,997,000 and 7,890,000, respectively.
(g) Pre-opening Costs--The Company capitalizes certain costs directly related to opening new stores. Effective August 1, 1995, the Company revised its policy for capitalizing and amortizing preopening costs associated with the opening of new stores. The amortization period was reduced from 24 months to 12 months. The impact of the change in accounting policy did not have a material impact on the Company's consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(h) Advertising--Costs for newspaper, television, radio and other media are expensed as the advertised events take place. Advertising expense for 1996, 1995 and 1994 was $16,475,000, $15,317,000 and $13,652,000, respectively.
(i) Estimates--The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(j) Foreign Currency Transactions--The Company has entered into foreign exchange contracts to hedge its foreign currency transactions related to specific purchase orders for merchandise. Gains and losses on these contracts have been minimal and are deferred until the related merchandise is received.
(k) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of--The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity.
(l) Stock Option Plan--Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair- value based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the previsions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
(2) RECEIVABLES FROM OFFICERS
At December 31, 1996 and 1995, Other Assets included a receivable from an officer of the Company of $124,000 and $114,000, respectively. This loan was initiated in 1992. It bears interest at the prime rate and is secured with Company stock.
Due from Officer at December 31, 1996 and 1995 is $2,679,000 and $2,211,000, respectively. This unsecured loan was initiated in 1994 and bears interest at prime.
(3) LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising from the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial statements.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(4) LINES OF CREDIT
The Company had no balances outstanding related to their line of credit at December 31, 1996 or 1995. As of December 31, 1996 and 1995, the Company had outstanding letters of credit of $9,819,000 and $6,186,000, respectively, primarily for inventory purchases.
In July 1994, the Company entered into a three-year $45,000,000 revolving line of credit with a new bank. This agreement is secured by a pledge of substantially all the Company's assets. Borrowings were limited to the lesser of $45,000,000 or 50% (60% for up to 120 days each year) of eligible inventory, as defined. The availability is further reduced by the aggregate undrawn amount of outstanding letters of credit and a reserve for the foreign currency contracts, discussed in Note 12. At the Company's option, the amount borrowed bore interest at either the Reference Rate plus 0.75% or the Eurodollar Rate plus 2.50%. An Unused Line Fee of 0.25%, per annum, was paid on the difference between $45,000,000 and the average total of the amount borrowed and letters of credit outstanding.
During 1996, this agreement was further amended to extend the term through July 1999 and to increase the borrowing capacity to $55,000,000 for the period beginning July 1 and ending October 31 of each year. This amendment allows the Company, at its option, to borrow at either the Reference Rate or the Eurodollar Rate plus 2.00%. The maximum amount of outstanding and unused Letters of Credit was also increased to $12,000,000.
The weighted-average interest rates were 8.38% and 8.88% during 1996 and 1995, respectively.
In connection with this line of credit, the Company is required to maintain a minimum net worth and comply with other financial covenants including limitations on dividends, indebtedness and capital expenditures. At December 31, 1996, the Company was in compliance with these covenants.
(5) MORTGAGE ON PROPERTY, PLANT AND EQUIPMENT
During 1995, the Company entered into a seven-year agreement with a bank to refinance and consolidate its mortgages on land and buildings. The amount of the note was $7,146,000, the proceeds of which were used to pay the previous mortgage notes. The note is secured by land and buildings and bears interest at LIBOR plus 2.125% (7.755% at December 31, 1996) with principal and interest due monthly. It matures on June 10, 2002.
Mortgages consist of the following at December 31, 1996 and 1995 (in thousands):
1996 1995
------ ------
Note payable to bank, in monthly installments of $85 plus
interest.................................................. $5,615 6,636
Less current installments.................................. (1,021) (1,021)
------ ------
$4,594 5,615
====== ======
|
In connection with this mortgage, the Company is required to maintain minimum net worth and comply with other financial covenants. At December 31, 1996, the Company was in compliance with these covenants.
The maturities of the mortgage are as follows (in thousands):
YEAR AMOUNT ---- ------ 1997.................................. $1,021 1998.................................. 1,021 1999.................................. 1,021 2000.................................. 1,021 2001.................................. 1,021 Later years........................... 510 |
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(6) CAPITAL LEASE
During September 1994, the Company entered into a capital lease with a financial institution to finance part of the acquisition of Point of Sale registers and Electronic Article Surveillance equipment. The amount financed under the capital lease totaled $2,642,000. Depreciation expense during 1996 and 1995 was $528,000 per year.
This lease is for five years and contains a bargain purchase option that the Company would be expected to exercise. This lease bears an implicit interest rate of approximately 12.5%.
The following is a schedule of future minimum lease payments under the capital lease together with the present value of the net minimum lease payments as of December 31, 1996 (in thousands):
YEAR AMOUNT
---- ------
1997.................................. $ 707
1998.................................. 256
1999.................................. 170
------
Total minimum lease payments........ 1,133
Less: Amount representing interest.... (126)
------
Present value of net minimum lease
payments............................. 1,007
Less: Current installments............ (625)
------
Long term capital lease obligation.... $ 382
======
|
(7) SHAREHOLDERS' EQUITY
On May 5, 1992, the Board of Directors of the Company approved the purchase of the Company's stock in open market purchases to be effected from time to time. There are no plans for purchases at this time.
The Company has a stock option plan ("the Plan") covering 2,160,500 shares of the Company's common stock which may be granted to employees of the Company. Under the Plan, stock options are granted at fair market value and vest over varying periods not to exceed 10 years.
At December 31, 1996, 829,000 shares were available for grant under the Plan. The per share weighted-average fair value of stock options granted during 1995 was $3.09 on the date of the grant using the Black Scholes option- pricing model with the following assumptions: expected dividend yield of 0%, risk-free interest rate of 6.1%, an expected life of 5 years and an expected volatility of 0.506. There were no options granted during 1996.
The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below:
1996 1995
------- -----
Net earnings
As reported.................................................. $11,516 4,773
Pro forma.................................................... 11,321 4,772
Earnings per share
As reported.................................................. $ 1.40 0.60
Pro forma.................................................... 1.38 0.60
|
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Pro forma amounts reflect only options granted in 1996 and 1995. The full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma amounts presented above because compensation cost is recognized over the vesting period and compensation cost for options granted prior to January 1, 1995 is not considered.
Following is a summary of transactions relating to the Plan's options for the three years ended December 31, 1996:
WEIGHTED-
NUMBER AVERAGE
OF SHARES EXERCISE PRICE
--------- --------------
Outstanding at December 31, 1993................... 996,600 $6.53
Exercised during year.............................. (40,000) 3.54
Canceled during year............................... (1,800) 9.63
Granted during year................................ 100,000 3.63
--------- -----
Outstanding at December 31, 1994................... 1,054,800 6.36
Exercised during year.............................. (44,000) 3.71
Canceled during year............................... (184,500) 8.69
Granted during year................................ 102,500 6.00
--------- -----
Outstanding at December 31, 1995................... 928,800 5.98
Exercised during year.............................. (37,450) 4.72
Canceled during year............................... (1,500) 9.63
Granted during year................................ 0 --
--------- -----
Outstanding at December 31, 1996................... 889,850 $6.03
========= =====
|
At December 31, 1996, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $3.38--$9.75 and 5.2 years, respectively.
At December 31, 1996 and 1995, the number of options exercisable was 835,000 and 847,000, respectively, and the weighted-average exercise price of these options was $5.88 and $5.80, respectively.
In May 1993 the Board of Directors approved a stock purchase plan for Company employees. It was implemented October 1, 1993. The Company matches the employee contribution at a rate of 25% up to the first $5,000 per year of individual employee contributions. Stock is purchased monthly at the average price of the shares traded during the month. The expense of the Company match was immaterial.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(8) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1996, 1995 and
1994 consists of (in thousands):
CURRENT DEFERRED TOTAL
------- -------- -----
Year ended December 31, 1996
U.S. Federal..................................... $6,606 (129) 6,478
State, local and other........................... 754 (240) 514
------ ---- -----
Total.......................................... 7,360 (368) 6,992
====== ==== =====
Year ended December 31, 1995
U.S. Federal..................................... 2,390 80 2,470
State, local and other........................... 99 (78) 21
------ ---- -----
Total.......................................... 2,489 2 2,491
====== ==== =====
Year ended December 31, 1994
U.S. Federal..................................... 1,086 279 1,365
State, local and other........................... (34) 34 --
------ ---- -----
Total.......................................... $1,052 313 1,365
====== ==== =====
|
A reconciliation of the expected Federal income tax expense to actual tax expense follows (based upon a tax rate of 35% for 1996 and 34% for 1995 and 1994, in thousands).
1996 1995 1994
------ ----- -----
Expected income tax
expense................ $6,478 2,470 1,365
State income taxes, net
of related Federal tax
effect................. 378 90 (16)
Other, net.............. 136 (69) 16
------ ----- -----
$6,992 2,491 1,365
====== ===== =====
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1996 and 1995 are as follows (in thousands):
1996 1995
------ -----
Deferred tax assets:
Compensated absences........................................... $ 169 134
Accrued expenses, principally due to items not yet deductible
for income tax purposes....................................... 499 93
Other.......................................................... 224 151
------ -----
Total gross deferred assets.................................. 892 378
------ -----
Deferred tax liabilities:
Property, plant and equipment, principally due to differences
in depreciation and capitalized interest...................... 3,024 3,107
Inventory costs................................................ 473 231
Other.......................................................... 252 265
------ -----
Total gross deferred tax liabilities......................... 3,749 3,603
------ -----
Net deferred tax liability..................................... $2,857 3,225
====== =====
|
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Management expects the deferred tax assets at December 31, 1996 to be recovered through the reversal during the carry-forward period of existing taxable temporary differences giving rise to the deferred income tax liability. Accordingly, no valuation allowances for deferred tax assets were considered necessary as of December 31, 1996 or December 31, 1995.
(9) SUPPLEMENTAL CASH FLOW INFORMATION
The reconciliation of net earnings to net cash provided by operating activities for the years ended December 31, 1996, 1995 and 1994 is as follows (in thousands):
1996 1995 1994
------- ------ ------
Net earnings...................................... $11,516 4,773 2,651
------- ------ ------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization................... 4,907 4,583 3,862
Deferred income taxes........................... (369) 2 313
Loss on sale of fixed assets.................... -- -- 12
Changes in operating assets and liabilities:
Income taxes receivable....................... -- -- 2,133
Inventories................................... (23,127) (5,552) 6,736
Prepaid expenses.............................. (55) 681 (683)
Other current assets.......................... (268) 191 597
Other assets.................................. 207 102 (251)
Accounts payable.............................. 9,836 (209) (2,943)
Accrued expenses.............................. 3,616 610 (1,359)
Income taxes payable.......................... 4,329 1,148 988
------- ------ ------
Total adjustments........................... (924) 1,556 9,405
------- ------ ------
Net cash provided by operating activities... $10,592 6,329 12,056
======= ====== ======
|
A capital lease obligation of $2,642,000 was incurred when the Company entered into a lease for new equipment in 1994.
(10) OPERATING LEASES
The Company leases substantially all store locations under noncancellable operating leases. New store leases do, however, allow the Company to terminate a lease after 12-18 months if the store does not achieve sales expectations. Future minimum rental payments under leases are as follows (in thousands):
YEAR AMOUNT
---- -------
1997................................... $15,931
1998................................... 13,996
1999................................... 10,604
2000................................... 8,501
2001................................... 5,649
Later years............................ 2,003
-------
Total minimum rental payments.......... $56,684
=======
|
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
In the normal course of business, management expects to renew or replace leases for store locations as they expire. Rental expense for 1996, 1995 and 1994 was $14,564,000, $13,124,000 and $12,323,000, respectively.
(11) PROFIT SHARING PLAN
The Company has a 401(K) profit sharing plan for the benefit of its employees. Under the plan, eligible employees may request the Company to deduct and contribute from 1% to 15% of their salary to the plan. The Company also contributes 1% of total compensation for all plan participants, and matches a portion of each participant's contribution up to 6% of the participant's compensation. The Company expensed contributions of $403,000, $327,000, and $330,000 during the years ended December 31, 1996, 1995 and 1994, respectively.
(12) FINANCIAL INSTRUMENTS
As of December 31, 1996 and 1995, the Company had approximately $4,042,000 and $474,000 respectively, of net foreign exchange contracts outstanding which are expected to be exercised by September of each following year. The Company's risk that counterparties to these contracts may be unable to perform is minimized by limiting the counterparties to major financial institutions.
The following table represents the carrying amounts and estimated fair values of the Company's notes receivable, variable rate long-term debt and foreign exchange contracts as of December 31, 1996 and 1995 (in thousands):
1996 1995
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
Assets--notes receivable..................... $2,878 2,878 2,567 2,567
Liabilities:
Foreign exchange contracts:
unrealized (gain)........................ -- (32) -- (22)
unrealized loss.......................... -- 14 -- --
Variable rate long-term debt............... 5,615 5,615 6,636 6,636
|
The carrying values of the Company's variable rate long-term debt and notes receivable approximate the estimated fair values since the obligations bear interest at current market rates. The fair values of the foreign exchange contracts are based on the exchange rates existing at the balance sheet dates.
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results for 1996 and 1995 follows (in thousands, except per share amounts):
QUARTERS ENDED
--------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996
--------- -------- --------- --------
Net sales............................. $35,740 54,286 48,537 118,193
Comparable store sales increase....... 11.5% 6.7% 18.0% 16.1%
Gross profit.......................... $ 3,397 18,218 18,750 41,203
Net earnings (loss)................... $ (676) 434 698 11,060
Net earnings (loss) per common share
and share equivalent................. $ (0.09) 0.05 0.08 1.33
Weighted-average number of common
shares and share equivalents out-
standing............................. 7,851 8,319 8,370 8,343
QUARTERS ENDED
--------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995
--------- -------- --------- --------
Net sales............................. $29,958 47,977 38,240 94,090
Comparable store sales increase....... 15.2% 10.3% (5.6)% 7.4%
Gross profit.......................... $10,349 15,927 14,863 31,699
Net earnings (loss)................... $(2,046) (155) (336) 7,310
Net earnings (loss) per common share
and share equivalent................. $ (0.26) (0.02) (0.04) 0.92
Weighted-average number of common
shares and share equivalents out-
standing............................. 7,797 7,836 7,840 7,980
|
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
SEPT. 30, SEPT. 30,
1997 1996
--------- ---------
(IN THOUSANDS)
ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 3,029 $ 599
Federal income tax receivable............................ -- 96
Inventories.............................................. 159,687 114,347
Prepaid expenses......................................... 1,203 2,627
Other current assets..................................... 313 211
-------- --------
Total current assets.................................... 164,232 117,880
-------- --------
Property, plant and equipment, at cost:
Land..................................................... 8,356 8,356
Buildings................................................ 13,875 13,285
Furniture and fixtures................................... 19,506 17,138
Equipment................................................ 17,104 14,348
Leasehold improvements................................... 2,277 2,093
-------- --------
61,118 55,220
Less accumulated depreciation & amortization............. (29,679) (24,806)
-------- --------
Net property, plant and equipment....................... 31,439 30,414
-------- --------
Other assets, at cost:
Due from Officer......................................... 2,866 2,617
Other assets............................................. 678 757
-------- --------
Total Assets.............................................. $199,215 $151,668
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current installments of mortgages........................ $ 1,021 $ 1,021
Current installments of capital lease obligation......... 213 772
Accounts payable......................................... 45,181 31,097
Accrued expenses
Sales tax................................................ 1,332 1,068
Other.................................................... 4,922 3,324
Deferred income taxes.................................... 57 231
Income taxes payable..................................... 2,301 --
-------- --------
Total current liabilities............................... 55,027 37,513
-------- --------
Mortgages on land, buildings and equipment................ 3,828 4,849
Long term notes payable................................... 56,127 41,776
Long term capital lease obligation........................ 220 433
Deferred income taxes..................................... 2,800 2,994
Shareholders' equity:
Preferred stock of $1 par value per share Authorized
2,000,000 shares, none issued........................... -- --
Common stock of $.01 par value per share Authorized
30,000,000 shares; issued 12,357,467 shares at September
30, 1997 12,215,379 shares at September 30, 1996
12,271,554 shares at December 31, 1996.................. 123 81
Additional paid-in capital............................... 18,922 18,277
Retained earnings........................................ 64,196 47,773
Less: treasury stock 411,750 shares at September 30, 1997
411,750 shares at September 30, 1996 411,750 shares at
December 31, 1996....................................... (2,028) (2,028)
-------- --------
Total shareholders' equity.............................. 81,213 64,103
-------- --------
Total Liabilities and Shareholders' Equity................ $199,215 $151,668
======== ========
|
See accompanying notes to consolidated financial statements
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
----------- -----------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net sales................... $ 179,058 $ 138,563
Cost of sales............... 112,620 88,199
----------- -----------
Gross profit............ 66,438 50,364
Selling, general and
administrative expenses.... 56,193 48,134
----------- -----------
Operating income........ 10,245 2,230
----------- -----------
Other income (expense):
Interest income........... 250 195
Interest expense.......... (2,330) (2,147)
Other income.............. 420 434
----------- -----------
(1,660) (1,518)
----------- -----------
Income before income
taxes.................. 8,585 712
Income tax.................. 3,219 256
----------- -----------
Net income.............. $ 5,366 $ 456
=========== ===========
Net income per share...... $ 0.43 $ 0.04
=========== ===========
Weighted average common
share and share
equivalents................ 12,556 12,396
=========== ===========
|
See accompanying notes to consolidated financial statements
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Cash flows from operating activities:
Cash received from customers.......................... $ 179,058 $ 138,563
Cash paid to suppliers and employees.................. (227,299) (176,911)
Interest received..................................... 250 195
Interest paid......................................... (2,329) (2,147)
Income taxes paid..................................... (7,383) (2,489)
--------- ---------
Net cash used by operating activities................... (57,703) (42,789)
--------- ---------
Cash flows used by investing activities:
Loans to officers..................................... (373) (406)
Capital expenditures.................................. (4,756) (2,935)
--------- ---------
Net cash used by investing activities................... (5,129) (3,341)
--------- ---------
Cash flows from financing activities:
Proceeds from short and long term borrowings.......... 56,127 41,776
Payment of mortgages.................................. (766) (766)
Principal payments under capital lease obligation..... (574) (557)
Proceeds from exercise of common stock options/stock
purchase plan........................................ 323 --
--------- ---------
Net cash provided by financing activities............... 55,110 40,453
--------- ---------
Net decrease in cash and cash equivalents............... (7,722) (5,677)
Cash and cash equivalents at beginning of period........ 10,753 6,276
--------- ---------
Cash and cash equivalents at end of period.............. $ 3,031 $ 599
========= =========
Reconciliation of net income to net cash used by
operating activities:
Net income.............................................. $ 5,366 $ 456
--------- ---------
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation and amortization......................... 3,704 3,582
Change in operating assets and liabilities:
Increase in income taxes receivable................. -- (96)
Increase in inventories............................. (84,194) (61,980)
Increase in prepaid expense......................... (155) (1,634)
Decrease in other current assets.................... 414 247
Decrease in other assets and liabilities............ 178 119
Increase in accounts payable........................ 22,638 18,390
Increase (decrease) in accrued expenses............. (1,490) 263
Decrease in income taxes payable.................... (4,164) (2,136)
--------- ---------
Total adjustments................................. (63,069) (43,245)
--------- ---------
Net cash used by operating activities................... $ (57,703) $ (42,789)
========= =========
|
See accompanying notes to consolidated financial statements
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. In September 1997, the Company and Madison Dearborn Partners II, L.P. ("Madison Dearborn") entered into an Agreement and Plan of Merger under which Madison Dearborn would acquire all of the Company's outstanding shares of common stock for $25 per share in cash. The merger was consummated on December 29, 1997.
2. The consolidated interim financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements include all adjustments, consisting only of those of a normal recurring nature, which in the opinion of management, are necessary to present fairly the results of the Company for the interim periods presented and should be read in conjunction with the consolidated financial statements and notes thereto in the Company's 1996 Annual Report.
3. Net income per share amounts are based on the weighted average number of shares and dilutive share equivalents outstanding during the period. See note 6 below.
4. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
5. Notes payable under the terms of the Company's revolving line of credit agreement are classified between current and long term in accordance with the terms of the agreement.
6. On May 13, 1997 the Board of Directors approved a three-for-two stock split of the Company's common stock. All financial statements presented reflect this transaction which was completed in June, 1997.
NO DEALER, PERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN- FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN- DER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Cautionary Notice Regarding Forward-Looking Statements.................... iii
Available Information..................................................... iii
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 16
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Unaudited Pro Forma Financial Statements.................................. 24
Selected Consolidated Financial Data...................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operation................................................................ 33
Business.................................................................. 39
Management................................................................ 46
Certain Transactions...................................................... 49
Principal Shareholders.................................................... 51
Description of the Senior Credit Facility................................. 52
Description of the Units.................................................. 54
The Preferred Stock Exchange Offer........................................ 94
Description of the Capital Stock.......................................... 104
Description of the Exchange Notes......................................... 107
Certain Federal Income Tax Considerations................................. 108
Plan of Distribution...................................................... 108
Legal Matters............................................................. 109
Experts................................................................... 109
Index to Financial Statements............................................. F-1
|
$25,000,000
LOGO
TUESDAY MORNING CORPORATION
OFFER TO EXCHANGE ITS
13 1/4% SERIES B SENIOR
EXCHANGEABLE PREFERRED STOCK DUE 2009 FOR ANY AND ALL OF ITS OUTSTANDING 13
1/4% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
PROSPECTUS
, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law
The Company is incorporated under the laws of the State of Delaware.
Section 145 ("Section 145") of the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (the "DGCL"), inter
alia, provides that a Delaware corporation may indemnify any persons who were,
are or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reasons of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145.
Certificates of Incorporation
The Certificate of Incorporation of the Company provides that, to the fullest extent permitted by the DGCL, a director of the Company shall not be liable to the Company or its stockholders for monetary damages for a breach of fiduciary duty as a director.
By-Laws
Article V of the By-laws of the Company ("Article V") provides, among other things, that each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he, or a person of whom he is the legal representative , is or was a director or officer, of the Company or is or was serving at the request of the Company as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Company to the fullest extent which it is empowered to do so by the DGCL against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such Proceeding) and such indemnification shall inure to the benefit of his heirs, executors and administrators; provided, however, that, except in certain circumstances, the Company shall
II-1
indemnify any such person seeking indemnification in connection with a Proceeding initiated by such person only if such Proceeding was authorized by the board of directors of the Company. The right to indemnification conferred in Article V shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any such Proceeding in advance of its final disposition. The Company may, by action of its board of directors, provide indemnification to employees and agents of the Company with the same scope and effect as the foregoing indemnification of directors and officers.
Article V further provides that any indemnification of a director or officer of the Company under Article V or advance of expenses shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the Company that the director or officer is entitled to indemnification pursuant to Article V is required, and the Company fails to respond within 60 days to a written request for indemnity, the Company shall be deemed to have approved the request. If the Company denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Company. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Company) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Company to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Company. Neither the failure of the Company (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Company (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Persons who are not covered by Article V and who are or were employees or agents of the Company, or who are or were serving at the request of the Company as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors.
Article V provides that the Company may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the Company or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the Company would have the power to indemnify such person against such liability under Article V.
Insurance
All of the Company's directors and officers will be covered by insurance policies intended to be obtained by the Company against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933.
II-2
ITEM 21.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
2.1 Agreement and Plan of Merger, dated as of September 12, 1997, by and among
the Company, Merger Sub and MDP.
2.2 Amendment to the Agreement and Plan of Merger, dated as of December 26,
1997, by and among Company, Merger Sub and MDP.
3.1 Certificate of Incorporation of the Company.
3.2 Certificate of Designation
3.3 By-Laws of the Company.
4.1 Indenture, dated as of December 29, 1997, by and between the Company and
the Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee.
4.2 Indenture, dated as of December 29, 1997, by and between the Company and
the Subsidiary Guarantors and United States Trust Company of New York, as
trustee.
4.3 Form of Notes (included in Exhibit 4.1).
4.4 Form of Exchange Notes (included in Exhibit 4.1).
4.5 Credit Agreement, dated as of December 29, 1997, among the Company, as
Borrower, the Subsidiary Guarantors, as Guarantors, each of the lenders
that is a signatory thereto, Merrill Lynch, as Agent and Fleet National
Bank, as Administrative Agent.
4.6 Security Agreement, dated as of December 29, 1997, by and among the
Company, the Subsidiary Guarantors and Fleet National Bank, as
Administrative Agent.
4.7 Registration Rights Agreement, dated as of December 29, 1997, by and among
the Company, the Subsidiary Guarantors and the Initial Purchaser.
5.1 Opinion of Kirkland & Ellis.*
10.1 Subscription Agreement, dated as of December 26, 1997, by and between
Merger Sub and each of the investors listed on the Schedule of Subscribers
attached thereto.
10.2 Subscription Agreement, dated as of December 29, 1997, by and between the
Company and Madison Dearborn.
10.3 Employment Agreement, dated as of December 29, 1997, by and between the
Company and Jerry M. Smith.
10.4 Consulting and Non-Competition Agreement, dated as of December 29, 1997,
by and between the Company and Lloyd L. Ross.
10.5 Employment Put Agreement, dated as of December 29, 1997, by and between
the Company and Jerry M. Smith.
|
II-3
10.6 Term Put Agreement, dated as of December 29, 1997, by and among the
Company, Madison Dearborn and Lloyd L. Ross.
10.7 Stock Pledge Agreement, dated as of December 29, 1997, by and between the
Company and Jerry M. Smith.
10.8 Stock Pledge Agreement, dated as of December 29, 1997, by and between the
Company and Lloyd L. Ross.
10.9 1997 Long-Term Equity Incentive Plan of the Company.
10.10 Stock Option Agreement, dated as of December 29, 1997, by and between the
Company and Jerry M. Smith.
10.11 Stockholders Agreement, dated as of December 29, 1997, by and among the
Company, Madison Dearborn and the executives listed on Schedule I attached
thereto.
11.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
11.2. Statement Regarding Computation of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
21.1 Subsidiaries of the Company and each of the Subsidiary Guarantors.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in Part II to the Registration Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
|
* To be filed by amendment.
+ The Company agrees to furnish supplementally to the Commission a copy of any omitted schedule or exhibit to such agreement upon request by the Commission.
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act");
II-4
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bonafide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(4) The undersigned registrants hereby undertake as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(5) The registrants undertake that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described under Item 20 or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
II-5
business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(9) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Tuesday Morning Corporation has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas on February 10, 1998.
TUESDAY MORNING CORPORATION
By: /s/ Jerry M. Smith
---------------------------------------
Jerry M. Smith
Chief Executive Officer and President
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Benjamin D. Chereskin and Robin P. Selati and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement (and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the offerings which this Registration Statement relates), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
****
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement and power of attorney have been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATES
--------- -------- -----
/s/ Jerry M. Smith
-----------------------------
Jerry M. Smith Chief Executive Officer, President February 10, 1998
and Director
/s/ Mark E. Jarvis
-----------------------------
Mark E. Jarvis Senior Vice President, Chief February 10, 1998
Financial Officer and Secretary
/s/ G. Michael Anderson
-----------------------------
Michael Anderson Senior Vice President, Buying Group February 10, 1998
/s/ Lloyd L. Ross
-----------------------------
Lloyd L. Ross Chairman of the Board February 10, 1998
/s/ William J. Hunckler, III
-----------------------------
William J. Hunckler, III Director February 10, 1998
/s/ Benjamin D. Chereskin
-----------------------------
Benjamin D. Chereskin Director February 10, 1998
/s/ Robin P. Selati
-----------------------------
Robin P. Selati Director February 10, 1998
|
II-7
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
MADISON DEARBORN PARTNERS II, L.P.,
TUESDAY MORNING ACQUISITION CORP.
AND
TUESDAY MORNING CORPORATION
DATED AS OF SEPTEMBER 12, 1997
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 12, 1997 (this "Agreement"), is made and entered into by and among Madison Dearborn Partners II, L.P., a Delaware limited partnership ("Parent"), Tuesday Morning Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and Tuesday Morning Corporation, a Delaware corporation (the "Company").
WHEREAS, the general partner of Parent and the respective Boards of Directors of Sub and the Company have approved the acquisition of the Company by Parent, by means of the merger (the "Merger") of Sub with and into the Company, upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to those certain option agreements (the "Option Agreements"), dated as of August 13, 1997, by and between Parent and each of Messrs. Lloyd L. Ross and Jerry M. Smith (the "Stockholders"), Parent has acquired an option (the "Option") to purchase 3,896,757 shares of common stock, par value $0.01 per share, of the Company ("Shares" or "Company Common Stock") held by the Stockholders (including 1,143,600 Shares issuable to the Stockholders upon exercise of stock options), which Shares are currently being held in escrow by NationsBank of Texas, N.A.;
WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law, as amended (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time. At the Effective Time, the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving corporation and a direct wholly owned subsidiary of Parent (Sub and the Company are sometimes hereinafter referred to as "Constituent Corporations" and, as the context requires, the Company is sometimes hereinafter referred to as the "Surviving Corporation"), and shall continue under the name "Tuesday Morning Corporation."
1.2 Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 7.1, and subject to the satisfaction or waiver of the conditions set forth in Article VI, the closing of the merger (the "Closing") shall take place at 10:00 a.m., Chicago time, on the first business day after satisfaction and/or waiver of all of the conditions set forth in Article VI (the "Closing Date"), at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, unless another date, time or place is agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, as provided in the DGCL, on the Closing Date. The Merger shall become effective upon such filing or at such time thereafter as is provided in the Certificate of Merger (the "Effective Time").
1.4 Effects of the Merger.
(a) The Merger shall have the effects as set forth in the applicable provisions of the DGCL.
(b) The directors of Sub and the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the initial directors and officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company shall be amended and restated in its entirety as set forth on Exhibit A hereto, and, from and after the Effective Time, such amended and restated Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with the terms thereof and the DGCL.
(d) The Bylaws of the Company shall be amended and restated in their entirety as set forth on Exhibit B hereto and, from and after the Effective Time, such amended and restated Bylaws shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by applicable law, the Certificate of Incorporation or the Bylaws.
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of any holder of shares of Company Common Stock or any holder of shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation or such other equity securities of the Surviving Corporation as Parent shall specify.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of Company Common Stock and all other shares of capital stock of the Company that are owned by the Company and all shares of Company Common Stock and other shares of capital stock of the Company owned by Parent or Sub shall be canceled and retired and shall cease to exist and no consideration shall be delivered or deliverable in exchange therefor.
2.2 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Sub, the Company or the holders of any of the shares thereof:
(a) (i) Subject to the other provisions of this Section 2.2, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares owned, directly or indirectly (other than the shares covered by the Option), by the Company or by Parent, Sub or any other Subsidiary of Parent and Dissenting Shares (as defined in Section 2.6)) shall be converted into the right to receive $25.00 per share, net to the seller in cash, payable to the holder thereof, without any interest thereon (the "Merger Consideration"), upon surrender and exchange of the Certificate (as defined in Section 2.3) representing such share of Company Common Stock. As used in this Agreement, the word "Subsidiary", with respect to any party, means any corporation, partnership, joint venture or other organization, whether incorporated or unincorporated, of which: (i) such party or any other Subsidiary of such party is a general partner; (ii) voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation, partnership, joint venture or other organization is held by such party or by any one or more of its Subsidiaries, or by such party and any one or more of its Subsidiaries; or (iii) at least 25% of the equity, other securities or other interests is, directly or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and any one or more of its Subsidiaries.
(ii) All such shares of Company Common Stock, when converted as provided in Section 2.2(a)(i), no longer shall be outstanding and shall automatically be canceled and retired and shall cease to exist, and each
Certificate previously evidencing such Shares shall thereafter represent
only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to the
Company Common Stock except as otherwise provided herein or by law and,
upon the surrender of Certificates in accordance with the provisions of
Section 2.3, shall only represent the right to receive for their Shares,
the Merger Consideration, without any interest thereon.
2.3 Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, Sub shall appoint a United States bank or trust company reasonably acceptable to the Company to act as paying agent (the "Paying Agent") for the payment of the Merger Consideration, and Sub shall deposit or shall cause to be deposited with the Paying Agent in a separate fund established for the benefit of the holders of shares of Company Common Stock, for payment in accordance with this Article II, through the Paying Agent (the "Payment Fund"), immediately available funds in amounts necessary to make the payments pursuant to Section 2.2(a)(i) and this Section 2.3 to holders (other than the Company or Parent, Sub or any other Subsidiary of Parent, or holders of Dissenting Shares). The Paying Agent shall, pursuant to irrevocable instructions, pay the Merger Consideration out of the Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as Parent directs in obligations of or guaranteed by the United States of America, in commercial paper obligations receiving the highest investment grade rating from both Moody's Investors Services, Inc. and Standard & Poor's Corporation, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted Investments"); provided, however, that the maturities of Permitted Investments shall be such as to permit the Paying Agent to make prompt payment to former holders of Company Common Stock entitled thereto as contemplated by this Section. The Surviving Corporation shall cause the Payment Fund to be promptly replenished to the extent of any losses incurred as a result of Permitted Investments. All earnings on Permitted Investments shall be paid to the Surviving Corporation. If for any reason (including losses) the Payment Fund is inadequate to pay the amounts to which holders of shares of Company Common Stock shall be entitled under this Section 2.3, the Surviving Corporation shall in any event be liable for payment thereof. The Payment Fund shall not be used for any purpose except as expressly provided in this Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall instruct the Paying Agent to
mail to each holder of record (other than the Company or Parent, Sub or any
other Subsidiary of Parent) of a Certificate or Certificates which,
immediately prior to the Effective Time, evidenced outstanding shares of
Company Common Stock (the "Certificates"), (i) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and shall be in such form and have such
other provisions as the Surviving Corporation reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for payment therefor. Upon surrender of a Certificate for
cancellation to the Paying Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in respect thereof cash in an amount equal to the product of (x) the
number of shares of Company Common Stock represented by such Certificate and
(y) the Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. Absolutely no interest shall be paid or accrued on the
Merger Consideration payable upon the surrender of any Certificate. If payment
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the surrendered Certificate or established to
the satisfaction of the Surviving Corporation that such tax has been paid or
is not applicable. Until surrendered in accordance with the provisions of this
Section 2.3(b), each Certificate (other than Certificates representing Shares
owned by the Company or Parent, Sub or any other Subsidiary of Parent), shall
represent for all purposes only the right to receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the Payment Fund which remains undistributed to the holders of Company Common Stock for 180 days after the Effective Time shall be delivered to the Surviving Corporation upon demand, and any holders of Company Common Stock who have not theretofore complied with this Article II and the instructions set forth in the letter of transmittal mailed to such holder after the Effective Time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration to which they are entitled. All interest accrued in respect of the Payment Fund shall inure to the benefit of and be paid to the Surviving Corporation.
(d) No Liability. Neither Parent nor the Surviving Corporation shall be liable to any holder of shares of Company Common Stock for any cash from the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
2.4 Stock Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfer of shares of Company Common Stock thereafter on the records of the Company. On or after the Effective Time, any certificates presented to the Paying Agent or Parent for any reason shall be converted into the Merger Consideration.
2.5 Stock Option Plans. At or about the Effective Time, the holders of then outstanding options to purchase Shares under the Company's Restated Incentive Stock Option Plan and Non-Qualified Stock Option Plan (the "Stock Option Plans"), whether or not then exercisable (collectively, the "Employee Options"), shall, in cancellation and settlement thereof, receive for each Share subject to such Employee Option an amount (subject to any applicable withholding tax) in cash equal to the difference between the Merger Consideration and the per Share exercise price of such Employee Option to the extent such difference is a positive number (such amount being hereinafter referred to as, the "Option Consideration"). Upon receipt of the Option Consideration, the Employee Option shall be canceled. The surrender of an Employee Option to the Company in exchange for the Option Consideration shall be deemed a release of any and all rights the holder had or may have had in respect of such Employee Option. Prior to the Closing, the Company shall obtain all necessary consents or releases from holders of Employee Options under the Stock Option Plans and take all such other lawful action as may be necessary to give effect to the transactions contemplated by this Section 2.5. The Stock Option Plans shall terminate as of the Effective Time, and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary thereof shall be canceled as of the Effective Time. Prior to the Closing, the Company shall take all action necessary to (i) ensure that, following the Effective Time, no participant in the Stock Option Plans or any other plans, programs or arrangements shall have any right thereunder to acquire equity securities of the Company, the Surviving Corporation or any Subsidiary thereof and (ii) terminate all such plans, programs and arrangements.
2.6 Dissenting Shares. Notwithstanding any other provisions of this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and which are held by stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration. Such stockholders instead shall be entitled to receive payment of the appraised value of such shares of Company Common Stock held by them in accordance with the provisions of such Section 262 of the DGCL, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares of Company Common Stock under such Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 2.3, of the Certificate or Certificates that, immediately prior to the Effective Time, evidenced such shares of Company Common Stock.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Company. The Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business as a foreign corporation and in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not (i) have a Material Adverse Effect (as defined below) with respect to the Company or (ii) impair in any material respect the ability of the Company to consummate the transactions contemplated by this Agreement. The Company has heretofore delivered to Parent complete and correct copies of its and its Subsidiaries' respective Certificates of Incorporation and Bylaws. All Subsidiaries of the Company and their respective jurisdictions of incorporation or organization are identified on Schedule 3.1(a). As used in this Agreement: a "Material Adverse Effect" shall mean, with respect to any party, the result of one or more events, changes or effects which, individually or in the aggregate, would have a material adverse effect on the business, operations, results of operations, assets, condition (financial or otherwise) or prospects of such party and its Subsidiaries, taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 Shares and 2,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). As of
the date hereof: (i) 12,346,974 Shares are issued and 11,917,681 Shares are
outstanding; (ii) no shares of Preferred Stock are issued and outstanding;
and (iii) 1,248,863 Shares are reserved for issuance pursuant to Employee
Options outstanding under the Stock Option Plans. Except for the issuance
of Shares pursuant to the exercise of outstanding Employee Options, there
are no employment, executive termination or similar agreements providing
for the issuance of Shares. No Shares are held by the Company, and no
Shares are held by any Subsidiary of the Company. No bonds, debentures,
notes or other instruments or evidence of indebtedness having the right to
vote (or convertible into, or exercisable or exchangeable for, securities
having the right to vote) on any matters on which the Company stockholders
may vote ("Company Voting Debt") are issued or outstanding. All outstanding
Shares are validly issued, fully paid and nonassessable and are not subject
to preemptive or other similar rights. Except as set forth on Schedule
3.1(b), all outstanding shares of capital stock of the Subsidiaries of the
Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all liens, charges, encumbrances, claims and
options of any nature. Except as set forth in this Section 3.1(b), there
are outstanding: (i) no shares of capital stock, Company Voting Debt or
other voting securities of the Company; (ii) no securities of the Company
or any Subsidiary of the Company convertible into, or exchangeable or
exercisable for, shares of capital stock, Company Voting Debt or other
voting securities of the Company or any Subsidiary of the Company; and
(iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which the Company or any Subsidiary of the
Company is a party or by which it is bound, in any case obligating the
Company or any Subsidiary of the Company to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Company
Voting Debt or other voting securities of the Company or of any Subsidiary
of the Company, or obligating the Company or any Subsidiary of the Company
to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Except as set forth on Schedule 3.1(b), since June
30, 1997, the Company has not (i) granted any options, warrants or rights
to purchase shares of Company Common Stock or (ii) amended or repriced any
Employee Option or the Stock Option Plans. The Company has previously
delivered to Parent a complete and correct list of all outstanding options,
warrants and rights to purchase shares of Company Common Stock and the
exercise prices relating thereto. Except for the Option Agreements, there
are not as of the date hereof and there will not be at the Effective Time
any stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting of any shares of the capital stock of the Company which will limit in any way the solicitation of proxies by or on behalf of the Company from, or the casting of votes by, the stockholders of the Company with respect to the Merger. There are no restrictions on the Company to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and authority to enter into this Agreement and, subject to the approval of this Agreement and the Merger by the holders of a majority of the outstanding Shares ("Company Stockholder Approval"), to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to the Company Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, subject to the Company Stockholder Approval, constitutes a valid and binding obligation of the Company enforceable in accordance with its terms and conditions except that the enforcement hereof may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
(ii) Except as set forth on Schedule 3.1(c)(ii), the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Company will not conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration (including pursuant to any put right) of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest or other encumbrance on assets or property, or right of first refusal with respect to any asset or property (any such conflict, violation, default, right of termination, cancellation or acceleration, loss, creation or right of first refusal, a "Violation"), pursuant to, (A) any provision of the Certificate of Incorporation or Bylaws of the Company or any of its Subsidiaries or (B) except as to which requisite waivers or consents have been obtained and assuming the consents, approvals, authorizations or permits and filings or notifications referred to in paragraph (iii) of this Section 3.1(c) are duly and timely obtained or made and the Company Stockholder Approval has been obtained, result in any Violation of (1) any loan or credit agreement, note, mortgage, deed of trust, indenture, lease, Benefit Plan (as defined in Section 3.1(i)), Company Permit (as defined in Section 3.1(f)), or any other agreement, obligation, instrument, concession, franchise, or license or (2) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or assets (collectively, "Laws"). The Board of Directors of the Company has taken all actions necessary under the DGCL, including approving the transactions contemplated by this Agreement, to ensure that Section 203 of the DGCL does not, and will not, apply to the transactions contemplated in this Agreement.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, notice to, or permit from any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a "Governmental Entity"), is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for: (A) the filing of a pre- merger notification and report form by the Company under the Hart- Scott-Rodino Antitrust improvements Act of 1976, as amended (the "HSR Act"), and the expiration or termination of the applicable waiting period thereunder; (B) the filing with the United States Securities and Exchange Commission (the "SEC") of (x) a proxy statement in definitive form relating to a meeting of the holders of Company Common Stock to approve the Merger (such proxy statement as amended or supplemented from time to time being hereinafter referred to as the "Proxy Statement") and (y) such reports under and such other compliance with the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions
contemplated hereby; (C) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware; (D) such filings and
approvals as may be required by any applicable state securities, "blue
sky" or takeover laws; and (E) such filings in connection with any
state or local tax which is attributable to the beneficial ownership of
the Company's or its Subsidiaries' real property, if any (collectively,
the "Gains and Transfer Taxes").
(d) SEC Documents. The Company has delivered to Parent a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January
1, 1994 and prior to the date of this Agreement (the "Company SEC
Documents"), which are all the documents (other than preliminary material)
that the Company was required to file with the SEC since such date. As of
their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the Company SEC
Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present
in accordance with applicable requirements of GAAP (subject, in the case of
the unaudited statements, to normal, recurring adjustments, which will not
be material, either individually or in the aggregate) the consolidated
financial position of the Company and its consolidated Subsidiaries as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries
for the periods presented therein.
(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement will, on the date it is first mailed to the holders of the
Company Common Stock or at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If, at any
time prior to the Effective Time, any event with respect to the Company or
any of its Subsidiaries, or with respect to other information supplied by
the Company for inclusion in the Proxy Statement, shall occur which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Proxy Statement,
insofar as it relates to the Company or its Subsidiaries or other
information supplied by the Company for inclusion therein will comply as to
form, in all material respects, with the provisions of the Exchange Act or
the rules and regulations thereunder.
(f) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all material permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the
lawful conduct of their respective businesses (the "Company Permits"). The
Company and its Subsidiaries are in compliance in all material respects
with the terms of the Company Permits (a list of which is set forth on
Schedule 3.1(f)). Except as disclosed in Schedule 3.1(f), the Company and
its Subsidiaries have complied in all material respects with all applicable
laws, ordinances and regulations of all Governmental Entities. As of the
date of this Agreement, no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending
or, to the knowledge of the Company, threatened.
(g) Litigation. Except as set forth on Schedule 3.1(g), there is no suit,
action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary of the
Company ("Company Litigation"), nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary of the Company ("Company
Order").
(h) Taxes. Except as set forth on Schedule 3.1(h) hereto:
(i) All Tax Returns required to be filed by or with respect to the Company and each of its Subsidiaries have been duly and timely filed, and all such Tax Returns are true, correct and complete in all material respects. The Company and each of its Subsidiaries has duly and timely paid (or there has been paid on its behalf) all Taxes that are due, or claimed or asserted by any taxing authority to be due, from or with respect to it. With respect to any period for which Taxes are not yet due with respect to the Company or any Subsidiary, the Company and each of its Subsidiaries has made due and sufficient current accruals for such Taxes in accordance with GAAP in the most recent financial statements contained in the Company SEC Documents. The Company and each of its Subsidiaries has made (or there has been made on its behalf) all required estimated Tax payments sufficient to avoid any material underpayment penalties. The Company and each of its Subsidiaries has withheld and paid all Taxes required by all applicable laws to be withheld or paid in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party.
(ii) There are no outstanding agreements, waivers, or arrangements extending the statutory period of limitation applicable to any claim for, or the period for the collection or assessment of, material Taxes due from or with respect to the Company or any of its Subsidiaries for any taxable period. No audit or other proceeding by any court, governmental or regulatory authority, or similar person is pending or, to the knowledge of the Company, threatened in regard to any Taxes due from or with respect to the Company or any of the Subsidiaries or any Tax Return filed by or with respect to the Company or any of its Subsidiaries. No assessment of Taxes is proposed against the Company or any of its Subsidiaries or any of their assets.
(iii) No election under Section 338 of the Code has been made or filed by or with respect to the Company or any of its Subsidiaries. No consent to the application of Section 341(f)(2) of the Code (or any predecessor provision) has been made or filed by or with respect to the Company or any of its Subsidiaries or any of their assets. None of the Company or any of its Subsidiaries has agreed to make any adjustment pursuant to Section 481(a) of the Code (or any predecessor provision) by reason of any change in any accounting method, and there is no application pending with any taxing authority requesting permission for any changes in any accounting method of the Company or any of its Subsidiaries. None of the assets of the Company or any of its Subsidiaries is or will be required to be treated as being owned by any person (other than the Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately before the enactment of the Tax Reform Act of 1986.
(iv) None of the Company or any of its Subsidiaries is a party to, is bound by, or has any obligation under, any Tax sharing agreement, Tax allocation agreement or similar contract.
(v) There is no contract, agreement, plan or arrangement covering any person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by the Company or any of its Subsidiaries by reason of Section 280G of the Code.
(vi) Schedule 3.1(h) accurately sets forth (i) the amount of all deferred intercompany gains for purposes of Treasury Regulation section 1.1502-13 (including any predecessor regulation) with respect to the Company and its Subsidiaries; and (ii) the amount of any excess loss account with respect to the stock of each of the Subsidiaries for purposes of Treasury Regulation section 1.1502-19 (including any predecessor regulation).
(vii) The term "Code" shall mean the internal Revenue Code of 1986, as amended. The term "Taxes" shall mean all taxes, charges, fees, levies, or other similar assessments or liabilities, including (a) income, gross receipts, ad valorem, premium, excise, real property, personal property, sales, use, transfer, withholding, employment, payroll, and franchise taxes imposed by the United States of America, or by any state, local, or foreign government, or any subdivision, agency, or other similar person of the United States or any such government; and (b) any interest, fines, penalties, assessments, or additions to taxes resulting from, attributable to, or incurred in connection with any Tax or any
contest, dispute, or refund thereof. The term "Tax Returns" shall mean any report, return, or statement required to be supplied to a taxing authority in connection with Taxes.
(i) Pension And Benefit Plans; ERISA.
(i) Schedule 3.1(i)(i) sets forth a complete and correct list of:
(A) all "employee benefit plans", as defined in Sections 3(3) and 4(b)(4) of ERISA, under which Company or any of its Subsidiaries has any obligation or liability, contingent or otherwise ("Benefit Plans"); and
(B) all employment or consulting agreements, and all bonus or other incentive compensation, deferred compensation, salary continuation during any absence from active employment for disability or other reasons, severance, sick days, stock award, stock option, stock purchase, tuition assistance, club membership, employee discount, employee loan, or vacation pay agreements, policies or arrangements which the Company or any of its Subsidiaries maintains or has any obligation or liability (contingent or otherwise) and each of which has a cost to the Company or any of its Subsidiaries in excess of $10,000 for any year (the "Employee Arrangements").
(ii) with respect to each Benefit Plan and Employee Arrangement, a
complete and correct copy of each of the following documents (if
applicable) has been delivered to Parent or its representatives: (i) the
most recent plan and related trust documents, and all amendments thereto;
(ii) the most recent summary plan description, and all related summaries of
material modifications thereto; (iii) the most recent Form 5500 (including
schedules and attachments); (iv) the most recent IRS determination letter;
(v) the most recent actuarial reports (including for purposes of Financial
Accounting Standards Board report no. 87, 106 and 112).
(iii) The Company and its Subsidiaries have not during the preceding six
years had any obligation or liability (contingent or otherwise) with
respect to a Benefit Plan which is described in Section 3(35), 3(37),
4(b)(4), 4063 or 4064 of ERISA.
(iv) The Benefit Plans and their related trusts intended to qualify under
Sections 401(a) and 501(a) of the Code, respectively, are qualified under
such sections. Any voluntary employee benefit association which provides
benefits to current or former employees of the Company and its
Subsidiaries, or their beneficiaries, is and has been qualified under
Section 501(c)(9) of the Code.
(v) All contributions or other payments required to have been made by the Company or any of its Subsidiaries to or under any Benefit Plan or Employee Arrangement by applicable law or the terms of such Benefit Plan or Employee Arrangement (or any agreement relating thereto) have been timely and properly made.
(vi) The Benefit Plans and Employee Arrangements have been maintained and administered in all material respects in accordance with their terms and applicable laws.
(vii) Except as disclosed in Schedule 3.1(i)(vii), there are no pending or, to the best knowledge of the Company, threatened actions, claims or proceedings against or relating to any Benefit Plan or Employee Arrangement other than routine benefit claims by persons entitled to benefits thereunder.
(viii) Except as disclosed in Schedule 3.1(i)(viii), the Company and its Subsidiaries do not maintain or have an obligation to contribute to retiree life or retiree health plans which provide for continuing benefits or coverage for current or former officers, directors or employees of the Company or any of its Subsidiaries except (i) as may be required under Part 6 of Title I of ERISA) and at the sole expense of the participant or the participant's beneficiary or (ii) a medical expense reimbursement account plan pursuant to Section 125 of the Code.
(ix) Except as disclosed in Schedule 3.1(i)(ix) none of the assets of any Benefit Plan is directly invested in stock of the Company or any of its affiliates, or property leased to or jointly owned by the Company or any of its affiliates.
(x) Except as disclosed in Schedule 3.1(i)(x) or in connection with equity compensation, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any payment becoming due to any employee (current, former or retired) of the Company and its Subsidiaries, (B) increase any benefits under any Benefit Plan or Employee Arrangement or (C) result in the acceleration of the time of payment of, vesting of or other rights with respect to any such benefits.
(xi) The Company and its Subsidiaries have no liability (contingent or otherwise) under Section 4069 of ERISA by reason of a transfer of an underfunded pension plan.
(j) Absence of Certain Changes or Events. Since June 30, 1997, the business of the Company and its Subsidiaries has been carried on only in the ordinary and usual course and no event or events has or have occurred that (either individually or in the aggregate) has had, or could have, a Material Adverse Effect on the Company.
(k) No Undisclosed Liabilities. Except as specifically and individually set forth on Schedule 3.1(k) or the other schedules hereto (specific reference to which shall be made on Schedule 3.1(k)), there are no liabilities of the Company or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that are material to the Company and its Subsidiaries considered as a whole other than: (i) liabilities reflected on the Company's audited financial statements (together with the related notes thereto) filed with the Company's Annual Statement on Form 10-K for the year ended December 31, 1996 (as filed with the SEC) or unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997 (such audited and unaudited financial statements being referred to herein as the "Company Financial Statements"); and (ii) liabilities under this Agreement.
(l) Opinion of Financial Advisor. The Company has received the opinion of SBC Warburg Dillon Read Inc., (the "Financial Advisor") dated September 12, 1997, to the effect that, as of the date hereof, the Merger Consideration to be received by the holders of Company Common Stock in the Merger is fair from a financial point of view to such holders, a signed, true and complete copy of which opinion shall be delivered to Parent, and such opinion has not been withdrawn or modified. True and complete copies of all agreements and understandings between the Company or any of its affiliates and the Financial Advisor relating to the transactions contemplated by this Agreement are attached hereto as Schedule 3.1(l).
(m) Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock is the only vote of the holders of any class or series of the Company's capital stock necessary (under applicable law or otherwise) to approve the Merger, this Agreement and the transactions contemplated hereby.
(n) Labor Matters.
(i) Neither the Company nor any of its Subsidiaries is a party to any labor or collective bargaining agreement, and no employees of the Company or any of its Subsidiaries are represented by any labor organization. Within the preceding three years, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority. Within the preceding three years, to the knowledge of the Company, there have been no organizing activities involving the Company or any of its Subsidiaries with respect to any group of employees of the Company or any of its Subsidiaries.
(ii) There are no strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances or other material labor disputes pending or, to the knowledge of the Company, threatened against or involving the Company or any of its Subsidiaries. There are no unfair labor practice charges, grievances or complaints pending or, to the knowledge of the Company, threatened by or on behalf of any employee or group of employees of the Company or any of its Subsidiaries.
(iii) Except as set forth on Schedule 3.1(g), there are no complaints, charges or claims against the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened to be brought or filed with any governmental authority, arbitrator or court based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by the Company or any of its Subsidiaries.
(iv) Each of the Company and its Subsidiaries is in material compliance with all laws, regulations and orders relating to the employment of labor, including all such laws, regulations and orders relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health, workers, compensation and the collection and payment of withholding and/or social security taxes and any similar tax.
(v) Since January 1, 1996, there has been no "mass layoff" or "plant closing" (as defined by the Worker Adjustment Retraining and Notification Act of 1988, as amended ("WARN Act") with respect to the Company or any of its Subsidiaries.
(o) Intangible Property. Except as set forth on Schedule 3.1(o) attached hereto, each of the Company and its subsidiaries owns or has a right to use each material trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design and copyright owned, used or useful in connection with the operation of its businesses, including any registrations thereof and pending applications therefor, and each license or other contract relating thereto (collectively, the "Company Intangible Property"), free and clear of any and all liens, claims or encumbrances. Schedule 3.1(o) hereto sets forth a complete list of the Company Intangible Property. The use of the Company Intangible Property by the Company or its Subsidiaries does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including any intellectual property right, trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design, copyright or any pending application therefor of any other person.
(p) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means any and all losses, liabilities, obligations, damages, fines, penalties, judgments, actions, claims, costs and expenses (including fees, disbursements and expenses of legal counsel, experts, engineers and consultants and the costs of investigation and feasibility studies and the costs to clean up, remove, treat, or in any other way address any Hazardous Materials) arising from or under any Environmental Law.
(B) "Environmental Law" means any applicable law regulating or prohibiting Releases of Hazardous materials into any part of the natural environment, or pertaining to the protection of natural resources, the environment and public and employee health and safety from Hazardous Materials including the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Clean Water Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (33 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S) 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) ("OSHA") and the regulations promulgated pursuant thereto, and any such applicable state or local statutes, including the Industrial Site Recovery Act ("IRSA"), and the regulations promulgated pursuant thereto, as such laws have been and may be amended or supplemented through the Closing Date;
(C) "Hazardous Material" means any substance, material or waste which is regulated by any public or governmental authority in the jurisdictions in which the applicable party or its Subsidiaries conducts business, or the United States, including any material or substance which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste" or "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law and shall also include petroleum, petroleum products, asbestos, polychlorinated biphenyls and radioactive materials;
(D) "Release" means any release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the environment, or into or out of any property; and
(E) "Remedial Action" means all actions, including any expenditures, required by a governmental entity or required under any Environmental Law, or voluntarily undertaken to (I) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Materials or other substance in the environment; (II) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public health or welfare or the environment; (III) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (IV) bring the applicable party into compliance with any Environmental Law.
(ii) (A) The operations of the Company and its Subsidiaries have been and, as of the Closing Date, will be, in compliance with all Environmental Laws;
(B) The Company and its Subsidiaries have obtained and will, as of the Closing Date, maintain all permits required under applicable Environmental Laws for the continued operations of their respective businesses, except such permits the lack of which would not materially impair the ability of the Company and its Subsidiaries to continue operations;
(C) The Company and its Subsidiaries are not subject to any
outstanding written orders from, or written agreements with, any
Governmental Entity or other person respecting (I) Environmental Laws,
(II) Remedial Action or (III) any Release or threatened Release of a
Hazardous Material;
(D) The Company and its Subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability under any Environmental Law, which violation or liability is outstanding;
(E) Neither the Company nor any of its Subsidiaries has any contingent liability in connection with the Release of any Hazardous Material into the environment (whether on-site or off-site) which would be reasonably likely to result in the Company and its Subsidiaries incurring Environmental Costs and Liabilities in excess of $100,000;
(F) The operations of the Company or its Subsidiaries do not involve the transportation, treatment, storage or disposal of hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement) or any state equivalent;
(G) Except as set forth on Schedule 3.1(p) attached hereto, to the
knowledge of the Company, there is not now nor has there been in the
past, on or in any owned property of the Company or its Subsidiaries
any of the following: (I) any underground storage tanks or surface
impoundments, (II) any asbestos-containing materials in friable form or
(III) any polychlorinated biphenyls; and
(H) No judicial or administrative proceedings or governmental investigations are pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries alleging the violation of or seeking to impose liability pursuant to any Environmental Law.
(q) Real Property.
(i) The Company has previously provided to Parent a list of all of
the real property owned in fee by the Company and its Subsidiaries.
Each of the Company and its Subsidiaries has good and marketable title
to each parcel of real property owned by it free and clear of all
mortgages, pledges, liens, encumbrances and security interests, except
(1) those reflected or reserved against in the balance sheet of the
Company dated as of December 31, 1996, (2) taxes and general and
special assessments not in default and payable without penalty and
interest, (3) statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are
not delinquent and (4) liens which are not substantial in character,
amount or extent and which do not detract from the value, or interfere
with the present use, of the property subject thereto or affected
thereby.
(ii) The Company has previously provided to Parent a list setting forth
each lease, sublease or other agreement (collectively, the "Real Property
Leases") under which the Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property. Each Real Property Lease is valid, binding and in full force and
effect, all rent and other sums and charges payable by the Company and its
Subsidiaries as tenants thereunder are current, no termination event or
condition or uncured default of a material nature on the part of the
Company or any Subsidiary of the Company or, to the Company's knowledge,
the landlord, exists under any Real Property Lease. Each of the Company and
its Subsidiaries has a good and valid leasehold interest in each parcel of
real property leased by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except (1) those reflected or reserved
against in the balance sheet of the Company dated as of December 31, 1996,
(2) taxes and general and special assessments not in default and payable
without penalty and interest, (3) statutory liens arising or incurred in
the ordinary course of business with respect to which the underlying
obligations are not delinquent and (4) liens which are not substantial in
character, amount or extent and which do not detract from the value, or
interfere with the present use, of the property subject thereto or affected
thereby.
(r) Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has by the vote of those directors
participating (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to and in the best
interests of the stockholders of the Company and has approved the same, and
(ii) resolved to recommend that the holders of the shares of Company Common
Stock approve this Agreement and the transactions contemplated herein,
including the Merger.
(s) Material Contracts. The Company has delivered to Parent (i) true and complete copies of all written contracts, agreements, commitments, arrangements, leases (including with respect to personal property), policies and other instruments to which it or any of its Subsidiaries is a party or by which it or any such Subsidiary is bound which require payments to be made in excess of $1,000,000 per year (other than purchase orders entered into in the ordinary course of business, real estate leases or agreements listed in any of the other disclosure schedules attached hereto) (collectively, "Material Contracts") and (ii) a written description of each Material Contract that has not been reduced to writing. Each of the Material Contracts is listed on Schedule 3.1(s). Neither the Company nor any of its Subsidiaries is, or has received any notice or has any knowledge that any other party is, in default in any material respect under any such Material Contract; and there has not occurred any event or events that with the lapse of time or the giving of notice or both would constitute such a material default.
(t) Related Party Transactions. Except as set forth in the Company SEC Documents, no director, officer, "affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of the Company or any of its Subsidiaries (i) has borrowed any monies from or has outstanding any indebtedness or other similar obligations to the Company or any of its Subsidiaries; (ii) owns any direct or indirect interest of any kind in, or is a director, officer, employee, partner, affiliate or associate of, or consultant or lender to, or borrower from, or has the right to participate in the management, operations or profits of, any person or entity which is (A) a competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor of the Company or any of its Subsidiaries, (B) engaged in a business related to the business of the Company or any of its Subsidiaries, or (C) participating in any transaction to which the Company or any of its Subsidiaries is a party; or (iii) is otherwise a party to any contract, arrangement or understanding with the Company or any of its Subsidiaries.
(u) Indebtedness. Except as set forth on Schedule 3.1(u) hereto (or otherwise disclosed in the Company Financial Statements), neither the Company nor any of its Subsidiaries has any outstanding indebtedness for borrowed money or representing the deferred purchase price of property or services or similar liabilities or obligations, including any guarantee in respect thereof ("Indebtedness"), or is a party to any agreement, arrangement or understanding providing for the creation, incurrence or assumption thereof.
(v) Liens. Except as set forth on Schedule 3.1(v) (or otherwise disclosed in the Company Financial Statements), neither the Company nor any of its Subsidiaries has granted, created, or suffered to exist with
respect to any of its assets, any mortgage, pledge, charge, hypothecation, collateral assignment, lien, encumbrance or security agreement of any kind or nature whatsoever, except for statutory liens arising or incurred in the ordinary course of business with respect to which the underlying obligations are not delinquent and liens which are not substantial in character, amount or extent and which do not detract from the value, or interfere with the present use, of the property subject thereto or affected thereby.
(w) Suppliers. There has been no material deterioration in the relations of the Company and its Subsidiaries with any of their material suppliers since June 30, 1997.
(x) Disclosure. Neither this Section 3 nor any schedule, attachment, written statement, document, certificate or other item supplied to Parent by or on behalf of the Company with respect to the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits a material fact necessary to make each statement contained herein or therein not misleading.
3.2 Representations and Warranties of Parent and Sub. Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Parent is a limited partnership and Sub is a corporation, and each is duly organized, validly existing and in good standing under the laws of its state of organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business as a foreign partnership or corporation and in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification necessary, other than in such jurisdictions where the failure so to qualify could not have a Material Adverse Effect with respect to Parent.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite partnership or corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary partnership or corporate action on
the part of Parent and Sub. This Agreement has been duly executed and
delivered by each of Parent and Sub and assuming this Agreement constitutes
the valid and binding agreement of the Company, constitutes a valid and
binding obligation of Parent and Sub enforceable in accordance with its
terms and conditions except that the enforcement hereof may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity).
(ii) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by each of Parent and Sub will not
result in any Violation pursuant to any provision of the respective
Partnership Agreement or Certificate of Incorporation or Bylaws of Parent
or Sub (as applicable) or, except as to which requisite waivers or consents
have been obtained and assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in paragraph (iii) of this
Section 3.2(b) are duly and timely obtained or made, and the Company
Stockholder Approval has been obtained, result in any Violation of any loan
or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or
Sub or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, notice to, or permit from any Governmental Entity, is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement by each of Parent and Sub or the consummation by each of Parent or Sub of the transactions contemplated hereby, except for: (A) filings under the HSR Act; (B) the filing with the SEC of such reports under and such other compliance with the Exchange Act and the rules and regulations thereunder, as may be required in connection with this Agreement and the transactions contemplated hereby; (C) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (D) such filings and approvals as may be required by any applicable state securities, "blue sky" or takeover laws; and (E) such filings in connection with any Gains and Transfer Taxes.
(c) Information Supplied. None of the information supplied or to be supplied by Parent or Sub for inclusion in the Proxy Statement will, at the date it is first mailed to the Company's stockholders or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If, at any time prior to the Effective Time, any event with respect to Parent or Sub, or with respect to information supplied by Parent or Sub for inclusion in the Proxy Statement, shall occur which is required to be described in an amendment of, or a supplement to, any of such documents, such event shall be so described to the Company.
(d) Financing. Parent and Sub have delivered to the Company a true and complete copy of the letters obtained by Parent and Sub from Merrill Lynch & Co., Inc. to provide debt financing for the transactions contemplated hereby (the "Financing Letters"). Parent and its Affiliates will provide $115,000,000 in equity financing for the transactions contemplated hereby.
(e) Due Diligence. Parent and Sub acknowledge that they and their representatives have conducted an independent due diligence investigation of the Company and its Subsidiaries prior to the execution of this Agreement and will continue to do so. At the time of the execution of this Agreement, the officers of Parent are not aware of facts which would currently entitle Parent and Sub to decline to effect the Merger pursuant to Section 6.2(a). Parent and Sub agree to confirm to the Company in writing at the time the Proxy Statement is mailed to the Company's stockholders that such officers are not aware of any such facts.
ARTICLE IV
Covenants Relating to Conduct of Business
4.1 Covenants of the Company. During the period from the date of this Agreement and continuing until the Effective Time, the Company agrees as to the Company and its Subsidiaries that (except as expressly contemplated or permitted by this Agreement, or to the extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. Each of the Company and its Subsidiaries shall carry on its businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and shall use all reasonable efforts to preserve intact its present business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having material business dealings with it to the end that its goodwill and ongoing business shall not be impaired in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it permit any of its Subsidiaries to: (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock; (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; or (iii) repurchase or otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire, any shares of its capital stock, except as required by the terms of its securities outstanding on the date hereof.
(c) Issuance of Securities. The Company shall not, nor shall it permit any of its Subsidiaries to, (i) grant any options, warrants or rights, to purchase shares of Company Common Stock, (ii) amend the terms of or reprice any option or amend the terms of the Stock Option Plans, or (iii) issue, deliver or sell, or authorize or propose to issue, deliver or sell, any shares of its capital stock of any class or series, any Company Voting Debt or any securities convertible into, or any rights, warrants or options to acquire, any such shares, Company Voting Debt or convertible securities, other than the issuance of Shares upon the exercise of Employee Options that are outstanding on the date hereof.
(d) Governing Documents. The Company shall not amend or propose to amend its Certificate of Incorporation or Bylaws, except as contemplated hereby.
(e) No Solicitation. From and after the date hereof until the termination of this Agreement, neither the Company or any of its Subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including any investment banker, advisor attorney or accountant retained by any of the above) (such officers, directors, employees, representatives, agents, affiliates, investment bankers, attorneys and accountants being referred to herein, collectively, as "Representatives"), will, directly or indirectly, (i) initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal (as defined below), (ii) provide any information to any other person or entity concerning the Company (other than information which the Company provides to other persons in the ordinary course of its business, so long as the Company has no reason to believe that such information will be used to make or evaluate an Acquisition Proposal, or as required by law) or (iii) enter into or maintain or continue discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal; and neither the Company nor any of its Subsidiaries will authorize or permit any of its Representatives to take any such action, and the Company shall notify Parent orally (within one business day) and in writing (as promptly as practicable) of all of the relevant details relating to, and all material aspects of, all inquiries and proposals which it or any of its Subsidiaries or any of their respective Representatives may receive relating to any of such matters, including the identity of the offeror and the terms and conditions of such proposal, inquiry or contact, and, if such inquiry or proposal is in writing, the Company shall deliver to Parent a copy of such inquiry or proposal as promptly as practicable; provided, however, that nothing contained in this Section 4.1(e) shall prohibit the Board of Directors of the Company from responding to any unsolicited written, bona fide Acquisition Proposal if, and only to the extent that, (A) the Board of Directors of the Company, after consultation with and based upon the advice of its Financial Advisor, determines in good faith that such Acquisition Proposal is reasonably capable of being completed on the terms proposed and would, if consummated, result in a transaction more favorable to the Company's stockholders than the transaction contemplated herein, (B) the Board of Directors of the Company, after consultation with and based upon the advice of independent legal counsel (who may be the Company's regularly engaged independent legal counsel), determines in good faith that such action is necessary for the Board of Directors of the Company to comply with its fiduciary duties to stockholders under applicable law, (C) prior to taking such action, the Company (x) provides reasonable prior notice to Parent to the effect that it is taking such action and (y) receives from such person or entity an executed confidentiality agreement in reasonably customary form, and (D) the Company shall promptly and continuously advise Parent as to all of the relevant details relating to, and all material aspects, of any such discussions or negotiations.
For purposes of this Agreement, "Acquisition Proposal" shall mean any of the following (other than the transactions among the Company, Parent and Sub contemplated hereunder) involving the Company or any of its Subsidiaries: (i) any merger, consolidation, share exchange, recapitalization, business combination, or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender offer or exchange offer for all or substantially all of the outstanding shares of capital stock of the Company or the filing of a registration statement under the Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
(f) No Acquisitions. The Company shall not, nor shall it permit any of its Subsidiaries to, merge or consolidate with, or acquire any equity interest in, any corporation, partnership, association or other business organization, or enter into an agreement with respect thereto. The Company shall not acquire or agree to acquire any assets of any corporation, partnership, association or other business organization or division thereof, except for the purchase of inventory and supplies in the ordinary course of business.
(g) No Dispositions. Other than sales of inventory in the ordinary course of business consistent with past practice, the Company shall not, nor shall it permit any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease (whether such lease is an operating or capital lease), encumber or otherwise dispose of, any of its assets (including any capital stock or other ownership interest of any Subsidiary of the Company).
(h) Governmental Filings. The Company shall promptly provide Parent (or its counsel) with copies of all filings made by the Company with the SEC or any other state or federal Governmental Entity in connection with this Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. The Company shall not authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the Company or any of its Subsidiaries.
(j) Other Actions. The Company will not nor will it permit any of its Subsidiaries to take or agree or commit to take any action that is reasonably likely to result in any of the Company's representations or warranties hereunder being untrue in any material respect or in any of the Company's covenants hereunder or any of the conditions to the Merger not being satisfied in all material respects.
(k) Certain Employee Matters. The Company and its Subsidiaries shall not (without the prior written consent of Parent): (i) grant any increases in the compensation of any of its directors, officers or key employees; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated to be paid prior to the Effective Time by any of the existing Benefit Plans or Employee Arrangements as in effect on the date hereof to any such director, officer or key employee, whether past or present; (iii) enter into any new, or materially amend any existing, employment or severance or termination agreement with any such director, officer or key employee; or (iv) except as may be required to comply with applicable law, become obligated under any new Benefit Plan or Employee Arrangement, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder.
(l) Indebtedness; Agreements.
(i) The Company shall not, nor shall the Company permit any of its Subsidiaries to, assume or incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any of its Subsidiaries or guarantee any debt securities of others (other than borrowings under the Company's existing revolving credit facility in the ordinary course of business consistent with past practice) or enter into any operating or capital lease (other than entering into operating leases in connection with leasing additional retail space in the ordinary course of business consistent with past practice) or create any mortgages, liens, security interests or other encumbrances on the property of the Company or any of its Subsidiaries, or enter into any "keep well" or other agreement or arrangement to maintain the financial condition of another person.
(ii) The Company shall not, nor shall the Company permit any of its Subsidiaries to, enter into, modify, rescind, terminate, waive, release or otherwise amend in any material respect any of the terms or- provisions of any Material Contract.
(m) Accounting. The Company shall not take any action, other than in the ordinary course of business, consistent with past practice or as required by the SEC or by law, with respect to accounting policies, procedures and practices.
(n) Capital Expenditures. The Company and its Subsidiaries shall not incur any capital expenditures in excess of $100,000, except for capital expenditures contemplated by the Company's budget previously supplied to Parent.
(o) Requisite Consents. The Company and its Subsidiaries shall use all commercially reasonable efforts to (i) obtain consents from third parties to the consummation of the Merger and the transactions contemplated thereby and hereby, which consents are material to the business of the Company (the "Requisite Consents") and (ii) ensure that such Requisite Consents are in full force and effect as of the Closing Date.
ARTICLE V
Additional Agreements
5.1 Preparation of the Proxy Statement; Company Stockholders Meeting.
(a) As soon as practicable following the date hereof, the Company and Parent shall prepare the Proxy Statement. The Company will, as soon as practicable following the date hereof, file the Proxy Statement with the SEC. The Company will use all commercially reasonable efforts to respond to all SEC comments with respect to the Proxy Statement and to cause the Proxy Statement to be mailed to the Company's stockholders at the earliest practicable date.
(b) The Company will, as soon as practicable following the date hereof, duly call, give notice of, convene and hold a meeting of the Company's stockholders for the purpose of approving this Agreement and the transactions contemplated hereby. At such stockholders meeting, Parent shall cause all of the shares of Company Common Stock then owned by Parent and Sub to be voted in favor of the Merger.
(c) Sub shall promptly submit this Agreement and the transactions contemplated hereby for approval and adoption by Parent, as its sole stockholder, by written consent.
5.2 Access to Information. Upon reasonable notice, each of the Company or
Parent, as the case may be, shall (and shall cause each of its Subsidiaries
to) afford to the officers, employees, accountants, counsel and other
representatives of the other party (including, in the case of Parent and Sub,
potential financing sources and their employees, accountants, counsel and
other representatives), access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other party,
(a) copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to SEC requirements and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. The Confidentiality Agreement
previously entered into between Parent and the Company (the "Confidentiality
Agreement") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
5.3 Settlements. Neither the Company nor any of its Subsidiaries shall effect any settlements of any legal proceedings arising out of or related to the execution, delivery or performance of this Agreement or the consummation of any of the transactions contemplated hereby without the prior written consent of Parent.
5.4 Fees and Expenses.
(a) Except as otherwise provided in this Section 5.4 and except with respect to claims for damages incurred as a result of the breach of this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense.
(b) The Company agrees to pay Parent a fee in immediately available funds equal to $9,750,000 upon:
(i) the termination of this Agreement under Section 7.1(d) in the event that any of the following events shall occur (each, a "Trigger Event"):
(1) the Board of Directors of the Company shall have (A) withdrawn or modified, in a manner adverse to Parent or Sub, its recommendation of the Agreement or the Merger or (B) failed to confirm its recommendation of the Agreement or the Merger within two business days after a written request by Parent to do so after the occurrence of an Acquisition Proposal;
(2) the Board of Directors of the Company shall have approved, endorsed or recommended to the stockholders of the Company an Acquisition Proposal;
(3) the Company shall have entered into an agreement (other than a confidentiality agreement as contemplated by Section 4.1(e)) with respect to an Acquisition Proposal;
(4) any Person or group (other than Parent, Sub or any of their Affiliates) shall have acquired Company Common Stock after the date of this Agreement which, when added to Company Common Stock already owned by such Person or group, constitutes a majority of the outstanding Company Common Stock or a tender or exchange offer for Company Common Stock shall have been commenced and such offer ultimately results, including after the termination of this Agreement, in a Person or group owning a majority of the outstanding Company Common Stock; or
(5) (A) an Acquisition Proposal is made and (B) the Company fails to call and hold a stockholders meeting to approve the Agreement and the Merger as promptly as is reasonably practicable having regard to the expected timing of the financing of the Merger and, in any event, on or prior to the 175th calendar day after the date hereof (such time period shall be extended by an amount of time equal, in the reasonable judgment of the Company, to any delays beyond the reasonable control of the Company in obtaining any required regulatory approvals in connection with the transactions contemplated hereby); or
(ii) the termination of this Agreement under Section 7.1(b) following a material and willful breach by the Company of any covenant or agreement set forth in this Agreement, which breach could reasonably be expected to aid or encourage an Acquisition Proposal and shall not have been cured within ten business days following receipt by the Company of notice of such breach.
(c) Upon any termination of this Agreement (other than a termination by the
Company under Section 7.1(b)(i) hereof), the Company shall pay to Parent (not
later than one business day after receipt of reasonable documentation therefor
and in no event prior to January 2, 1998) such amounts as may be necessary to
reimburse Parent and Sub for their reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent or Sub to third parties in
connection with the Merger or the consummation of any of the transactions
contemplated by this Agreement, including all costs and reasonable fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants, provided that (x) reimbursement for such fees and expenses shall
be limited to $1,000,000 and (y) reimbursement under this sentence shall not
cover fees incurred or paid by or on behalf of Parent or Sub under the
Financing Letters. In addition, in the event the payment becomes due under
Section 5.4(b), the Company shall pay to Parent (not later than one business
day after receipt of reasonable documentation therefor) all fees and expenses
incurred or paid by or on behalf of Parent or Sub under the Financing Letters,
provided that reimbursement for fees and expenses under this sentence shall be
limited to $1,000,000. The Company shall in any event pay the amount requested
(subject to the limits in the preceding two sentences) within one business day
of receipt of reasonable documentation from Parent. The amounts payable to
Parent and Sub under this Section 5.4(c) shall be in addition to (and not an
offset against) the amount (if any) payable to Parent under Section 5.4(b).
(d) Any amounts due under this Section 5.4 that are not paid when due shall bear interest at the rate of 12% per annum from the date due through and including the date paid.
5.5 Brokers or Finders. (a) The Company represents, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finders fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except the Financial Advisor and Hatchett Capital Group, Inc., whose fees and expenses will be paid by the Company in accordance with the Company's agreements with such firms (copies of which have been delivered by the Company to Parent prior to the date of this Agreement).
(b) Parent represents, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finders fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement.
5.6 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, the Surviving Corporation shall, indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
any of its Subsidiaries (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorneys' fees and expenses),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director or
officer of the Company or any of its Subsidiaries whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the full extent a
corporation is permitted under the DGCL to indemnify its own directors or
officers as the case may be (and the Company and the Surviving Corporation, as
the case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent
permitted by law). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time), the
Company shall defend the Indemnified Parties in such matter with counsel of
the Company's choosing and the Indemnified Parties will use all reasonable
efforts to assist in the vigorous defense of any such matter. In no event will
the Company or the Surviving Corporation be liable for any settlement effected
without its prior written consent which consent shall not unreasonably be
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 5.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Company (or after the Effective Time,
the Surviving Corporation) (but the failure so to notify shall not relieve a
party from any liability which it may have under this Section 5.6 except to
the extent such failure prejudices such party), and shall deliver to the
Company (or after the Effective Time, the Surviving Corporation) the
undertaking contemplated by Section 145(e) of the DGCL. The Company and Sub
agree that the foregoing rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Indemnified Parties with respect to matters occurring
through the Effective Time, shall survive the Merger and shall continue in
full force and effect for a period of not less than six years from the
Effective Time; provided, however, that all rights to indemnification in
respect of any Indemnified Liabilities asserted or made within such period
shall continue until the disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, the Surviving Corporation shall cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries (provided that Parent may substitute therefor policies of at least the same coverage and containing terms and conditions which are not materially less advantageous to the Indemnified Parties) with respect to matters arising before the Effective Time, provided that Parent shall not be required to pay an annual premium for such insurance in excess of 200% of the last annual premium paid by the Company prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. The last annual premium paid by the Company was $105,000.
(c) The provisions of this Section 5.6 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his heirs and his personal representatives and shall be binding on all successors and assigns of Sub, the Company and the Surviving Corporation.
5.7 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, under applicable laws and regulations or otherwise, to consummate and make effective the transactions contemplated by this Agreement, subject to the Company Stockholder Approval, including cooperating fully with the other party, including by provision of information and making of all necessary filings in connection with, among other things, approvals under the HSR Act. In case at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of either of the Constituent Corporations, the proper officers and directors of each
party to this Agreement shall take all such necessary action. Without limiting the generality of the foregoing, the Company agrees to cooperate with Parent's and Sub's efforts to secure the financing contemplated by the Financing Letters, such cooperation to include providing such information to Parent's and Sub's financing sources as Parent or Sub may reasonably request and making available management and such other employees of the Company as Parent and Sub may reasonably request to participate in any marketing and sales efforts relating to sales of securities in connection with the Financing Letters.
5.8 Conduct of Business of Sub. During the period of time from the date of this Agreement to the Effective Time, Sub shall not engage in any activities of any nature except as provided in or contemplated by this Agreement.
5.9 Publicity. The parties will consult with each other and will mutually agree upon any press release or public announcement pertaining to the Merger and shall not issue any such press release or make any such public announcement prior to such consultation and agreement, except as may be required by applicable law, in which case the party proposing to issue such press release or make such public announcement shall use reasonable efforts to consult in good faith with the other party before issuing any such press release or making any such public announcement.
5.10 Withholding Rights. Sub and the Surviving Corporation, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as Sub or the Surviving Corporation, as applicable, is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Sub or the Surviving Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Sub or the Surviving Corporation, as applicable.
ARTICLE VI
Conditions Precedent
6.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been approved and adopted by the affirmative vote of the holders of a majority of the outstanding Shares entitled to vote thereon.
(b) HSR Act. The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired, and no restrictive order or other requirements shall have been placed on the Company, Parent, Sub or the Surviving Corporation in connection therewith.
(c) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger shall be in effect; provided, however, that prior to invoking this condition, each party shall use all commercially reasonable efforts to have any such decree, ruling, injunction or order vacated.
(d) Statutes. No statute, rule, order, decree or regulation shall have been enacted or promulgated by any government or governmental agency or authority which prohibits the consummation of the Merger.
6.2 Conditions of Obligations of Parent and Sub. The obligations of Parent and Sub to effect the Merger are subject to the satisfaction of the following conditions, any or all of which may be waived in whole or in part by Parent and Sub:
(a) Representations and Warranties. The representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by this Agreement and except in those instances where the aggregate amounts represented by all breaches (other than breaches for which the Company has obtained the consent of Parent and Sub) of such representations and warranties are not likely to result in a Material Adverse Effect on the Company; and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and by the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and by the chief financial officer of the Company to such effect.
(c) Financing. Parent and Sub shall have received the debt financing for the transactions contemplated hereby on terms substantially as outlined in the Financing Letters.
(d) Employment Matters. Lloyd L. Ross shall have entered into a two-year consulting agreement with the Surviving Corporation on terms consistent with the letter dated September 12, 1997 from Parent to him. Jerry M. Smith shall have entered into a three-year employment agreement with the Surviving Corporation on terms consistent with the letter dated September 12, 1997 from Parent to him and shall have made the investment in Sub as contemplated therein.
(e) No Litigation. There shall be no action, suit or proceeding pending against Parent, Sub or the Company seeking to restrain or enjoin the Merger, or seeking a material amount of damages in connection with the Merger, which action, suit or proceeding has, in the opinion of legal counsel to Parent, a reasonable possibility of success.
(f) Consents. The Company and the Subsidiaries shall have obtained all of Requisite Consents.
(g) Dissenting Shares. No more than five percent (5.0%) of the shares of Company Common Stock outstanding immediately prior to the Effective Time shall be Dissenting Shares.
6.3 Conditions of Obligations of the Company. The obligation of the Company to effect the Merger is subject to the satisfaction of the following conditions, any or all of which may be waived in whole or in part by the Company:
(a) Representations and Warranties. The representations and warranties of Parent and Sub set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except as otherwise contemplated by this Agreement, and the Company shall have received a certificate signed on behalf of Parent by the chief executive officer and by the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by the Chief Executive officer and by the Chief Financial Officer of Parent to such effect.
ARTICLE VII
Termination and Amendment
7.1 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the stockholders of the Company or by Parent:
(a) by mutual written consent of the Company and Parent, or by mutual action of their respective Boards of Directors;
(b) by either the Company or Parent (i) so long as such party is not then in material breach of its obligations hereunder, if there has been a breach of any representation, warranty, covenant or agreement on the part of the other set forth in this Agreement which breach has not been cured within five business days following receipt by the breaching party of notice of such breach, or (ii) if any permanent injunction or other order of a court or other competent authority preventing the consummation of the Merger shall have become final and non-appealable;
(c) by either the Company or Parent, so long as such party is not then in
material breach of its obligations hereunder, if the Merger shall not have
been consummated on or before the 180th calendar day following the date
hereof; provided, that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date; or
(d) by Parent in the event that a Trigger Event has occurred under
Section 5.4(b) prior to the Closing.
7.2 Effect of Termination. In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their respective affiliates, officers, directors or shareholders except (i) with respect to (A) this Section 7.2, (B) the second sentence of Section 5.2 and (C) Section 5.4, and (ii) to the extent that such termination results from the material breach by a party hereto of any of its representations or warranties, or of any of its covenants or agreements, in each case, as set forth in this Agreement.
7.3 Amendment. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Parent, Sub and the Company at any time prior to the Effective Date with respect to any of the terms contained herein; provided, however, that, after this Agreement is approved by the Company's stockholders, no such amendment or modification shall reduce the amount or change the form of consideration to be delivered to the holders of Shares.
7.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by mutual action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed: (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto; (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto; and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
General Provisions
8.1 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Article II and Section 5.6 hereof. The Confidentiality Agreement shall survive the execution and delivery of this Agreement, and the provisions of the Confidentiality Agreement shall apply to all information and material delivered by any party hereunder.
8.2 Notices. Any notice or communication required or permitted hereunder shall be in writing and either delivered personally, telegraphed or telecopied or sent by certified or registered mail, postage prepaid, and shall be deemed to be given, dated and received when so delivered personally, telegraphed or telecopied or, if mailed, five business days after the date of mailing to the following address or telecopy number, or to such other address or addresses as such person may subsequently designate by notice given hereunder:
(a)if to Parent or Sub, to:
Madison Dearborn Partners II, L.P.
Three First National Plaza
Chicago, Illinois 60602
Attn: Benjamin D. Chereskin
Telephone: (312) 732-5115
Telecopy: (312) 732-4098
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Carter W. Emerson, P.C.
Telephone: (312) 861-2000
Telecopy: (312) 861-2200
(b) if to the Company, to:
Tuesday Morning Corporation
14621 Inwood Rd.
Dallas, Texas 75244
Attn: Jerry M. Smith
Telephone: (972) 450-8267
Telecopy: (972) 387-2344
with copies to:
Crouch & Hallet, L.L.P.
717 N. Harwood Suite 1400
Dallas, TX 775201
Attn: Bruce Hallett
Telephone: (214) 953-0053
Telecopy: (214) 953-0576
8.3 Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the word "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available.
8.4 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership. This Agreement (together with the Confidentiality Agreement and any other documents and instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and, except as provided in Section 5.6, is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.
8.6 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof.
8.7 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that (a) Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to (i) any newly-formed direct wholly-owned Subsidiary of Parent or Sub or (ii) any institutional lender who provides funds to Parent, Sub or the Surviving Corporation for the consummation of the transactions contemplated hereby and (b) Parent may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Madison Dearborn Capital Partners II, L.P. or any subsidiary of the type contemplated in clause (a)(i) above. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.
PARENT:
Madison Dearborn Partners II, L.P.
By: Madison Dearborn Partners, Inc.
/s/ Benjamin Chereskin
By: _________________________________
Benjamin D. Chereskin
|
SUB:
Tuesday Morning Acquisition Corp.
/s/ Benjamin D. Chereskin
By: _________________________________
Benjamin D. Chereskin
Vice President
|
COMPANY:
Tuesday Morning Corporation
/s/ Lloyd L. Ross
By: _________________________________
Lloyd L. Ross
Chief Executive Officer
|
Exhibit 2.2
AMENDMENT TO MERGER AGREEMENT
This Amendment is made as of the 26th day of December, 1997 by the undersigned parties to the Agreement and Plan of Merger (the "Merger Agreement") among them dated as of September 12, 1997.
The Merger Agreement is hereby amended to add Exhibit A hereto as Exhibit A to the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
TUESDAY MORNING CORPORATION
/s/ Mark E. Jarvis ___________________________ By: Mark E. Jarvis Its: Chief Financial Officer |
TUESDAY MORNING ACQUISITION
CORP.
MADISON DEARBORN PARTNERS II,
L.P.
By: Madison Dearborn Partners, Inc.
Its: General Partner
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TUESDAY MORNING CORPORATION
ARTICLE ONE
The name of the corporation is Tuesday Morning Corporation.
ARTICLE TWO
The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, Corporation Trust Center, in the City of Wilmington, County of New Castle, 19805. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of capital stock which the Corporation has authority to issue is 11,152,500 shares, consisting of:
Shares of Senior Exchangeable Preferred may be issued from time to time in one or more series, each of such series to have such powers, preferences and rights as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Senior Exchangeable Preferred which are redeemed or otherwise acquired by the Corporation shall be canceled and shall not be reissued or transferred. Except as otherwise required by law, different series of Senior Exchangeable Preferred shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided.
Each series of Senior Exchangeable Preferred shall rank senior to the Series B Preferred as set forth in the resolution or resolutions providing for the issue of such series of Senior Exchangeable Preferred adopted by the Board of Directors as herein provided.
Upon any liquidation, dissolution or winding up of the Corporation (whether voluntary or involuntary), each holder of Series B Preferred shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value (plus all accrued and unpaid dividends) of all Series B Shares held by such holder, and the holders of Series B Preferred shall not be entitled to any further payment. If, upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Series B Preferred are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid under this Section 2, then the entire assets to be distributed shall be distributed ratably among such holders based upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of the Series B Preferred held by each such holder. Prior to the time of any liquidation, dissolution or winding up of the Corporation, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Series B Preferred. Not less than 60 days prior to the payment date stated therein, the Corporation shall mail written notice of such liquidation, dissolution or winding up to each record holder of Series B Preferred. Neither the consolidation or merger of the Corporation into or with any other entity or entities (whether or not the Corporation is the surviving entity), nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, nor any other form of recapitalization or reorganization affecting the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 2.
So long as any Series B Preferred remains outstanding, neither the Corporation nor any Subsidiary shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior Securities, if at the time of or immediately after any such redemption, purchase, acquisition, dividend or distribution the Corporation has failed to pay the full amount of dividends accrued on the Series B Preferred or the Corporation has failed to make any redemption of the Series B-1 Preferred required hereunder; provided that the Corporation may purchase shares of Common Stock from present or former employees of the Corporation and its Subsidiaries in accordance with the provisions of the Executive Stock Agreements.
total number of Series B Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of Series B Shares ratably among the holders of the Series B Shares to be redeemed based upon the aggregate Liquidation Value of such Series B Shares (plus all accrued and unpaid dividends thereon) held by each such holder. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series B Shares, such funds shall immediately be used to redeem the balance of the Series B Shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. Prior to the time of any redemption of Series B Shares, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Shares which are to be redeemed.
Except as otherwise provided herein and as otherwise required by law, the Series B Preferred shall have no voting rights; provided that each holder of Series B Preferred shall be entitled to notice of all stockholders meetings at the same time and in the same manner as notice is given to the stockholders entitled to vote at such meeting.
The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of each series of Series B Preferred.
Upon the surrender of any certificate representing shares of Series B Preferred at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor, representing in the aggregate the number of shares of such class represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of such class as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate. The issuance of new certificates shall be made without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of Series B Preferred, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor, its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.
normal circumstances to elect a majority of the Corporation's board of directors (whether by merger, consolidation, sale or transfer of the Corporation's Common Stock) or (ii) all or substantially all of the Corporation's assets determined on a consolidated basis.
All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal executive offices and to any stockholder at such holder's address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder).
No amendment, modification or waiver of any provision of this Part B hereof shall be effective without the prior approval or consent of the holders of a majority of the then outstanding Series B Preferred.
Except as otherwise provided in this Part C or as otherwise required by applicable law, holders of Common Stock shall be entitled to one (1) vote per share on all matters to be voted on by the stockholders of the Corporation.
Subject to the provisions of the Preferred Stock, the holders of the Common Stock shall be entitled to participate ratably based on the number of Common Shares held by such
holder in all distributions to the holders of Common Stock in any liquidation, dissolution or winding up of the Corporation.
The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Common Shares. Upon the surrender of any certificate representing any class of Common Shares at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the number of Common Shares of such class represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and will represent such number of Common Shares of such class as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate. The issuance of new certificates shall be made without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance.
Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more Common Shares of any class, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Common Shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.
All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal executive offices and to any stockholder at such holder's address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder).
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. 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 THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A 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 TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE OR THE REGISTRAR, AS THE CASE MAY BE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRADED, EXCHANGED OR OTHERWISE TRANSFERRED UNTIL (I) JUNE 15, 1998; (II) THE OCCURRENCE OF A CHANGE IN CONTROL; (III) THE DATE ON WHICH A PREFERRED STOCK REGISTRATION STATEMENT IS DECLARED EFFECTIVE; (IV) IMMEDIATELY PRIOR TO ANY REDEMPTION OF SENIOR EXCHANGEABLE PREFERRED STOCK BY THE COMPANY WITH THE PROCEEDS OF A PUBLIC EQUITY OFFERING; OR (V) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH IN ITS SOLE DISCRETION (THE DATE OF THE OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I)-(V) BEING THE "SEPARATION DATE").
ARTICLE FIVE
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Bruce H. Hallett 1601 Elm Street, Suite 3000
Dallas, TX 75201
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ARTICLE SIX
The corporation is to have perpetual existence.
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the corporation so provide.
ARTICLE NINE
To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE NINE shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
ARTICLE TEN
The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation.
Exhibit 3.2
Tuesday Morning Corporation (the "Company"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by its Certificate of Incorporation (hereinafter referred to as the "Certificate of Incorporation") and pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, said Board of Directors, by unanimous written consent dated December 29, 1997, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that pursuant to the authority vested in the Board of Directors by its Certificate of Incorporation, the Board of Directors hereby creates, authorizes and provides for the issuance of two series of Preferred Stock of the Company, designated as 13 1/4% Series A Senior Exchangeable Preferred Stock of the Company, par value $0.01 per share, and 13 1/4% Series B Senior Exchangeable Preferred Stock of the Company, par value $0.01 per share, having the designations, preferences, relative, participating, optional and other special rights of the shares of each such series, and the qualifications, limitations and restrictions thereof that are set forth in the Certificate of Incorporation and in this Resolution, as follows:
Securities Act of 1933, as amended, and exchanged for the outstanding Series A Senior Preferred Stock and to be issued as dividends if the Company elects to pay dividends in additional shares of Series B Senior Preferred Stock.
(b) All dividends paid with respect to shares of the Senior Exchangeable Preferred Stock pursuant to Section 2(a) of this Certificate of Designation shall be paid pro rata to the Holders entitled thereto.
(c) Nothing contained in this Certificate of Designation shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare, or the Company to pay or set apart for payment, any dividends on shares of the Senior Exchangeable Preferred Stock at any time.
(d) Holders shall be entitled to receive the dividends provided for in
Section 2(a) of this Certificate of Designation (including any accumulated and
unpaid cash dividends on the Senior Exchangeable Preferred Stock) in preference
to and in priority over any cash dividends (including accumulated and unpaid
dividends) upon any of the Junior Securities.
(e) No full dividends may be declared or paid or funds set apart for
the payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment set apart for such payment on the Senior
Exchangeable Preferred Stock. If full dividends are not so paid, the Senior
Exchangeable Preferred Stock will share dividends pro rata with the Parity
Securities. No dividends shall be paid or set apart for such payment on Junior
Securities (except dividends on Junior Securities payable in additional shares
of Junior Securities) and no Junior Securities or Parity Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
full (or deemed paid) on any issued and outstanding Senior Exchangeable
Preferred Stock; provided, however, the Company may repurchase, redeem or
otherwise acquire or retire for value the Management Stock in accordance with
Section 8(b).
(f) Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record of the Senior Exchangeable Preferred Stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by the Board of Directors.
(g) Each fractional share of Senior Exchangeable Preferred Stock outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of Senior Exchangeable Preferred Stock pursuant to Section 2(a), and all such dividends with respect to such outstanding fractional shares shall accumulate at the Dividend Rate and shall be payable in the same manner and at such times as provided for in Section 2(a) with respect to dividends on each outstanding share of Senior Exchangeable Preferred Stock.
(h) Dividends payable on the Senior Exchangeable Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which dividends are payable.
(including an amount equal to a prorated dividend for the period from the last Dividend Payment Date to the date fixed for liquidation, dissolution or winding- up), before any distribution is made on any Junior Securities, including, without limitation, on any common stock of the Company. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the amounts payable with respect to the Senior Exchangeable Preferred Stock and all other Parity Securities are not paid in full, the Holders of the Senior Exchangeable Preferred Stock and the holders of the Parity Securities will share equally and ratably in any distribution of assets of the Company in proportion to the liquidation preference, together with all accumulated and unpaid dividends, to which each is entitled. After payment of the full amount of the liquidation preference and accumulation and unpaid dividends to which they are entitled, Holders will not be entitled to any further participation in any distribution of assets of the Company. For the purposes of this Section 3, neither the sale, conveyance, exchange or transfer (for cash, shares of 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 one or more entities shall be deemed to be a liquidation, dissolution or winding-up of the Company.
The liquidation preference with respect to each outstanding fractional share of Senior Exchangeable Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payments with respect to each outstanding full share of Senior Exchangeable Preferred Stock.
(i) that the Company has elected to exchange the Senior Exchangeable Preferred Stock into Exchange Debentures pursuant to this Certificate of Designation;
(ii) the date of such exchange (the "Exchange Date");
(iii) that the Holder is to surrender to the Company, at the place or places and in the manner designated in the Exchange Notice, its certificate or certificates representing the shares of Senior Exchangeable Preferred Stock;
(iv) that dividends on the shares of Senior Exchangeable Preferred Stock to be exchanged shall cease to accumulate at the close of business on the day prior to the Exchange Date, whether or not certificates for shares of Senior Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date, unless the Company shall default in the delivery of Exchange Debentures; and
(v) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Senior Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date.
On the Exchange Date, if the conditions set forth in clauses (A) through (F) below are satisfied and if the exchange is then permitted under the Exchange Indenture, the Company shall issue Exchange Debentures in exchange for the Senior Exchangeable Preferred Stock as provided in the next paragraph, provided that: (A) on the Exchange Date there are no accumulated and unpaid dividends on the Senior Exchangeable Preferred Stock (including the dividend payable on such date) or other contractual impediments to such exchange; (B) there shall be legally available funds sufficient for the exchange to occur (including, without limitation, legally available funds sufficient therefor under Section 160 and 170 (or any successor provisions) of the General Corporation Law of the State of Delaware); (C) no Voting Right Triggering Event has occurred and is continuing at the time of such exchange; (D) immediately after giving effect to such exchange, no Default or Event of Default (each as defined in the Exchange Indenture) would exist under the Exchange Indenture, and no Default or Event of Default would exist under any material instrument governing Indebtedness outstanding of the Company at the time of such exchange; (E) the Exchange Indenture shall have been qualified under the Trust Indenture Act, if qualification is required; and (F) the Company shall have delivered to the Debenture Trustee, a written Opinion of Counsel, dated the Exchange Date, regarding the satisfaction of the conditions set forth in clauses (A) through (E). In the event that any of the conditions set forth in clauses (A) through (F) of the preceding sentence are not satisfied on the Exchange Date, then no shares of Senior Exchangeable Preferred Stock shall be exchanged, and in order to effect an exchange as provided for in this Section 4, the Company shall be required to fix another date for the exchange and issue a new Exchange Notice and the Company shall use its best efforts to satisfy such conditions and effect such exchange as soon as practicable.
(b) Upon any exchange pursuant to this Section 4, Holders shall be entitled to receive, subject to the provisions hereof, $1.00 principal amount of Exchange Debentures for each $1.00 of the aggregate of the liquidation preference of the Senior Exchangeable Preferred Stock and all accumulated and unpaid dividends thereon, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon for the period from the immediately preceding Dividend Payment Date to the day prior to the Exchange Date; provided that the Company shall pay cash in lieu of issuing an Exchange Debenture in a principal amount of less than $1,000 and provided further that the Exchange Debentures will be issuable only in denominations of $1,000 and integral multiples thereof.
(c) On or before the Exchange Date, each Holder shall surrender the certificate or certificates representing such shares of the Senior Exchangeable Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Company shall cause the Exchange Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of the Senior Exchangeable Preferred Stock so
exchanged (properly endorsed or assigned for transfer, if the Exchange Notice shall so state), such shares shall be exchanged by the Company into Exchange Debentures as aforesaid. The Company shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date.
(d) If the Exchange Notice has been mailed as aforesaid, and if before the Exchange Date all Exchange Debentures necessary for such exchange shall have been duly executed by the Company and delivered to the Debentures Trustee with irrevocable instructions to authenticate the Exchange Debentures necessary for such exchange, then the rights of the Holders as stockholders of the Company shall cease (except the right to receive the Exchange Debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and cash in lieu of any Exchange Debenture that is in a principal amount less than $1,000), and the person or persons entitled to receive the Exchange Debentures issuable upon exchange shall be treated for all purposes as a registered holder or holders of such Exchange Debentures as of the Exchange Date.
(b) If (i) dividends on the Senior Exchangeable Preferred Stock are in arrears and unpaid (and if with respect to dividends payable for periods beginning after December 15, 2002, such dividends are not paid in cash) for six quarterly periods (whether or not consecutive); (ii) the Company fails to discharge its obligation to redeem the Senior Exchangeable Preferred Stock on the Mandatory Redemption Date or fails to otherwise discharge any redemption obligation with respect to the Senior Exchangeable Preferred Stock; (iii) the Company fails to make a Change in Control Offer if such offer is required by the provisions set forth under Section 8 below or fails to purchase shares of Senior Exchangeable Preferred Stock from holders who elect to have such shares purchased pursuant to the Change in Control Offer; (iv) a breach or violation of any other provisions contained in Section 8 hereof occurs and the breach or violation continues for a period of 30 days or more after the Company receives notice thereof specifying the default from the holders of at least 25% of the shares of Senior Exchangeable Preferred Stock then outstanding; or (v) the Company or any Restricted Subsidiary fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary, or the final stated maturity of any such Indebtedness is accelerated, if the aggregate principal amount of such Indebtedness in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or that has been accelerated, aggregates $10,000,000 or more at any time, then the holders of the majority of the then outstanding Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, as one class, will be entitled to elect the lesser of two directors of the Board of Directors or at least 25% of the Board of Directors. Such voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the Senior Exchangeable Preferred Stock are paid
in full (and with respect to dividends payable for periods beginning after December 15, 2002, paid in cash) and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of Senior Exchangeable Preferred Stock then outstanding, at which time the term of the directors elected pursuant to the provisions of this paragraph shall terminate. Each such event described in clauses (i) through (v) above is referred to herein as a "Voting Rights Triggering Event."
(c) The Company shall not modify, change, affect or amend the Certificate of Incorporation or this Certificate of Designation to affect materially and adversely the specified rights, preferences, privileges or voting rights of the Holders of the Senior Exchangeable Preferred Stock, or authorize the issuance of any additional shares of Senior Exchangeable Preferred Stock, without the affirmative vote or consent of Holders of at least a majority of the shares of Senior Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. In addition, the Company shall not authorize, create (by way of reclassification or otherwise) or issue (i) any Parity Securities, or any obligation or security convertible into or evidencing the right to purchase any Parity Securities, without the affirmative vote or consent of the Holders of a majority of the then outstanding shares of Senior Exchangeable Preferred Stock and (ii) any Senior Securities, or any obligation or security convertible into or evidencing the right to purchase Senior Securities, without the affirmative vote or consent of the Holders of at least two-thirds of the outstanding shares of the Senior Exchangeable Preferred Stock, in each case voting or consenting, as the case may be, as one class.
(d) Immediately after voting power to elect directors shall have become vested and be continuing in the Holders pursuant to Section 5(b) or if vacancies shall exist in the offices of directors elected by the Holders, a proper officer of the Company shall call a special meeting of the Holders for the purpose of electing the directors which such Holders are entitled to elect. Any such meeting shall be held at the earliest practicable date, and the Company shall provide Holders with access to the lists of Holders, pursuant to the provisions of this Section 5(d). At any meeting held for the purpose of electing directors at which the Holders shall have the right, voting separately as a class, to elect directors, the presence in person or by proxy of the Holders of at least a majority of the outstanding shares of Senior Exchangeable Preferred Stock shall be required to constitute a quorum of such Holders.
(e) Any vacancy occurring in the office of a director elected by the Holders may be filled by the remaining directors elected by the Holders unless and until such vacancy shall be filled by the Holders.
(f) In any case in which the Holders shall be entitled to vote pursuant to this Section 5 or pursuant to the General Corporation Law of the State of Delaware, each Holder shall be entitled to one vote for each share of Senior Exchangeable Preferred Stock held.
(g) Holders of at least a majority of the then outstanding shares of Senior Exchangeable Preferred Stock, voting or consenting, as the case may be, separately as a class, may waive compliance with any provision of this Certificate of Designation.
Further, Holders are entitled to vote as a class upon a proposed amendment to the Certificate of Incorporation if the amendment would increase or decrease the par value of the shares of, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. Except as set forth above, (i) the creation, authorization or issuance of any shares of Junior Securities, Parity Securities or Senior Securities, including the designation of series thereof within the existing class of Preferred Stock of the Company, or (ii) the increase or decrease in the amount of authorized Capital Stock of any class, including any Preferred Stock of the Company, shall not require the consent of the Holders and shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of Holders.
Year Redemption Price ----- ---------------- 2002................. 109.938% 2003................. 106.625% 2004................. 103.313% 2005 and thereafter 100.000% |
(ii) In addition, at any time prior to December 15, 2001, the Company may at its option redeem for cash all, but not less than all, of the outstanding Senior Exchangeable Preferred Stock within 20 days of a Public Equity Offering with the net proceeds of such offering at a redemption price per share equal to 113.25% of the aggregate liquidation preference thereof, together with, without duplication, an amount in cash equal to all accumulated and unpaid dividends, if any, to the Redemption Date (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date), subject to the right of Holders of record on the relevant record date to receive dividends due on a Dividend Payment Date.
(iii) No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the Senior Exchangeable Preferred Stock. If less then all the Senior Exchangeable Preferred Stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that the Company may redeem such shares held by any holder of fewer than 100 shares without regard to such pro rata, redemption requirement. If any Senior Exchangeable Preferred Stock is to be redeemed in part, the Redemption Notice that relates to such Senior Exchangeable Preferred Stock shall state the portion of the liquidation preference to be redeemed. New shares of the same Series of Senior Exchangeable Preferred Stock having an aggregate liquidation preference equal to the unredeemed portion will be issued in the name of the holder thereof upon cancellation of the original shares of Senior Exchangeable Preferred Stock and, unless the Company fails to pay the redemption price on the Redemption Date, after the Redemption Date dividends will cease to accumulate on the Senior Exchangeable Preferred Stock called for redemption.
(b) Mandatory Redemption. The Company shall redeem all outstanding Senior Exchangeable Preferred Stock (subject to the legal availability of funds therefor) in whole on the redemption date of December 15, 2009 (the "Mandatory Redemption Date"), at a redemption price equal to 100% of the liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption.
(c) Procedure for Redemption. (i) Not more than 60 and not less then 30 days prior to any Redemption Date, written notice (the "Redemption Notice") shall be given by first-class mail, postage prepaid, to each Holder of record of shares to be redeemed on the record date fixed for such redemption of the Senior Exchangeable Preferred Stock at such Holder's address as the same appears on the stock register of the Company, provided, however, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Senior Exchangeable Preferred Stock to be redeemed except as to the Holder or Holders to whom the Company has failed to give such notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state:
(A) the Redemption Price;
(B) whether all or less than all the outstanding shares of the Senior Exchangeable Preferred Stock are to be redeemed and the total number of shares of such Senior Exchangeable Preferred Stock being redeemed;
(C) the number of shares of Senior Exchangeable Preferred Stock held by the Holder that the Company intends to redeem;
(D) the Redemption Date;
(E) that the Holder is to surrender to the Company, at the place or places, which shall be designated in such Redemption Notice, its certificates representing the shares of Senior Exchangeable Preferred Stock to be redeemed;
(F) that dividends on the shares of the Senior Exchangeable Preferred Stock to be redeemed shall cease to accumulate on the day prior to such Redemption Date unless the Company defaults in the payment of the redemption price; and
(G) the name of any bank or trust company performing the duties referred to in subsection (c)(v) below.
(ii) On or before the Redemption Date, each Holder of Senior Exchangeable Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Senior Exchangeable Preferred Stock to the Company, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares shall be payable in cash to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be returned to authorized but unissued shares. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.
(iii) Unless the Company defaults in the payment in full of the redemption price, dividends on the Senior Exchangeable Preferred Stock called for redemption shall cease to accumulate on the day prior to the Redemption Date, and the Holders of such shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price, without interest.
(iv) If a Redemption Notice shall have been duly given, and if, on or before the Redemption Date specified therein, all funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds, in trust for the pro rata benefit of the Holders of the Senior Exchangeable Preferred Stock called for redemption so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, all shares so called for redemption shall no longer be deemed outstanding, and all rights with respect to such shares shall forthwith on such Redemption Date cease and terminate, except only the right of the Holders thereof to receive the amount payable on redemption thereof, without interest.
(v) If a Redemption Notice shall have been duly given or if the Company shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and if on or before the Redemption Date specified therein the funds necessary for such redemption shall have been deposited by the Company with such bank or trust company in trust for the pro rata benefit of the Holders of the Senior Exchangeable Preferred Stock called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall
not have been surrendered for cancellation, from and after the time of such deposit, all shares so called, or to be so called pursuant to such irrevocable authorization, for redemption shall no longer be deemed to be outstanding and all rights with respect of such shares shall forthwith cease and terminate, except only the right of the Holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America or of the State of New York, shall be doing business in the Borough of Manhattan, The City of New York, shall have capital, surplus and undivided profits aggregating at least 100,000,000 according to its last published statement of condition, and shall be identified in the Redemption Notice. Any interest accrued on such funds shall be paid to the Company from time to time. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of three years from such Redemption Date shall, to the extent permitted by law, be released or repaid to the Company, after which repayment the Holders of the shares so called for redemption shall look only to the Company for payment thereof.
(a) Limitation on Indebtedness. The Company shall not, and shall not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness; provided, however, that the Company and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness) if at the time of such incurrence (i) no Voting Rights Triggering Event shall have
occurred and be continuing or shall occur as a consequence thereof and (ii) the Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness for which internal financial statements are available, taken as one period (and after giving pro forma effect to (A) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such four-quarter period, (B) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired on the first day of such four-quarter period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such four-quarter period) and (C) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred on the first day of such four-quarter period), would have been at least equal to 2.0 to 1.0.
(b) Limitations on Restricted Payments. (I) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to the holders of any Parity Securities or Junior Securities (other than dividends or distributions payable solely in shares of Qualified Capital Stock (other than Senior Securities) or in options, warrants or other rights to purchase shares of Qualified Capital Stock (other than Senior Securities));
(ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Parity Securities or Junior Securities or any Capital Stock of the Company or any Affiliate of the Company or any options, warrants or other rights to acquire Parity Securities or Junior Securities or such Capital Stock (other than such options, warrants or rights owned by the Company or a wholly owned Restricted Subsidiary);
(iii) declare or pay any dividend on, or make any distribution to holders of any shares of Capital Stock of any Restricted Subsidiary (other than to the Company or any of its wholly owned Restricted Subsidiaries or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis); or
(iv) make any Investment (other than any Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from) clauses (i)
through (iv) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment,
if other than cash, as determined by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a Board Resolution),
(1) no Voting Rights Triggering Event shall have occurred and be continuing, (2)
the Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 8(a) and (3) the aggregate amount of
all Restricted Payments declared or made after the Issuance Date shall not
exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day of the Company's first fiscal quarter after the Issuance Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Qualified Capital Stock of the Company (including upon the exercise of options, warrants or rights) or warrants, options or rights to purchase shares of Qualified Capital Stock of the Company, plus
(C) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities or Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, to the extent such securities were originally sold for cash, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted Payment that was made after the Issuance Date is sold or is otherwise liquidated or repaid, an amount (to the extent not included in Consolidated Adjusted Net Income) equal to (I) the lesser of (x) the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) and (y) the initial amount of such Investment, or (II) with respect to solely any Restricted Payment to be made pursuant to clause (iv) of this paragraph (a), the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) in excess of the amount in (I), plus
(E) $5,000,000.
(II) Notwithstanding paragraph (I) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v) and (vi) below) at the time of and after giving effect thereto no Voting Rights Triggering Event has occurred and is continuing:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration the payment of such dividend would have complied with the provisions of paragraph (I) above;
(ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock (other than Senior Securities) of the Company;
(iii) the repurchase, redemption or other acquisition or retirement for value of shares of Management Stock; provided that (1) the Company is required, by the terms of written agreements between the Company and each of Lloyd L. Ross and Jerry M. Smith as in effect on the Issuance Date, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $25,000,000 in the aggregate;
(iv) the repurchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company from employees who have died (or their estates or beneficiaries) or whose employment has been terminated; provided that such payment shall not exceed $1,500,000 in any twelve-month period, excluding any amounts used to repurchase, redeem, acquire or retire for value shares of Capital Stock of the Company pursuant to clause (iii) above;
(v) repurchases of Capital Stock of the Company (or warrants or options convertible into or exchangeable for such Capital Stock) deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock (or warrants or options convertible into or exchangeable for such Capital Stock) represent a portion of the exercise price of such options; and
(vi) the issuance by the Company of shares of Preferred Stock as dividends paid in kind on the Preferred Stock of the Company outstanding on the Issuance Date or on shares of Preferred Stock so issued as payment- in-kind dividends, such dividends made pursuant to the terms of the certificate of designation or the certificate of incorporation, as the case may be, for such Preferred Stock as in effect on the Issuance Date.
The actions described in clauses (i), (ii), (iii), (iv) and (v) of this paragraph (II) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (II) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (I) above and the actions described in clause (vi) of this paragraph (II) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (II) and
shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (I).
(III) Notwithstanding the foregoing, the Company shall not, and shall not permit any Restricted Subsidiary to, pay any cash dividends on any shares of Capital Stock of the Company which shall rank junior to the Senior Exchangeable Preferred Stock until such time as the Notes have received a rating from Moody's of at least "B1" or higher.
(c) Change in Control. If a Change in Control shall occur at any time, then each Holder of Senior Exchangeable Preferred Stock shall have the right to require that the Company purchase such Holder's Senior Exchangeable Preferred Stock, in whole or in part, at a purchase price in cash (a "Change in Control Payment") in an amount equal to 101% of the liquidation preference of such Senior Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to the date of purchase, pursuant to the offer described below (the "Change in Control Offer") and the other procedures set forth herein.
Within 30 days following any Change in Control, the Company will mail
a notice to each Holder of Senior Exchangeable Preferred Stock with a copy to
the Transfer Agent, with the following information: (i) a Change in Control
Offer is being made pursuant to this Section 8(c) of this Certificate of
Designation, and that all Senior Exchangeable Preferred Stock properly tendered
pursuant to such Change in Control Offer will be accepted for payment; (ii) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 75 days from the date such notice is mailed, except as may be
otherwise required by applicable law (the "Change in Control Payment Date");
(iii) any Senior Exchangeable Preferred Stock not properly tendered will remain
outstanding and continue to accumulate dividends; (iv) unless the Company
defaults in the payment of the Change in Control Payment, all Senior
Exchangeable Preferred Stock accepted for payment pursuant to the Change in
Control Offer will cease to accumulate dividends on the Change in Control
Payment Date; (v) Holders electing to have any shares of Senior Exchangeable
Preferred Stock purchased pursuant to a Change in Control Offer will be required
to surrender such shares, properly endorsed for transfer, to the Transfer Agent
for the Senior Exchangeable Preferred Stock at the address specified in the
notice prior to the close of business on the third Business Day preceding the
Change in Control Payment Date; (vi) Holders will be entitled to withdraw their
tendered shares of Senior Exchangeable Preferred Stock and their election to
require the Company to purchase such shares, provided that the Transfer Agent
receives, not later than the close of business on the last day of the offer
period, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the aggregate liquidation preference of the Senior
Exchangeable Preferred Stock tendered for purchase, and a statement that such
holder is withdrawing his tendered shares of Senior Exchangeable Preferred Stock
and his election to have such shares of Senior Exchangeable Preferred Stock
purchased; and (vii) that holders whose shares of Senior Exchangeable Preferred
Stock are being purchased only in part will be issued new shares of Senior
Exchangeable Preferred Stock equal in aggregate liquidation preference to the
unpurchased portion of the shares of Senior Exchangeable Preferred Stock
surrendered, which unpurchased portion must be equal to $1,000 in aggregate liquidation preference or an integral multiple thereof.
On the Change in Control Payment Date, the Company shall, to the extent permitted by law, (i) accept for payment all shares of Senior Exchangeable Preferred Stock or portions thereof properly tendered pursuant to the Change in Control Offer, (ii) deposit with the Transfer Agent an amount in cash equal to the aggregate Change in Control Payment in respect of all shares of Senior Exchangeable Preferred Stock or portions thereof so tendered and (iii) deliver, or cause to be delivered, to the Transfer Agent for cancellation the shares of Senior Exchangeable Preferred Stock so accepted together with an Officers' Certificate stating that such shares of Senior Exchangeable Preferred Stock or portions thereof have been tendered to and purchased by the Company. The Transfer Agent shall promptly mail to each holder of Senior Exchangeable Preferred Stock the Change in Control Payment for such Senior Exchangeable Preferred Stock, and the Transfer Agent shall promptly mail to each holder new shares of Senior Exchangeable Preferred Stock equal in aggregate liquidation preference to any unpurchased portion of Senior Exchangeable Preferred Stock surrendered, if any. The Company shall publicly announce the results of the Change in Control Offer on or as soon as practicable after the Change in Control Payment Date.
The Company shall not, and shall not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the Issuance Date) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Senior Exchangeable Preferred Stock or, if such Change in Control Offer is made, to pay for the Senior Exchangeable Preferred Stock tendered for purchase.
Prior to making a Change in Control Offer, the Company shall terminate all commitments and repay in full all Indebtedness under the Senior Credit Agreement and the Notes, respectively, and shall have obtained the requisite consents under the Senior Credit Agreement and the Indenture to permit the purchase of the Senior Exchangeable Preferred Stock as provided for herein.
(d) Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (i) shall not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly owned Restricted Subsidiary) and (ii) shall not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this provision shall not prohibit (A) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions herein, (B) the ownership by other Persons of Qualified Capital Stock (other than Preferred Stock) issued prior to the time such Restricted Subsidiary became a Subsidiary of the Company that was neither issued in contemplation of such Subsidiary
becoming a Subsidiary nor acquired at that time or (C) the ownership by directors of directors' qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law.
(e) Consolidation, Merger and Sale of Assets. The Company shall not, in a single transaction or through a series of transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and immediately after giving effect thereto:
(i) either (a) the Company shall be the continuing corporation or
(b) the Person (if other than the Company) formed by such consolidation or
into which the Company or such Restricted Subsidiary is merged or the
Person that acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all the properties and assets of the
Company and its Restricted Subsidiaries on a consolidated basis (the
"Surviving Entity") shall be a corporation duly organized and validly
existing under the laws of the United States of America, any state thereof
or the District of Columbia;
(ii) the Senior Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of the Surviving Entity having in respect of the Surviving Entity the same rights and privileges that the Senior Exchangeable Preferred Stock had immediately prior to such transaction with respect to the Company;
(iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis, no Voting Rights Triggering Event, and no event that after the giving of notice or lapse of time or both would become a Voting Rights Triggering Event, shall have occurred and be continuing;
(iv) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (on the
assumption that the transaction or series of transactions occurred on the
first day of the four-quarter period immediately prior to the consummation
of such transaction or series of transactions with the appropriate
adjustments with respect to the transaction or series of transactions
being included in such pro forma calculation), the Company (or the
Surviving Entity, as the case may be) could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 8(a) of this Certificate of Designation; and
(v) the Company or the Surviving Entity shall have delivered to the Transfer Agent an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition comply with this Certificate of Designation.
The Surviving Entity shall file an appropriate certificate of designation with respect to the preferred stock referred to in clause (ii) above with the Secretary of State (or similar public official) of the jurisdiction under whose laws it is organized. In such event, the Company shall be released from its obligations under this Certificate of Designation.
(f) Reports and Other Information. The Company shall file on a
timely basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Company has a class of securities registered
under the Exchange Act, the annual reports, quarterly reports and other
documents that the Company would be required to file if it were subject to
Section 13 or 15 of the Exchange Act. The Company shall also (a) file with the
Transfer Agent, and provide to each holder of Senior Exchangeable Preferred
Stock, without cost to such holder, copies of such reports and documents within
15 days after the date on which the Company files such reports and documents
with the Commission or the date on which the Company would be required to file
such reports and documents if the Company were so required, and (b) if filing
such reports and documents with the Commission is not accepted by the Commission
or is prohibited under the Exchange Act, to supply at the Company's cost copies
of such reports and documents to any prospective holder of Senior Exchangeable
Preferred Stock promptly upon written request.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. 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 THE TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OR
THIS SECURITY) AND THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE
OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH 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 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 TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E)
TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, 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
(AND IF ACQUIRING THE SECURITIES FROM SUCH AN ACCREDITED INVESTOR,
IS ACQUIRING SECURITIES HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT
LESS THAN $100,000), OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) 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 (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRADED, EXCHANGED OR OTHERWISE TRANSFERRED UNTIL (I) JUNE 15,
1998, (II) THE OCCURRENCE OF A CHANGE IN CONTROL; (III) THE DATE ON
WHICH A PREFERRED STOCK REGISTRATION STATEMENT IS DECLARED EFFECTIVE;
(IV) IMMEDIATELY PRIOR TO ANY REDEMPTION OF SENIOR EXCHANGEABLE
PREFERRED STOCK BY THE COMPANY WITH THE PROCEEDS OF A PUBLIC EQUITY
OFFERING; OR (V) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH IN
ITS SOLE DISCRETION (THE DATE OF THE OCCURRENCE OF AN EVENT SPECIFIED
IN CLAUSES (I)-(V) BEING THE "SEPARATION DATE").
(b) The Transfer Agent shall refuse to register any transfer of Series A Senior Preferred Stock in violation of the restrictions contained in the legend provided for in Section 11(a).
(c) The legend provided for in Section 11(a) may be removed if the Series A Senior Preferred Stock has been registered pursuant to a Preferred Stock Shelf Registration Statement under the Securities Act. Unlegended Series B Senior Preferred Stock may be issued in exchange for Series A Senior Preferred Stock pursuant to a Preferred Stock Exchange Offer.
(d) At any time after the later of the Separation Date and 40 days following the Issuance Date, upon receipt by the Transfer Agent and the Company of a certificate substantially in the form of Exhibit A hereto, the Transfer Agent shall authenticate and deliver one or more shares of unlegended Series A Senior Preferred Stock in the place of shares of legended Series A Senior Preferred Stock.
(e) In connection with proposed transfers of Series A Senior Preferred Stock described in Exhibit B or Exhibit C, the Transfer Agent or the Company may require the transferor or transferee, as the case may be, to deliver the appropriate letter attached hereto as Exhibit B or C. Each Holder of Series A Senior Preferred Stock shall notify the Company or the Transfer Agent in the event of any transfer by such Holder of any shares of Series A Senior Preferred Stock to a foreign transferee.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.
"Affiliate" means, with respect to any specified Person, (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (b) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or (c) any executive officer or director of any such specified Person or other Person or (d) with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Average Life" means, as of the date of determination with respect to any Indebtedness or Senior Exchangeable Preferred Stock, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) or liquidation value payment of such Indebtedness or Senior Exchangeable Preferred Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments.
"Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee of such board.
"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Transfer Agent.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the Issuance Date.
"Capitalized Lease Obligation" means, with respect to any Person, any obligation of such Person under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Certificate of Designation, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means: (a) any evidence of Indebtedness with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (b) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (c) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or any successor rating agency or at least P-1 by Moody's or any successor rating agency; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) demand and time deposits with a domestic commercial bank that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million.
"Change in Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than 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 securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total outstanding Voting Stock of the Company and either (x) the Permitted Holders beneficially own, directly or indirectly, in the aggregate Voting Stock of the Company that represents a lesser percentage of the aggregate ordinary voting power of all classes of the Voting Stock of the Company, voting together as a single class, than such other person or group and are not entitled (by voting power, contract or otherwise) to elect directors of the Company having a majority of the total voting power of the Board of Directors, or (y) such other person or group is entitled to elect directors of the Company having a majority of the total voting power of the Board
of Directors; (b) the Company consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and cash, securities
and other property (other than Capital Stock of the surviving or transferee
corporation) in an amount that could be paid by the Company as a Restricted
Payment as described under Section 8(b) of this Certificate of Designation and
(ii) immediately after such transaction, no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, is 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 securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total outstanding Voting Stock
of the surviving or transferee corporation and either (x) the Permitted Holders
beneficially own, directly or indirectly, in the aggregate Voting Stock of the
surviving or transferee corporation that represents a lesser percentage of the
aggregate ordinary voting power of all classes of the Voting Stock of the
surviving or transferee corporation, voting together as a single class, than
such other person or group and are not entitled (by voting power, contract or
otherwise) to elect directors of the Surviving Entity having a majority of the
total voting power of the Board of Directors, or (y) such other person or group
is entitled to elect directors of the surviving or transferee corporation having
a majority of the total voting power of the elected Board of Directors; or (c)
during any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 66 2/3%
of the directors 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 (d) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under Section 8(e) of
this Certificate of Designation.
"Change in Control Offer" has the meaning specified in Section 8(c) hereof.
"Change in Control Payment" has the meaning specified in Section 8(c) hereof.
"Change in Control Payment Date" has the meaning specified in Section 8(c) hereof.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act.
"Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated, whether voting or non-voting) of such Person's common stock, whether outstanding on the Issuance Date or issued after the Issuance Date, and includes, without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first paragraph of this Certificate of Designation until a successor Person shall have become such pursuant to the applicable provisions of this Certificate of Designation, and thereafter "Company" shall mean such successor Person.
"Consolidated Adjusted Net Income" means, for any period, the consolidated net income (or loss) of the Company and all Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding, without duplication, (a) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash dividends or distributions during such period, (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders, and (f) for purposes of calculating Consolidated Adjusted Net Income under Section 8(b) of this Certificate of Designation, any net income (or loss) from any Restricted Subsidiary while it was an Unrestricted Subsidiary at any time during such period other than any amounts actually received from such Restricted Subsidiary during such period.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the extent deducted in computing Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges, in each case, for such period to (b) the Consolidated Interest Expense for such period.
"Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and all Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, (1) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of Interest Rate Agreements
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation and (iv) amortization of debt issuance costs, plus
(b) the interest component of Capitalized Lease Obligations of the Company and
its Restricted Subsidiaries during such period, plus (c) cash dividends due
(whether or not declared) on Preferred Stock by the Company and any Restricted
Subsidiary, plus (d) cash dividends due (whether or not declared) on Redeemable
Capital Stock by the Company and any Restricted Subsidiary, in each case as
determined on a consolidated basis in accordance with GAAP, less (2) interest on
the Exchange Debentures outstanding on the Exchange Date paid in kind with
Exchange Debentures and on Exchange Debentures so issued as payment in kind
interest, all in accordance with the Exchange Indenture as in effect on the
Issuance Date; provided that (x) the Consolidated Interest Expense attributable
to interest on any Indebtedness computed on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying at the option of the Company, either the fixed or
floating rate, and (y) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness 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 applicable period; provided
further that, notwithstanding the foregoing, the interest rate with respect to
any Indebtedness covered by any Interest Rate Agreement shall be deemed to be
the effective interest rate with respect to such Indebtedness after taking into
account such Interest Rate Agreement.
"Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization, depletion and other non-cash expenses of the Company and any Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period).
"corporation" includes corporations, associations, companies and business trusts.
"Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates.
"Debenture Guarantee" means any guarantee of the obligations of the Company under the Exchange Indenture and the Exchange Debentures by any Restricted Subsidiary in accordance with the provisions of the Exchange Indenture.
"Dividend Payment Date" means each March 15, June 15, September 15 and December 15 of each year on which dividends shall be paid or are payable, any Redemption Date and any other date on which dividends in arrears may be paid.
"Dividend Rate" has the meaning specified in Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" has the meaning specified in Section 4(a) hereof.
"Exchange Debentures" means the 13 1/4% Subordinated Exchange Debentures due 2009 of the Company issuable in exchange for the Senior Exchangeable Preferred Stock, at the option of the Company, plus any additional Exchange Debentures issued in lieu of cash interest, pursuant to the Exchange Indenture as in effect on the Issuance Date.
"Exchange Indenture" means the Indenture dated as of December 29, 1997 among the Company, the Subsidiary Debenture Guarantors and United States Trust Company of New York, as trustee, relating to the Exchange Debentures.
"Exchange Notice" has the meaning specified in Section 4(a) hereof.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States consistently applied, that are in effect on the Issuance Date.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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.
"Headquarters Facility" means the headquarters facility and warehouse of the Company as of the Issuance Date located in Dallas, Texas.
"Holder" has the meaning specified in Section 2(a) hereof.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money (including overdrafts) or
for the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (c) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (d) all Capitalized Lease Obligations of such Person, (e) all obligations of such Person under or in respect of Interest Rate Agreements or Currency Agreements, (f) all Indebtedness referred to in (but not excluded from) the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset and the amount of the obligation so secured), (g) all guarantees by such Person of Indebtedness referred to in this definition of any other Person and (h) all Redeemable Capital Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Certificate of Designation, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) designed to protect against or manage exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect advance, loan, guarantee or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued or owned by, any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. In addition, the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices.
"Issuance Date" means the date on which the Senior Exchangeable Preferred Stock is originally issued under this Certificate of Designation.
"Junior Securities" has the meaning specified in Section 7 hereof.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.
"Management Stock" means the Capital Stock of the Company and the options to acquire Capital Stock of the Company owned by Lloyd L. Ross and Jerry M. Smith as of the Issuance Date together with Preferred Stock issued as payment in kind dividends on such Preferred Stock and any shares of Preferred Stock issued as payment in kind dividends thereon, such dividends made pursuant to the terms of the certificate of designation or the certificate of incorporation, as the case may be, for such Preferred Stock as in effect on the Issuance Date.
"Mandatory Redemption Date" has the meaning specified in Section 6(b) hereof.
"Notes" means the 11% Senior Subordinated Notes due 2007 of the Company, issuable pursuant to the Notes Indenture.
"Notes Indenture" means the Indenture dated as of December 29, 1997 among the Company, the Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee, relating to the Notes.
"Note Guarantee" means any guarantee of the obligations of the Company under the Notes Indenture and the Notes by the Subsidiary Guarantors in accordance with the provisions of the Notes Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Transfer Agent.
"Opinion of Counsel" means a written opinion of legal counsel, which and who may be counsel for the Company, including an employee of the Company, and who shall be reasonably acceptable to the Transfer Agent.
"Parity Securities" has the meaning specified in Section 8 hereof.
"Permitted Holders" means, as of the date of determination, Madison Dearborn Capital Partners II, L.P. and its Affiliates.
"Permitted Indebtedness" means any of the following:
(a) (i) Indebtedness of the Company under the Senior Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (A) $110 million less the amount of any permanent reductions made by the Company in respect of any term loans under the Senior Credit Agreement and (B) with respect to revolving borrowings, the greater of (1) $115 million and (2) 60% of the Eligible Inventory (as defined in the Senior Credit Agreement on the Issuance Date) of the Company and the Restricted Subsidiaries and (ii) any guarantee by a Subsidiary Debenture Guarantor of Indebtedness incurred under this clause (a);
(b) Indebtedness of the Company pursuant to the Notes or of any Restricted Subsidiary pursuant to a Note Guarantee;
(c) Indebtedness of the Company or any Restricted Subsidiary outstanding on the date of the Exchange Indenture and listed on a schedule thereto;
(d) Indebtedness of the Company owing to any wholly owned Restricted Subsidiary; provided that any Indebtedness of the Company owing to any such Restricted Subsidiary is subordinated in right of payment from and after such time as the Exchange Debentures shall become due and payable (whether at Stated Maturity, acceleration or otherwise) to the payment and performance of the Company's obligations under such Exchange Debentures; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or another wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (d);
(e) Indebtedness of a Restricted Subsidiary owing to the Company or to another wholly owned Restricted Subsidiary; provided that any such Indebtedness is subordinated in right of payment to the Debenture Guarantee of such Subsidiary Debenture Guarantor; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or a wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary not permitted by this clause (e);
(f) guarantees of any Restricted Subsidiary made in accordance with the provisions of Section 1015, "Limitation on Guarantees of Indebtedness by Restricted Subsidiaries," of the Notes Indenture;
(g) obligations of the Company or any Subsidiary Debenture Guarantor entered into in the ordinary course of business (i) pursuant to Interest Rate Agreements designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Restricted Subsidiary, which obligations do not exceed the aggregate principal amount of such Indebtedness and (ii) pursuant to Currency Agreements entered into by the Company or any of its Restricted Subsidiaries in respect of its (x) assets or (y) obligations, as the case may be, denominated in a foreign currency;
(h) Indebtedness of the Company or any Subsidiary Debenture Guarantor in respect of Purchase Money Obligations and Capitalized Lease Obligations of the Company or any Subsidiary Debenture Guarantor in an aggregate amount which does not exceed $15,000,000 at any one time outstanding;
(i) Indebtedness of the Company or any Subsidiary Debenture Guarantor consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries;
(j) Indebtedness of the Company or any Subsidiary Debenture Guarantor represented by (x) letters of credit for the account of the Company or any Restricted Subsidiary or (y) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers' compensation claims, payment obligations in connection with self-insurance or other similar requirements in the ordinary course of business;
(k) Acquired Indebtedness of any Restricted Subsidiary that is organized outside of the United States of America in an aggregate amount which, together with any Indebtedness permitted to be incurred pursuant to this clause (k) and refinanced pursuant to clause (p) below, does not exceed $10,000,000 at any one time outstanding;
(l) Indebtedness of the Company owing to Jerry M. Smith under a note issued pursuant to a written agreement between the Company and Jerry M. Smith as in effect on the Issuance Date, in consideration for the repurchase of Common Stock of the Company owned by Jerry M. Smith at his retirement, in an aggregate amount not to exceed $15,000,000 outstanding at any time;
(m) Preferred Stock issued as payment in kind dividends on Preferred Stock outstanding on the Issuance Date and any shares of Preferred Stock issued as payment in kind dividends thereon, such dividends made pursuant to the terms of the certificate of
designation or the certificate of incorporation, as the case may be, for such Preferred Stock as in effect on the Issuance Date;
(n) Indebtedness of the Company or a Subsidiary Debenture Guarantor incurred in connection with the Company's Headquarters Facility or the purchase or construction of a new headquarters facility, in each case, as permitted under the Senior Credit Agreement as in effect on the Issuance Date;
(o) Indebtedness of the Company or any Subsidiary Debenture Guarantor not otherwise permitted by the foregoing clauses (a) through (n) in an aggregate principal amount not in excess of $20,000,000 at any one time outstanding; and
(p) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness, referred to in clauses (b), (c) and (k) of this definition, including any successive refinancings, so long as (i) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced, plus the lesser of the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined as necessary to accomplish such refinancing, (ii) such new Indebtedness has an Average Life longer than the Average Life of the Senior Exchangeable Preferred Stock and a final Stated Maturity later than the Mandatory Redemption Date and (iii) Indebtedness of the Company or a Subsidiary Debenture Guarantor may only be refinanced with Indebtedness of the Company or a Subsidiary Debenture Guarantor and Indebtedness of a Restricted Subsidiary may only be refinanced with Indebtedness of a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary that is not a Subsidiary Debenture Guarantor may only be refinanced with Indebtedness of such Restricted Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clause
(d) or (e) of the definition of "Permitted Indebtedness;"
(d) Investments in an amount not to exceed $10,000,000 at any one time outstanding;
(e) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a wholly owned Restricted Subsidiary or (ii) such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly owned Restricted Subsidiary;
(f) bonds, notes, debentures and other securities received as consideration for Assets Sales to the extent permitted under Section 1014 of the Notes Indenture;
(g) negotiable instruments held for deposit or collection in the ordinary course of business, except to the extent they would constitute Investments in Affiliates; or
(h) Investments in the form of the sale (on a "true-sale" non- recourse basis) or the servicing of receivables transferred from the Company or any Restricted Subsidiary.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Issuance Date, and including, without limitation, all classes and series of preferred or preference stock of such Person.
"Preferred Stock Exchange Offer" means an offer by the Company to exchange the Series A Senior Preferred Stock for the Series B Senior Preferred Stock pursuant to an effective registration statement.
"Preferred Stock Shelf Registration Statement" means a shelf registration statement which becomes effective and covers resales of the Series A Senior Preferred Stock.
"Public Equity Offering" means an offer and sale of common stock (which is Qualified Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).
"Purchase Money Obligations" means, with respect to any Person, obligations, other than Capitalized Lease Obligations, incurred or assumed in the ordinary course of business in connection with the purchase of property to be used in the business of such Person within 90
days of such purchase, provided that the amount of any Purchase Money Obligation shall not exceed the purchase price of the property purchased.
"Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Exchange Debentures or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity.
"Redemption Date" has the meaning specified in Section 6(a)(i) hereof.
"Redemption Notice" has the meaning specified in Section 6(c)(i) hereof.
"Redemption Price" means the price at which the Senior Exchangeable Preferred Stock may be redeemed.
"Restricted Payment" has the meaning specified in Section 8(b) hereof.
"Restricted Subsidiary" means, at any time, any direct or indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of "Restricted Subsidiary."
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Senior Credit Agreement" means the credit agreement dated as of December 29, 1997 among the Company, the Subsidiary Debenture Guarantors, the several lenders parties thereto, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger and syndication agent, and Fleet National Bank, as administrative agent, as such agreement may be amended, renewed, extended, substituted, restated, refinanced, restructured, supplemented, increased or otherwise modified from time to time (including, without limitation, any successive amendments, renewals, extensions, substitutions, restatements, refinancings, restructurings, supplements or other modifications of the foregoing); provided that, with respect to any agreement providing for the refinancing of Indebtedness under the Senior Credit Agreement, such agreement shall be the Senior Credit Agreement under the Exchange Indenture only if a notice to that effect is delivered by the Company to the Transfer Agent and there shall be at any time only one instrument that is the Senior Credit Agreement under this Certificate of Designation.
"Senior Exchangeable Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Senior Securities" has the meaning specified in Section 7 hereof.
"Series A Senior Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Series B Preferred" means the Series B-1 Cumulative Junior Redeemable Preferred Stock of the Company, par value $.01 per share and the Series B-2 Cumulative Junior Perpetual Preferred Stock of the Company, par value $.01 per share, in each case authorized pursuant to the Certificate of Incorporation.
"Series B Senior Preferred Stock" has the meaning set forth in
Section 1 hereof.
"Stated Maturity" means, when used with respect to any Exchange Debenture or any installment of interest thereon, the date specified in such Exchange Debenture as the fixed date on which the principal of such Exchange Debenture or such installment of interest is due and payable, and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable.
"Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries.
"Subsidiary Debenture Guarantor" means each of TMI Holdings Inc., a Delaware corporation, Tuesday Morning Inc., a Texas corporation, Friday Morning, Inc., a Texas corporation, and TMIL Corporation, a Delaware corporation, and any Restricted Subsidiary that would be required to incur a Debenture Guarantee under the Exchange Indenture; provided that, if such Person would be released and discharged from its Debenture Guarantee in accordance with the Exchange Indenture, such Person shall cease to be a Subsidiary Debenture Guarantor.
"Subsidiary Guarantor" means each of TMI Holdings Inc., a Delaware corporation, Tuesday Morning Inc., a Texas corporation, Friday Morning, Inc., a Texas corporation, and TMIL Corporation, a Delaware corporation, and any Restricted Subsidiary that incurs a Notes Guarantee under the Notes Indenture; provided that, upon the release and discharge of any Person from its Notes Guarantee in accordance with the Notes Indenture, such Person shall cease to be a Subsidiary Guarantor.
"Transfer Agent" means United States Trust Company of New York or any successor transfer agent.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force on the date on which this Certificate of Designation was filed.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Company, as provided below) and (b) any Subsidiary of an
Unrestricted Subsidiary; provided, however, that in no event shall any
Subsidiary Debenture Guarantor be an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as
(i) neither the Company nor any Restricted Subsidiary is directly or indirectly
liable for any Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of Section 1019
"Limitation on Unrestricted Subsidiaries," of the Exchange Indenture, (iv)
neither the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than those that might be obtained at the time from
Persons who are not Affiliates of the Company, and (v) neither the Company nor
any Restricted Subsidiary has any obligation (1) to subscribe for additional
shares of Capital Stock or other equity interest in such Subsidiary, or (2) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results. Any such designation
by the Board of Directors of the Company shall be evidenced to the Transfer
Agent by filing a Board Resolution with the Transfer Agent giving effect to such
designation. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such designation, there would be no Voting Rights Triggering Event
under this Certificate of Designation and the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
8(a) of this Certificate of Designation.
"Voting Rights Triggering Event" has the meaning set forth above in
Section 5(b) hereof.
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
IN WITNESS WHEREOF, the Company has caused the Certificate of Designation to be duly executed in its corporate name on this 29th day of December, 1997.
TUESDAY MORNING CORPORATION
By:_____________________________________________
Name: Jerry M. Smith
Title: Chief Executive Officer and
President
By:_____________________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief Financial
Officer and Secretary
This instrument was acknowledged before me on December 29, 1997 by Mark E. Jarvis, as Secretary of Tuesday Morning Corporation.
Notary Public
(Seal, if any)
[Date]
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Ladies and Gentlemen:
This letter relates to [insert number of shares] shares of Series A Senior Preferred Stock represented by the attached Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 11(d) of the Certificate of Designation (the "Certificate of Designation") filed with the Secretary of State of the State of Delaware on December 29, 1997 relating to the Series A Senior Preferred Stock and the Series B Senior Preferred Stock, we hereby certify that we are a person outside the United States to whom the Series A Senior Preferred Stock could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the shares of Series A Senior Preferred Stock represented by the Legended Certificate for a like number of shares of Series A Senior Preferred Stock, which shall be represented by the attached Certificate (the "Unlegended Certificate"), which does not bear a legend outlining restrictions upon the transfer of such Unlegended Certificate, all in the manner provided for in the Certificate of Designation.
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. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Signature of Holder]
[Date]
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of [insert number of shares] shares of the Securities, we confirm that:
1. The undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities, except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities my not be offered at sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Securities, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if requested by the Company, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (F) pursuant to an effective registration statement under the Securities Act, and
we further agree to provide to any person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein.
3. We understand that, on any proposed resale of any Securities or Conversion Shares, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the effect set out in paragraph 2.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable at evaluating the merits and risks of our investment in the
Securities and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion.
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.
Very truly yours,
[Signature of Holder]
[Date]
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Ladies and Gentlemen
In connection with our proposed sale of [insert number of shares] shares 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, 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 order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act of 1933.
In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be.
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. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Signature of Holder]
Exhibit 3.3
AMENDED AND RESTATED BY-LAWS
OF
TUESDAY MORNING CORPORATION
A Delaware corporation
(Effective as of December 29, 1997)
unless, within sixty (60) days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof.
objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.
dent or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six (6) years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the president or treasurer may, from time to time, prescribe.
to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.
the corporation would have the power to indemnify such person against such liability under this Article V.
a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such president, vice-presi dent, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation.
shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation.
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers.
EXHIBIT 4.1
TUESDAY MORNING CORPORATION
Company
TMI HOLDINGS, INC.
TUESDAY MORNING, INC.
FRIDAY MORNING, INC.
TMIL CORPORATION
Subsidiary Guarantors
and
HARRIS TRUST AND SAVINGS BANK
Trustee
INDENTURE
Dated as of December 29, 1997
$100,000,000
11% Senior Subordinated Notes due 2007 11% Series B Senior Subordinated Notes due 2007
TUESDAY MORNING CORPORATION
Trust Indenture Indenture
Act Section Section
--------------- ---------
(S) 310(a)(1)......................... 607
(a)(2)............................ 607
(b)............................... 608
(S) 312(c)............................ 701
(S) 314(a)............................ 703
(a)(4)............................ 1004
(c)(1)............................ 102
(c)(2)............................ 102
(e)............................... 102
(S) 315(b)............................ 601
(S) 316(a)(last sentence)............. 101 ("Outstanding")
(a)(1)(A)......................... 502, 512
(a)(1)(B)......................... 513
(b)............................... 508
(c)............................... 104(d)
(S) 317(a)(1)......................... 503
(a)(2)............................ 504
(b)............................... 1003
(S) 318(a)............................ 111
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Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
PARTIES....................................................................... 1
RECITALS OF THE COMPANY....................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions...................................................... 2
Acquired Indebtedness.......................................... 2
Act............................................................ 2
Affiliate...................................................... 2
Agent Bank..................................................... 3
Agent Members.................................................. 3
Asset Sale..................................................... 3
Authenticating Agent........................................... 3
Average Life................................................... 3
Bankruptcy Law................................................. 3
Board of Directors............................................. 4
Board Resolution............................................... 4
Business Day................................................... 4
Capital Stock.................................................. 4
Capitalized Lease Obligation................................... 4
Cash Equivalents............................................... 4
Certificate of Designation..................................... 5
Change in Control.............................................. 5
Commission..................................................... 6
Common Stock................................................... 6
Company........................................................ 6
Company Request" or "Company Order............................. 6
Consolidated Adjusted Net Income............................... 6
Consolidated Fixed Charge Coverage Ratio....................... 7
Consolidated Income Tax Expense................................ 7
Consolidated Interest Expense.................................. 7
Consolidated Non-Cash Charges.................................. 8
Corporate Trust Office......................................... 8
corporation.................................................... 8
Currency Agreements............................................ 8
Custodian...................................................... 8
Default........................................................ 8
Defaulted Interest............................................. 8
Depositary..................................................... 8
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Designated Senior Indebtedness................................. 8 Disinterested Director......................................... 8 Dollar" or "$.................................................. 9 Event of Default............................................... 9 Exchange Act................................................... 9 Exchange Debentures............................................ 9 Exchange Notes................................................. 9 Exchange Offer................................................. 9 Exchange Offer Registration Statement.......................... 9 Fair Market Value.............................................. 9 Generally Accepted Accounting Principles....................... 9 Global Notes................................................... 9 guarantee...................................................... 10 Guarantor Senior Indebtedness.................................. 10 Headquarters Facility.......................................... 10 Holder......................................................... 10 Indebtedness................................................... 10 Indenture...................................................... 11 Initial Notes.................................................. 11 Institutional Accredited Investor.............................. 11 Interest Payment Date.......................................... 11 Interest Rate Agreements....................................... 11 Investment..................................................... 12 Issuance Date.................................................. 12 Lien........................................................... 12 Management Stock............................................... 12 Maturity....................................................... 12 Moody's........................................................ 12 Net Cash Proceeds.............................................. 12 Non-Payment Default............................................ 13 Non-U.S. Person................................................ 13 Note Guarantee................................................. 13 Note Register" and "Note Registrar............................. 13 Notes.......................................................... 13 Officers' Certificate.......................................... 13 Offshore Global Note........................................... 13 Offshore Note Exchange Date.................................... 13 Offshore Physical Note......................................... 13 Opinion of Counsel............................................. 14 Outstanding.................................................... 14 Pari Passu Indebtedness........................................ 15 Paying Agent................................................... 15 Payment Blockage Period........................................ 15 Payment Default................................................ 15 Permitted Holders.............................................. 15 |
Permitted Indebtedness......................................... 15 Permitted Investments.......................................... 18 Permitted Junior Securities.................................... 18 Person......................................................... 18 Physical Notes................................................. 18 Place of Payment............................................... 19 Predecessor Note............................................... 19 Preferred Stock................................................ 19 Private Placement Legend....................................... 19 Public Equity Offering......................................... 19 Purchase Money Obligations..................................... 19 QIB............................................................ 19 Qualified Capital Stock........................................ 19 Redeemable Capital Stock....................................... 19 Redemption Date................................................ 20 Redemption Price............................................... 20 Registration Rights Agreement.................................. 20 Registration Statement......................................... 20 Regular Record Date............................................ 20 Regulation S................................................... 20 Representative................................................. 20 Responsible Officer............................................ 20 Restricted Subsidiary.......................................... 20 Rule 144A...................................................... 20 S&P............................................................ 20 Sale and Leaseback Transaction................................. 20 Securities Act................................................. 21 Senior Credit Agreement........................................ 21 Senior Exchangeable Preferred Stock............................ 21 Senior Indebtedness............................................ 21 Shelf Registration Statement................................... 22 Significant Subsidiary......................................... 22 Special Record Date............................................ 22 Stated Maturity................................................ 22 Subordinated Indebtedness...................................... 22 Subsidiary..................................................... 22 Subsidiary Guarantor........................................... 22 Trust Indenture Act" or "TIA................................... 22 Trustee........................................................ 22 United States.................................................. 23 Unrestricted Subsidiary........................................ 23 U.S. Global Note............................................... 23 U.S. Government Obligations.................................... 23 U.S. Physical Note............................................. 24 Vice President................................................. 24 |
Voting Stock................................................... 24
SECTION 102. Compliance Certificates and Opinions............................. 24
SECTION 103. Form of Documents Delivered to Trustee........................... 25
SECTION 104. Acts of Holders.................................................. 25
SECTION 105. Notices, Etc., to Trustee, Company, any Subsidiary Guarantor
and Agent Bank................................................ 27
SECTION 106. Notice to Holders; Waiver........................................ 27
SECTION 107. Effect of Headings and Table of Contents......................... 28
SECTION 108. Successors and Assigns........................................... 28
SECTION 109. Separability Clause.............................................. 28
SECTION 110. Benefits of Indenture............................................ 28
SECTION 111. Governing Law.................................................... 28
SECTION 112. Legal Holidays................................................... 29
SECTION 113. Trust Indenture Act Controls..................................... 29
SECTION 114. No Recourse Against Others....................................... 29
SECTION 115. Counterparts..................................................... 29
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.................................................. 30
SECTION 202. Form of Trustee's Certificate of Authentication.................. 31
SECTION 203. Restrictive Legends.............................................. 31
SECTION 204. Form of Certificate to be Delivered After the Offshore Note
Exchange Date................................................. 34
ARTICLE THREE
THE NOTES
SECTION 301. Amount........................................................... 35
SECTION 302. Denominations.................................................... 36
SECTION 303. Execution, Authentication, Delivery and Dating................... 36
SECTION 304. Temporary Notes.................................................. 37
SECTION 305. Registration, Registration of Transfer and Exchange.............. 38
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes...................... 39
SECTION 307. Payment of Interest; Interest Rights Preserved................... 40
SECTION 308. Persons Deemed Owners............................................ 41
SECTION 309. Cancellation..................................................... 41
SECTION 310. Computation of Interest.......................................... 42
SECTION 311. Book-Entry Provisions for Global Notes........................... 42
SECTION 312. Transfer Provisions.............................................. 43
SECTION 313. Form of Accredited Investor Certificate.......................... 52
SECTION 314. Form of Regulation S Certificate................................. 55
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SECTION 315. Form of Rule 144A Certificate.................................... 56
SECTION 316. CUSIP Numbers.................................................... 58
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.......................... 58
SECTION 402. Application of Trust Money....................................... 60
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default................................................ 60
SECTION 502. Acceleration of Maturity; Rescission and Annulment............... 62
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee....................................................... 63
SECTION 504. Trustee May File Proofs of Claim................................. 64
SECTION 505. Trustee May Enforce Claims Without Possession of Notes........... 65
SECTION 506. Application of Money Collected................................... 65
SECTION 507. Limitation on Suits.............................................. 66
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.......................................... 66
SECTION 509. Restoration of Rights and Remedies............................... 67
SECTION 510. Rights and Remedies Cumulative................................... 67
SECTION 511. Delay or Omission Not Waiver..................................... 67
SECTION 512. Control by Holders............................................... 67
SECTION 513. Waiver of Past Defaults.......................................... 68
SECTION 514. Waiver of Stay or Extension Laws................................. 68
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities............................. 69
SECTION 602. Notice of Defaults.............................................. 70
SECTION 603. Certain Rights of Trustee....................................... 70
SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes....... 72
SECTION 605. May Hold Notes.................................................. 72
SECTION 606. Money Held in Trust............................................. 73
SECTION 607. Compensation and Reimbursement.................................. 73
SECTION 608. Corporate Trustee Required; Eligibility......................... 74
SECTION 609. Resignation and Removal; Appointment of Successor............... 74
SECTION 610. Acceptance of Appointment by Successor.......................... 76
SECTION 611. Merger, Conversion, Consolidation or Succession to Business..... 76
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SECTION 612. Appointment of Authenticating Agent............................. 77
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses.................. 78
SECTION 702. Disclosure of Names and Addresses of Holders.................... 79
SECTION 703. Reports by Trustee.............................................. 79
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms............ 79
SECTION 802. Subsidiary Guarantors May Consolidate, Etc., Only on Certain
Terms......................................................... 81
SECTION 803. Successor Substituted........................................... 81
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.............. 82
SECTION 902. Supplemental Indentures with Consent of Holders................. 83
SECTION 903. Execution of Supplemental Indentures............................ 84
SECTION 904. Effect of Supplemental Indentures............................... 84
SECTION 905. Conformity with Trust Indenture Act............................. 84
SECTION 906. Reference in Notes to Supplemental Indentures................... 85
SECTION 907. Notice of Supplemental Indentures............................... 85
SECTION 908. Effect on Senior Indebtedness................................... 85
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest............ 85
SECTION 1002. Maintenance of Office or Agency................................ 85
SECTION 1003. Money for Notes Payments to Be Held in Trust................... 86
SECTION 1004. Corporate Existence............................................ 87
SECTION 1005. Payment of Taxes and Other Claims.............................. 88
SECTION 1006. Maintenance of Properties...................................... 88
SECTION 1007. Statement by Officers as to Default............................ 88
SECTION 1008. Limitation on Indebtedness..................................... 89
SECTION 1009. Limitation on Restricted Payments.............................. 90
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SECTION 1010. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries....................................... 94
SECTION 1011. Limitation on Transactions with Affiliates..................... 94
SECTION 1012. Limitation on Liens............................................ 95
SECTION 1013. Purchase of Notes upon Change in Control....................... 95
SECTION 1014. Limitation on Sale of Assets................................... 97
SECTION 1015. Limitations on Guarantees of Indebtedness by Restricted
Subsidiaries.................................................. 99
SECTION 1016. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries............................. 100
SECTION 1017. Limitation on Sale and Leaseback Transactions.................. 100
SECTION 1018. Limitation on Other Senior Subordinated Indebtedness........... 101
SECTION 1019. Limitation on Unrestricted Subsidiaries........................ 101
SECTION 1020. Reports........................................................ 101
SECTION 1021. Waiver of Certain Covenants.................................... 102
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Redemption..................................................... 102
SECTION 1102. Applicability of Article....................................... 102
SECTION 1103. Election to Redeem; Notice to Trustee.......................... 103
SECTION 1104. Selection by Trustee of Notes to Be Redeemed................... 103
SECTION 1105. Notice of Redemption........................................... 103
SECTION 1106. Deposit of Redemption Price.................................... 105
SECTION 1107. Notes Payable on Redemption Date............................... 105
SECTION 1108. Notes Redeemed in Part......................................... 105
ARTICLE TWELVE
SUBORDINATION OF NOTES
SECTION 1201. Notes Subordinate to Senior Indebtedness....................... 106
SECTION 1202. Payment over of Proceeds upon Dissolution, etc................. 106
SECTION 1203. Suspension of Payment When Designated Senior Indebtedness
in Default.................................................... 107
SECTION 1204. Payment Permitted If No Default................................ 108
SECTION 1205. Subrogation to Rights of Holders of Senior Indebtedness........ 109
SECTION 1206. Provisions Solely to Define Relative Rights.................... 109
SECTION 1207. Trustee to Effectuate Subordination............................ 109
SECTION 1208. No Waiver of Subordination Provisions.......................... 110
SECTION 1209. Distribution or Notice to Representative....................... 110
SECTION 1210. Notice to Trustee.............................................. 110
SECTION 1211. Reliance on Judicial Order or Certificate of Liquidating
Agent......................................................... 111
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SECTION 1212. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.............................. 112
SECTION 1213. Article Applicable to Paying Agents............................ 112
SECTION 1214. No Suspension of Remedies...................................... 112
SECTION 1215. Trust Moneys Not Subordinated.................................. 112
SECTION 1216. Trustee Not Fiduciary for Holders of Senior Indebtedness....... 112
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Note Guarantees................................................ 113
SECTION 1302. Severability................................................... 115
SECTION 1303. Restricted Subsidiaries........................................ 115
SECTION 1304. Subordination of Note Guarantees............................... 115
SECTION 1305. Limitation of Subsidiary Guarantors' Liability................. 115
SECTION 1306. Contribution................................................... 116
SECTION 1307. Subrogation.................................................... 116
SECTION 1308. Reinstatement.................................................. 117
SECTION 1309. Release of a Subsidiary Guarantor.............................. 117
SECTION 1310. Benefits Acknowledged.......................................... 117
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant
Defeasance.................................................... 117
SECTION 1402. Defeasance and Discharge....................................... 118
SECTION 1403. Covenant Defeasance............................................ 118
SECTION 1404. Conditions to Defeasance or Covenant Defeasance................ 119
SECTION 1405. Deposited Money and Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions...................... 120
SECTION 1406. Reinstatement.................................................. 121
TESTIMONIUM................................................................... 117
SIGNATURES AND SEALS.......................................................... 117
EXHIBIT A - Form of Note
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INDENTURE, dated as of December 29, 1997, among TUESDAY MORNING CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 14621 Inwood Road, Dallas, Texas 75244, and TMI HOLDINGS, INC., a Delaware corporation, TUESDAY MORNING, INC., a Texas corporation, FRIDAY MORNING, INC., a Texas corporation, and TMIL CORPORATION, a Delaware corporation (collectively, the "Subsidiary Guarantors"), and HARRIS TRUST AND SAVINGS BANK, an Illinois corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of its 11% Senior Subordinated Notes due 2007 (the "Initial Notes"), and its 11% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes" and, together with the Initial Notes, the "Notes"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture.
Each Subsidiary Guarantor has duly authorized the guarantee of up to $100,000,000 aggregate principal amount of the Initial Notes, and upon the issuance of the Exchange Notes, if any, up to $100,000,000 aggregate principal amount of the Exchange Notes and to provide therefor each Subsidiary Guarantor has duly authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the effectiveness of the Shelf Registration Statement (as defined herein), this Indenture will be subject to, and shall be governed by the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of or deemed to be part of and to govern the indentures qualified thereunder.
All things necessary have been done to make the Notes, when duly executed and duly issued by the Company and authenticated and delivered hereunder by the Trustee or the Authenticating Agent, the valid obligations of the Company and to make this Indenture a valid agreement of the Company, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self- liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles; and
(4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person; provided that, for purposes of Section 1008, such Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.
"Act," when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" means, with respect to any specified Person, (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (b) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or (c) any executive officer or director of any such specified Person or other Person or (d) with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Bank" means Fleet National Bank in its capacity as administrative agent under the Senior Credit Agreement and any future or successor or replacement administrative agent under the Senior Credit Agreement.
"Agent Members" has the meaning specified in Section 311.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (a) any Capital Stock
of any Restricted Subsidiary; (b) all or substantially all of the properties and
assets of the Company or its Restricted Subsidiaries; or (c) any other
properties or assets of any division or line of business of the Company or any
Restricted Subsidiary, other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (i) that is governed by the provisions of
Article Eight, (ii) between or among the Company and Restricted Subsidiaries in
accordance with the terms of this Indenture, (iii) that consist of accounts
receivable transferred to third parties that are not Affiliates of the Company
or any Subsidiary of the Company in the ordinary course of business, including
by way of the securitization of such receivables, (iv) of the Company or any
Restricted Subsidiary in exchange for properties or assets of substantially
equal value of another Person to be used in the same line of business being
conducted by the Company or any Restricted Subsidiary at the time of such
transfer having a Fair Market Value of less than $1.0 million in any given
fiscal year, (v) to an Unrestricted Subsidiary, if permitted under Section 1009,
(vi) consisting of the Headquarters Facility to third parties that are not
Affiliates of the Company or any Subsidiary of the Company or (vii) having a
Fair Market Value of less than $1.0 million in any given fiscal year.
"Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Notes.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee of such board.
"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day," when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Notes, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the date of the Indenture.
"Capitalized Lease Obligation" means, with respect to any Person, any obligation of such Person under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means: (a) any evidence of Indebtedness with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (b) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (c) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or any successor rating agency or at least P-1 by Moody's or any successor rating agency; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) demand and time deposits with a domestic commercial bank that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million.
"Certificate of Designation" means the certificate of designations, preferences and rights of the Senior Exchangeable Preferred Stock filed with the Secretary of State of the State of Delaware on December 29, 1997.
"Change in Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than 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
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding Voting Stock of the
Company and either (x) the Permitted Holders beneficially own, directly or
indirectly, in the aggregate Voting Stock of the Company that represents a
lesser percentage of the aggregate ordinary voting power of all classes of the
Voting Stock of the Company, voting together as a single class, than such other
person or group and are not entitled (by voting power, contract or otherwise) to
elect directors of the Company having a majority of the total voting power of
the Board of Directors, or (y) such other person or group is entitled to elect
directors of the Company having a majority of the total voting power of the
Board of Directors; (b) the Company consolidates with, or merges with or into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and cash, securities
and other property (other than Capital Stock of the surviving or transferee
corporation) in an amount that could be paid by the Company as a Restricted
Payment as described under Section 1009 and (ii) immediately after such
transaction, no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is 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 securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total outstanding Voting Stock of the surviving or transferee
corporation and either (x) the Permitted Holders beneficially own, directly or
indirectly, in the aggregate Voting Stock of the surviving or transferee
corporation that represents a lesser percentage of the aggregate ordinary voting
power of all classes of the Voting Stock of the surviving or transferee
corporation, voting together as a single class, than such other person or group
and are not entitled (by voting power, contract or otherwise) to elect directors
of the Surviving Entity having a majority of the total voting power of the Board
of Directors, or (y) such other person or group is entitled to elect directors
of the surviving or transferee having a majority of the total voting power of
the elected
Board of Directors; or (c) during any consecutive two year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 66 2/3% of the directors 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 (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with Article Eight.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated, whether voting or non-voting) of such Person's common stock, whether outstanding on the Issuance Date or issued after the Issuance Date, and includes, without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person.
"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 Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business, (c) the portion of net income (or loss)
of any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has
an ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any Restricted Subsidiary in cash
dividends or distributions during such period, (d) the net income (or loss) of
any Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to the date of combination,
(e) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders, and (f) for purposes of calculating Consolidated Adjusted Net Income under Section 1009, any net income (or loss) from any Restricted Subsidiary while it was an Unrestricted Subsidiary at any time during such period other than any amounts actually received from such Restricted Subsidiary during such period.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the extent deducted in computing Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges, in each case, for such period to (b) the Consolidated Interest Expense for such period.
"Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and all Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
(1) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of Interest Rate Agreements (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation and (iv) amortization of debt issuance costs, plus (b) the interest
component of Capitalized Lease Obligations of the Company and its Restricted
Subsidiaries during such period, plus (c) cash dividends due (whether or not
declared) on Preferred Stock by the Company and any Restricted Subsidiary, plus
(d) cash dividends due (whether or not declared) on Redeemable Capital Stock by
the Company and any Restricted Subsidiary, in each case as determined on a
consolidated basis in accordance with GAAP, less (2) interest on the Exchange
Debentures outstanding on the Exchange Date paid in kind with Exchange
Debentures and on Exchange Debentures so issued as payment in kind interest, all
in accordance with the Debenture Indenture as in effect on the Issuance Date;
provided that (x) the Consolidated Interest Expense attributable to interest on
any Indebtedness computed on a pro forma basis and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying at the option of the Company, either the fixed or
floating rate, and (y) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness 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 applicable period; provided
further that, notwithstanding the foregoing, the interest rate with respect to
any Indebtedness covered by any Interest Rate Agreement shall be deemed to be
the effective interest rate with respect to such Indebtedness after taking into
account such Interest Rate Agreement.
"Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization, depletion and other non-cash expenses of the Company and any Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period).
"Corporate Trust Office" means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office on the date of execution of this Indenture is located at 311 West Monroe Street, Chicago, Illinois 60606.
"corporation" includes corporations, associations, companies and business trusts.
"Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means The Depository Trust Company, its nominees and successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Senior Credit Agreement and (ii) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding of at least $25,000,000 and that has been specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under this Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Debentures" means the 13 1/4% Subordinated Exchange Debentures due 2009 of the Company issuable in exchange for the Senior Exchangeable Preferred Stock, plus any additional Exchange Debentures issued in lieu of cash interest, pursuant to the Exchange Indenture as in effect on the Issuance Date.
"Exchange Notes" has the meaning stated in the first recital of this Indenture and refers to any Exchange Notes containing terms substantially identical to the Initial Notes (except that (i) such Exchange Notes shall not contain terms with respect to transfer restrictions and shall be registered under the Securities Act, and (ii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) that are issued and exchanged for the Initial Notes in accordance with the Exchange Offer, as provided for in the Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders of the Initial Notes to exchange all of the Initial Notes for Exchange Notes, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the date of this Indenture.
"Global Notes" has the meaning set forth in Section 201.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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 nonperformance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Guarantor Senior Indebtedness" of a Subsidiary Guarantor means
Indebtedness of such Subsidiary Guarantor consisting of (i) a guarantee of any
Senior Indebtedness under the Senior Credit Agreement or any other Senior
Indebtedness and (ii) the principal of, premium, if any, and interest on all
other Indebtedness of such Subsidiary Guarantor (other than the Note Guarantee
issued by such Subsidiary Guarantor), whether outstanding on the date of this
Indenture or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be senior in right of payment to such Note Guarantee.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" of a Subsidiary
Guarantor shall not include (i) Indebtedness evidenced by the Note Guarantee of
such Subsidiary Guarantor, (ii) Indebtedness of such Subsidiary Guarantor that
is expressly subordinated in right of payment to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor, (iii) Indebtedness of such Subsidiary
Guarantor that by operation of law is subordinate to any general unsecured
obligations of such Subsidiary Guarantor, (iv) Indebtedness of such Subsidiary
Guarantor to the extent incurred in violation of any covenant of this Indenture,
(v) any liability for federal, state or local taxes or other taxes, owed or
owing by such Subsidiary Guarantor, (vi) trade account payables owed or owing by
such Subsidiary Guarantor, (vii) amounts owed by such Subsidiary Guarantor for
compensation to employees or for services rendered to such Subsidiary Guarantor,
(viii) Indebtedness of such Subsidiary Guarantor to any Affiliate of the
Company, (ix) Redeemable Capital Stock of such Subsidiary Guarantor and (x)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to
such Subsidiary Guarantor or any Subsidiary.
"Headquarters Facility" means the headquarters facility and warehouse of the Company as of the Issuance Date located in Dallas, Texas.
"Holder" means the Person in whose name a Note is registered in the Note Register.
"Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (c) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (d) all Capitalized Lease Obligations of such Person, (e) all obligations of such Person under or in respect of Interest Rate Agreements or Currency Agreements, (f) all Indebtedness referred to in (but not excluded from) the preceding clauses of other Persons and all dividends of other Persons, the payment of which
is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (g) all guarantees by such Person of Indebtedness referred to in this definition of any other Person, and (h) all Redeemable Capital Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Notes" has the meaning specified in the recitals to this Indenture.
"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) of Regulation D under the Securities Act.
"Interest Payment Date," when used with respect to any Note, means the Stated Maturity of an installment of interest on such Note.
"Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) designed to protect against or manage exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect advance, loan, guarantee or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued or owned by, any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. In addition, the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at
such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices.
"Issuance Date" means the closing date for the sale and original issuance of Notes hereunder.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.
"Management Stock" means the Capital Stock of the Company and the options to acquire Capital Stock of the Company owned by Lloyd L. Ross and Jerry M. Smith as of the Issuance Date together with Preferred Stock issued as payment in kind dividends on such Preferred Stock and any shares of Preferred Stock issued as payment in kind dividends thereon, and such dividends made pursuant to the terms of the certificate of designation or the certificate of incorporation, as the case may be, for such Preferred Stock as in effect on the Issuance Date.
"Maturity" means, with respect to any Note, the date on which any principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after 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 Officers' Certificate delivered to the Trustee.
"Non-Payment Default" means any event of default (other than a Payment Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person as defined in Regulation S.
"Note Guarantee" means any guarantee of the obligations of the Company under the Indenture and the Notes by any Restricted Subsidiary in accordance with the provisions of the Indenture.
"Note Register" and "Note Registrar" have the respective meanings specified in Section 305.
"Notes" has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.
"Offshore Global Note" has the meaning set forth in Section 201.
"Offshore Note Exchange Date" has the meaning set forth in Section 201.
"Offshore Physical Note" has the meaning set forth in Section 201.
"Opinion of Counsel" means a written opinion of legal counsel, which and who may be counsel for the Company, including an employee of the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding," when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; and
(iv) Notes which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding (provided that in connection with any offer by the Company or any obligor to purchase the Notes, Notes tendered for purchase will be deemed to be Outstanding and held by the tendering Holder until the date of purchase), except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor.
"Pari Passu Indebtedness" means (a) with respect to the Notes, Indebtedness that ranks pari passu in right of payment to the Notes and (b) with respect to any Note Guarantee, Indebtedness that ranks pari passu in right of payment to such Note Guarantee.
"Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (or premium, if any, on) or interest on any Notes on behalf of the Company.
"Payment Blockage Period" has the meaning specified in Section 1203.
"Payment Default" means any default in the payment (whether at stated maturity, upon scheduled installment, by acceleration or otherwise) of principal of, or premium, if any, or interest on Designated Senior Indebtedness.
"Permitted Holders" means, as of the date of determination, Madison Dearborn Capital Partners II, L.P. and its Affiliates.
"Permitted Indebtedness" means any of the following:
(a) (i) Indebtedness of the Company under the Senior Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (A) $110 million less the amount of any permanent reductions made by the Company in respect of any term loans under the Senior Credit Agreement and (B) with respect to revolving borrowings, the greater of (1) $115 million and (2) 60% of the Eligible Inventory (as defined in the Senior Credit Agreement on the Issuance Date) of the Company and the Restricted Subsidiaries and (ii) any guarantee by a Subsidiary Guarantor of Indebtedness incurred under this clause (a);
(b) Indebtedness of the Company pursuant to the Notes or of any Restricted Subsidiary pursuant to a Note Guarantee;
(c) Indebtedness of the Company or any Restricted Subsidiary outstanding on the date of this Indenture and listed on Schedule A;
(d) Indebtedness of the Company owing to any wholly owned Restricted Subsidiary; provided that any Indebtedness of the Company owing to any such Restricted Subsidiary is subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, acceleration or otherwise) to the payment and performance of the Company's obligations under such Notes; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or another wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (d);
(e) Indebtedness of a Restricted Subsidiary owing to the Company or to another wholly owned Restricted Subsidiary; provided that any such Indebtedness of any Subsidiary Guarantor is subordinated in right of payment to the Note Guarantee of such Subsidiary Guarantor; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or a wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary not permitted by this clause (e);
(f) guarantees of any Restricted Subsidiary made in accordance with the provisions of Section 1015;
(g) obligations of the Company or any Subsidiary Guarantor entered into in the ordinary course of business (i) pursuant to Interest Rate Agreements designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Restricted Subsidiary, which obligations do not exceed the aggregate principal amount of such Indebtedness and (ii) pursuant to Currency Agreements entered into by the Company or any of its Restricted Subsidiaries in respect of its (x) assets or (y) obligations, as the case may be, denominated in a foreign currency;
(h) Indebtedness of the Company or any Subsidiary Guarantor in respect of Purchase Money Obligations and Capitalized Lease Obligations of the Company or any Subsidiary Guarantor in an aggregate amount which does not exceed $15,000,000 at any one time outstanding;
(i) Indebtedness of the Company or any Subsidiary Guarantor consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries;
(j) Indebtedness of the Company or any Subsidiary Guarantor represented by (x) letters of credit for the account of the Company or any Restricted Subsidiary or (y) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers' compensation claims, payment obligations in connection with self-insurance or other similar requirements in the ordinary course of business;
(k) Acquired Indebtedness of any Restricted Subsidiary that is organized outside of the United States of America in an aggregate amount which, together with any Indebtedness permitted to be incurred pursuant to this clause (k) and refinanced pursuant to clause (p) below, does not exceed $10,000,000 at any one time outstanding;
(l) Indebtedness of the Company owing to Jerry M. Smith, under a note issued pursuant to a written agreement between the Company and Jerry M. Smith as in effect on the Issuance Date, in consideration for the repurchase of Common Stock of the Company owned by Jerry M. Smith at his retirement, in an aggregate amount not to exceed $15,000,000 outstanding at any time;
(m) Preferred Stock issued as payment in kind dividends on Preferred Stock outstanding on the Issuance Date and any shares of Preferred Stock issued as payment in kind dividends thereon, such dividends made pursuant to the terms of the certificate of
designation for such Preferred Stock or the certificate of incorporation, as the case may be, as in effect on the Issuance Date;
(n) Indebtedness of the Company or a Subsidiary Guarantor incurred in connection with the Company's Headquarters Facility or the purchase or construction of a new headquarters facility, in each case, as permitted under the Senior Credit Agreement as in effect on the Issuance Date;
(o) Indebtedness of the Company or any Subsidiary Guarantor not otherwise permitted by the foregoing clauses (a) through (n) in an aggregate principal amount not in excess of $20,000,000 at any one time outstanding; and
(p) any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") of any Indebtedness, referred to in clauses (b), (c) and (k) of this definition, including any successive refinancings, so long as (i) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced, plus the lesser of the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined as necessary to accomplish such refinancing, (ii) in the case of any refinancing by the Company of Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Notes at least to the same extent as the Indebtedness being refinanced, (iii) in the case of any refinancing by any Subsidiary Guarantor of Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness is made pari passu with or subordinate to the Note Guarantee of such Subsidiary Guarantor at least to the same extent as the Indebtedness being refinanced, (iv) such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity later than the final Stated Maturity of the Notes and (v) Indebtedness of the Company or a Subsidiary Guarantor may only be refinanced with Indebtedness of the Company or a Subsidiary Guarantor and Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor may only be refinanced with Indebtedness of such Restricted Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clause
(d) or (e) of the definition of "Permitted Indebtedness;"
(d) Investments in an amount not to exceed $10,000,000 at any one time outstanding;
(e) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a wholly owned Restricted Subsidiary or (ii) such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly owned Restricted Subsidiary;
(f) bonds, notes, debentures and other securities received as consideration for Assets Sales to the extent permitted under Section 1014;
(g) negotiable instruments held for deposit or collection in the ordinary course of business, except to the extent they would constitute Investments in Affiliates; or
(h) Investments in the form of the sale (on a "true-sale" non- recourse basis) or the servicing of receivables transferred from the Company or any Restricted Subsidiary.
"Permitted Junior Securities" has the meaning specified in Section 1202.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Physical Notes" has the meaning set forth in Section 201.
"Place of Payment" means the office or agency maintained by the Company where the principal of (and premium, if any, on) and interest on the Notes are payable as specified in Section 1002.
"Predecessor Note" of any particular Note, means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference
stock whether now outstanding, or issued after the Issuance Date, and including, without limitation, all classes and series of preferred or preference stock of such Person.
"Private Placement Legend" has the meaning set forth in Section 203.
"Public Equity Offering" means an offer and sale of common stock (which is Qualified Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).
"Purchase Money Obligations" means, with respect to any Person, obligations, other than Capitalized Lease Obligations, incurred or assumed in the ordinary course of business in connection with the purchase of property to be used in the business of such Person within 90 days of such purchase, provided that the amount of any Purchase Money Obligation shall not exceed the purchase price of the property purchased.
"QIB" means a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act.
"Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity.
"Redemption Date," when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement dated as of December 29, 1997, among the Company, the Subsidiary Guarantors and the Holders of Initial Notes.
"Registration Statement" means the Registration Statement as defined in the Registration Rights Agreement.
"Regular Record Date" has the meaning specified in Section 301.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means (i) with respect to the Senior Credit Agreement, the Agent Bank and (ii) with respect to any other Senior Indebtedness, the indenture trustee or other trustee, agent or representative for the holders of such Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means any vice president, any assistant secretary, any assistant treasurer, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above- designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means, at any time, any direct or indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of "Restricted Subsidiary."
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc. and its successors.
"Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing of such property or asset to the seller or transferor.
"Securities Act" means Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Senior Credit Agreement" means the credit agreement dated as of December 29, 1997, among the Company, the several lenders parties thereto, the Subsidiary Guarantors, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger and syndication agent, and Fleet National Bank, as administrative agent, as such agreement may be amended, renewed, extended, substituted, restated, refinanced, restructured, supplemented, increased or otherwise modified from time to time (including, without limitation, any successive amendments, renewals, extensions, substitutions, restatements, refinancings, restructurings, supplements or other modifications of the foregoing); provided that with respect to any agreement providing for the refinancing of Indebtedness under the Senior Credit Agreement, such agreement shall be the Senior Credit Agreement under the Indenture only if a notice to that effect is delivered by the
Company to the Trustee and there shall be at any time only one instrument that is the Senior Credit Agreement under the Indenture.
"Senior Exchangeable Preferred Stock" means the 13 1/4% Senior Exchangeable Preferred Stock issued by the Company on the Issuance Date and any shares of Senior Exchangeable Preferred Stock issued as payment in kind dividends thereon or on shares of Senior Exchangeable Preferred Stock so issued as payment in kind dividends pursuant to the Certificate of Designation as in effect on the Issuance Date.
"Senior Indebtedness" means (i) all obligations of the Company, now or
hereafter existing, under or in respect of the Senior Credit Agreement, whether
for principal, premium, if any, interest (including, interest accruing after the
filing of, or which would have accrued but for the filing of, a petition by or
against the Company under Bankruptcy Law, whether or not such interest is
allowed as a claim after such filing in any proceeding under such law) and other
amounts due in connection therewith (including any fees, premiums, expenses and
indemnities) and (ii) the principal of, premium, if any, and interest on all
other Indebtedness of the Company (other than the Notes), whether outstanding on
the date of this Indenture or thereafter created, incurred or assumed, unless,
in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(i) Indebtedness evidenced by the Notes, (ii) Indebtedness of the Company that
is expressly subordinated in right of payment to any Senior Indebtedness of the
Company or the Notes, (iii) Indebtedness of the Company that by operation of law
is subordinate to any general unsecured obligations of the Company, (iv)
Indebtedness of the Company to the extent incurred in violation of Section 1008,
(v) any liability for federal, state or local taxes or other taxes, owed or
owing by the Company, (vi) trade account payables owed or owing by the Company,
(vii) amounts owed by the Company for compensation to employees or for services
rendered to the Company, (viii) Indebtedness of the Company to any Restricted
Subsidiary or any other Affiliate of the Company, (ix) Redeemable Capital Stock
of the Company and (x) Indebtedness which when incurred and without respect to
any election under Section 1111(b) of Title 11 of the United States Code is
without recourse to the Company or any Restricted Subsidiary.
"Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year.
"Special Record Date" for the payment of any Defaulted Interest on the Notes means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a Subsidiary Guarantor that is expressly subordinated in right of payment to the Notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries.
"Subsidiary Guarantor" means each of TMI Holdings Inc., Tuesday Morning Inc., Friday Morning, Inc. and TMIL Corporation and any Restricted Subsidiary that incurs a Note Guarantee; provided that, upon the release and discharge of any Person from its Note Guarantee in accordance with the Indenture, such Person shall cease to be a Subsidiary Guarantor.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force at the date as of which this Indenture was executed, except as provided in
Section 905.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder.
"United States" means the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (b) any Subsidiary of an Unrestricted Subsidiary; provided, however, that in no event shall any Subsidiary Guarantor be an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 1019, (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, and (v) neither the Company nor any Restricted Subsidiary has any obligation (1) to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or (2) to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary 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 a board resolution with the Trustee giving effect to such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving effect to such designation, there would be no Default or Event of Default under this Indenture and the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008.
"U.S. Global Note" has the meaning set forth in Section 201.
"U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt.
"U.S. Physical Note" has the meaning set forth in Section 201.
"Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company, the Subsidiary Guarantors and any other obligor on the Notes (if applicable) shall, at the request of the Trustee, furnish to the Trustee an Officers' Certificate in form and substance reasonably acceptable to the Trustee stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and, at the request of the Trustee, an Opinion of Counsel to the effect that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of any such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 1007) shall include:
(1) a statement that each individual or firm signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual or such firm, he or it has made such examination or investigation as is necessary to enable him or it 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 each such individual or such firm, such covenant or condition has been complied with.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Subsidiary Guarantor or other obligor on the Notes may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, any Subsidiary Guarantor or other obligor on the Notes stating that the information with respect to such factual matters is in the possession of the Company, any Subsidiary Guarantor or other obligor on the Notes, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Note Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company or any Subsidiary Guarantor in reliance thereon, whether or not notation of such action is made upon such Note.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Subsidiary
Guarantor or any other obligor on the Notes shall be sufficient for every
purpose hereunder if made, given, furnished or delivered in writing and
mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to or with the Trustee at its Corporate Trust Office, Attention:
Indenture Trust Division/J. Bartolini, or
(2) the Company or any Subsidiary Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing, or mailed, first-class postage prepaid, or delivered by recognized overnight courier, to the Company or such Subsidiary Guarantor addressed to it at the address of its principal office, for the attention of the Chief Financial Officer, specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company or such Subsidiary Guarantor, or
(3) the Agent Bank by the Company or any Subsidiary Guarantor, the Trustee or any Holder shall be sufficient for any purpose hereunder if made, given, furnished or delivered in writing to or with the Agent Bank addressed to it as set forth in the Senior Credit Agreement, or at any other address previously furnished in writing to the Company, the Subsidiary Guarantors and the Trustee by the Agent Bank.
Where this Indenture provides for notice of any event to Holders of Notes by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first- class postage prepaid, to each such Holder affected by such event, at its address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
In case, by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impractical to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice for every purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
In case any provision in this Indenture or in any Note 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.
Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Notes Registrar and their successors hereunder and the Holders and, with respect to any provisions hereof relating to the subordination of the Notes or the rights of holders of Senior Indebtedness, the holders of Senior Indebtedness, any benefit or any legal or equitable right, remedy or claim under this Indenture.
This Indenture and the Notes shall be governed by and construed in accordance with the law of the State of New York. Upon the effectiveness of the Shelf Registration Statement or the consummation of the Exchange Offer, this Indenture will be subject to the provisions of the Trust Indenture Act that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.
In any case where any Interest Payment Date, Redemption Date, or Stated Maturity or Maturity of any Note shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of any Note) payment of principal (and
premium, if any) or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity or Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.
If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be.
A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Guarantor under the Notes, any Note Guarantee or this Indenture, as applicable, or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note and the related Note Guarantee, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes and the Note Guarantees.
This Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument.
ARTICLE TWO
NOTE FORMS
The Initial Notes shall be known as the "11% Senior Subordinated Notes due 2007" and the Exchange Notes shall be known as the "11% Series B Senior Subordinated Notes due 2007," in each case, of the Company. The Notes and the Trustee's certificate of authentication shall be in substantially the forms set forth in Exhibit A hereto and in this Article, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. Each Note shall be dated the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Notes, as evidenced by their execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A under the Securities Act shall be issued initially in the form of a single permanent global Note in substantially the form set forth in Exhibit A and contain each of the legends set forth in Section 203 (the "U.S. Global Note"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold in offshore transactions in reliance on Regulation S under the Securities Act shall be issued initially in the form of a single temporary global Note in substantially the form set forth in Exhibit A and contain the legends set forth in Section 203 (the "Temporary Offshore Global Note"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. At any time following 41 days after the date hereof (the "Offshore Note Exchange Date"), upon receipt by the Trustee and the Company of a certificate substantially in the form set forth in Section 204, a single permanent global Note substantially in the form of Exhibit A hereto (the "Permanent Offshore Global Note"; and together with the Temporary Offshore Global Note, the "Offshore Global Note") duly executed by the Company and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depositary, and the Note Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Temporary Offshore Global Note in an amount equal to the principal amount of the beneficial interest in the Temporary Offshore Global Note transferred. The aggregate principal amount of the Offshore Global Note may from time to time be increased or decreased by adjustments made in the records of the Trustee, as custodian for the Depositary or its nominee, as herein provided. Initial Notes issued pursuant to Section 305 in exchange for or upon transfer of beneficial interests in the U.S. Global Note or the Offshore Global Note shall be in the form of U.S. Physical Notes or in the form of permanent certificated Notes substantially in the form set forth in Exhibit A (the "Offshore Physical Notes"), respectively, as hereinafter provided.
Initial Notes which are offered and sold to Institutional Accredited Investors which are not QIBs (excluding Non-U.S. Persons) shall be issued in the form of permanent certificated Notes in substantially the form set forth in Exhibit A and contain the Private Placement Legend as set forth in Section 203 (the "U.S. Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes." The U.S. Global Note and the Offshore Global Note are sometimes collectively referred to as the "Global Notes."
Exchange Notes shall be issued substantially in the form set forth in Exhibit A.
Subject to Section 611, the Trustee's certificate of authentication shall be in substantially the following form:
This is one of the Notes referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
Dated: __________ By: ____________________
Authorized Signatory
|
Unless and until (i) an Initial Note is sold pursuant to an effective Shelf Registration Statement or (ii) an Initial Note is exchanged for an Exchange Note in an Exchange Offer pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, (A) each U.S. Global Note and U.S. Physical Note shall bear the following legend set forth below (the "Private Placement Legend") on the face thereof and (B) the Offshore Physical Notes and the Temporary Offshore Global Note shall bear the Private Placement Legend on the face thereof until the Offshore Note Exchange Date and receipt by the Company and the Trustee of a certificate substantially in the form provided in Section 204:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. 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 THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR
(B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE
TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT AND ANY
SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR AND THIS SECURITY) AND THE LAST DAY ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE
UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A 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 TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED
THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 SECTIONS 311 AND 312 OF THE INDENTURE.
On or after February 8, 1998
HARRIS TRUST AND SAVINGS BANK
311 West Monroe Street
Chicago, IL 60606
Attention: Indenture Trust Division/J. Bartolini
Ladies and Gentlemen:
This letter relates to $_______________ principal amount of Notes represented by the temporary offshore global note certificate (the "Temporary Offshore Global Note"). Pursuant to Section [201] [203] of the Indenture dated as of December 29, 1997 (the "Indenture") relating to
the Notes, we hereby certify that (1) we are the beneficial owner of such
principal amount of Notes represented by the Temporary Offshore Global Note and
(2) we are a Non-U.S. Person to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the Securities Act of
1933, as amended (the "Regulation S"). [Accordingly, you are hereby requested to
exchange the Temporary Offshore Global Note for an unlegended Permanent Offshore
Global Note representing the undersigned's interest in the principal amount of
Notes represented by the Temporary Offshore Global Note, all in the manner
provided for in the Indenture.] [Accordingly, you are hereby requested to issue
an Offshore Physical Note representing the undersigned's interest in the
principal amount of Notes represented by the Temporary Offshore Global Note, all
in the manner provided by the Indenture.]
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. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:__________________________ Authorized Signature
ARTICLE THREE
THE NOTES
The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $100,000,000, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 311, 312, 906, 1013, 1014 or 1108 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the "11% Senior Subordinated Notes due 2007" and the Exchange Notes shall be known and designated as the "11% Series B Senior Subordinated Notes due 2007," in each case, of the Company. The Stated Maturity of the Notes shall be December 15, 2007, and they shall bear interest at the rate of 11% per annum from December 29, 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable on June 15, 1998 and semi-annually thereafter on June 15 and
December 15 in each year, until the principal thereof is paid in full and to the Person in whose name the Note (or any predecessor Note) is registered at the close of business on the June 1 or December 1 immediately preceding such Interest Payment Date (each, a "Regular Record Date"). Interest will be computed on the Notes as specified in Section 310 hereof.
The principal of (and premium, if any) and interest on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid (a) by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (b) by wire transfer to an account located in the United States maintained by the payee.
Holders shall have the right to require the Company to purchase their
Notes, in whole or in part, in the event of a Change in Control pursuant to
Section 1013. The Notes shall be subject to repurchase pursuant to an Excess
Proceeds Offer as provided in Section 1014.
The Notes shall be redeemable as provided in Article Eleven and in the Notes. The Indebtedness evidenced by the Notes shall be subordinated in right of payment to Senior Indebtedness as provided in Article Twelve. The due and punctual payment of principal of, and premium, if any, and interest on the Notes payable by the Company is irrevocably and unconditionally guaranteed, to the extent set forth herein, by each of the Subsidiary Guarantors. The Note Guarantee issued by any Subsidiary Guarantor will be subordinated to all existing and future Guarantor Senior Indebtedness of such Subsidiary Guarantor as provided in Article 12.
The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof.
The Notes shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer or a Vice President. The signature of any of these officers on the Notes may be the manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.
On Company Order, the Trustee shall authenticate for original issue Initial Notes in an aggregate principal amount not to exceed $100,000,000. On Company Order, the Trustee shall authenticate for original issue Exchange Notes in an aggregate principal amount not to exceed $100,000,000; provided that such Exchange Notes shall be issuable only upon the valid surrender for cancellation of Initial Notes of a like aggregate principal amount in accordance with an Exchange Offer pursuant to the Registration Rights Agreement. In each case, the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication of Notes. Such order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company or any Subsidiary Guarantor, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or such Subsidiary Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 303 in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name.
Pending the preparation of definitive Notes, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes, upon surrender of the temporary Notes at the office or agency of the Company in a Place of Payment, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and, upon Company Order, the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register for the Notes (the register maintained in the Corporate Trust Office of the Trustee and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Note Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as note registrar (the Trustee in such capacity, together with any successor of the Trustee in such capacity, the "Note Registrar") for the purpose of registering Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the office or agency in a Place of Payment, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes, of any authorized denomination or denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Notes may be exchanged for other Notes, of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange (including an exchange of Initial Notes for Exchange Notes), the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled
to receive; provided that no exchange of Initial Notes for Exchange Notes shall occur until an Exchange Offer Registration Statement shall have been declared effective by the Commission, the Trustee shall have received an Officers' Certificate confirming that the Exchange Offer Registration Statement has been declared effective by the Commission and the Initial Notes to be exchanged for the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Note Registrar) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Note Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 303, 304, 906, 1013, 1014 or 1108 not involving any transfer.
If any mutilated Note is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such mutilated Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.
If there shall be delivered to the Company, any Subsidiary Guarantor and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Note and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company, any Subsidiary Guarantor or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.
Every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Company, any Subsidiary Guarantor and any other obligor upon the Notes, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the Place of Payment; provided, however, that each installment of interest on any Note may at the Company's option be paid (i) by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Note Register or (ii) by wire transfer to an account located in the United States maintained by the payee.
Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such defaulted interest and, if applicable, interest on such defaulted interest (to the extent lawful) at the rate specified in the Notes (such defaulted interest and, if applicable, interest thereon herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (the "Special Record Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given in the manner provided in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose name the Registered Notes (or their respective
Predecessor Notes) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause
(2).
(2) The Company may make payment of any Defaulted Interest on the Notes in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.
Prior to due presentment of a Note for registration of transfer, the Company, any Subsidiary Guarantor, the Trustee and any agent of the Company, any Subsidiary Guarantor or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, any Subsidiary Guarantor, the Trustee or any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary.
All Notes surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Notes so delivered to the Trustee shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Notes, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures unless by Company Order the Company shall direct that cancelled Notes be returned to it.
Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.
(a) Each Global Note initially shall (i) be registered in the name of the Depositary for such Global Notes or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note, and the Depositary may be treated by the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Subsidiary Guarantors, the Trustee or any agent of the Company, the Subsidiary Guarantors or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial owner of any Note. The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be transferred in accordance with the applicable rules and procedures of the Depositary and the provisions of Section 312. Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees, except (i) as otherwise set forth in Section 312 and (ii) U.S. Physical Notes or Offshore Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Note or the Offshore Global Note, respectively, in the event that the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the applicable Global Note or the Depositary ceases to be a "Clearing Agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days or an Event of Default has occurred and is continuing and the Note Registrar has received a request from the Depositary. In connection with a transfer of an entire Global Note to beneficial owners pursuant to clause (ii) of this paragraph (b), the applicable Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the applicable Global Note, an equal aggregate principal amount at maturity of U.S. Physical Notes (in the case of the U.S. Global Note) or Offshore Physical Notes (in the case of the Offshore Global Note), as the case may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in the other Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.
(d) Any U.S. Physical Note delivered in exchange for an interest in the U.S. Global Note pursuant to paragraph (b) of this Section shall, unless such exchange is made on or after the Resale Restriction Termination Date and except as otherwise provided in Section 312, bear the Private Placement Legend.
Unless and until (i) an Initial Note is sold pursuant to an effective Registration Statement, or (ii) an Initial Note is exchanged for an Exchange Note in the Exchange Offer pursuant to an effective Registration Statement, in each case, pursuant to the Registration Rights Agreement, the following provisions shall apply:
As used in this Indenture, "Accredited Investor Certificate" means a
certificate substantially in the form set forth in Section 313; "Regulation
S Certificate" means a certificate substantially in the form set forth in
Section 314; "Rule 144A Certificate" means a certificate substantially in
the form set forth in Section 315; and "Non-Registration Opinion and
Supporting Evidence" means a written opinion of counsel reasonably
acceptable to the Company to the effect that, and such other certification
or information as the Company may reasonably require to confirm that, the
proposed transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act.
(c) [Intentionally Omitted]
1. If the proposed transfer occurs prior to the Offshore Note Exchange Date, and the proposed transferor holds:
(A) a U.S. Physical Note which is surrendered to the Note Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and,
if required by the Company, a Non-Registration Opinion and
Supporting Evidence, or delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee requests delivery in
the form of a U.S. Physical Note, then the Note Registrar
shall (x) register such transfer in the name of such
transferee and record the date thereof in its books and
records, (y) cancel such surrendered U.S. Physical Note and
(z) deliver a new U.S. Physical Note to such transferee duly
registered in the name of such transferee in principal
amount equal to the principal amount being transferred of
such surrendered U.S. Physical Note;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Note, then the Note Registrar shall (x) cancel such surrendered U.S. Physical Note, (y) record an increase in the principal amount of the U.S. Global Note equal to the principal amount being transferred of such surrendered U.S. Physical Note and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Note, then the Note Registrar shall (x) cancel such surrendered U.S. Physical Note, (y) record an increase in the principal amount of the Temporary Offshore Global Note equal to the principal amount being transferred of such surrendered U.S. Physical Note and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
In any of the cases described in this Section 312(e)(1)(A), the Note Registrar shall deliver to the transferor a new U.S. Physical Note in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Note, as applicable.
(B) the U.S. Global Note, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Note, then the Note Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the U.S. Global Note in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Note to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Note, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Note, then the Note Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the U.S. Global Note in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the Temporary Offshore Global Note equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
(C) the Temporary Offshore Global Note, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Note, then the Note Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global Note in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Note to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Note, then the Note Registrar shall (x) record a decrease in the principal amount of the Offshore Global Note in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Note equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Note, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; provided, however, that until the Offshore Note Exchange Date occurs, beneficial interests in the Offshore Global Note may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account.
2. If the proposed transfer occurs on or after the Offshore Note Exchange Date and the proposed transferor holds:
(A) a U.S. Physical Note which is surrendered to the Note Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Note, then the procedures set forth in Section 312(e)(1)(A)(i) shall apply;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Offshore Global Note, then the procedures set forth in Section 312(e)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Note Registrar shall cancel such surrendered U.S. Physical Note and at the direction of the transferee, either:
(x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Note to such transferee in principal amount equal to the principal amount being transferred of such surrendered U.S. Physical Note, or
(y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Note equal to the principal amount being transferred of such surrendered U.S. Physical Note and notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
In any of the cases described in this Section
312(e)(2)(A)(i), (ii) or (iii)(x), the Note Registrar shall
deliver to the transferor a new U.S. Physical Note in
principal amount equal to the principal amount not
being transferred of such surrendered U.S. Physical Note, as
applicable.
(B) the U.S. Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Note, then the procedures set forth in Section 312(e)(1)(B)(i) shall apply; or
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Note, then the procedures set forth in Section 312(e)(1)(B)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Note Registrar shall (x) record a decrease in the principal amount of the U.S. Global Note in an amount equal to the beneficial interest therein being transferred, (y) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer and (z) at the direction of the transferee, either:
(x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Note to such transferee in principal amount equal to the amount of such decrease, or
(y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Note equal to the amount of such decrease.
(C) an Offshore Physical Note which is surrendered to the Note Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Note, then the Note Registrar shall (x) cancel such surrendered Offshore Physical Note, (y) record an increase in the principal amount of the U.S. Global Note equal to the principal amount being transferred of such surrendered Offshore Physical Note and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting through an Agent Member, requests that the proposed transferee receive a beneficial interest in the Offshore Global Note, then the Note Registrar shall (x) cancel such surrendered Offshore Physical Note, (y) record an increase in the principal amount of the Offshore Global Note equal to the principal amount being transferred of such surrendered Offshore Physical Note and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) does not make a request covered by Section 312(e)(2)(C)(i) or Section 312(e)(2)(C)(ii), then the Note Registrar shall (x) register such transfer in the name of such transferee and record the date thereof in its books and records, (y) cancel such surrendered Offshore Physical Note and (z) deliver a new Offshore Physical Note to such transferee duly registered in the name of such transferee in principal amount equal to the principal amount being transferred of such surrendered Offshore Physical Note.
In any of the cases described in this Section 312(e)(2)(C), the Note Registrar shall deliver to the transferor a new U.S. Physical Note in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Note, as applicable.
(D) the Offshore Global Note, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Note, then the Note
Registrar shall (x) record a decrease in the principal amount of the Offshore Global Note in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Note equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting through an Agent Member, requests that the proposed transferee receive a beneficial interest in the Offshore Global Note, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or
(iii) does not make a request covered by Section 312(e)(2)(D)(i) or Section 312(e)(2)(D)(ii), then the Note Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global Note in an amount equal to the beneficial interest therein being transferred, (y) deliver a new Offshore Physical Note to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
311 West Monroe Street
Chicago, IL 60606
Attention: Indenture Trust Division/J. Bartolini
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate principal amount of the 11% Senior Subordinated Notes due 2007 (the "Notes") of Tuesday Morning Corporation. (the "Company"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of
1933, as amended (the "Securities Act")) purchasing for our own account or
for the account of such an
institutional "accredited investor," and we are acquiring the Notes 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 other applicable securities law and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and 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 and acknowledge that the Notes have not been
registered under the Securities Act, or any other applicable securities law
and may not be offered, sold or otherwise transferred except in compliance
with the registration requirements of the Securities Act or any other
applicable securities law, or pursuant to an exemption therefrom, and in
each case in compliance with the conditions for transfer set forth below.
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 or any
subsidiary thereof, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) for so long as the Notes
are eligible for resale pursuant to Rule 144A under the Securities Act
("Rule 144A"), to a person we reasonably believe is a "Qualified
Institutional Buyer" within the meaning of 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) pursuant to offers and sales to non-U.S. persons that occur outside the
United States within the meaning of Regulation S under the Securities Act,
or (e) 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 to 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) or (e) above prior to
the Resale Restriction Termination Date, the transferor shall deliver to
the trustee (the "Trustee") under the Indenture pursuant to which the Notes
are issued a letter from the transferee substantially in the form of this
letter, which shall provide, among other things, that the transferee is a
person or entity as defined in paragraph 1 of this letter and that it is
acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. We acknowledge that the Company and the
Trustee reserve the right prior to any offer, sale or other transfer of the
Notes pursuant to clauses (d) and (e) above prior to the Resale Restriction
Termination Date to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and
the Trustee.
3. We are acquiring the Notes purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion.
4. 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 proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By:______________________________
Date:____________________________
Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
NAME ADDRESS TAXPAYER ID NUMBER ------ ------- ------------------ |
Date of this Certificate: _________ __, 199_
To: Harris Trust and Savings Bank,
as Trustee (the "Trustee")
311 West Monroe Street
Chicago, IL 60606
Attention: Indenture Trust Division/J. Bartolini
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate principal amount of Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S ("Regulation S") under the Securities Act of 1933, as amended (the "Securities Act"), and accordingly, we hereby certify as follows:
1. The offer of the Notes was not made to a person in the United States (unless such person or the account held by it for which it is acting is excluded from the definition of "U.S. person" pursuant to Rule 902(o) of Regulation S under the circumstances described in Rule 902(i)(3) of Regulation S) or specifically targeted at an identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable.
4. The proposed transfer of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling concession or other fee or remuneration in respect of the Notes, and the proposed transfer takes place before the Offshore Note Exchange Date referred to in the Indenture, dated as of December 29, 1997, among the Company, the guarantors thereunder and the Trustee, or we are an officer or director of the Company or a distributor, we certify that the proposed transfer is being made in accordance with the provisions of Rules 903 and 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
To: Harris Trust and Savings Bank,
as Trustee (the "Trustee")
311 West Monroe Street
Chicago, IL 60606
Attention: Indenture Trust Division/J. Bartolini
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate principal amount of Notes, we confirm that such sale has been effected pursuant to and in accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"). We are aware that the transfer of Notes to us is being made in reliance on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have been given the opportunity to obtain from the Company the information referred to in Rule 144A(d)(4), and have either declined such opportunity or have received such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use) in addition to serial numbers, and, if so, the Trustee shall use such "CUSIP" numbers in addition to serial numbers in notices of redemption, repurchase or other notices to Holders as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Notes, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
This Indenture shall, upon Company Request, cease to be of further effect with respect to Notes (except as to any surviving rights of registration of transfer or exchange of Notes expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when
(1) either
(A) all Notes theretofore authenticated and delivered (other than
(i) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306, and (ii) Notes for
whose payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all Notes and, in the case of (i) or (ii) below, not theretofore delivered to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company or any Subsidiary Guarantor, in the case of
(i), (ii) or (iii) above, has irrevocably deposited or caused to
be deposited with the Trustee as trust funds in trust for such
purpose an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest on the Notes to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument or agreement to which the Company or any Subsidiary Guarantor is a party or by which it is bound;
(3) the Company or any Subsidiary Guarantor has paid or caused to be paid all other sums payable hereunder by the Company or any Subsidiary Guarantor;
(4) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of such Notes at maturity or the Redemption Date, as the case may be; and
(5) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606, the obligations of the Company to any Authenticating Agent under Section 612 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive.
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money in accordance with Section 401 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 any Subsidiary Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
"Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article 12 or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Note when it becomes due and payable and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of, or premium, if any, on any Note at its Maturity (upon acceleration, optional redemption, required purchase or otherwise);
(3) default in the performance, or breach, of the provisions of Article Eight, the failure to make or consummate a Change in Control Offer in accordance with Section 1013
or the failure to make or consummate an Excess Proceeds Offer in accordance with Section 1014;
(4) default in the performance, or breach, of any covenant or warranty of the Company or any Subsidiary Guarantor contained in this Indenture or any Note Guarantee (other than a default in the performance, or breach, of a covenant or warranty which is specifically dealt with in clause (1), (2) or (3) of this Section) and continuance of such default or breach for a period of 30 days after there has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of all Outstanding Notes;
(5) (a) one or more defaults in the payment of principal of or premium, if any, on Indebtedness of the Company or any Restricted Subsidiary aggregating $10,000,000 or more, when the same becomes due and payable at the stated maturity thereof, and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived or (b) Indebtedness of the Company or any Restricted Subsidiary aggregating $10,000,000 or more shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment) prior to the stated maturity thereof;
(6) one or more final judgments or orders shall be rendered against the Company or any Restricted Subsidiary which require the payment of money, either individually or in an aggregate amount, in excess of $10,000,000 and shall not be discharged and either (a) an enforcement proceeding shall have been commenced by any creditor upon such judgment or order or (b) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, was not in effect;
(7) any Note Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Guarantor denies that it has any further liability under any Note Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Note Guarantee in accordance with this Indenture);
(8) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors, or (E) admits in writing that it is generally not paying its debts (other than debts which are the subject of a bona fide dispute) as they become due; or
(9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that remains unstayed and in effect for 60 days and: (A) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case; (B) appoints a Custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries; or (C) orders the liquidation of the Company or any of its Significant Subsidiaries; provided that clauses (A), (B) and (C) shall not apply to an Unrestricted Subsidiary, unless such action or proceeding has a material adverse effect on the interests of the Company or any Restricted Subsidiary.
If an Event of Default (other than an Event of Default specified in clause (8) or (9) of Section 501) occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Notes by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee, upon the written request of such Holders, shall declare the principal of, premium, if any, and accrued interest on all of the Outstanding Notes to be due and payable immediately; provided that so long as the Senior Credit Agreement shall be in full force and effect, if an Event of Default shall have occurred and be continuing (other than as specified in clause (8) or (9) of Section 501 with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (x) five Business Days following delivery of a written notice of such acceleration of the Notes to the agent under the Senior Credit Agreement and (y) the acceleration of any Indebtedness under the Senior Credit Agreement. Upon any such declaration all such amounts payable in respect of the Notes shall become immediately due and payable. If an Event of Default specified in clause (8) or (9) of Section 501 occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the Outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in aggregate principal amount of the Outstanding Notes, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any Outstanding Notes that has become due otherwise than by such declaration of acceleration together with interest on such unpaid principal at the rate borne by such Notes,
(C) to the extent that payment of such interest is lawful, interest on overdue interest and overdue principal at the rate borne by such Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;
(2) all Events of Default, other than the non-payment of amounts of principal (or premium, if any, on) or interest on Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513,
No such rescission shall affect any subsequent default or impair any right consequent thereon.
The Company covenants that if
(1) default is made in the payment of any installment of interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Note at the Maturity thereof,
then the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by such Notes, and, in addition thereto, 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.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any Subsidiary Guarantor (in accordance with the applicable Note Guarantee) or any other obligor upon such Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, any Subsidiary Guarantor or any other obligor upon such Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture or the Note Guarantees by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, including seeking recourse against any Subsidiary Guarantor, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy, including, without limitation, seeking recourse against any Subsidiary Guarantor.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor, including any Subsidiary Guarantor, upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes, to take such other actions (including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter) and to file such 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 of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder 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 such Holders, vote for the election of a trustee in bankruptcy or other similar official.
All rights of action and claims under this Indenture, the Notes or the Note Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.
Subject to Article Twelve, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
No Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Notes shall have made a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a majority in principal amount of the Outstanding Notes;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture, any Note or any Note Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, any Note or any Note Guarantee, except in the manner herein provided and for the equal and ratable benefit of all Holders.
Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Eleven) and in such Note of the principal of (and premium, if any, on) and (subject to Section 307) interest on, such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, any Subsidiary Guarantor, any other obligor on the Notes, the Trustee and the Holders of Notes shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Notes is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or with this Indenture,
(2) subject to Section 315 of the Trust Indenture Act, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in personal liability or that the Trustee determines in good faith is unjustly prejudicial to the Holders of Notes not consenting, it being understood that, subject to Section 601, the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unjustly prejudicial to such holders.
Subject to Sections 508, 902 and the last paragraph of Section 502, the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes) may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences under this Indenture or any Note Guarantee, except a default
(1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.
Upon any such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture and the Note Guarantees; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.
Each of the Company, the Subsidiary Guarantors and any other obligor on the Notes covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company, any Subsidiary Guarantor or any such obligor from paying all or any portion of the principal of, premium, if any, or interest on the Notes contemplated herein or in the Notes or which may affect the covenants or the performance of this Indenture; and each of the Company, the Subsidiary Guarantors and any other obligor on the Notes (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
(a) Except during the continuance of a Default or an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith or willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof.
(b) In case a Default or an Event of Default has occurred and is continuing of which a Responsible Officer of the Trustee has actual knowledge or of which written notice of such Default or Event of Default shall have been given to the Trustee by the Company, any other obligor of the Notes or by any Holder, 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.
(1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and
(4) 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 in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
Within ten days after the earlier of receipt from the Company of
notice of the occurrence of any Default or Event of Default hereunder or the
date when such Default or Event of Default becomes known to the Trustee, the
Trustee shall transmit, in the manner and to the extent provided in TIA Section
313(c), notice of such Default or Event of Default hereunder known to the
Trustee, unless such Default or Event of Default shall have been cured or
waived; provided, however, that, except in the case of a Default or Event of
Default in the payment of the principal of (or premium, if any, on) or interest
on any Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders.
Subject to the provisions of TIA Sections 315(a) through 315(d) (determined as if the TIA were applicable to this Indenture at all times):
(1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(2) 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;
(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate;
(4) before the Trustee acts or refrains from acting, the Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) 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 of Notes pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(6) 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;
(7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(9) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder;
(10) the permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty; and
(11) except for a default under Sections 501(1) or (2) hereof, or any other event of which the Trustee has "actual knowledge" and which event, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Indenture, the Trustee shall not be deemed to have notice of any default or Event of Default unless specifically notified in writing of such event by the Company or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding; 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.
The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The recitals contained herein and in the Notes, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in its Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Notes or the proceeds thereof.
The Trustee, any Authenticating Agent, any Paying Agent, any Note Registrar or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Note Registrar or such other agent.
All money received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel and costs and expenses of collection), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee and its agents for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, 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.
The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(8) or Section 501(9), the expenses (including the reasonable charges and expenses of its counsel) of and the compensation of the Trustee for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this Indenture.
There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and which shall have an office in The City of New York, and shall have a combined capital and surplus of at least $50,000,000. If the Trustee does not have an office in The City of New York, the Trustee may appoint an agent in The City of New York reasonably acceptable to the Company to conduct any activities which the Trustee may be required under this Indenture to conduct in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 610.
(b) The Trustee may resign at any time with respect to the Notes by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument executed by authority of the Board of Directors, a copy of which shall be delivered to the resigning Trustee and a copy to the successor trustee. If the instrument of acceptance by a successor Trustee required by Section 610 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes.
(c) The Trustee may be removed at any time with respect to the Notes by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 610 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six months,
or
(2) the Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a Custodian of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee with respect to all Notes, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Notes and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Notes, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Notes shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Notes and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Notes shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes.
(f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Notes and each appointment of a successor Trustee with respect to the Notes to the Holders of Notes in the manner provided for in Section 106. Each notice shall include the name of the successor Trustee with respect to the Notes and the address of its Corporate Trust Office.
(a) Each successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the time of such acceptance, such successor Trustee shall be qualified and eligible under this Article.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. In case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee. In all such cases such certificates shall have the full force and effect which this Indenture provides for, the certificate of authentication of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
At any time when any of the Notes remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes and the Trustee shall give written notice of such appointment to all Holders of Notes with respect to which such Authenticating Agent will serve, in the manner provided for in Section 106. Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, and a copy of such instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give written notice of
such appointment to all Holders of Notes, in the manner provided for in Section
106. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time such compensation for its services under this Section as shall be agreed in writing between the Company and such Authenticating Agent.
If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Notes designated therein referred to in the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: _______________________________
as Authenticating Agent
By: _______________________________
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content to that in Subsection (a) hereof as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Note Registrar, no such list need be furnished.
Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).
Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Notes pursuant to this Indenture, the Trustee shall transmit to the Holders of Notes (with a copy to the Company at the Place of Payment), in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company will not, in a single transaction or through a series of transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and immediately after giving effect thereto:
(a) either (1) the Company shall be the continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis (the "Surviving Entity") (i) will be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and (ii) will expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustees, in form reasonably satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of (and premium, if any) and interest on all the Notes and the performance and observance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or any Restricted Subsidiary incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing;
(c) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the four-quarter period immediately prior to the consummation of such transaction or series of transactions with the appropriate adjustments with respect to the transaction or series of transactions being included in such pro forma calculation), the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008;
(d) each Subsidiary Guarantor, if any, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Note Guarantee will apply to such Person's obligations hereunder and under the Notes;
(e) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1012 are complied with; and
(f) the Company or the Surviving Entity shall have delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been satisfied.
Each Subsidiary Guarantor, if any (other than any Subsidiary whose Note Guarantee is being released pursuant to the provisions of Section 1309 as a result of such transaction), will not, and the Company will not permit a Subsidiary Guarantor to, in a single transaction or through a series of related transactions, merge or consolidate with or into any other corporation or other entity (other than the Company or any Subsidiary Guarantor), or sell, assign, convey, transfer, lease or otherwise dispose of its properties and assets on a consolidated basis substantially as an entirety to any entity (other than the Company or any Subsidiary Guarantor) unless at the time and after giving effect thereto:
(a) either (1) such Subsidiary Guarantor shall be the continuing corporation or partnership or (2) the Person (if other than such Subsidiary Guarantor) formed by such consolidation or into which such Subsidiary Guarantor is merged or the entity which acquires by sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of such Subsidiary Guarantor, as the case
may
be, shall be a corporation or partnership organized and validly existing under the laws of the United States, any state thereof or the District of Columbia, and shall expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all obligations of such Subsidiary Guarantor under the Notes and this Indenture;
(b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or such Subsidiary Guarantor incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and
(c) such Subsidiary Guarantor or such Person shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Section 802 and that all conditions precedent herein provided for relating to such transaction have been satisfied.
Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company or any Subsidiary Guarantor in accordance with Sections 801 and 802, the successor Person formed by such consolidation or into which the Company or such Subsidiary Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Subsidiary Guarantor, as the case may be, under this Indenture and/or the Note Guarantees, as the case may be, with the same effect as if such successor had been named as the Company or such Subsidiary Guarantor, as the case may be, herein and/or the Note Guarantees, as the case may be. When a successor assumes all the obligations of its predecessor hereunder, the Notes or a Note Guarantee, as the case may be, the predecessor shall be released from all obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal and interest or other obligations on the Notes or a Note Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Without the consent of any Holders, the Company or any Subsidiary Guarantor, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, a Subsidiary Guarantor or any other obligor on the Notes, and the assumption by any such successor of the covenants of the Company or such obligor or Subsidiary Guarantor contained herein and in the Notes and in any Note Guarantee in accordance with Article Eight;
(2) to add to the covenants of the Company, any Subsidiary Guarantor or any other obligor upon the Notes for the benefit of the Holders or to surrender any right or power conferred upon the Company, or any Subsidiary Guarantor or any other obligor on the Notes, as applicable, herein, in the Notes or in any Note Guarantee;
(3) to cure any ambiguity, or to correct or supplement any provision herein, in the Notes or in any Note Guarantee which may be defective or inconsistent with any other provision herein, in the Notes or in any Note Guarantee or to make any other provisions with respect to matters or questions arising under this Indenture, the Notes or any Note Guarantee; provided that, in each case, such provisions shall not adversely affect the interests of the Holders;
(4) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;
(5) to add a Subsidiary Guarantor of the Notes under this Indenture;
(6) to evidence and provide for the acceptance of the appointment of a successor Trustee under this Indenture; or
(7) to mortgage, pledge, hypothecate or grant a security interest in favor of the Trustee for the benefit of the Holders as additional security for the payment and performance of the Company's and any Subsidiary Guarantor's obligations under this Indenture, in any property, or assets, including any of which are required to be mortgaged, pledged or hypothecated, or in which a security interest is required to be granted to the Trustee pursuant to this Indenture or otherwise.
With the consent of the Holders of not less than a majority in principal amount of all Outstanding Notes that are affected thereby, by Act of said Holders delivered to the Company, the Subsidiary Guarantors and the Trustee, the Company and the Subsidiary Guarantors, when authorized by or pursuant to their respective Board Resolutions, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date);
(2) amend, change or modify any of the provisions of Section 1013 or
Section 1014 including any definitions relating thereto in any manner
materially adverse to the Holders;
(3) reduce the percentage in principal amount of Outstanding Notes, the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;
(4) modify any provisions of this Section, Section 1021 or Section 513, except to increase the percentage in principal amount of the Outstanding Notes required to take any of the actions described therein or to provide that certain additional provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby;
(5) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company or any Subsidiary Guarantor of any of their rights or obligations under this Indenture;
(6) amend or modify any of the provisions of Article Thirteen in any manner adverse to the Holders; or
(7) modify any of the provisions of this Indenture relating to the subordination of the Notes in a manner adverse to the Holders.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Notes.
Promptly after the execution by the Company, any Subsidiary Guarantor
and the Trustee of any supplemental indenture pursuant to the provisions of
Section 902, the Company shall give notice thereof to the Holders of each
Outstanding Note affected, in the manner provided for in Section 106, setting
forth in general terms the substance of such supplemental indenture.
No supplemental indenture shall adversely affect the rights of the holders of Senior Indebtedness under Article Twelve of this Indenture without the consent of such holders affected thereby.
ARTICLE TEN
COVENANTS
The Company covenants and agrees for the benefit of the Holders of Notes that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Notes in accordance with the terms of the Notes and this Indenture.
The Company will maintain in The City of New York an office or agency where Notes may be presented or surrendered for payment (the "Place of Payment"), where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company hereby designates the Corporate Trust Office as the Place of Payment.
The Company will give prompt written notice to the Trustee of the location, and any change in the location, of the Place of Payment. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive such respective presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Notes for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
If the Company shall at any time act as its own Paying Agent with respect to the Notes, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) 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.
Whenever the Company shall have one or more Paying Agents for the Notes, it will, prior to or on each due date of the principal of (and premium, if any, on) or interest on any Notes, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and premium, if any) and interest on the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal of (and premium, if any) or interest on the Notes; and
(3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.
Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory), licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that, subject to the other provisions of this Indenture, the Company shall not be required to preserve any such existence (except the Company), right, license or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not, and will not be, disadvantageous in any material respect to the Holders.
The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, would by law become a material liability or lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP.
The Company will cause all material properties owned by the Company or any Restricted Subsidiary or used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Restricted Subsidiary and not adverse in any material respect to the Holders.
(a) The Company and each Subsidiary Guarantor will deliver to the Trustee, within 45 days after the end of each fiscal quarter and within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company or the Subsidiary Guarantor, as the case may be, during the preceding quarter or the preceding fiscal year, as the case may be, has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill its obligations under this Indenture and further stating, as to each such officer signing such certificate, that, to the best of his or her knowledge, the Company during such preceding quarter or the preceding fiscal year, as the case may be, has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill each and every such covenant contained in this Indenture and no Default or Event of Default occurred during such quarter or year, as the case may be, and at the date of such certificate there is no Default or Event of Default which has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year-end. For purposes of this Section 1007(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.
(b) When any Default or Event of Default has occurred and is continuing under this Indenture, or if the trustee for or the holder of any other evidence of Indebtedness of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness in the principal amount of less than $10,000,000),
the Company shall deliver to the Trustee by registered or certified mail or by telegram, telex or facsimile transmission an Officers' Certificate specifying such event, notice or other action within five Business Days of its occurrence.
The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness; provided, however, that the Company and any Subsidiary Guarantor may incur Indebtedness (including Acquired Indebtedness) if at the time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness for which internal financial statements are available, taken as one period (and after giving pro forma effect to (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such four- quarter period, (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired on the first day of such four-quarter period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such four-quarter period) and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four- quarter period, as if such acquisition or disposition occurred on the first day of such four-quarter period), would have been at least equal to 2.0 to 1.0.
(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to acquire such shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock of the Company or any Affiliate of the Company or any options, warrants or other rights to acquire such shares of Capital Stock (other than
such options, warrants or rights owned by the Company or a wholly owned Restricted Subsidiary);
(iii) declare or pay any dividend on, or make any distribution to holders of, any shares of Capital Stock of any Restricted Subsidiary to any Person (other than to the Company or any of its wholly owned Restricted Subsidiaries or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis);
(iv) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness of the Company or any Subsidiary Guarantor; or
(v) make any Investment (other than any Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a Board Resolution), (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1008 and (3) the aggregate amount of all Restricted Payments
declared or made after the date of this Indenture shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day of the Company's first fiscal quarter after the date of this Indenture and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the date of this Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Qualified Capital Stock of the Company (including upon the exercise of options, warrants or fights) or warrants, options or rights to purchase shares of Qualified Capital Stock of the Company, plus
(C) the aggregate net cash proceeds received after the date of this Indenture by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities or Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, to the extent such securities were originally sold
for cash, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted Payment that was made after the date of this Indenture is sold or is otherwise liquidated or repaid, an amount (to the extent not included in Consolidated Adjusted Net Income) equal to the sum of (I) the lesser of (x) the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) and (y) the initial amount of such Investment, and (II) with respect solely to any Restricted Payment to be made pursuant to clause (v) of this paragraph (a), the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) in excess of the amount in (I), plus
(E) $5,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix) and (x) below) at the time of and after giving effect thereto no Default or Event of Default shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration the payment of such dividend would have complied with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iv) the purchase of any Indebtedness that is expressly subordinated in right of payment to the Notes at a purchase price not greater than 101% of the principal amount thereof in the event of a Change in Control in accordance with provisions similar to those of Section 1013; provided that prior to such purchase the Company has made the Change in Control Offer as provided in Section 1013 and has purchased all Notes validly tendered for payment in connection with such Change in Control Offer;
(v) the repurchase, redemption or other acquisition or retirement for value of shares of Management Stock; provided that (1) the Company is required, by the terms of written agreements between the Company and each of Lloyd L. Ross and Jerry M. Smith as in effect on the Issuance Date, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $25,000,000 in the aggregate;
(vi) the repurchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company from employees who have died (or their estates or beneficiaries) or whose employment has been terminated; provided that such payment shall not exceed $1,500,000 in any twelve month period, excluding any amounts used to repurchase, redeem, acquire or retire for value shares of Capital Stock of the Company pursuant to clause (v) above;
(vii) repurchases of Capital Stock of the Company (or warrants or options convertible into or exchangeable for such Capital Stock) deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock (or warrants or options convertible into or exchangeable for such Capital Stock) represent a portion of the exercise price of such options;
(viii) the issuance by the Company of shares of Preferred Stock as dividends paid in kind on the Preferred Stock of the Company outstanding on the Issuance Date or on shares of Preferred Stock so issued as payment in kind dividends, such dividends made pursuant to the terms of the Certificate of Designation for such Preferred Stock as in effect on the Issuance Date;
(ix) the issuance by the Company of Exchange Debentures in exchange for Senior Exchangeable Preferred Stock; and
(x) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, new Subordinated Indebtedness so long as (A) the principal amount of such new Subordinated Indebtedness does not exceed the principal amount (or, if such Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, defeased, acquired or retired, plus either the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of such Indebtedness being refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus, in either case, the amount of reasonable
expenses of the Company incurred in connection with such refinancing, (B) such new Subordinated Indebtedness is pari passu or subordinated, as applicable, to the Notes to the same extent as such Indebtedness so purchased, redeemed, defeased, acquired or retired and (C) such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes.
The actions described in clauses (i), (ii), (iii), (iv), (v), (vi) and
(vii) of this paragraph (b) shall be Restricted Payments that shall be permitted
to be taken in accordance with this paragraph (b) but shall reduce the amount
that would otherwise be available for Restricted Payments under clause (3) of
paragraph (a) above and the actions described in clauses (viii), (ix) and (x) of
this paragraph (b) shall be Restricted Payments that shall be permitted to be
taken in accordance with this paragraph (b) and shall not reduce the amount that
would otherwise be available for Restricted Payments under clause (3) of
paragraph (a).
(c) Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to, pay any cash dividends on any shares of Capital Stock of the Company which shall rank junior to the Senior Exchangeable Preferred Stock until such time as the Notes have received a rating from Moody's of at least "B1" or higher.
The Company (i) shall not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly owned Restricted Subsidiary) and (ii) shall not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this Section 1010 shall not prohibit (a) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of this Indenture, (b) the ownership by other Persons of Qualified Capital Stock (other than Preferred Stock) issued prior to the time such Restricted Subsidiary became a Subsidiary of the Company that was neither issued in contemplation of such Subsidiary becoming a Subsidiary nor acquired at that time or (c) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law.
The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with, or for the benefit of, any Affiliate of the Company or any Restricted Subsidiary (other than
the Company or a Restricted Subsidiary) (collectively, "Interested Persons"),
unless (i) such transaction or series of transactions are on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could have been able to be obtained in an arm's-length
transaction with third parties that are not Interested Persons, (ii) with
respect to any transaction or series of related transactions involving aggregate
consideration equal to or greater than $1,000,000, the Company has delivered an
Officers' Certificate to the Trustee certifying that such transaction or series
of transactions complies with clause (i) above and (iii) with respect to any
transaction or series of related transactions involving aggregate consideration
equal to or greater than $5,000,000, such transaction or series of related
transactions (x) has been approved by the Board of Directors of the Company
(including a majority of the Disinterested Directors of the Company) or (y) the
Company has obtained a written opinion from a nationally recognized investment
banking or valuation firm certifying that such transaction or series of related
transactions is fair to the Company or its Restricted Subsidiary, as the case
may be, from a financial point of view; provided, however, that this Section
1011 shall not restrict (1) the Company from paying reasonable and customary
regular compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted Subsidiary,
(2) the payment of management fees to Permitted Holders in an aggregate amount
not to exceed $500,000 per year, (3) loans and advances to officers, directors
and employees of the Company or any Restricted Subsidiary in the ordinary course
of business in accordance with the past practices of the Company or any
Restricted Subsidiary not to exceed $3,000,000 in the aggregate outstanding at
any time, (4) any transactions made in compliance with Section 1009, (5) the
issuance and sale of Qualified Capital Stock of the Company to Persons who are
stockholders of the Company at the time of such issuance and sale and (6) the
performance of any written agreement as in effect on the date of this Indenture
and as amended from time to time, provided that any such amendment is not less
favorable in any material respect to the Company or any Restricted Subsidiary
than the terms of such agreement as in effect on the date of this Indenture.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or indebtedness of any Restricted Subsidiary, whether owned at the date of this Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Company, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Subordinated Indebtedness of the Company, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
(b) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of such Restricted Subsidiary on or with respect to any such Restricted Subsidiary's properties or assets, including any shares of stock or Indebtedness of any Subsidiary of such Restricted Subsidiary, whether owned at the date of this Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Restricted Subsidiary, such Note Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Subordinated Indebtedness of the Restricted Subsidiary, such Note Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
(a) If a Change in Control shall occur at any time, then each Holder of Notes will have the right to require that the Company purchase such Holder's Notes, in whole or in part in integral multiples of $1,000, at a purchase price (the "Change in Control Purchase Price") in cash in an amount equal to 101% of the principal amount thereof, plus accrued interest, if any, to the date of purchase (the "Change in Control Purchase Date"), pursuant to the offer described below (the "Change in Control Offer") and the other procedures set forth in this Indenture.
(b) Within 30 days following any Change in Control, the Company shall
notify the Trustee thereof and give written notice of such Change in Control
Offer to each Holder by first-class mail, postage prepaid, at the address of
such Holder appearing in the Note Register, stating, among other things, (i) the
Change in Control Purchase Price and the Change in Control Purchase Date, which
shall be a Business Day no earlier than 30 days nor later than 75 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act or any applicable securities laws or
regulations; (ii) that any Note not tendered will continue to accrue interest;
(iii) that, unless the Company defaults in the payment of the Change in Control
Purchase Price, any Notes accepted for payment pursuant to the Change in Control
Offer shall cease to accrue interest after the Change in Control Purchase Date;
and (iv) that Holders electing to have any Notes purchased pursuant to a Change
in Control Offer shall be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change in Control
Purchase Date; (v) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change in Control Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing its election to have such Notes purchased; (vi) that
Holders whose Notes are being purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; (vii) the instructions that the Holders of Notes must follow in order to tender their Notes; and (viii) the circumstances and relevant facts regarding such Change in Control.
(c) The Company shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change in Control Offer.
(d) The Company shall not, and shall not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the date of this Indenture) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Notes or, if such Change in Control Offer is made, to pay for the Notes tendered for purchase.
(e) Prior to complying with the provisions of this Section 1013, but in any event within 30 days following a Change in Control, the Company shall either terminate all commitments and repay in full all Indebtedness under the Senior Credit Agreement and or obtain the requisite consents, if any, under the Senior Credit Agreement to permit the purchase of the Notes as provided for under this Section 1013.
(f) The Company shall not, and shall not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the date of this Indenture) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Notes or, if such Change in Control Offer is made, to pay for the Notes tendered for purchase.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly, or indirectly, consummate any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) at least 75% of such consideration consists of cash or Cash Equivalents. The amount of any (I) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor or any Senior Indebtedness of the Company or any Subsidiary Guarantor that is actually assumed by the transferee in such Asset Sale and from which the Company and the Restricted Subsidiaries are fully released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries (excluding any liabilities that are incurred in connection with or in anticipation of such Asset Sale) and (II) notes or other similar obligations received by the Company or any Restricted Subsidiary from such transferee that are converted, sold or
exchanged within 30 days of the related Asset Sale by the Company or the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount equal to the net cash proceeds realized upon such conversion, sale or exchange for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after such Asset Sale, to (i) permanently repay or prepay any then outstanding Senior Indebtedness of the Company or any Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto) or (ii) invest (or enter into a legally binding agreement to invest) in other properties or assets to replace the properties or assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be, existing at the time such assets are sold. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, then the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall, within 30 Business Days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as an integral multiple of $1,000) of Notes that may be purchased with the Excess Proceeds. The offer price as to each Note shall be payable in cash in an amount equal to 100% of the principal amount of such Note plus accrued interest, if any (the "Offered Price"), to the date such Excess Proceeds Offer is consummated (the "Offer Date"). To the extent that the aggregate principal amount of Notes tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for any lawful purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes to be purchased will be selected on a pro rata basis. Upon completion of such Exceeds Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
(d) Whenever the Excess Proceeds received by the Company exceed $10,000,000, such Excess Proceeds shall be set aside by the Company in a separate account pending (i) deposit with the Trustee or a paying agent of the amount required to purchase the Notes tendered in an Excess Proceeds Offer, (ii) delivery by the Company of the Offered Price to the holders of the Notes tendered in an Excess Proceeds Offer and (iii) application, as set forth above, of Excess Proceeds for any lawful purposes. Such Excess Proceeds may be invested in Cash Equivalents, provided that the maturity date of any investment shall not be later than the Offer Date. The Company shall be entitled to any interest or dividends accrued, earned or paid on such Cash Equivalents.
(e) If the Company becomes obligated to make an Excess Proceeds Offer pursuant to clause (c) above, the Notes shall be purchased by the Company, at the option of the Holders thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 30 days and not later than 60 days from the date the notice is given to holders, or such later date as may be necessary for the Company to comply with the requirements under the Exchange Act, subject to proration in the event the amount of Excess Proceeds is less than the aggregate Offered Price of all Notes tendered.
(f) Within 15 days after the obligation of the Company to make an
Excess Proceeds Offer arises, the Company shall notify the Trustee thereof and
give written notice of such Excess Proceeds Offer to each Holder of Notes by
first-class mail, postage prepaid, at the address of such Holder appearing in
the Note Register, stating, (i) the Offered Price and the Offer Date, which
shall be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act or any applicable securities laws or
regulations; (ii) that any Note not tendered will continue to accrue interest;
(iii) that, unless the Company defaults in the payment of the Offered Price, any
Notes accepted for payment pursuant to the Excess Proceeds Offer shall cease to
accrue interest after the date of purchase; (iv) that Holders electing to have
any Notes purchased pursuant to an Excess Proceeds Offer shall be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Offer Date; (v) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Offer Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing its election to have such Notes purchased; (vi) that Holders whose
Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof; (vii) the instructions that the Holders of Notes must follow
in order to tender their Notes; and (viii) the circumstances and relevant facts
regarding such Excess Proceeds Offer.
(g) The Company shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with an Excess Proceeds Offer.
(a) The Company will not permit any Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Indebtedness of the Company unless (i) (A) if such Restricted Subsidiary is not a Subsidiary
Guarantor, such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture, in form satisfactory to the Trustee, providing for a guarantee of the Notes by such Restricted Subsidiary and delivers to such Trustee an Opinion of Counsel reasonably satisfactory to such Trustee to the effect that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary and is in compliance with the terms of this Indenture and (B) with respect to any guarantee by a Restricted Subsidiary of Subordinated Indebtedness of the Company, any such guarantee shall be subordinated to such Restricted Subsidiary's Note Guarantee at least to the same extent as such guaranteed Indebtedness is subordinated to the Notes and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Note Guarantee.
(b) Notwithstanding the foregoing, any guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph (a) will provide
by its terms that it will be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer to any Person not an
Affiliate of the Company of all of the Company's Capital Stock in, or all or
substantially all the assets of, the applicable Subsidiary Guarantor (which
sale, exchange or transfer is otherwise in compliance with this Indenture) or
(ii) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary
in accordance with the terms of this Indenture.
The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary (other than customary restrictions on transfers of property subject to a Lien permitted under this Indenture that would not materially adversely affect the Company's ability to satisfy its obligations under the Notes and this Indenture) or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary provisions restricting subletting or assignment of any lease or assignment of any other contract to which the Company or any Restricted Subsidiary is a party or to which any of their respective properties or assets are subject, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (iv)
encumbrances and restrictions in effect on the Issuance Date pursuant to the Senior Credit Facility and its related documentation, (v) any encumbrance or restriction contained in contracts for sales of assets permitted by Section 1014 with respect to the assets to be sold pursuant to such contract and (vi) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (iii) and (iv); provided that the terms and conditions of any such encumbrances or restrictions are not materially less favorable to the Holders than those under or pursuant to the agreement so extended, renewed, refinanced or replaced.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into any Sale and Leaseback Transaction with
respect to any property or assets (whether now owned or hereafter acquired),
unless (i) the sale or transfer of such property or assets to be leased is
treated as an Asset Sale and the Company complies with Section 1014 and (ii) the
Company or such Restricted Subsidiary would be permitted to incur Indebtedness
under Section 1008 in the amount of the Capitalized Lease Obligations incurred
in respect of such Sale and Leaseback Transaction; provided, however, that the
Company and its Restricted Subsidiaries will not be required to comply with
Section 1017 with respect to the sale and leaseback of the Headquarters
Facility.
Neither the Company nor any Restricted Subsidiary shall incur, create, assume, guarantee or in any other manner become directly or indirectly liable with respect to or responsible for, or permit to remain outstanding, any Indebtedness, other than the Notes, that is subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Notes pursuant to subordination provisions substantially similar to those contained in this Indenture.
The Company shall not make, and shall not permit any of its Restricted
Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the
time thereof, the aggregate amount of such Investments would exceed the amount
of Restricted Payments then permitted to be made pursuant to Section 1008. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
Section 1019 (i) shall be treated as the making of a Restricted Payment in
calculating the amount of Restricted Payments made by the Company or a
Restricted Subsidiary and (ii) may be made in cash or property.
The Company shall file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company shall also (a) file with the Trustee, and provide to each Holder of Notes (at their respective addresses set forth in the Note Register, without cost to such Holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required, and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request.
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).
The Company and the Restricted Subsidiaries may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1007 to 1012, inclusive, and Sections 1015 to 1019, inclusive, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of all Outstanding Notes affected by such term, provision or covenant, by Act of such Holders, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company, the Restricted Subsidiaries and the duties of the Trustee, as applicable, in respect of any such term, provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
The Notes may or shall be, as the case may be, redeemed, as a whole or from time to time in part, subject to the conditions and the Redemption Prices specified in the form of Note, together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive interest due on an Interest Payment Date), on the Redemption Date.
Redemption of Notes at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with the terms of such Notes and in accordance with this Article Eleven.
The election of the Company to redeem any Notes pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 1104.
If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or, if such Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Notes; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Notes to be redeemed. The Trustee shall give notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall deliver to the Trustee, at least 45 days prior
to the Redemption Date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such notice
as provided in the following items.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed, the identification of the particular Notes to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption,
(4) in case any Note is to be redeemed in part only, the notice which relates to such Note shall state that on and after the Redemption Date, upon surrender of such Note, the holder will receive, without charge, a new Note or Notes of authorized denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 1107) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Notes called for redemption (or the portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Notes are to be surrendered for payment of the Redemption Price and accrued interest, if any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes are to be redeemed.
Prior to 10:00 A.M. on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Notes which are to be redeemed on that date.
Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, according to their terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate of interest set forth in the Note.
Any Note which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holders attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered, provided, that each such new Note will be in a principal amount of $1,000 or integral multiple thereof.
ARTICLE TWELVE
SUBORDINATION OF NOTES
The Company covenants and agrees, and each Holder of a Note, by its acceptance thereof, likewise covenants and agrees, for the benefit of the holders, from time to time, of Senior Indebtedness that, to the extent and in the manner hereinafter set forth in this Article, the Indebtedness represented by the Notes and the payment of the principal of (and premium, if any) and interest on each and all of the Notes are hereby expressly made subordinate and subject in right of payment as provided in this Article to the prior payment in full in cash or cash equivalents of all Senior Indebtedness; provided, however, that the Notes, the Indebtedness represented thereby and the payment of the principal of (and premium, if any) and interest on the Notes in all respects shall rank equally with, or prior to, all existing and future senior subordinated indebtedness (including, without limitation, Indebtedness) of the Company that is subordinated to Senior Indebtedness.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or other marshalling of
assets or liabilities of the Company (except in connection with the
consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
Article Eight), then and in any event:
(1) the holders of Senior Indebtedness shall first be entitled to receive payment in full in cash or cash equivalents of all Senior Indebtedness, or provision shall be made for such payment in full, before the Holders will be entitled to receive any payment or distribution of any kind or character (other than any payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding to at least the same extent as the Notes are so subordinated as provided in this Indenture (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities") and any payment made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Trustee) on account of principal of (or premium, if any) or interest on the Notes or on account of the purchase or redemption or other acquisition of Notes; and
(2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities and any payment made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Trustee), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Indenture shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight.
(a) Unless Section 1202 shall be applicable, upon the occurrence of a Payment Default, no payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Trustee), shall be made by or on behalf of the Company on account of principal of (or premium, if any) or interest on the Notes or on account of the purchase or redemption or other acquisition of Notes unless and until such Payment Default shall have been cured or waived in writing from the Agent Bank or any other representative of a holder of Designated Senior Indebtedness or shall have ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full in cash or cash equivalents, after which the Company shall resume making any and all required payments in respect of the Notes, including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence of a Non-Payment Default and (2) receipt by the Trustee of written notice thereof from the Agent Bank or any other representative of a holder of Designated Senior Indebtedness, then no payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Trustee), shall be made by or on behalf of the Company on account of any principal of (or premium, if any) or interest on the Notes or on account of the purchase, redemption or other acquisition of Notes for a period ("Payment Blockage Period") commencing on the date of receipt by the Trustee of written notice from the Agent Bank or such other representative and ending on the earliest of (i) 179 days thereafter (provided that any Designated Senior Indebtedness as to which notice was given shall not theretofore have been accelerated, in which case the provisions of paragraph (a) shall apply), (ii) the date on which such Non-Payment Default is cured, waived or ceases to exist or such Designated Senior Indebtedness is discharged or paid in full in cash or cash equivalents or (iii) the date on which such Payment Blockage Period shall have been terminated by written notice to the Trustee or the Company from the Agent Bank or such other representative initiating such Payment Blockage Period, after which the Company will resume making any and all required payments in respect of the Notes, including any missed payments. In any event, not more than one Payment Blockage Period may be commenced during any period of 360 consecutive days. No event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period will be, or can be, made the basis for the commencement of a subsequent Payment Blockage Period, unless such default has been cured or waived for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Period. In no event will a Payment Blockage Period extend beyond 179 days.
In the event that, notwithstanding the foregoing and the provisions of
Section 1202, any payments or distribution shall be made to the Trustee (and not
paid over to the Holders of the Notes) which is prohibited by the foregoing
provisions of this Section and the provisions of Section 1202, then and in such
event such payment shall be paid over and delivered forthwith by the Trustee to
the Agent Bank and any other representative of holders of Designated Senior
Indebtedness, as their interests may appear, to the extent necessary to pay in full, in cash or cash equivalents all Designated Senior Indebtedness.
Nothing contained in this Article or elsewhere in this Indenture or in any of the Notes shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1202 or under the conditions described in Section 1203, from making payments at any time of principal of, and premium, if any, or interest on the Notes.
Subject to the payment in full of all Senior Indebtedness, the Holders of the Notes shall be subrogated (equally and ratably with the holders of all Pari Passu Indebtedness of the Company) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Notes or on their behalf or by the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Notes, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness; it being understood that the provisions of this Article are intended solely for the purpose of determining the relative rights of the Holders of Notes, on the one hand, and the holders of Senior Indebtedness, on the other hand.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders the
principal of, and premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders and creditors of the
Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness.
Each Holder of a Note by its acceptance thereof authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 504 hereof at least 30 days before the expiration of the time to file such claim, the Agent Bank (if the Senior Credit Agreement is still outstanding) is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes.
(a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this Section, 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, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of Senior Indebtedness, do any one or more of the following: (1) 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; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person.
Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in this Article Twelve, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such 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 acts pertinent thereto or to this Article Twelve.
(a) 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 Notes. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Notes, unless and until the Trustee shall have received written notice thereof from the Company, the Agent Bank or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to TIA Sections 315(a) through 315(d), shall be entitled in all respects to assume that no such facts exist; provided, however, that, if the Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of, and premium, if any, or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing itself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further 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, 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 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.
Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d), and the Holders of the Notes shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Notes, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of 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; provided that such court, trustee, receiver, custodian, assignee, agent or other Person has been apprised of, or the order, decree or certificate makes reference to, the provisions of this Article.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606.
In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 1212 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Nothing contained in this Article shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law, except as provided in Article Five.
Notwithstanding anything contained herein to the contrary, payments from cash or the proceeds of U.S. Government Obligations held in trust under Article Fourteen hereof by the Trustee (or other qualifying trustee) and which were deposited in accordance with the terms of Article Fourteen hereof and not in violation of Section 1203 hereof for the payment of principal of (and premium, if any) and interest on the Notes shall not be subordinated to the prior payment
of any Senior Indebtedness or subject to the restrictions set forth in this Article Twelve, and none of the Holders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or any other creditor of the Company.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if the Trustee shall mistakenly, in the absence of gross negligence or willful misconduct, pay over or distribute to Holders of Notes 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 or otherwise. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee.
ARTICLE THIRTEEN
GUARANTEES
Each Subsidiary Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably guarantees the Notes and obligations of the Company hereunder and thereunder, and guarantees to each Holder of a Note authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, that: (a) the principal of (and premium, if any) and interest on the Notes will be paid in full when due, whether at Stated Maturity, by acceleration or otherwise (including, without limitation, the amount that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Law), together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or of any such other obligations, the same will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise, subject, however, in the case of clauses (a) and (b) above, to the limitations set forth in Section 1305 hereof.
Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Subsidiary Guarantor, 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 Subsidiary Guarantor hereby waives (to the extent permitted by law) the benefits of diligence, presentment, demand for 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 or any other Person, protest, notice and all demands whatsoever and covenants that the Note Guarantee of such Subsidiary Guarantor shall not be discharged as to any Note except by complete performance of the obligations contained in such Note, this Indenture and such Note Guarantee. Each Subsidiary Guarantor acknowledges that the Note Guarantee is a guarantee of payment and not of collection. Each of the Subsidiary Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Note, whether at its Stated Maturity, by acceleration, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Note, subject to the terms and conditions set forth in this Indenture, directly against each of the Subsidiary Guarantors to enforce such Subsidiary Guarantor's Note Guarantee without first proceeding against the Company or any other Subsidiary Guarantor. Each Subsidiary Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Notes, to collect interest on the Notes, or to enforce or exercise any other right or remedy with respect to the Notes, such Subsidiary Guarantor will pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders.
If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or any Subsidiary Guarantor, any amount paid by any of them to the Trustee or such Holder, the Note Guarantee of each of the Subsidiary Guarantors, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) subject to this Article Thirteen, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five hereof for the purposes of the Note Guarantee of such Subsidiary Guarantor, 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 Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of the Note Guarantee of such Subsidiary Guarantor.
Each Note Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should
a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, whether as a "voidable preference", "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
In case any provision of any Note 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.
If the Company or any of its Restricted Subsidiaries acquires or forms a Restricted Subsidiary organized within the United States, the Company will cause any such Restricted Subsidiary (and any other Restricted Subsidiary as required pursuant to Section 1015) to (i) execute and deliver to the Trustee a supplemental indenture in accordance with the provisions of Article Nine of this Indenture pursuant to which such Restricted Subsidiary shall guarantee all of the obligations on the Notes, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under Bankruptcy Law, whether or not such interest is allowed as a claim after such filing in any proceeding under such law) and other amounts due in connection therewith (including any fees, expenses and indemnities), on a senior unsecured subordinated basis, and (ii) deliver to such Trustee an Opinion of Counsel reasonably satisfactory to such Trustee to the effect that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary and is in compliance with the terms of this Indenture. Upon the execution of any such supplemental indenture, the obligations of the Subsidiary Guarantors and any such Restricted Subsidiary under their respective Note Guarantees shall become joint and several and each reference to the "Subsidiary Guarantor" in this Indenture shall, subject to Section 1308, be deemed to refer to all Subsidiary Guarantors, including such Restricted Subsidiary.
The Note Guarantee issued by any Subsidiary Guarantor will be unsecured senior subordinated obligations of such Subsidiary Guarantor, ranking pari passu with all other existing and future senior subordinated indebtedness of such Subsidiary Guarantor, if any. The Indebtedness evidenced by such Note Guarantee will be subordinated on the same basis to
Guarantor Senior Indebtedness of such Subsidiary Guarantor as the Notes are subordinated to Senior Indebtedness under Article Twelve.
Each Subsidiary Guarantor and by its acceptance hereof each Holder confirms that it is the intention of all such parties that the guarantee by each such Subsidiary Guarantor pursuant to its Note Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law or the provisions of its local law relating to fraudulent transfer or conveyance. To effectuate the foregoing intention, the Holders and each such Subsidiary Guarantor hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Note Guarantee shall be limited to the maximum amount that will not, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Note Guarantee or pursuant to Section 1305 hereof, result in the obligations of such Subsidiary Guarantor under its Note Guarantee constituting such fraudulent transfer or conveyance.
In order to provide for just and equitable contribution among the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the event any payment or distribution is made by any Subsidiary Guarantor (a "Funding Guarantor") under a Note Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Subsidiary Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined below) of each Subsidiary Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Notes or any other Subsidiary Guarantor's obligations with respect to the Note Guarantee of such Subsidiary Guarantor. "Adjusted Net Assets" of such Subsidiary Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Note Guarantee of such Subsidiary Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Subsidiary Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Subsidiary Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), excluding debt in respect of the Note Guarantee of such Subsidiary Guarantor, as they become absolute and matured.
Each Subsidiary Guarantor shall be subrogated to all rights of Holders against the Company in respect of any amounts paid by any Subsidiary Guarantor pursuant to the provisions of Section 1301; provided, however, that, if an Event of Default has occurred and is continuing, no Subsidiary Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Company under this Indenture or the Notes shall have been paid in full.
Each Subsidiary Guarantor hereby agrees (and each Person who becomes a
Subsidiary Guarantor shall agree) that the Note Guarantee provided for in
Section 1301 shall continue to be effective or be reinstated, as the case may
be, if at any time, payment, or any part thereof, of any obligations or interest
thereon is rescinded or must otherwise be restored by a Holder to the Company
upon the bankruptcy or insolvency of the Company or any Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture, the Note Guarantee issued by any Subsidiary Guarantor under this Indenture shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer to any Person not an Affiliate of the Company or a Restricted Subsidiary of all of the Company's Capital Stock in, or all or substantially all the assets of, such Subsidiary Guarantor (which sale, exchange or transfer is not prohibited by this Indenture).
(b) Concurrently with the discharge of the Notes under Section 401, the defeasance of the Notes under Section 1402 hereof, or the covenant defeasance of the Notes under Section 1403 hereof, the Subsidiary Guarantors shall be released from all their obligations under their Note Guarantees under this Article Thirteen.
Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that its guarantee and waivers pursuant to its Note Guarantee are knowingly made in contemplation of such benefits.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, effect defeasance of the Notes under Section 1402, or covenant defeasance of the Notes under Section 1403, in accordance with the terms of the Notes and in accordance with this Article.
Upon the Company's exercise under Section 1401 of the option applicable to this Section 1402, the Company and the Subsidiary Guarantors shall be deemed to have been discharged from their obligations with respect to the Outstanding Notes and the Note Guarantees, respectively, on the date the conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Notes, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under the Notes and this Indenture insofar as the Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Outstanding Notes to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Notes when such payments are due, (B) the Company's obligations with respect to such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder, and the Company's obligations in connection therewith and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to such Notes.
Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company and the Subsidiary Guarantors shall be released from their obligations under Section 801, 802 and Sections 1008 through 1019 with respect to the Outstanding Notes on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such Notes shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all
other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Notes, the Company and any Subsidiary Guarantor, as applicable, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(3) or 501(4) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.
The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (A) an amount in cash, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal (including any premium) and interest, if any, on such Notes, money in an amount, or (C) a combination thereof, in each case in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any, on) and interest on such Outstanding Notes on the Stated Maturity of such principal (and premium, if any) or installment of interest; provided that the Trustee (or such qualifying trustee) shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to such Notes.
(2) No Default or Event of Default with respect to such Notes shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs (8) and (9) of Section 501 are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any material agreement to which the Company or any Subsidiary Guarantor is a party or by which it is bound.
(4) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the Issuance Date, there has been a change in the applicable federal income tax law or interpretation of such federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.
(5) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.
(6) In the case of defeasance under Section 1402 or covenant defeasance under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Senior Indebtedness under Article Twelve hereof, and (B) after the 91st day following the deposit or after the date such opinion is delivered, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.
(7) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Notes or any Note Guarantee over the other creditors of either the Company or any Subsidiary Guarantor with the intent of hindering, delaying or defrauding creditors of either the Company or any Subsidiary Guarantor.
(8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403, as the case may be, have been complied with.
Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 1405, the "Trustee") pursuant to Sections 1404 and 1406 in respect of such Outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Twelve.
The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1404 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 such Outstanding Notes.
Anything in this Article Fourteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1405 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and such Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1402 or 1403, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1405; provided, however, that if the Company makes any payment of principal of
(or premium, if any) or interest on any such Note following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
TUESDAY MORNING CORPORATION
By ______________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
TMI HOLDINGS, INC.
By ______________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
TUESDAY MORNING, INC.
By ______________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
FRIDAY MORNING, INC.
By ______________________________________
Name: Jerry M. Smith
Title: President and Chief Operating
Officer
TMIL CORPORATION
By ______________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:______________________________________
Name:
Title:
TUESDAY MORNING CORPORATION
11% [Series B]/1/ Senior Subordinated Note due 2007
No. _______________ CUSIP No. __________
$ __________
TUESDAY MORNING CORPORATION, a Delaware corporation (the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, promises to pay to ___________, or its registered assigns, the principal sum of ____________________________________ Dollars ($___________), on December 15, 2007.
[Interest Rate: [__]% per annum.]/1/
Interest Payment Dates: June 15 and December 15 of each year
commencing June 15, 1998.
Regular Record Dates: June 1 and December 1 of each year.
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Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
/1/ Include only for Exchange Notes.
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers.
Date: _____________________ TUESDAY MORNING CORPORATION
By: _________________________
Name:
Title:
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(Form of Trustee's Certificate of Authentication)
This is one of the 11% [Series B]/2/ Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
Dated: __________ By: ___________________________
Authorized Signatory
___________________
/2/ Include only for Exchange Note.
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[REVERSE SIDE OF NOTE]
TUESDAY MORNING CORPORATION
11% [Series B] /1/Senior Subordinated Note due 2007
The Company will pay the principal of this Note on December 15, 2007.
The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate of 11% per annum [(subject to adjustment as provided below)]/2/ [except that interest accrued on this Note pursuant to the fourth paragraph of this Section 1 for periods prior to the applicable Exchange Date (as such term is defined in the Registration Rights Agreement referred to below) will accrue at the rate or rates borne by the Notes from time to time during such periods]./1/
Interest will be payable semi-annually (to the Holders of record of the Notes (or any Predecessor Notes) at the close of business on the June 1 or December 1 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing June 15, 1998.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated December 29, 1997, among the Company, the
Subsidiary Guarantors and the Initial Purchasers named therein (the
"Registration Rights Agreement"). In the event that either (a) the Exchange
Offer Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 45th calendar day following the date of original issue of the Notes, (b)
the Exchange Offer Registration Statement (as such term is defined in the
Registration Rights Agreement) has not been declared effective on or prior to
the 120th calendar day following the date of original issue of the Notes or (c)
the Exchange Offer is not consummated or a Shelf Registration Statement (as such
terms are defined in the Registration Rights Agreement) is not declared
effective on or prior to the 150th calendar day following the date of original
issue of the Notes, the interest rate borne by this Note shall be increased by
one-quarter of one percent per annum following such 45-day period in the case of
(a) above, following such 120-day period in the case of (b) above or following
such 150-day period in the case of (c) above, which rate will be increased by an
additional one-quarter of one percent per annum for each 90-day period that any
additional interest continues to accrue;
/1/ Include only for Exchange Note.
/2/ Include only for Exchange Note.
provided that the aggregate increase in such annual interest rate shall in no event exceed one percent. Upon (x) the filing of the Exchange Offer Registration Statement after the 45-day period described in clause (a) above, (y) the effectiveness of the Exchange Offer Registration Statement after the 120-day period described in clause (b) above or (z) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 150-day period described in clause (c) above, the interest rate borne by this Note from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the interest rate set forth above; provided, however, that, if after any such reduction in interest rate, a different event specified in clause (a), (b) or (c) above occurs, the interest rate may again be increased pursuant to the foregoing provisions.]/1/
Interest on this Note will accrue from the most recent date to which interest has been paid [on this Note or the Note surrendered in exchange herefor]/2/ or, if no interest has been paid, from December 29, 1997; provided that, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee its attorney-in-fact for such purpose.
The Company will pay interest (except defaulted interest) on the principal amount of the Notes on each June 15 and December 15 to the Persons who are Holders (as reflected in the Note Register at the close of business on the June 1 and December 1 immediately preceding the Interest Payment Date), in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such Regular Record Date; provided that, with respect to the
/1/ Include only for Initial Note.
/2/ Include only for Exchange Note.
payment of principal, the Company will make payment to the Holder that surrenders this Note to any Paying Agent on or after December 15, 2007.
The Company will pay principal (premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal (premium, if any) and interest by its check payable in such money. The Company may pay interest on the Notes either (a) by mailing a check for such interest to a Holder's registered address (as reflected in the Note Register) or (b) by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period.
Initially, the Trustee will act as Paying Agent and Note Registrar. The Company may change any Paying Agent or Note Registrar upon written notice thereto. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Note Registrar or co-registrar.
The Company issued the Notes under an Indenture dated as of December 29, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors and Harris Trust and Savings Bank, as trustee (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior subordinated obligations of the Company. The Indenture limits the aggregate principal amount of the Notes to $100,000,000.
prior to the Redemption Date), if redeemed during the 12-month period beginning December 15 of each of the years set forth below:
Redemption
Year Price
---- ----------
2002........................... 105.50%
2003........................... 103.67%
2004........................... 101.83%
2005 and thereafter............ 100.00%
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In addition to the optional redemption of the Notes in accordance with the provisions of the preceding paragraph, at any time prior to December 15, 2000, the Company may redeem up to $35,000,000 aggregate principal amount of the Notes, within 20 days of one or more Public Equity Offerings with the net proceeds of such offerings, at 111% of the principal amount thereof, together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of holders of record on relevant Regular Record Dates to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date); provided, however, that at least $65,000,000 of the original aggregate principal amount of the Notes remains outstanding thereafter.
If less than all the Notes are to be redeemed pursuant to the preceding two paragraphs, the Trustee shall select the Notes or portions thereof to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Notes being redeemed are listed, or if the Notes are not so listed, on a pro rata basis, by lot or by such other method the Trustee shall deem fair and appropriate; provided that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000.
Notice of a redemption will be mailed, first-class postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder to be redeemed at such Holder's last address as it appears in the Note Register. Notes in original denominations larger than $1,000 may be redeemed in part in integral multiples of $1,000. On and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Company defaults in the payment of the Redemption Price.
Upon the occurrence of (a) a Change in Control, the Holders of the Notes will have the right to require that the Company purchase such Holder's outstanding Notes, in whole or in part, at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase and (b) Asset Sales, the Company may be obligated to make offers to purchase Notes with a portion of the Net Cash Proceeds of such Asset Sales at a
redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.
The Notes are in registered form without coupons, in denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Note Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Note Registrar need not register the transfer or exchange of any Notes selected for redemption (except the unredeemed portion of any Note being redeemed in part).
A Holder may be treated as the owner of a Note for all purposes.
If money for the payment of principal (premium, if any) or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.
If the Company irrevocably deposits, or causes to be deposited, with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of (premium, if any) and accrued interest on the Notes (a) to redemption or maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company will be discharged from certain covenants set forth in the Indenture.
Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend
or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not adversely affect the rights of any Holder.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Capital Stock of
Restricted Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi)
purchase of Notes upon a Change in Control; (vii) disposition of proceeds of
Asset Sales; (viii) guarantees of Indebtedness by Restricted Subsidiaries; (ix)
dividend and other payment restrictions affecting Restricted Subsidiaries; (x)
merger and certain transfers of assets; and (xi) limitation on Unrestricted
Subsidiaries. Within 120 days after the end of each fiscal year and within 45
days after each fiscal quarter, the Company must report to the Trustee on
compliance with such limitations.
When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations.
If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be immediately due and payable; provided that so long as the Senior Credit Agreement shall be in full force and effect, if an Event of Default shall have occurred and be continuing (other than with respect to certain bankruptcy or insolvency defaults with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (x) five Business Days following delivery of a written notice of such acceleration of the Notes to the Agent Bank under the Senior Credit Agreement and (y) the acceleration of any indebtedness under the Senior Credit Agreement. If a bankruptcy or insolvency default with respect to the Company or any of its Significant Subsidiaries occurs and is continuing, the Notes automatically become immediately due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power.
The Company's obligations under the Notes are fully, irrevocably and unconditionally guaranteed on a senior unsecured basis, to the extent set forth in the Indenture, by each of the Subsidiary Guarantors.
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Company and its Affiliates as if it were not the Trustee.
This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note.
Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Tuesday Morning Corporation, 14621 Inwood Road, Dallas, Texas 75244, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to the date which is the earlier of the date of an effective Registration Statement or December 29, 1999, the undersigned confirms that without utilizing any general solicitation or general advertising that:
(a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder.
(b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and
until the conditions to any such transfer of registration set forth herein and in Sections 311 and 312 of the Indenture shall have been satisfied.
Date: ______________________
Signature Guarantee: ___________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Dated: _____________________ _________________________________________ NOTICE: To be executed by an executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1013 or Section 1014 of the Indenture, check the Box: ].
If you wish to have a portion of this Note purchased by the Company pursuant to Section 1013 or Section 1014 of the Indenture, state the amount (in original principal amount) below:
$_____________________.
Date: ________________________________
Your Signature: ______________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
SCHEDULE A
Indebtedness under Pacific Atlantic Systems Leasing, Inc. Capital Lease outstanding as of the Closing Date (monthly payment: $20,928.65).
Real Estate mortgages with Compass Bank outstanding as of the Closing Date.
EXHIBIT 4.2
TUESDAY MORNING CORPORATION
TMI HOLDINGS, INC.
TUESDAY MORNING, INC.
FRIDAY MORNING, INC.
TMIL CORPORATION
Subsidiary Debenture Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK
Debenture Trustee
Exchange Indenture
Dated as of December 29, 1997
13 1/4% Subordinated Exchange Debentures due 2009 13 1/4% Series B Subordinated Exchange Debentures due 2009
TUESDAY MORNING CORPORATION
Trust Indenture Exchange Indenture
Act Section Section
--------------- ------------------
(S) 310(a)(1)................................................. 607
(a)(2)................................................. 607
(b).................................................... 608
(S) 312(c).................................................... 701
(S) 314(a).................................................... 703
(a)(4)................................................. 1004
(c)(1)................................................. 102
(c)(2)................................................. 102
(e).................................................... 102
(S) 315(b).................................................... 601
(S) 316(a)(last sentence)..................................... 101 ("Outstanding")
(a)(1)(A).............................................. 502, 512
(a)(1)(B).............................................. 513
(b).................................................... 508
(c).................................................... 104(d)
(S) 317(a)(1)................................................. 503
(a)(2)................................................. 504
(b).................................................... 1003
(S) 318(a).................................................... 111
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TABLE OF CONTENTS
Page
PARTIES.................................................................................................... 1
RECITALS OF THE COMPANY.................................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................................................. 2
Acquired Indebtedness....................................................................... 2
Act......................................................................................... 2
Affiliate................................................................................... 2
Agent Bank.................................................................................. 3
Agent Members............................................................................... 3
Asset Sale.................................................................................. 3
Authenticating Agent........................................................................ 3
Average Life................................................................................ 3
Bankruptcy Law.............................................................................. 3
Board of Directors.......................................................................... 4
Board Resolution............................................................................ 4
Business Day................................................................................ 4
Capital Stock............................................................................... 4
Capitalized Lease Obligation................................................................ 4
Cash Equivalents............................................................................ 4
Certificate of Designation.................................................................. 5
Change in Control........................................................................... 5
Commission.................................................................................. 6
Common Stock................................................................................ 6
Company..................................................................................... 6
Company Request" or "Company Order.......................................................... 6
Consolidated Adjusted Net Income............................................................ 6
Consolidated Fixed Charge Coverage Ratio.................................................... 7
Consolidated Income Tax Expense............................................................. 7
Consolidated Interest Expense............................................................... 7
Consolidated Non-Cash Charges............................................................... 8
Corporate Trust Office...................................................................... 8
Corporation................................................................................. 8
Currency Agreements......................................................................... 8
Custodian................................................................................... 8
Debenture Guarantee......................................................................... 8
Debenture Guarantor Senior Indebtedness..................................................... 8
Debenture Guarantor Senior Subordinated Indebtedness........................................ 9
Debenture Trustee........................................................................... 9
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Default...................................................................................... 10 Defaulted Interest........................................................................... 10 Depositary................................................................................... 10 Designated Senior Indebtedness............................................................... 10 Disinterested Director....................................................................... 10 Dollar" or "$................................................................................ 10 Event of Default............................................................................. 10 Exchange Act................................................................................. 10 Exchange Debenture Register" and "Exchange Debenture Registrar............................... 11 Exchange Offer............................................................................... 11 Exchange Offer Registration Statement........................................................ 11 Fair Market Value............................................................................ 11 Generally Accepted Accounting Principles..................................................... 11 Global Exchange Debentures................................................................... 11 guarantee.................................................................................... 11 Headquarters Facility........................................................................ 11 Holder....................................................................................... 11 Indebtedness................................................................................. 12 Initial Exchange Debentures.................................................................. 12 Institutional Accredited Investor............................................................ 12 Interest Payment Date........................................................................ 12 Interest Rate Agreements..................................................................... 13 Investment................................................................................... 13 Issuance Date................................................................................ 13 Junior Subordinated Indebtedness............................................................. 13 Lien ........................................................................................ 13 Management Stock............................................................................. 13 Maturity..................................................................................... 13 Moody's...................................................................................... 14 Net Cash Proceeds............................................................................ 14 New Exchange Debentures...................................................................... 14 Non-Payment Default.......................................................................... 14 Non-U.S. Person.............................................................................. 14 Note Guarantee............................................................................... 14 Notes........................................................................................ 14 Notes Indenture.............................................................................. 15 Officers' Certificate........................................................................ 15 Offshore Exchange Debenture Exchange Date.................................................... 15 Offshore Global Exchange Debenture........................................................... 15 Offshore Physical Exchange Debenture......................................................... 15 Opinion of Counsel........................................................................... 15 Outstanding.................................................................................. 15 Pari Passu Indebtedness...................................................................... 16 Paying Agent................................................................................. 16 |
Payment Blockage Period...................................................................... 16 Payment Default.............................................................................. 16 Permitted Holders............................................................................ 16 Permitted Indebtedness....................................................................... 17 Permitted Investments........................................................................ 19 Permitted Junior Securities.................................................................. 20 Person....................................................................................... 20 Physical Debentures.......................................................................... 20 Place of Payment............................................................................. 20 Predecessor Exchange Debenture............................................................... 20 Preferred Stock.............................................................................. 21 Private Placement Legend..................................................................... 21 Public Equity Offering....................................................................... 21 Purchase Money Obligations................................................................... 21 Qualified Capital Stock...................................................................... 21 QIB.......................................................................................... 21 Redeemable Capital Stock..................................................................... 21 Redemption Date.............................................................................. 21 Redemption Price............................................................................. 21 Registration Rights Agreement................................................................ 21 Registration Statement....................................................................... 22 Regular Record Date.......................................................................... 22 Regulation S................................................................................. 22 Representative............................................................................... 22 Responsible Officer.......................................................................... 22 Restricted Subsidiary........................................................................ 22 Rule 144A.................................................................................... 22 Sale and Leaseback Transaction............................................................... 22 S&P.......................................................................................... 22 Securities Act............................................................................... 22 Senior Credit Agreement...................................................................... 22 Senior Exchangeable Preferred Stock.......................................................... 23 Senior Indebtedness.......................................................................... 23 Senior Subordinated Indebtedness............................................................. 23 Shelf Registration Statement................................................................. 24 Significant Subsidiary....................................................................... 24 Special Record Date.......................................................................... 24 Stated Maturity.............................................................................. 24 Subordinated Indebtedness.................................................................... 25 Subsidiary................................................................................... 25 Subsidiary Debenture Guarantor............................................................... 25 Trust Indenture Act" or "TIA................................................................. 25 United States................................................................................ 25 Unrestricted Subsidiary...................................................................... 25 U.S. Global Debenture........................................................................ 26 |
U.S. Government Obligations.................................................................. 26
U.S. Physical Debenture...................................................................... 26
Vice President............................................................................... 26
Voting Stock................................................................................. 26
SECTION 102. Compliance Certificates and Opinions......................................................... 26
SECTION 103. Form of Documents Delivered to Debenture Trustee............................................. 27
SECTION 104. Acts of Holders.............................................................................. 28
SECTION 105. Notices, Etc., to Debenture Trustee, Company, Any Subsidiary
Debenture Guarantor and Agent Bank........................................................... 29
SECTION 106. Notice to Holders; Waiver.................................................................... 30
SECTION 107. Effect of Headings and Table of Contents..................................................... 30
SECTION 108. Successors and Assigns....................................................................... 31
SECTION 109. Separability Clause.......................................................................... 31
SECTION 110. Benefits of Exchange Indenture............................................................... 31
SECTION 111. Governing Law................................................................................ 31
SECTION 112. Legal Holidays............................................................................... 31
SECTION 113. Trust Indenture Act Controls................................................................. 32
SECTION 114. No Recourse Against Others................................................................... 32
SECTION 115. Counterparts................................................................................. 32
ARTICLE TWO
EXCHANGE DEBENTURE FORMS
SECTION 201. Forms Generally.............................................................................. 32
SECTION 202. Form of Debenture Trustee's Certificate of Authentication.................................... 34
SECTION 203. Restrictive Legends.......................................................................... 34
SECTION 204. Form of Certificate to Be Delivered After the Offshore Exchange
Debenture Exchange Date...................................................................... 37
ARTICLE THREE
THE EXCHANGE DEBENTURES
SECTION 301. Amount....................................................................................... 38
SECTION 302. Denominations................................................................................ 39
SECTION 303. Execution, Authentication, Delivery and Dating............................................... 39
SECTION 304. Temporary Exchange Debentures................................................................ 41
SECTION 305. Registration, Registration of Transfer and Exchange.......................................... 41
SECTION 306. Mutilated, Destroyed, Lost and Stolen Exchange Debentures.................................... 43
SECTION 307. Payment of Interest; Interest Rights Preserved............................................... 44
SECTION 308. Persons Deemed Owners........................................................................ 45
SECTION 309. Cancellation................................................................................. 45
SECTION 310. Computation of Interest...................................................................... 46
SECTION 311. Book-Entry Provisions for Global Exchange Debentures......................................... 46
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SECTION 312. Transfer Provisions.......................................................................... 47
SECTION 313. Form of Accredited Investor Certificate...................................................... 57
SECTION 314. Form of Regulation S Certificate............................................................. 59
SECTION 315. Form of Rule 144A Certificate................................................................ 61
SECTION 316. CUSIP Numbers................................................................................ 62
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Exchange Indenture.............................................. 62
SECTION 402. Application of Trust Money.................................................................... 64
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default............................................................................. 65
SECTION 502. Acceleration of Maturity; Rescission and Annulment............................................ 66
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Debenture Trustee..................... 68
SECTION 504. Debenture Trustee May File Proofs of Claim.................................................... 69
SECTION 505. Debenture Trustee May Enforce Claims Without Possession of Exchange Debentures................ 69
SECTION 506. Application of Money Collected................................................................ 70
SECTION 507. Limitation on Suits........................................................................... 70
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest..................... 71
SECTION 509. Restoration of Rights and Remedies............................................................ 71
SECTION 510. Rights and Remedies Cumulative................................................................ 72
SECTION 511. Delay or Omission Not Waiver.................................................................. 72
SECTION 512. Control by Holders............................................................................ 72
SECTION 513. Waiver of Past Defaults....................................................................... 73
SECTION 514. Waiver of Stay or Extension Laws.............................................................. 73
ARTICLE SIX
THE DEBENTURE TRUSTEE
SECTION 601. Certain Duties and Responsibilities........................................................... 74
SECTION 602. Notice of Defaults............................................................................ 75
SECTION 603. Certain Rights of Debenture Trustee........................................................... 75
SECTION 604. Debenture Trustee Not Responsible for Recitals or Issuance of Exchange Debentures............. 77
SECTION 605. May Hold Exchange Debentures.................................................................. 77
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SECTION 606. Money Held in Trust........................................................................... 77
SECTION 607. Compensation and Reimbursement................................................................ 78
SECTION 608. Corporate Debenture Trustee Required; Eligibility............................................. 79
SECTION 609. Resignation and Removal; Appointment of Successor............................................. 79
SECTION 610. Acceptance of Appointment by Successor........................................................ 81
SECTION 611. Merger, Conversion, Consolidation or Succession to Business................................... 81
SECTION 612. Appointment of Authenticating Agent........................................................... 82
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY DEBENTURE TRUSTEE
AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses................................................ 84
SECTION 702. Disclosure of Names and Addresses of Holders.................................................. 84
SECTION 703. Reports by Debenture Trustee.................................................................. 84
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.......................................... 85
SECTION 802. Subsidiary Debenture Guarantors May Consolidate, Etc., Only on Certain Terms.................. 86
SECTION 803. Successor Substituted......................................................................... 87
ARTICLE NINE
SUPPLEMENTAL EXCHANGE INDENTURES
SECTION 901. Supplemental Exchange Indentures Without Consent of Holders................................... 88
SECTION 902. Supplemental Exchange Indentures with Consent of Holders...................................... 89
SECTION 903. Execution of Supplemental Exchange Indentures................................................. 90
SECTION 904. Effect of Supplemental Exchange Indentures.................................................... 90
SECTION 905. Conformity with Trust Indenture Act........................................................... 90
SECTION 906. Reference in Exchange Debentures to Supplemental Exchange Indentures.......................... 91
SECTION 907. Notice of Supplemental Exchange Indentures.................................................... 91
SECTION 908. Effect on Senior Indebtedness and Senior Subordinated Indebtedness............................ 91
ARTICLE TEN
COVENANTS
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SECTION 1001. Payment of Principal, Premium, if Any, and Interest.......................................... 91
SECTION 1002. Maintenance of Office or Agency.............................................................. 92
SECTION 1003. Money for Exchange Debentures Payments to Be Held in Trust................................... 92
SECTION 1004. Corporate Existence.......................................................................... 94
SECTION 1005. Payment of Taxes and Other Claims............................................................ 94
SECTION 1006. Maintenance of Properties.................................................................... 94
SECTION 1007. Statement by Officers as to Default.......................................................... 95
SECTION 1008. Limitation on Indebtedness................................................................... 95
SECTION 1009. Limitation on Restricted Payments............................................................ 96
SECTION 1010. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries.. ............. 100
SECTION 1011. Limitation on Transactions with Affiliates................................................... 100
SECTION 1012. Limitation on Liens.......................................................................... 101
SECTION 1013. Purchase of Exchange Debentures upon Change in Control....................................... 102
SECTION 1014. Limitation on Sale of Assets................................................................. 103
SECTION 1015. Limitations on Guarantees of Indebtedness by Restricted Subsidiaries......................... 105
SECTION 1016. Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries................................................................................. 106
SECTION 1017. Limitation on Sale and Leaseback Transactions................................................ 107
SECTION 1018. Limitation on Other Subordinated Indebtedness................................................ 107
SECTION 1019. Limitation on Unrestricted Subsidiaries...................................................... 108
SECTION 1020. Reports...................................................................................... 108
SECTION 1021. Waiver of Certain Covenants.................................................................. 108
ARTICLE ELEVEN
REDEMPTION OF EXCHANGE DEBENTURES
SECTION 1101. Redemption................................................................................... 109
SECTION 1102. Applicability of Article..................................................................... 109
SECTION 1103. Election to Redeem; Notice to Debenture Trustee.............................................. 109
SECTION 1104. Selection by Debenture Trustee of Exchange Debentures to Be Redeemed......................... 109
SECTION 1105. Notice of Redemption......................................................................... 110
SECTION 1106. Deposit of Redemption Price.................................................................. 111
SECTION 1107. Exchange Debentures Payable on Redemption Date............................................... 111
SECTION 1108. Exchange Debentures Redeemed in Part......................................................... 112
ARTICLE TWELVE
SUBORDINATION OF EXCHANGE DEBENTURES
SECTION 1201. Exchange Debentures Subordinate to Senior Indebtedness....................................... 112
SECTION 1202. Payment Over of Proceeds upon Dissolution, Etc............................................... 113
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SECTION 1203. Suspension of Payment When Designated Senior Indebtedness in Default......................... 114
SECTION 1204. Payment Permitted if No Default.............................................................. 115
SECTION 1205. Subrogation to Rights of Holders of Senior Indebtedness and
Senior Subordinated Indebtedness............................................................. 115
SECTION 1206. Provisions Solely to Define Relative Rights.................................................. 116
SECTION 1207. Debenture Trustee to Effectuate Subordination................................................ 116
SECTION 1208. No Waiver of Subordination Provisions........................................................ 117
SECTION 1209. Distribution or Notice to Representative..................................................... 117
SECTION 1210. Notice to Debenture Trustee.................................................................. 118
SECTION 1211. Reliance on Judicial Order or Certificate of Liquidating Agent............................... 118
SECTION 1212. Rights of Debenture Trustee as a Holder of Senior Indebtedness
and Senior Subordinated Indebtedness; Preservation of Debenture Trustee's Rights............. 119
SECTION 1213. Article Applicable to Paying Agents.......................................................... 119
SECTION 1214. No Suspension of Remedies.................................................................... 119
SECTION 1215. Trust Moneys Not Subordinated................................................................ 119
SECTION 1216. Debenture Trustee Not Fiduciary for Holders of Senior
Indebtedness or Senior Subordinated Indebtedness............................................. 120
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Debenture Guarantees......................................................................... 120
SECTION 1302. Severability................................................................................. 122
SECTION 1303. Restricted Subsidiaries...................................................................... 122
SECTION 1304. Subordination of Debenture Guarantees........................................................ 123
SECTION 1305. Limitation of Subsidiary Debenture Guarantors' Liability..................................... 123
SECTION 1306. Contribution................................................................................. 124
SECTION 1307. Subrogation.................................................................................. 124
SECTION 1308. Reinstatement................................................................................ 124
SECTION 1309. Release of a Subsidiary Debenture Guarantor.................................................. 125
SECTION 1309. Benefits Acknowledged........................................................................ 125
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance................................. 125
SECTION 1402. Defeasance and Discharge..................................................................... 125
SECTION 1403. Covenant Defeasance.......................................................................... 126
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.............................................. 127
SECTION 1405. Deposited Money and Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions........................................................ 128
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SECTION 1406. Reinstatement................................................................................ 129 |
TESTIMONIUM
SIGNATURES AND SEALS
EXHIBIT A - Form of Exchange Debenture
Exchange Indenture, dated as of December 29, 1997, among TUESDAY MORNING CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 14621 Inwood Road, Dallas, Texas 75244, and TMI HOLDINGS, INC., a Delaware corporation, TUESDAY MORNING, INC., a Texas corporation, FRIDAY MORNING, INC., a Texas corporation and TMIL CORPORATION, a Delaware corporation (collectively, the "Subsidiary Debenture Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as Debenture Trustee (herein called the "Debenture Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of its 13 1/4% Subordinated Exchange Debentures due 2009 (the "Initial Exchange Debentures"), and its 13 1/4% Series B Subordinated Exchange Debentures due 2009 (the "New Exchange Debentures" and, together with the Initial Exchange Debentures, the "Exchange Debentures"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Exchange Indenture.
Each Subsidiary Debenture Guarantor has duly authorized the guarantee the aggregate principal amount of the Initial Exchange Debentures, and upon the issuance of the New Exchange Debentures, if any, the aggregate principal amount of the New Exchange Debentures and to provide therefor each Subsidiary Debenture Guarantor has duly authorized the execution and delivery of this Exchange Indenture.
Upon the issuance of the New Exchange Debentures, if any, or the effectiveness of the Shelf Registration Statement (as defined herein), this Exchange Indenture will be subject to, and shall be governed by the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of or deemed to be part of and to govern the indentures qualified thereunder.
All things necessary have been done to make the Exchange Debentures, when duly executed and duly issued by the Company and authenticated and delivered hereunder by the Debenture Trustee or the Authenticating Agent, the valid obligations of the Company and to make this Exchange Indenture a valid agreement of the Company, in accordance with their and its terms.
NOW, THEREFORE, THIS EXCHANGE INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Senior Exchangeable Preferred Stock by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Exchange Debentures, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
For all purposes of this Exchange Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self- liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles; and
(4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Exchange Indenture as a whole and not to any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person; provided that, for purposes of Section 1008, such Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.
"Act," when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" means, with respect to any specified Person, (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (b) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or (c) any executive officer or director of any such specified Person or other Person or (d) with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Bank" means Fleet National Bank in its capacity as administrative agent under the Senior Credit Agreement and any future or successor or replacement administrative agent under the Senior Credit Agreement.
"Agent Members" has the meaning specified in Section 311.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction) (collectively, a "transfer"), directly or indirectly, in one or a series of related transactions, of (a) any Capital Stock of any Restricted Subsidiary; (b) all or substantially all of the properties and assets of the Company or its Restricted Subsidiaries; or (c) any other properties or assets of any division or line of business of the Company or any Restricted Subsidiary, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any transfer of properties or assets (i) that is governed by the provisions of Article Eight, (ii) between or among the Company and Restricted Subsidiaries in accordance with the terms of this Exchange Indenture, (iii) that consist of accounts receivable transferred to third parties that are not Affiliates of the Company or any Subsidiary of the Company in the ordinary course of business, including by way of the securitization of such receivables, (iv) of the Company or any Restricted Subsidiary in exchange for properties or assets of substantially equal value of another Person to be used in the same line of business being conducted by the Company or any Restricted Subsidiary at the time of such transfer having a Fair Market Value of less than $1.0 million in any given fiscal year, (v) to an Unrestricted Subsidiary, if permitted under Section 1009, (vi) consisting of the Headquarters Facility to third parties that are not Affiliates of the Company or any Subsidiary of the Company or (vii) having a Fair Market Value of less than $1.0 million in any given fiscal year.
"Authenticating Agent" means any Person authorized by the Debenture Trustee to act on behalf of the Debenture Trustee to authenticate the Exchange Debentures.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee of such board.
"Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Debenture Trustee.
"Business Day," when used with respect to any Place of Payment or any other particular location referred to in this Exchange Indenture or in the Exchange Debentures, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the date of the Indenture.
"Capitalized Lease Obligation" means, with respect to any Person, any obligation of such Person under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Exchange Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means: (a) any evidence of Indebtedness with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (b) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million; (c) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or any successor rating agency or at least P-1 by Moody's or any successor rating agency; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) demand and time deposits with a domestic commercial bank that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million.
"Certificate of Designation" means the certificate of designations, preferences and rights of the Senior Exchangeable Preferred Stock filed with the Secretary of State of the State of Delaware on December 29, 1997.
"Change in Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than 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
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding Voting Stock of the
Company and either (x) the Permitted Holders beneficially own, directly or
indirectly, in the aggregate Voting Stock of the Company that represents a
lesser percentage of the aggregate ordinary voting power of all classes of the
Voting Stock of the Company, voting together as a single class, than such other
person or group and are not entitled (by voting power, contract or otherwise) to
elect directors of the Company having a majority of the total voting power of
the Board of Directors, or (y) such other person or group is entitled to elect
directors of the Company having a majority of the total voting power of the
Board of Directors; (b) the Company consolidates with, or merges with or into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and cash, securities
and other property (other than Capital Stock of the surviving or transferee
corporation) in an amount that could be paid by the Company as a Restricted
Payment as described under Section 1009 and (ii) immediately after such
transaction, no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is 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 securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total outstanding Voting Stock of the surviving or transferee
corporation and either (x) the Permitted Holders beneficially own, directly or
indirectly, in the aggregate Voting Stock of the surviving or transferee
corporation that represents a lesser percentage of the aggregate ordinary voting
power of all classes of the Voting Stock of the surviving or transferee
corporation, voting together as a single class, than such other person or group
and are not entitled (by voting power, contract or otherwise) to elect directors
of the Surviving Entity having a majority of the total voting power of the Board
of Directors, or (y) such other person or group is entitled to elect directors
of the surviving or transferee having a majority of the total voting power of
the elected
Board of Directors; or (c) during any consecutive two year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 66% of the directors 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 (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with Article Eight .
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this Exchange Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated, whether voting or non-voting) of such Person's common stock, whether outstanding on the Issuance Date or issued after the Issuance Date, and includes, without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first paragraph of this Exchange Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Exchange Indenture, and thereafter "Company" shall mean such successor Person.
"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 Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Debenture Trustee.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business, (c) the portion of net income (or loss)
of any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has
an ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any Restricted Subsidiary in cash
dividends or distributions during such period, (d) the net income (or loss) of
any Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to the date of combination,
(e) the net income of any
Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders, and (f) for purposes of calculating Consolidated Adjusted Net Income under Section 1009, any net income (or loss) from any Restricted Subsidiary while it was an Unrestricted Subsidiary at any time during such period other than any amounts actually received from such Restricted Subsidiary during such period.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the extent deducted in computing Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges, in each case, for such period to (b) the Consolidated Interest Expense for such period.
"Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and all Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
(1) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of Interest Rate Agreements (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation and (iv) amortization of debt issuance costs, plus (b) the interest
component of Capitalized Lease Obligations of the Company and its Restricted
Subsidiaries during such period, plus (c) cash dividends due (whether or not
declared) on Preferred Stock by the Company and any Restricted Subsidiary, plus
(d) cash dividends due (whether or not declared) on Redeemable Capital Stock by
the Company and any Restricted Subsidiary, in each case as determined on a
consolidated basis in accordance with GAAP, less (2) interest on the Exchange
Debentures outstanding on the Exchange Date paid in kind with Exchange
Debentures and on Exchange Debentures so issued as payment in kind interest, all
in accordance with the Exchange Indenture as in effect on the Issuance Date;
provided that (x) the Consolidated Interest Expense attributable to interest on
any Indebtedness computed on a pro forma basis and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying at the option of the Company, either the fixed or
floating rate, and (y) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness 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 applicable period; provided
further that, notwithstanding the foregoing, the interest rate with respect to
any
Indebtedness covered by any Interest Rate Agreement shall be deemed to be the effective interest rate with respect to such Indebtedness after taking into account such Interest Rate Agreement.
"Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization, depletion and other non-cash expenses of the Company and any Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period).
"Corporate Trust Office" means the principal corporate trust office of the Debenture Trustee, at which at any particular time its corporate trust business shall be administered, which office on the date of execution of this Exchange Indenture is located at 114 West 47th Street, New York, New York 10036.
"corporation" includes corporations, associations, companies and business trusts.
"Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.
"Debenture Guarantee" means any guarantee of the obligations of the Company under this Exchange Indenture and the Exchange Debentures by any Restricted Subsidiary in accordance with the provisions of this Exchange Indenture.
"Debenture Guarantor Senior Indebtedness" of a Subsidiary Debenture Guarantor means Indebtedness of such Subsidiary Debenture Guarantor consisting of (i) a guarantee of any Senior Indebtedness under the Senior Credit Agreement or any other Senior Indebtedness and (ii) the principal of, premium, if any, and interest on all other Indebtedness of such Subsidiary Debenture Guarantor (other than the Debenture Guarantee issued by such Subsidiary Debenture Guarantor), whether outstanding on the Issuance Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to such Debenture Guarantee. Notwithstanding the foregoing, "Debenture Guarantor Senior Indebtedness" of a Subsidiary Debenture Guarantor shall not include (i) Indebtedness evidenced by the Debenture Guarantee of such Subsidiary Debenture Guarantor, (ii) Indebtedness of such Subsidiary Debenture Guarantor that is expressly subordinated in right of payment to any Debenture Guarantor Senior Indebtedness of such Subsidiary Debenture Guarantor, (iii) Indebtedness of such Subsidiary Debenture Guarantor that by operation of law is
subordinate to any general unsecured obligations of such Subsidiary Debenture Guarantor, (iv) Indebtedness of such Subsidiary Debenture Guarantor to the extent incurred in violation of any covenant of this Exchange Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by such Subsidiary Debenture Guarantor, (vi) trade account payables owed or owing by such Subsidiary Debenture Guarantor, (vii) amounts owed by such Subsidiary Debenture Guarantor for compensation to employees or for services rendered to such Subsidiary Debenture Guarantor, (viii) Indebtedness of such Subsidiary Debenture Guarantor to any Affiliate of the Company, (ix) Redeemable Capital Stock of such Subsidiary Debenture Guarantor and (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to such Subsidiary Debenture Guarantor.
"Debenture Guarantor Senior Subordinated Indebtedness" of a Subsidiary
Debenture Guarantor means Indebtedness of such Subsidiary Debenture Guarantor
consisting of (i) a guarantee of any Senior Subordinated Indebtedness under the
Notes Indenture or any other Senior Subordinated Indebtedness and (ii) the
principal of, premium, if any, and interest on all other Indebtedness of such
Subsidiary Debenture Guarantor (other than the Debenture Guarantee issued by
such Subsidiary Debenture Guarantor), whether outstanding on the Issuance Date
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to such Debenture
Guarantee. Notwithstanding the foregoing, "Debenture Guarantor Senior
Subordinated Indebtedness" of a Subsidiary Debenture Guarantor shall not include
(i) Indebtedness evidenced by the Debenture Guarantee of such Subsidiary
Debenture Guarantor, (ii) Indebtedness of such Subsidiary Debenture Guarantor
that is expressly subordinated in right of payment to any Debenture Guarantor
Senior Subordinated Indebtedness of such Subsidiary Debenture Guarantor, (iii)
Indebtedness of such Subsidiary Debenture Guarantor that by operation of law is
subordinate to any general unsecured obligations of such Subsidiary Debenture
Guarantor, (iv) Indebtedness of such Subsidiary Debenture Guarantor to the
extent incurred in violation of any covenant of this Exchange Indenture, (v) any
liability for federal, state or local taxes or other taxes, owed or owing by
such Subsidiary Debenture Guarantor, (vi) trade account payables owed or owing
by such Subsidiary Debenture Guarantor, (vii) amounts owed by such Subsidiary
Debenture Guarantor for compensation to employees or for services rendered to
such Subsidiary Debenture Guarantor, (viii) Indebtedness of such Subsidiary
Debenture Guarantor to any Affiliate of the Company, (ix) Redeemable Capital
Stock of such Subsidiary Debenture Guarantor and (x) Indebtedness which when
incurred and without respect to any election under Section 1111(b) of Title 11
of the United States Code is without recourse to such Subsidiary Debenture
Guarantor.
"Debenture Trustee" means the Person named as the "Debenture Trustee" in the first paragraph of this Exchange Indenture until a successor Debenture Trustee shall have become such pursuant to the applicable provisions of this Exchange Indenture, and thereafter "Debenture Trustee" shall mean or include each Person who is then an Debenture Trustee hereunder.
"Debentures" has the meaning stated in the first recital of the Exchange Indenture and more particularly means any Debentures authenticated and delivered under this Exchange Indenture.
"Debenture Trustee" means the Person named as "Debenture Trustee" in the first paragraph of this Exchange Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Exchange Indenture, and thereafter "Debenture Trustee" shall mean or include each Person who is then a Debenture Trustee hereunder.
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means The Depository Trust Company, its nominees and successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Senior Credit Agreement and (ii) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding of at least $25,000,000 and that has been specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under this Exchange Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" means the date on which the shares of Senior Exchangeable Preferred Stock are exchanged into Exchange Debentures at the option of the Company.
"Exchange Debenture Register" and "Exchange Debenture Registrar" have the respective meanings specified in Section 305.
"Exchange Debentures" has the meaning specified in the recitals to this Exchange Indenture.
"Exchange Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.
"Exchange Offer" means the offer by the Company to the Holders of the Initial Exchange Debentures or Senior Exchangeable Preferred Stock to exchange all of the Initial Exchange Debentures or Senior Exchangeable Preferred Stock, as the case may be, for New Exchange Debentures or Senior Exchangeable Preferred Stock registered under the Securities Act, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the date of this Exchange Indenture.
"Global Exchange Debentures" has the meaning set forth in Section 201.
"guarantee" means, as applied to any obligation, (a) 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 (b) 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 nonperformance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Headquarters Facility" means the headquarters facility and warehouse of the Company as of the Issuance Date located in Dallas, Texas.
"Holder" means the Person in whose name an Exchange Debenture is registered in the Exchange Debenture Register.
"Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money (including overdrafts) or for the deferred purchase price of
property or services, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar facilities, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business, (d) all Capitalized Lease Obligations of such
Person, (e) all obligations of such Person under or in respect of Interest Rate
Agreements or Currency Agreements, (f) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person, and
(h) all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Exchange Indenture, and if
such price is based upon, or measured by, the fair market value of such
Redeemable Capital Stock, such fair market value shall be determined in good
faith by the board of directors of the issuer of such Redeemable Capital Stock.
"Initial Exchange Debentures" has the meaning specified in the recitals to this Exchange Indenture.
"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) of Regulation D under the Securities Act.
"Interest Payment Date," when used with respect to any Exchange Debenture, means the Stated Maturity of an installment of interest on such Exchange Debenture.
"Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) designed to protect against or manage exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect advance, loan, guarantee or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued or owned by, any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. In addition, the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices.
"Issuance Date" means the date on which the Senior Exchangeable Preferred Stock is originally issued under the Certificate of Designation.
"Junior Subordinated Indebtedness" means Indebtedness of the Company or a Subsidiary Debenture Guarantor that is subordinated in right of payment to the Exchange Debentures or the Debenture Guarantee of such Subsidiary Debenture Guarantor, as the case may be.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.
"Management Stock" means the Capital Stock of the Company and the options to acquire Capital Stock of the Company owned by Lloyd L. Ross and Jerry M. Smith as of the Issuance Date together with Preferred Stock issued as payment in kind dividends on such Preferred Stock and any shares of Preferred Stock issued as payment in kind dividends thereon, and such dividends made pursuant to the terms of the certificate of designation for such Preferred Stock or the certificate of incorporation, as the case may be, as in effect on the Issuance Date.
"Maturity" means, with respect to any Exchange Debenture, the date on which any principal of such Exchange Debenture becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after 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 Officers' Certificate delivered to the Debenture Trustee.
"New Exchange Debentures" has the meaning stated in the first recital of this Exchange Indenture and refers to any New Exchange Debenture containing terms substantially identical to the Initial Exchange Debenture (except that (i) such New Exchange Debenture shall not contain terms with respect to transfer restrictions and shall be registered under the Securities Act, and (ii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) that are issued and exchanged for the Initial Exchange Debentures in accordance with the Exchange Offer, as provided for in the Registration Rights Agreement and this Exchange Indenture.
"Non-Payment Default" means any event of default (other than a Payment Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person as defined in Regulation S.
"Note Guarantee" means any guarantee of the obligations of the Company under the Notes Indenture and the Notes by any Restricted Subsidiary (as such term is defined in the Notes Indenture) in accordance with the provisions of the Notes Indenture.
"Notes" means the 11% Senior Subordinated Notes due 2007 issued pursuant to the Notes Indenture.
"Notes Indenture" means the Indenture dated as of December 29, 1997, among the Company, the guarantors named therein and Harris Trust and Savings Bank, as trustee, with respect to the Notes.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Debenture Trustee.
"Offshore Exchange Debenture Exchange Date" has the meaning set forth in
Section 201.
"Offshore Global Exchange Debenture" has the meaning set forth in Section 201.
"Offshore Physical Exchange Debenture" has the meaning set forth in Section 201.
"Opinion of Counsel" means a written opinion of legal counsel, which and who may be counsel for the Company, including an employee of the Company, and who shall be reasonably acceptable to the Debenture Trustee.
"Outstanding," when used with respect to Exchange Debentures, means, as of the date of determination, all Exchange Debentures theretofore authenticated and delivered under this Exchange Indenture, except:
(i) Exchange Debentures theretofore cancelled by the Debenture Trustee or delivered to the Debenture Trustee for cancellation;
(ii) Exchange Debentures, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Debenture Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Exchange Debentures; provided that, if such Exchange Debentures are to be redeemed, notice of such redemption has been duly given pursuant to this Exchange Indenture or provision therefor satisfactory to the Debenture Trustee has been made;
(iii) Exchange Debentures, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; and
(iv) Exchange Debentures which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Exchange Debentures have been authenticated and delivered pursuant to this Exchange Indenture, other than any such Exchange Debentures in respect of which there shall have been presented to the Debenture Trustee proof satisfactory to it that such Exchange Debentures are held by a bona fide purchaser in whose hands such Exchange Debentures are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Exchange Debentures have given any request, demand, authorization, direction, notice, consent or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Exchange Debentures owned by the Company or any other obligor upon the Exchange Debentures or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding (provided that in connection with any offer by the Company or any obligor to purchase the Exchange Debentures, Exchange Debentures tendered for purchase will be deemed to be Outstanding and held by the tendering Holder until the date of purchase), except that, in determining whether the Debenture Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Exchange Debentures which a Responsible Officer of the Debenture Trustee actually knows to be so owned shall be so disregarded. Exchange Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Debenture Trustee the pledgee's right to act with respect to such Exchange Debentures and that the pledgee is not the Company or any other obligor upon the Exchange Debentures or any Affiliate of the Company or such other obligor.
"Pari Passu Indebtedness" means (a) with respect to the Exchange Debentures, Indebtedness that ranks pari passu in right of payment to the Exchange Debentures and (b) with respect to any Debenture Guarantee, Indebtedness that ranks pari passu in right of payment to such Debenture Guarantee.
"Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (or premium, if any, on) or interest on any Exchange Debentures on behalf of the Company.
"Payment Blockage Period" has the meaning specified in Section 1203.
"Payment Default" means any default in the payment (whether at stated maturity, upon scheduled installment, by acceleration or otherwise) of principal of, or premium, if any, or interest on Designated Senior Indebtedness.
"Permitted Holders" means, as of the date of determination, Madison Dearborn Capital Partners II, L.P. and its Affiliates.
"Permitted Indebtedness" means any of the following:
(a) (i) Indebtedness of the Company under the Senior Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (A) $110 million less the amount of any permanent reductions made by the Company in respect of any term loans under the Senior Credit Agreement and (B) with respect to revolving borrowings, the greater of (1) $115 million and (2) 60% of the Eligible Inventory (as
defined in the Senior Credit Agreement on the Issuance Date) of the Company and the Restricted Subsidiaries and (ii) any guarantee by a Subsidiary Debenture Guarantor of Indebtedness incurred under this clause (a);
(b) Indebtedness of the Company pursuant to the Notes or of any Restricted Subsidiary (as such term is defined in the Notes Indenture) pursuant to a Note Guarantee;
(c) Indebtedness of the Company pursuant to the Exchange Debentures or of any Restricted Subsidiary pursuant to a Debenture Guarantee;
(d) Indebtedness of the Company or any Restricted Subsidiary outstanding on the date of this Exchange Indenture and listed on Schedule A hereto;
(e) Indebtedness of the Company owing to any wholly owned Restricted Subsidiary; provided that any Indebtedness of the Company owing to any such Restricted Subsidiary is subordinated in right of payment from and after such time as the Exchange Debentures shall become due and payable (whether at Stated Maturity, acceleration or otherwise) to the payment and performance of the Company's obligations under such Exchange Debentures; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or another wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (e);
(f) Indebtedness of a Restricted Subsidiary owing to the Company or to another wholly owned Restricted Subsidiary; provided that any such Indebtedness of any Subsidiary Debenture Guarantor is subordinated in right of payment to the Debenture Guarantee of such Subsidiary Debenture Guarantor; provided further that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to the Company or a wholly owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary not permitted by this clause (f);
(g) guarantees of any Restricted Subsidiary made in accordance with the provisions of Section 1015;
(h) obligations of the Company or any Subsidiary Debenture Guarantor entered into in the ordinary course of business (i) pursuant to Interest Rate Agreements designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Restricted Subsidiary, which obligations do not exceed the aggregate principal amount of such Indebtedness and (ii) pursuant to Currency Agreements entered into by the Company or any of its Restricted Subsidiaries
in respect of its (x) assets or (y) obligations, as the case may be, denominated in a foreign currency;
(i) Indebtedness of the Company or any Subsidiary Debenture Guarantor in respect of Purchase Money Obligations and Capitalized Lease Obligations of the Company or any Subsidiary Debenture Guarantor in an aggregate amount which does not exceed $15,000,000 at any one time outstanding;
(j) Indebtedness of the Company or any Subsidiary Debenture Guarantor consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock of Restricted Subsidiaries;
(k) Indebtedness of the Company or any Subsidiary Debenture Guarantor represented by (x) letters of credit for the account of the Company or any Restricted Subsidiary or (y) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers' compensation claims, payment obligations in connection with self-insurance or other similar requirements in the ordinary course of business;
(l) Acquired Indebtedness of any Restricted Subsidiary that is organized outside of the United States of America in an aggregate amount which, together with any Indebtedness permitted to be incurred pursuant to this clause (l) and refinanced pursuant to clause (q) below, does not exceed $10,000,000 at any one time outstanding;
(m) Indebtedness of the Company owing to Jerry M. Smith, under a note issued pursuant to a written agreement between the Company and Jerry M. Smith as in effect on the Issuance Date, in consideration for the repurchase of Common Stock of the Company owned by Jerry M. Smith at his retirement, in an aggregate amount not to exceed $15,000,000 outstanding at any time;
(n) Preferred Stock issued as payment in kind dividends on Preferred Stock outstanding on the Issuance Date and any shares of Preferred Stock issued as payment in kind dividends thereon, such dividends made pursuant to the terms of the certificate of designation for such Preferred Stock or the certificate of incorporation, as the case may be, as in effect on the Issuance Date;
(o) Indebtedness of the Company or a Subsidiary Debenture Guarantor incurred in connection with the Company's Headquarters Facility or the purchase or construction of a new headquarters facility, in each case, as permitted under the Senior Credit Agreement as in effect on the Issuance
Date;
(p) Indebtedness of the Company or any Subsidiary Debenture Guarantor not otherwise permitted by the foregoing clauses (a) through (o) in an aggregate principal amount not in excess of $20,000,000 at any one time outstanding; and
(q) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
Indebtedness, referred to in clauses (b), (c), (d) and (l) of this
definition, including any successive refinancings, so long as (i) any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the lesser of the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined as necessary to accomplish such refinancing, (ii) in
the case of any refinancing by the Company of Pari Passu Indebtedness or
Junior Subordinated Indebtedness, such new Indebtedness is made pari passu
with or subordinate to the Exchange Debentures at least to the same extent
as the Indebtedness being refinanced, (iii) in the case of any refinancing
by any Subsidiary Debenture Guarantor of Pari Passu Indebtedness or Junior
Subordinated Indebtedness, such new Indebtedness is made pari passu with or
subordinate to the Debenture Guarantee of such Subsidiary Debenture
Guarantor at least to the same extent as the Indebtedness being refinanced,
(iv) such new Indebtedness has an Average Life longer than the Average Life
of the Exchange Debentures and a final Stated Maturity later than the final
Stated Maturity of the Exchange Debentures and (v) Indebtedness of the
Company or a Subsidiary Debenture Guarantor may only be refinanced with
Indebtedness of the Company or a Subsidiary Debenture Guarantor and
Indebtedness of a Restricted Subsidiary that is not a Subsidiary Debenture
Guarantor may only be refinanced with Indebtedness of such Restricted
Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clause (e) or
(f) of the definition of "Permitted Indebtedness";
(d) Investments in an amount not to exceed $10,000,000 at any one time outstanding;
(e) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a wholly owned
Restricted Subsidiary or (ii) such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a wholly owned Restricted Subsidiary;
(f) bonds, notes, debentures and other securities received as consideration for Assets Sales to the extent permitted under Section 1014;
(g) negotiable instruments held for deposit or collection in the ordinary course of business, except to the extent they would constitute Investments in Affiliates; or
(h) Investments in the form of the sale (on a "true-sale" non-recourse basis) or the servicing of receivables transferred from the Company or any Restricted Subsidiary.
"Permitted Junior Securities" has the meaning specified in Section 1202.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Physical Debentures" has the meaning set forth in Section 201.
"Place of Payment" means the office or agency maintained by the Company where the principal of (and premium, if any, on) and interest on the Exchange Debentures are payable as specified in Section 1002.
"Predecessor Exchange Debenture" of any particular Exchange Debenture, means every previous Exchange Debenture evidencing all or a portion of the same debt as that evidenced by such particular Exchange Debenture; and, for the purposes of this definition, any Exchange Debenture authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Exchange Debenture shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Exchange Debenture.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Issuance Date, and including, without limitation, all classes and series of preferred or preference stock of such Person.
"Private Placement Legend" has the meaning set forth in Section 203.
"Public Equity Offering" means an offer and sale of common stock (which is Qualified Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other
than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).
"Purchase Money Obligations" means, with respect to any Person, obligations, other than Capitalized Lease Obligations, incurred or assumed in the ordinary course of business in connection with the purchase of property to be used in the business of such Person within 90 days of such purchase, provided that the amount of any Purchase Money Obligation shall not exceed the purchase price of the property purchased.
"Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock.
"QIB" means a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act.
"Redeemable Capital Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Exchange Debentures or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity.
"Redemption Date," when used with respect to any Exchange Debenture to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Exchange Indenture.
"Redemption Price," when used with respect to any Exchange Debenture to be redeemed, means the price at which it is to be redeemed pursuant to this Exchange Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement dated as of December 29, 1997, among the Company, the Subsidiary Debenture Guarantors and the holders of Senior Exchangeable Preferred Stock.
"Registration Statement" means the Registration Statement as defined in the Registration Rights Agreement.
"Regular Record Date" has the meaning specified in Section 301.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means (i) with respect to the Senior Credit Agreement, the Agent Bank and (ii) with respect to any other Senior Indebtedness, the indenture trustee or other trustee, agent or representative for the holders of such Senior Indebtedness.
"Responsible Officer," when used with respect to the Debenture Trustee, means any vice president, any assistant secretary, any assistant treasurer, any trust officer or assistant trust officer, or any other officer of the Debenture Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means, at any time, any direct or indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of "Restricted Subsidiary."
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing of such property or asset to the seller or transferor.
"S&P" means Standard and Poor's Ratings Services, a division of The McGraw- Hill, Inc. and its successors.
"Securities Act" means Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Senior Credit Agreement" means the credit agreement dated as of December 29, 1997, among the Company, the several lenders parties thereto, the Subsidiary Debenture Guarantors, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger and syndication agent, and Fleet National Bank, as administrative agent, as such agreement may be amended, renewed, extended, substituted, restated, refinanced, restructured, supplemented, increased or otherwise modified from time to time (including, without limitation, any successive amendments, renewals, extensions, substitutions, restatements, refinancings, restructurings, supplements or other modifications of the foregoing); provided that with respect to any agreement providing for the refinancing of Indebtedness under the Senior Credit Agreement, such agreement shall be the Senior Credit Agreement under this Exchange Indenture only if a notice to that effect is delivered by the Company to the Debenture Trustee and there shall be at any time only one instrument that is the Senior Credit Agreement under the Exchange Indenture.
"Senior Exchangeable Preferred Stock" means the 13 1/4% Senior Exchangeable Preferred Stock issued by the Company on the Issuance Date and any shares of Senior Exchangeable Preferred Stock issued as payment in kind dividends thereon or on shares of Senior Exchangeable Preferred Stock so issued as payment in kind dividends pursuant to the Certificate of Designation as in effect on the Issuance Date.
"Senior Indebtedness" means (i) all obligations of the Company, now or
hereafter existing, under or in respect of the Senior Credit Agreement, whether
for principal, premium, if any, interest (including, interest accruing after the
filing of, or which would have accrued but for the filing of, a petition by or
against the Company under Bankruptcy Law, whether or not such interest is
allowed as a claim after such filing in any proceeding under such law) and other
amounts due in connection therewith (including any fees, premiums, expenses and
indemnities) and (ii) the principal of, premium, if any, and interest on all
other Indebtedness of the Company (other than the Exchange Debentures), whether
outstanding on the date of this Exchange Indenture or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Exchange Debentures. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) Indebtedness evidenced by the
Exchange Debentures, (ii) Indebtedness of the Company that is expressly
subordinated in right of payment to any Senior Indebtedness of the Company,
(iii) Indebtedness of the Company that by operation of law is subordinate to any
general unsecured obligations of the Company, (iv) Indebtedness of the Company
to the extent incurred in violation of Section 1008, (v) any liability for
federal, state or local taxes or other taxes, owed or owing by the Company, (vi)
trade account payables owed or owing by the Company, (vii) amounts owed by the
Company for compensation to employees or for services rendered to the Company,
(viii) Indebtedness of the Company to any Restricted Subsidiary or any other
Affiliate of the Company, (ix) Redeemable Capital Stock of the Company and (x)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to the
Company or any Restricted Subsidiary.
"Senior Subordinated Indebtedness" means (i) all obligations of the Company, now or hereafter existing, under or in respect of the Notes, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under Bankruptcy Law, whether or not such interest is allowed as a claim after such filing in any proceeding under such law) and (ii) the principal of, premium, if any, and interest on all other Indebtedness of the Company (other than the Exchange Debentures), whether outstanding on the date of this Exchange Indenture or thereafter created, incurred or assumed, for which, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness will be subordinate in right of payment to any Senior Indebtedness or other general unsecured obligations of the Company, unless, such instrument expressly provides that such Indebtedness will be subordinate in right of payment to the Notes or any Indebtedness
that is pari passu in right of payment to the Notes. Notwithstanding the
foregoing, "Senior Subordinated Indebtedness" shall not include (i) Indebtedness
evidenced by the Exchange Debentures, (ii) Indebtedness of the Company that is
expressly subordinated in right of payment to any Senior Subordinated
Indebtedness of the Company or the Notes, (iii) Indebtedness of the Company that
by operation of law is subordinate to any general unsecured obligations of the
Company, (iv) Indebtedness of the Company to the extent incurred in violation of
any covenant prohibiting the incurrence of Indebtedness under the Certificate of
Designation or this Exchange Indenture, (v) any liability for federal, state or
local taxes or other taxes, owed or owing by the Company, (vi) trade account
payables owed or owing by the Company, (vii) amounts owed by the Company for
compensation to employees or for services rendered to the Company, (viii)
Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate
of the Company, (ix) Redeemable Capital Stock of the Company and (xi)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to the
Company or any Restricted Subsidiary.
"Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year.
"Special Record Date" for the payment of any Defaulted Interest on the
Exchange Debentures means a date fixed by the Debenture Trustee pursuant to
Section 307.
"Stated Maturity" means, when used with respect to any Exchange Debenture or any installment of interest thereon, the date specified in such Exchange Debenture as the fixed date on which the principal of such Exchange Debenture or such installment of interest is due and payable, and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a Subsidiary Guarantor that is expressly subordinated in right of payment to the Notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries.
"Subsidiary Debenture Guarantor" means each of TMI Holdings Inc., Tuesday Morning Inc., Friday Morning, Inc. and TMIL Corporation and any Restricted Subsidiary that incurs a Debenture Guarantee; provided that, upon the release and discharge of any Person from its Debenture Guarantee in accordance with this Exchange Indenture, such Person shall cease to be a Subsidiary Debenture Guarantor.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this Exchange Indenture was executed, except as provided in Section 905.
"United States" means the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (b) any Subsidiary of an Unrestricted Subsidiary; provided, however, that in no event shall any Subsidiary Debenture Guarantor be an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary but excluding any Subsidiary Debenture Guarantor) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 1019, (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, and (v) neither the Company nor any Restricted Subsidiary has any obligation (1) to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or (2) to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Debenture Trustee by filing a board resolution with the Debenture Trustee giving effect to such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving effect to such designation, there would be no Default or Event of Default under this Exchange Indenture and the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008.
"U.S. Global Debenture" has the meaning set forth in Section 201.
"U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt.
"U.S. Physical Debenture" has the meaning set forth in Section 201.
"Vice President," when used with respect to the Company or the Debenture Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
Upon any application or request by the Company to the Debenture Trustee to take any action under any provision of this Exchange Indenture, the Company, the Subsidiary Debenture Guarantors and any other obligor on the Exchange Debentures (if applicable) shall, at the request of the Debenture Trustee, furnish to the Debenture Trustee an Officers' Certificate in form and substance reasonably acceptable to the Debenture Trustee stating that all conditions precedent, if any, provided for in this Exchange Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and, at the request of the Debenture Trustee, an Opinion of Counsel to the effect that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of any such documents is specifically required by any provision of this Exchange Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Each certificate or opinion with respect to compliance with a covenant
or condition provided for in this Exchange Indenture (other than pursuant to
Section 1007) shall include:
(1) a statement that each individual or firm signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual or such firm, he or it has made such examination or investigation as is necessary to enable him or it 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, in the opinion of each such individual or such firm, such covenant or condition has been complied with.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Subsidiary Debenture Guarantor or other obligor on the Exchange Debentures may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, any Subsidiary Debenture Guarantor or other obligor on the Exchange Debentures stating that the information with respect to such factual matters is in the possession of the Company, any Subsidiary Debenture Guarantor or other obligor on the Exchange Debentures, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Exchange Indenture, they may, but need not, be consolidated and form one instrument.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Exchange Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Debenture Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Exchange Indenture and conclusive in favor of the Debenture Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Debenture Trustee deems sufficient.
(c) The principal amount and serial numbers of Exchange Debentures held by any Person, and the date of holding the same, shall be proved by the Exchange Debenture Register.
(d) If the Company shall solicit from the Holders of Exchange Debentures any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Exchange Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Exchange Debentures shall be computed as of such record date; provided that no such
authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Exchange Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Exchange Debenture shall bind every future Holder of the same Exchange Debenture and the Holder of every Exchange Debenture issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Debenture Trustee or the Company or any Subsidiary Debenture Guarantor in reliance thereon, whether or not notation of such action is made upon such Exchange Debenture.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Exchange Indenture to be made upon, given or furnished to, or filed with,
(1) the Debenture Trustee by any Holder or by the Company or any Subsidiary Debenture Guarantor or any other obligor on the Exchange Debentures shall be sufficient for every purpose hereunder if made, given, furnished or delivered in writing and mailed, first-class postage prepaid, or delivered by recognized overnight courier, to or with the Debenture Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or
(2) the Company or any Subsidiary Debenture Guarantor by the Debenture Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing, or mailed, first-class postage prepaid, or delivered by recognized overnight courier, to the Company or such Subsidiary Debenture Guarantor addressed to it at the address of its principal office, for the attention of the Chief Financial Officer, specified in the first paragraph of this Exchange Indenture or at any other address previously furnished in writing to the Debenture Trustee by the Company or such Subsidiary Debenture Guarantor, or
(3) the Agent Bank by the Company or any Subsidiary Debenture Guarantor, the Debenture Trustee or any Holder shall be sufficient for any purpose hereunder if made, given, furnished or delivered in writing to or with the Agent Bank addressed to it as set forth in the Senior Credit Agreement, or at any other address previously furnished in writing to the Company, the Subsidiary Debenture Guarantors and the Debenture Trustee by the Agent Bank.
Where this Exchange Indenture provides for notice of any event to Holders of Exchange Debentures by the Company or the Debenture Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at its address as it appears in the Exchange Debenture Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
In case, by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impractical to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Exchange Indenture, then any manner of giving such notice as shall be satisfactory to the Debenture Trustee shall be deemed to be sufficient giving of such notice for every purpose hereunder.
Where this Exchange Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Debenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
All covenants and agreements in this Exchange Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
In case any provision in this Exchange Indenture or in any Exchange Debenture 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.
Nothing in this Exchange Indenture or in the Exchange Debentures, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Exchange Debenture Registrar and their successors hereunder and the Holders and, with respect to any provisions hereof relating to the subordination of the Exchange Debentures or the rights of holders of Senior Indebtedness or Senior Subordinated Indebtedness, any benefit or any legal or equitable right, remedy or claim under this Exchange Indenture.
This Exchange Indenture and the Exchange Debentures shall be governed by and construed in accordance with the law of the State of New York. Upon the effectiveness of the Shelf Registration Statement or the consummation of the Exchange Offer, this Exchange Indenture will be subject to the provisions of the Trust Indenture Act that are required to be part of this Exchange Indenture and shall, to the extent applicable, be governed by such provisions.
In any case where any Interest Payment Date, Redemption Date, or Stated Maturity or Maturity of any Exchange Debenture shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Exchange Indenture or of any Exchange Debenture) payment of principal (and premium, if any) or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity or Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.
If any provision of this Exchange Indenture limits, qualifies or conflicts with another provision which is required to be included in this Exchange Indenture by the TIA, the provision required by the TIA shall control.
A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Debenture Guarantor shall not have any liability for any obligations of the Company or such Subsidiary Debenture Guarantor under the Exchange Debentures, any Debenture Guarantee or this Exchange Indenture, as applicable, or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting an Exchange Debenture and the
related Debenture Guarantee, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Exchange Debentures and the Debenture Guarantees.
This Exchange Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument.
ARTICLE TWO
EXCHANGE DEBENTURE FORMS
The Initial Exchange Debentures shall be known as the "13 1/4% Subordinated Exchange Debentures due 2009" and the New Exchange Debentures shall be known as the "13 1/4% Series B Subordinated Exchange Debentures due 2009," in each case, of the Company. The Exchange Debentures and the Debenture Trustee's certificate of authentication shall be in substantially the forms set forth in Exhibit A hereto and in this Article, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Exchange Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company executing such Exchange Debentures, as evidenced by their execution of the Exchange Debentures. Any portion of the text of any Exchange Debenture may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Exchange Debenture. Each Exchange Debenture shall be dated the date of its authentication.
The definitive Exchange Debentures shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Exchange Debentures, as evidenced by their execution of such Exchange Debentures.
Initial Exchange Debentures offered and sold in reliance on Rule 144A under the Securities Act (or exchanged for Senior Exchangeable Preferred Stock so offered and sold) shall be issued initially in the form of a single permanent global Exchange Debentures in substantially the form set forth in Exhibit A and contain each of the legends set forth in Section 203 (the "U.S. Global Exchange Debenture"), registered in the name of the nominee of the Depositary, deposited with the Debenture Trustee, as custodian for the Depositary or its nominee, duly executed by the
Company and authenticated by the Debenture Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Exchange Debenture may from time to time be increased or decreased by adjustments made on the records of the Debenture Trustee, as custodian for the Depositary or its nominee, as hereinafter provided.
Initial Exchange Debentures offered and sold in offshore transactions
in reliance on Regulation S under the Securities Act (or exchanged for Senior
Exchangeable Preferred Stock so offered and sold) shall be initially issued in
the form of a single temporary global Exchange Debenture in substantially the
form set forth in Exhibit A (the "Temporary Offshore Global Exchange
Debenture"), registered in the name of the nominee of the Depositary, deposited
with the Debenture Trustee, as custodian for the Depositary or its nominee, duly
executed by the Company and authenticated by the Debenture Trustee as
hereinafter provided. At any time following 41 days after the date hereof (the
"Offshore Exchange Debenture Exchange Date"), upon receipt by the Debenture
Trustee and the Company of a certificate substantially in the form set forth in
Section 204, a single permanent global Exchange Debenture substantially in the
form of Exhibit A hereto (the "Permanent Offshore Global Exchange Debenture";
and together with the Temporary Offshore Global Exchange Debenture, the
"Offshore Global Exchange Debenture") duly executed by the Company and
authenticated by the Debenture Trustee as hereinafter provided shall be
deposited with the Debenture Trustee, as custodian for the Depositary, and the
Exchange Debenture Registrar shall reflect on its books and records the date and
a decrease in the principal amount of the Temporary Offshore Global Exchange
Debenture in an amount equal to the principal amount of the beneficial interest
in the Temporary Offshore Global Exchange Debenture transferred. The aggregate
principal amount of the Offshore Global Exchange Debenture may from time to time
be increased or decreased by adjustments made in the records of the Debenture
Trustee, as custodian for the Depositary or its nominee, as herein provided.
Initial Exchange Debentures issued pursuant to Section 305 (or exchanged for
Senior Exchangeable Preferred Stock so offered and sold) in exchange for or upon
transfer of beneficial interests in the U.S. Global Exchange Debenture or the
Offshore Global Exchange Debenture shall be in the form of U.S. Physical
Exchange Debentures or in the form of permanent certificated Exchange Debentures
substantially in the form set forth in Exhibit A (the "Offshore Physical
Exchange Debentures"), respectively, as hereinafter provided.
Initial Exchange Debentures which are offered and sold to Institutional Accredited Investors which are not QIBs (excluding Non-U.S. Persons) (or exchanged for Senior Exchangeable Preferred Stock so offered and sold) shall be issued in the form of permanent certificated Exchange Debentures in substantially the form set forth in Exhibit A and contain the Private Placement Legend as set forth in Section 203 (the "U.S. Physical Exchange Debentures").
The Offshore Physical Exchange Debentures and U.S. Physical Exchange Debentures are sometimes collectively referred to herein as the "Physical Exchange Debentures." The U.S. Global Exchange Debenture and the Offshore Global Exchange Debenture are sometimes collectively referred to as the "Global Exchange Debentures."
New Exchange Debentures shall be issued substantially in the form set forth in Exhibit A.
Subject to Section 611, the Debenture Trustee's certificate of authentication shall be in substantially the following form:
This is one of the Exchange Debentures referred to in the within- mentioned Exchange Indenture.
United States Trust Company of New York,
as Debenture Trustee
Dated: __________ By: _________________
Authorized Signatory
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Unless and until (i) an Initial Exchange Debenture is sold pursuant to an effective Shelf Registration Statement or (ii) an Initial Exchange Debenture or Senior Exchangeable Preferred Stock is exchanged for a New Exchange Debenture or Senior Exchangeable Preferred Stock in an Exchange Offer pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, (A) each U.S. Global Exchange Debenture and U.S. Physical Exchange Debenture shall bear the following legend set forth below (the "Private Placement Legend") on the face thereof and (B) the Offshore Physical Exchange Debentures and the Temporary Offshore Global Exchange Debenture shall bear the Private Placement Legend on the face thereof until the Offshore Exchange Debenture Exchange Date and receipt by the Company and the Debenture Trustee of a certificate substantially in the form provided in Section 204:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. 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 THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR AND THIS SECURITY) AND THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A 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 TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE DEBENTURE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE DEBENTURE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRADED, EXCHANGED OR OTHERWISE TRANSFERRED SEPARATELY FROM THE COMMON STOCK OF THE COMPANY UNTIL (I) JUNE 15, 1998; (II) THE OCCURRENCE OF A CHANGE
IN CONTROL; (III) THE DATE ON WHICH A PREFERRED STOCK REGISTRATION STATEMENT IS DECLARED EFFECTIVE; (IV) IMMEDIATELY PRIOR TO ANY REDEMPTION OF SENIOR EXCHANGEABLE PREFERRED STOCK BY THE COMPANY WITH THE PROCEEDS OF A PUBLIC EQUITY OFFERING; OR (V) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH IN ITS SOLE DISCRETION (THE DATE OF THE OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I)-(V) BEING THE "SEPARATION DATE").
Each Global Exchange Debenture, whether or not an Initial Exchange Debenture, shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 SECTIONS 311 AND 312 OF THE EXCHANGE INDENTURE.
On or after February 8, 1998
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Ladies and Gentlemen:
This letter relates to $__________ principal amount of Exchange Debentures represented by the temporary offshore global note certificate (the "Temporary Offshore Global Exchange Debenture"). Pursuant to Section [201] [203] of the Exchange Indenture dated as of December 29, 1997 (the "Exchange Indenture") relating to the Exchange Debentures, we hereby certify that (1) we are the beneficial owner of such principal amount of Exchange Debentures represented by the Temporary Offshore Global Exchange Debenture and (2) we are a Non-U.S. Person to whom the Exchange Debentures could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933 (the "Securities Act"). [Accordingly, you are hereby requested to exchange the Temporary Offshore Global Exchange Debenture for an unlegended Permanent Offshore Global Exchange Debenture representing the undersigned's interest in the principal amount of Exchange Debentures represented by the Temporary Offshore Global Exchange Debenture, all in the manner provided for in the Exchange Indenture.] [Accordingly, you are hereby requested to issue an Offshore Physical Exchange Debenture representing the undersigned's interest in the principal amount of Exchange Debentures represented by the Offshore Global Exchange Debenture, all in the manner provided by the Exchange Indenture.]
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. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:__________________________________________________________________
Authorized Signature
ARTICLE THREE
THE EXCHANGE DEBENTURES
The aggregate principal amount of Exchange Debentures which may be authenticated and delivered under this Exchange Indenture is limited to $50,000,000, except for Exchange Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Exchange Debentures pursuant to Section 303, 304, 305, 306, 311, 312, 906, 1013, 1014 or 1108 or pursuant to an Exchange Offer. Exchange Debentures may be issued in exchange for Senior Exchangeable Preferred Stock as provided in the Certificate of Designation with respect thereto or in connection with the payment of interest on Exchange Debentures as provided herein.
The Initial Exchange Debentures shall be known and designated as the "13 1/4% Subordinated Exchange Debentures due 2009" and the New Exchange Debentures shall be known and designated as the "13 1/4% Series B Subordinated Exchange Debentures due 2009," in each case, of the Company. The Stated Maturity of the Exchange Debentures shall be December 15, 2009, and they shall bear interest at the rate of 13 1/4% per annum from the Exchange Date, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable quarterly on March 15, June 15, September 15 and December 15 in each year, commencing on the first such date after the Exchange Date until the principal thereof is paid in full and to the Person in whose name the Exchange Debenture (or any predecessor Exchange Debenture) is registered at the close of business on the March 1, June 1, September 1 or December
1 immediately preceding such Interest Payment Date (each, a "Regular Record
Date"). Interest will be computed on the Exchange Debentures as specified in
Section 310 hereof. On or prior to December 15, 2002, interest is payable in
additional Exchange Debentures having an aggregate principal amount equal to the
amount of such interest, or at the option of the Company, in cash. Thereafter,
all interest will be payable only in cash. Interest on the Exchange Debentures
will accrue from the date of issuance thereof.
The principal of (and premium, if any) and interest on the Exchange Debentures shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid (a) by check (or, if Exchange Debentures have been issued as payment of interest in lieu of money, by such Exchange Debentures) mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Exchange Debenture Register or (b) by wire transfer to an account located in the United States maintained by the payee.
Holders shall have the right to require the Company to purchase their Exchange Debentures, in whole or in part, in the event of a Change in Control pursuant to Section 1013. The Exchange Debentures shall be subject to repurchase pursuant to an Excess Proceeds Offer as provided in Section 1014.
The Exchange Debentures shall be redeemable as provided in Article Eleven and in the Exchange Debentures. The Indebtedness evidenced by the Exchange Debentures shall be subordinated in right of payment to Senior Indebtedness as provided in Article Twelve. The due and punctual payment of principal of, and premium, if any, and interest on the Exchange Debentures payable by the Company is irrevocably and unconditionally guaranteed, to the extent set forth herein, by each of the Subsidiary Debenture Guarantors. The Debenture Guarantee issued by any Subsidiary Debenture Guarantor will be subordinated to all existing and future Guarantor Senior Indebtedness of such Subsidiary Debenture Guarantor as provided in Article Twelve.
The Exchange Debentures shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof.
The Exchange Debentures shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer or a Vice President. The signature of any of these officers on the
Exchange Debentures may be the manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Exchange Debentures.
Exchange Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Exchange Debentures or did not hold such offices at the date of such Exchange Debentures.
At any time and from time to time after the execution and delivery of
this Exchange Indenture, the Company may deliver (i) Exchange Debentures and
(ii) any additional Exchange Debentures issued in lieu of interest payments in
money as provided in this Exchange Indenture and in the Exchange Debentures, in
each case executed by the Company to the Debenture Trustee for authentication,
together with a Company Order for the authentication and delivery of such
Exchange Debentures, directing the Debenture Trustee to authenticate the
Exchange Debentures and certifying that all conditions precedent to the issuance
of Exchange Debentures contained herein have been fully complied with, and the
Debentures Trustee in accordance with such Company Order shall authenticate and
deliver such Initial Exchange Debentures and Exchange Debentures issued in lieu
of interest payments in money, as the case may be. On Company Order, the
Debenture Trustee shall authenticate for original issue New Exchange Debentures
in an aggregate principal amount not to exceed $50,000,000; provided that such
New Exchange Debentures shall be issuable only upon the valid surrender for
cancellation of Initial Exchange Debentures of a like aggregate principal amount
in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement. In each case, the Debenture Trustee shall be entitled to receive an
Officers' Certificate and an Opinion of Counsel of the Company that it may
reasonably request in connection with such authentication of Exchange
Debentures. Such order shall specify the amount of Exchange Debentures to be
authenticated and the date on which the original issue of Exchange Debentures is
to be authenticated.
Each Exchange Debenture shall be dated the date of its authentication.
No Exchange Debenture shall be entitled to any benefit under this Exchange Indenture or be valid or obligatory for any purpose unless there appears on such Exchange Debenture a certificate of authentication substantially in the form provided for herein duly executed by the Debenture Trustee by manual signature of an authorized signatory, and such certificate upon any Exchange Debenture shall be conclusive evidence, and the only evidence, that such Exchange Debenture has been duly authenticated and delivered hereunder and is entitled to the benefits of this Exchange Indenture.
In case the Company or any Subsidiary Debenture Guarantor, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person,
and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or such Subsidiary Debenture Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Debenture Trustee pursuant to Article Eight, any of the Exchange Debentures authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Exchange Debentures executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Exchange Debentures surrendered for such exchange and of like principal amount; and the Debenture Trustee, upon Company Request of the successor Person, shall authenticate and deliver Exchange Debentures as specified in such request for the purpose of such exchange. If Exchange Debentures shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 303 in exchange or substitution for or upon registration of transfer of any Exchange Debentures, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Exchange Debentures at the time Outstanding for Exchange Debentures authenticated and delivered in such new name.
Pending the preparation of definitive Exchange Debentures, the Company may execute, and upon Company Order the Debenture Trustee shall authenticate and deliver, temporary Exchange Debentures which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Exchange Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Exchange Debentures may determine, as conclusively evidenced by their execution of such Exchange Debentures.
If temporary Exchange Debentures are issued, the Company will cause definitive Exchange Debentures to be prepared without unreasonable delay. After the preparation of definitive Exchange Debentures, the temporary Exchange Debentures shall be exchangeable for definitive Exchange Debentures, upon surrender of the temporary Exchange Debentures at the office or agency of the Company in a Place of Payment, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Exchange Debentures, the Company shall execute and, upon Company Order, the Debenture Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Exchange Debentures of authorized denominations. Until so exchanged the temporary Exchange Debentures shall in all respects be entitled to the same benefits under this Exchange Indenture as definitive Exchange Debentures.
The Company shall cause to be kept at the Corporate Trust Office of the Debenture Trustee a register for the Exchange Debentures (the register maintained in the Corporate Trust Office of the Debenture Trustee and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Exchange Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Exchange Debentures and of transfers of Exchange Debentures. The Exchange Debenture Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Exchange Debenture Register shall be open to inspection by the Debenture Trustee. The Debenture Trustee is hereby initially appointed as note registrar (the Debenture Trustee in such capacity, together with any successor of the Debenture Trustee in such capacity, the "Exchange Debenture Registrar") for the purpose of registering Exchange Debentures and transfers of Exchange Debentures as herein provided.
Upon surrender for registration of transfer of any Exchange Debenture at the office or agency in a Place of Payment, the Company shall execute, and the Debenture Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Exchange Debentures, of any authorized denomination or denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Exchange Debentures may be exchanged for other Exchange Debentures, of any authorized denomination and of a like aggregate principal amount, upon surrender of the Exchange Debentures to be exchanged at such office or agency. Whenever any Exchange Debentures are so surrendered for exchange (including an exchange of Initial Exchange Debentures for New Exchange Debentures), the Company shall execute, and the Debenture Trustee shall authenticate and deliver, the Exchange Debentures which the Holder making the exchange is entitled to receive; provided that no exchange of Initial Exchange Debentures for New Exchange Debentures shall occur until an Exchange Offer Registration Statement shall have been declared effective by the Commission, the Debenture Trustee shall have received an Officers' Certificate confirming that the Exchange Offer Registration Statement has been declared effective by the Commission and the Initial Exchange Debentures to be exchanged for the New Exchange Debentures shall be cancelled by the Debenture Trustee.
All Exchange Debentures issued upon any registration of transfer or exchange of Exchange Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Exchange Indenture, as the Exchange Debentures surrendered upon such registration of transfer or exchange.
Every Exchange Debenture presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Exchange Debenture Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Exchange Debenture Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange or redemption of Exchange Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Exchange Debentures, other than exchanges pursuant to Section 303, 304, 906, 1013, 1014 or 1108 not involving any transfer.
If any mutilated Exchange Debenture is surrendered to the Debenture Trustee, the Company shall execute and the Debenture Trustee shall authenticate and deliver in exchange therefor a new Exchange Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such mutilated Exchange Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Exchange Debenture, pay such Exchange Debenture.
If there shall be delivered to the Company, any Subsidiary Debenture Guarantor and to the Debenture Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Exchange Debenture and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company, any Subsidiary Debenture Guarantor or the Debenture Trustee that such Exchange Debenture has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Debenture Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Exchange Debenture, a new Exchange Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such destroyed, lost or stolen Exchange Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Exchange Debenture, pay such Exchange Debenture.
Upon the issuance of any new Exchange Debenture under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Debenture Trustee) in connection therewith.
Every new Exchange Debenture issued pursuant to this Section in lieu of any destroyed, lost or stolen Exchange Debenture, shall constitute an original additional contractual obligation of the Company, any Subsidiary Debenture Guarantor and any other obligor upon the Exchange Debentures, whether or not the mutilated, destroyed, lost or stolen Exchange Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this
Exchange Indenture equally and proportionately with any and all other Exchange Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Exchange Debentures.
Interest on any Exchange Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Exchange Debenture (or one or more Predecessor Exchange Debentures) is registered at the close of business on the Regular Record Date for such interest at the Place of Payment; provided, however, that each installment of interest on any Exchange Debenture may at the Company's option be paid (i) by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Exchange Debenture Register or (ii) by wire transfer to an account located in the United States maintained by the payee.
Any interest on any Exchange Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of its having been such Holder, and such defaulted interest and, if
applicable, interest on such defaulted interest (to the extent lawful) at the
rate specified in the Exchange Debentures (such defaulted interest and, if
applicable, interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Exchange Debentures (or their respective Predecessor Exchange Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Debenture Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Exchange Debenture and the date of the proposed payment (the "Special Record Date"), and at the same time the Company shall deposit with the Debenture Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Debenture Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Debenture Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Debenture Trustee of the notice of the proposed
payment. The Debenture Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given in the manner provided in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose name the Registered Exchange Debentures (or
their respective Predecessor Exchange Debentures) are registered at the
close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the Exchange Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Exchange Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Debenture Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Debenture Trustee.
Subject to the foregoing provisions of this Section and Section 305, each Exchange Debenture delivered under this Exchange Indenture upon registration of transfer of or in exchange for or in lieu of any other Exchange Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Exchange Debenture.
Prior to due presentment of an Exchange Debenture for registration of transfer, the Company, any Subsidiary Debenture Guarantor, the Debenture Trustee and any agent of the Company, any Subsidiary Debenture Guarantor or the Debenture Trustee may treat the Person in whose name such Exchange Debenture is registered as the owner of such Exchange Debenture for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest on such Exchange Debenture and for all other purposes whatsoever, whether or not such Exchange Debenture be overdue, and none of the Company, any Subsidiary Debenture Guarantor, the Debenture Trustee or any agent of the Company, any Subsidiary Debenture Guarantor or the Debenture Trustee shall be affected by notice to the contrary.
All Exchange Debentures surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange shall, if surrendered to any Person other than the Debenture Trustee, be delivered to the Debenture Trustee. All Exchange Debentures so delivered to the Debenture Trustee shall be promptly cancelled by it. The Company may at any time deliver to the Debenture Trustee for cancellation any Exchange Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Debenture Trustee (or to any other Person for delivery to the Debenture Trustee) for cancellation any Exchange Debentures previously authenticated hereunder which the Company has not issued and sold, and all Exchange Debentures so delivered shall be promptly cancelled by the Debenture Trustee. If the Company shall so acquire any of the Exchange Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Exchange Debentures unless and until the same are surrendered to the Debenture Trustee for cancellation. No Exchange Debentures shall be authenticated in lieu of or in exchange for any Exchange Debentures cancelled as provided in this Section, except as expressly permitted by this Exchange Indenture. All cancelled Exchange Debentures held by the Debenture Trustee shall be disposed of by the Debenture Trustee in accordance with its customary procedures unless by Company Order the Company shall direct that cancelled Exchange Debentures be returned to it.
Interest on the Exchange Debentures shall be computed on the basis of a 360-day year of twelve 30-day months.
(a) Each Global Exchange Debenture initially shall (i) be registered in the name of the Depositary for such Global Exchange Debentures or the nominee of such Depositary, (ii) be delivered to the Debenture Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Exchange Indenture with respect to any Global Exchange Debenture, and the Depositary may be treated by the Company, the Subsidiary Debenture Guarantors, the Debenture Trustee and any agent of the Company, the Subsidiary Debenture Guarantors or the Debenture Trustee as the absolute owner of such Global Exchange Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Subsidiary Debenture Guarantors, the Debenture Trustee or any agent of the Company, the Subsidiary Debenture Guarantors or the Debenture Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial owner of any Exchange Debenture. The registered holder of a Global Exchange Debenture may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Exchange Indenture or the Exchange Debentures.
(b) Interests of beneficial owners in a Global Exchange Debenture may be transferred in accordance with the applicable rules and procedures of the Depositary and the
provisions of Section 312. Transfers of a Global Exchange Debenture shall be limited to transfers of such Global Exchange Debenture in whole, but not in part, to the Depositary, its successors or their respective nominees, except (i) as otherwise set forth in Section 312 and (ii) U.S. Physical Exchange Debentures or Offshore Physical Exchange Debentures shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Exchange Debenture or the Offshore Global Exchange Debenture, respectively, in the event that the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the applicable Global Exchange Debenture or the Depositary ceases to be a "Clearing Agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days or an Event of Default has occurred and is continuing and the Exchange Debenture Registrar has received a request from the Depositary. In connection with a transfer of an entire Global Exchange Debenture to beneficial owners pursuant to clause (ii) of this paragraph (b), the applicable Global Exchange Debenture shall be deemed to be surrendered to the Debenture Trustee for cancellation, and the Company shall execute, and the Debenture Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the applicable Global Exchange Debenture, an equal aggregate principal amount at maturity of U.S. Physical Exchange Debentures (in the case of the U.S. Global Exchange Debenture) or Offshore Physical Exchange Debentures (in the case of the Offshore Global Exchange Debenture), as the case may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Exchange Debentures that is transferred to a person who takes delivery in the form of an interest in the other Global Exchange Debenture will, upon transfer, cease to be an interest in such Global Exchange Debenture and become an interest in the other Global Exchange Debenture and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Exchange Debenture for as long as it remains such an interest.
(d) Any U.S. Physical Exchange Debenture delivered in exchange for an
interest in the U.S. Global Exchange Debenture pursuant to paragraph (b) of this
Section shall, unless such exchange is made on or after the Resale Restriction
Termination Date and except as otherwise provided in Section 312, bear the
Private Placement Legend.
Unless and until (i) an Initial Exchange Debenture is sold pursuant to an effective Registration Statement, or (ii) an Initial Exchange Debenture is exchanged for a New Exchange Debenture in the Exchange Offer pursuant to an effective Registration Statement, in each case, pursuant to the Registration Rights Agreement, the following provisions shall apply:
As used in this Exchange Indenture, "Accredited Investor Certificate" means a certificate substantially in the form set forth in Section 313; "Regulation S Certificate" means a certificate substantially in the form set forth in Section 314; "Rule 144A Certificate" means a certificate substantially in the form set forth in Section 315; and "Non-Registration Opinion and Supporting Evidence" means a written opinion of counsel reasonably acceptable to the Company to the effect that, and such other certification or information as the Company may reasonably require to confirm that, the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
(c) [Intentionally Omitted]
1. If the proposed transfer occurs prior to the Offshore Exchange Debenture Exchange Date, and the proposed transferor holds:
(A) a U.S. Physical Exchange Debenture which is surrendered to the Exchange Debenture Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Exchange Debenture, then the Exchange Debenture Registrar shall (x) register such transfer in the name of such transferee and record the date thereof in its books and records, (y) cancel such surrendered U.S. Physical Exchange Debenture and (z) deliver a new U.S. Physical Exchange Debenture to such transferee duly registered in the name of such transferee in principal amount equal to the principal amount being transferred of such surrendered U.S. Physical Exchange Debenture;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) cancel such surrendered U.S. Physical Exchange Debenture, (y) record an increase in the principal amount of the U.S. Global Exchange Debenture equal to the principal amount being transferred of such surrendered U.S. Physical Exchange Debenture and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) cancel such surrendered U.S. Physical Exchange Debenture, (y) record an increase in the principal amount of the Temporary Offshore Global Exchange
Debenture equal to the principal amount being transferred of such surrendered U.S. Physical Exchange Debenture and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
In any of the cases described in this Section 312(e)(1)(A), the Exchange Debenture Registrar shall deliver to the transferor a new U.S. Physical Exchange Debenture in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Exchange Debenture, as applicable.
(B) the U.S. Global Exchange Debenture, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Exchange Debenture, then the Exchange Debenture Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the U.S. Global Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Exchange Debenture to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Exchange Debenture, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Exchange Debenture, then the Exchange Debenture Registrar shall (w) register such transfer in the
name of such transferee and record the date thereof in its
books and records, (x) record a decrease in the principal
amount of the U.S. Global Exchange Debenture in an amount
equal to the beneficial interest therein being transferred,
(y) record an increase in the principal amount of the
Offshore Global Exchange Debenture equal to the amount of
such decrease and (z) notify the Depositary in accordance
with the procedures of the Depositary that it approves of
such transfer.
(C) the Temporary Offshore Global Exchange Debenture, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Exchange Debenture, then the Exchange Debenture Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) deliver a new U.S. Physical Exchange Debenture to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) record a decrease in the principal amount of the Offshore Global Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Exchange Debenture equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Temporary Offshore Global Exchange Debenture, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; provided, however, that until the Offshore Exchange Debenture Exchange Date occurs, beneficial interests in the Offshore Global Exchange Debenture may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account.
2. If the proposed transfer occurs on or after the Offshore Exchange Debentures Exchange Date and the proposed transferor holds:
(A) a U.S. Physical Exchange Debenture which is surrendered to the Exchange Debenture Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Exchange Debenture, then the procedures set forth in Section 312(e)(1)(A)(i) shall apply;
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the Offshore Global Exchange Debenture, then the procedures set forth in Section 312(e)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Exchange Debenture Registrar shall cancel such surrendered U.S. Physical Exchange Debenture and at the direction of the transferee, either:
(x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Exchange Debenture to such transferee in principal amount equal to the principal amount being transferred of such surrendered U.S. Physical Exchange Debenture, or
(y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Exchange Debenture equal to the principal amount being transferred of such surrendered U.S. Physical Exchange Debenture and notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
In any of the cases described in this Section
312(e)(2)(A)(i), (ii) or (iii)(x), the Exchange Debenture
Registrar shall deliver to the transferor a new U.S.
Physical Exchange Debenture in principal amount equal to the
principal amount not being transferred of such surrendered
U.S. Physical Exchange Debenture, as applicable.
(B) the U.S. Global Exchange Debenture, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if required by the Company, a Non-Registration Opinion and Supporting Evidence, or delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee requests delivery in the form of a U.S. Physical Exchange Debenture, then the procedures set forth in Section 312(e)(1)(B)(i) shall apply; or
(ii) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests that the proposed transferee receive a beneficial interest in the U.S. Global Exchange Debenture, then the procedures set forth in Section 312(e)(1)(B)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the Exchange Debenture Registrar shall (x) record a decrease in the principal amount of the U.S. Global Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer and (z) at the
direction of the transferee, either:
(x) register such transfer in the name of such transferee, record the date thereof in its books and records and deliver a new Offshore Physical Exchange Debenture to such transferee in principal amount equal to the amount of such decrease, or
(y) if the proposed transferee is or is acting through an Agent Member, record an increase in the principal amount of the Offshore Global Exchange Debenture equal to the amount of such decrease.
(C) an Offshore Physical Exchange Debenture which is surrendered to the Exchange Debenture Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) cancel such surrendered Offshore Physical Exchange Debenture, (y) record an increase in the principal amount of the U.S. Global Exchange Debenture equal to the principal amount being transferred of such surrendered Offshore Physical Exchange Debenture and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting through an Agent Member, requests that the proposed transferee receive a beneficial interest in the Offshore Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) cancel such surrendered Offshore Physical Exchange Debenture, (y) record an increase in the principal amount of the Offshore Global Exchange Debenture equal to the principal amount being transferred of such surrendered Offshore Physical Exchange Debenture and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer; or
(iii) does not make a request covered by Section 312(e)(2)(C)(i) or Section 312(e)(2)(C)(ii), then the Exchange Debenture Registrar shall (x) register such transfer in the name of such transferee and record the date thereof in its books and records, (y) cancel such surrendered Offshore Physical Exchange Debenture and (z) deliver a new Offshore Physical Exchange Debenture to such transferee duly registered in the name of such transferee in principal amount equal to the principal amount being transferred of such surrendered Offshore Physical Exchange Debenture.
In any of the cases described in this Section 312(e)(2)(C), the Exchange Debenture Registrar shall deliver to the transferor a new U.S. Physical Exchange Debenture in principal amount equal to the principal amount not being transferred of such surrendered U.S. Physical Exchange Debenture, as applicable.
(D) the Offshore Global Exchange Debenture, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to clause (d) above) a Rule 144A Certificate and the proposed transferee is or is acting through an Agent Member and requests delivery in the form of the U.S. Global Exchange Debenture, then the Exchange Debenture Registrar shall (x) record a decrease in the principal amount of the Offshore Global Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) record an increase in the principal amount of the U.S. Global Exchange Debenture equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting through an Agent Member, requests that the proposed transferee receive a beneficial interest in the Offshore Global Exchange Debenture, then the transfer shall be effected in accordance with the procedures of the Depositary therefor; or
(iii) does not make a request covered by Section 312(e)(2)(D)(i) or Section 312(e)(2)(D)(ii), then the Exchange Debenture Registrar shall (w) register such transfer in the name of such transferee and record the date thereof in its books and records, (x) record a decrease in the principal amount of the Offshore Global
Exchange Debenture in an amount equal to the beneficial interest therein being transferred, (y) deliver a new Offshore Physical Exchange Debenture to such transferee duly registered in the name of such transferee in principal amount equal to the amount of such decrease and (z) notify the Depositary in accordance with the procedures of the Depositary that it approves of such transfer.
Debentures that bear the Private Placement Legend unless (i) the circumstances exist contemplated by the fourth paragraph of Section 201 (with respect to an Offshore Physical Exchange Debenture) or the requested transfer is at least two years after the original issue date of the Initial Exchange Debenture (with respect to any Physical Exchange Debenture), (ii) there is delivered to the Exchange Debenture Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Debenture 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 or (iii) such Exchange Debentures are exchanged for New Exchange Debentures pursuant to an Exchange Offer.
United States Trust Company of New York,
as Debenture Trustee
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate principal amount of the 13 1/4% Subordinated Exchange Debentures due 2009 (the "Exchange Debentures") of Tuesday Morning Corporation (the "Company"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of
1933, as amended (the "Securities Act")) purchasing for our own account or
for the account of such an institutional "accredited investor," and we are
acquiring the Exchange Debentures 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 other applicable securities law and we
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Exchange Debentures, and 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 and acknowledge that the Exchange Debentures have not been registered under the Securities Act, or any other applicable securities law and may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, or pursuant to an exemption therefrom, and in each case in compliance with the conditions for transfer set
forth below. We agree on our own behalf and on behalf of any investor account for which we are purchasing Exchange Debentures to offer, sell or otherwise transfer such Exchange Debentures 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 Exchange Debentures (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company or any subsidiary thereof, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Exchange Debentures are eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a "Qualified Institutional Buyer" within the meaning of 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) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act or (e) 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 to 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 Exchange Debentures is proposed to be made pursuant to clause (d) or (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver to the trustee (the "Debenture Trustee") under the Exchange Indenture pursuant to which the Exchange Debentures are issued a letter from the transferee substantially in the form of this letter, which shall provide, among other things, that the transferee is a person or entity as defined in paragraph 1 of this letter and that it is acquiring such Exchange Debentures for investment purposes and not for distribution in violation of the Securities Act. We acknowledge that the Company and the Debenture Trustee reserve the right prior to any offer, sale or other transfer of the Exchange Debentures pursuant to clauses (d) and (e) above prior to the Resale Restriction Termination Date to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Debenture Trustee.
3. We are acquiring the Exchange Debentures purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion.
4. 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 proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By:____________________________
Date:__________________________
Upon transfer, the Exchange Debentures would be registered in the name of the new beneficial owner as follows:
Date of this Certificate _______________ __, 199__
To: United States Trust Company of New York,
as Debenture Trustee (the "Debenture Trustee")
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate principal amount of Exchange Debentures, we confirm that such sale has been effected pursuant to and in accordance with Regulation S ("Regulation S") under the Securities Act of 1933, as amended (the "Securities Act"), and accordingly, we hereby certify as follows:
1. The offer of the Exchange Debentures was not made to a person in the United States (unless such person or the account held by it for which it is acting is excluded from the definition of "U.S. person" pursuant to Rule 902(o) of Regulation S under the circumstances described in Rule 902(i)(3) of Regulation S) or specifically targeted at an identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable.
4. The proposed transfer of Exchange Debentures is not part of a plan or scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling concession or other fee or remuneration in respect of the Exchange Debentures, and the proposed transfer takes place before the Offshore Exchange Debenture Exchange Date referred to in the Exchange Indenture dated as of December 29, 1997, among the Company, the guarantors thereunder and the Debenture Trustee, or we are an officer or director of the Company or a distributor, we certify that the proposed transfer is being made in accordance with the provisions of Rules 903 and 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
To: United States Trust Company of New York,
as Debenture Trustee (the "Debenture Trustee")
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate principal amount of Exchange Debentures, we confirm that such sale has been effected pursuant to and in accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"). We are aware that the transfer of Exchange Debentures to us is being made in reliance on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have been given the opportunity to obtain from the Company the information referred to in Rule 144A(d)(4), and have either declined such opportunity or have received such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
The Company in issuing the Exchange Debentures may use "CUSIP" numbers (if then generally in use) in addition to serial numbers, and, if so, the Debenture Trustee shall use such "CUSIP" numbers in addition to serial numbers in notices of redemption, repurchase or other notices to Holders as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Exchange Debentures or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Exchange Debentures, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Debenture Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
This Exchange Indenture shall, upon Company Request, cease to be of further effect with respect to Exchange Debentures (except as to any surviving rights of registration of transfer or exchange of the Exchange Debentures as expressly provided for) and the Debenture Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Exchange Indenture when
(1) either
(A) all the Exchange Debentures theretofore authenticated and delivered (other than (i) Exchange Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, and (ii) Exchange Debentures for whose payment money has theretofore been deposited in trust with the Debenture Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 1003) have been delivered to the Debenture Trustee for cancellation; or
(B) all Exchange Debentures and, in the case of (i) or (ii)
below, not theretofore delivered to the Debenture Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at their Stated Maturity within one year or
(iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Debenture Trustee for the giving of notice of redemption by the Debenture Trustee in the name, and at the expense, of the Company,
and the Company or any Subsidiary Debenture Guarantor, in the case of (i),
(ii) or (iii) above, has irrevocably deposited or caused to be deposited
with the Debenture Trustee as trust funds in trust for such purpose an
amount sufficient to pay and discharge the entire indebtedness on such
Exchange Debentures not theretofore delivered to the Debenture Trustee for
cancellation, for principal (and premium, if any) and interest on the
Exchange Debentures to the date of such deposit (in the case of Exchange
Debentures which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) no Default or Event of Default with respect to this Exchange Indenture or the Exchange Debenture shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument or agreement to which the Company or any Subsidiary Debenture Guarantor is a party or by which it is bound;
(3) the Company or any Subsidiary Debenture Guarantor has paid or caused to be paid all other sums payable hereunder by the Company or any Subsidiary Debenture Guarantor;
(4) the Company has delivered irrevocable instructions to the Debenture Trustee to apply the deposited money toward the payment of such Exchange Debentures at maturity or the Redemption Date, as the case may be; and
(5) the Company has delivered to the Debenture Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Exchange Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Exchange Indenture, the obligations of the Company to the Debenture Trustee under Section 606, the obligations of the Company to any Authenticating Agent under Section 612 and, if money shall have been deposited with the Debenture Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Debenture Trustee under Section 402 and the last paragraph of Section 1003 shall survive.
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Debenture Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Exchange Debentures and this Exchange Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Debenture Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Debenture Trustee; but such money need not be segregated from other funds except to the extent required by law.
If the Debenture Trustee or Paying Agent is unable to apply any money in accordance with Section 401 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 any Subsidiary Debenture Guarantor's obligations under this Exchange Indenture and the Exchange Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Exchange Debentures because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Exchange Debentures to receive such payment from the money held by the Debenture Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
"Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article 12 or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Exchange Debenture when it becomes due and payable and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of, or premium, if any, on any Exchange Debenture at its Maturity (upon acceleration, optional redemption, required purchase or otherwise);
(3) default in the performance, or breach, of the provisions described in Article Eight, the failure to make or consummate a Change in Control Offer in accordance with Section 1013 or the failure to make or consummate an Excess Proceeds Offer in accordance with Section 1014;
(4) default in the performance, or breach, of any covenant or warranty of the Company or any Subsidiary Debenture Guarantor contained in this Exchange Indenture or any Debenture Guarantee (other than a default in the performance, or breach, of a covenant or warranty which is specifically dealt with in clause (1), (2) or (3) of this Section) and continuance of such default or breach for a period of 30 days after there has been given to the Company by the Debenture Trustee or to the Company and the Debenture Trustee by the Holders of at least 25% in aggregate principal amount of all Outstanding Exchange Debentures;
(5) (a) one or more defaults in the payment of principal of or premium, if any, on Indebtedness of the Company or any Restricted Subsidiary aggregating $10,000,000 or more, when the same becomes due and payable at the stated maturity thereof, and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived or (b) Indebtedness of the Company or any Restricted Subsidiary aggregating $10,000,000 or more shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment) prior to the stated maturity thereof;
(6) one or more final judgments or orders shall be rendered against the Company or any Restricted Subsidiary which require the payment of money, either individually or in an aggregate amount, in excess of $10,000,000 and shall not be discharged and either (a) an enforcement proceeding shall have been commenced by any creditor upon such judgment or order or (b) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, was not in effect;
(7) any Debenture Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Debenture Guarantor denies that it has any further liability under any Debenture Guarantee, or gives notice to such effect (other than by reason of the termination of this Exchange Indenture or the release of any such Debenture Guarantee in accordance with this Exchange Indenture); or
(8) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors, or (E) admits in writing that it is generally not
paying its debts (other than debts which are the subject of a bona fide dispute) as they become due; or
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that remains unstayed and in effect for 60 days and:
(A) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case; (B) appoints a Custodian of the
Company or any of its Significant Subsidiaries or for all or substantially
all of the property of the Company or any of its Significant Subsidiaries;
or (C) orders the liquidation of the Company or any of its Significant
Subsidiaries; provided that clauses (A), (B) and (C) shall not apply to an
Unrestricted Subsidiary, unless such action or proceeding has a material
adverse effect on the interests of the Company or any Restricted
Subsidiary.
If an Event of Default (other than an Event of Default specified in
clause (8) or (9) of Section 501) occurs and is continuing, then in every such
case the Debenture Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Exchange Debentures, by written notice to
the Company (and to the Debenture Trustee if such notice is given by the
Holders), may, and the Debenture Trustee, upon the written request of such
Holders, shall declare the principal of, premium, if any, and accrued interest
on all of the Outstanding Exchange Debentures to be due and payable immediately;
provided that so long as the Senior Credit Agreement shall be in full force and
effect, if an Event of Default shall have occurred and be continuing (other than
as specified in clause (8) or (9) of Section 501 with respect to the Company),
any such acceleration shall not be effective until the earlier to occur of (x)
five Business Days following delivery of a written notice of such acceleration
of the Exchange Debentures to the agent under the Senior Credit Agreement and
(y) the acceleration of any Indebtedness under the Senior Credit Agreement. Upon
any such declaration all such amounts payable in respect of the Exchange
Debentures shall become immediately due and payable. If an Event of Default
specified in clause (8) or (9) of Section 501 occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the Outstanding
Exchange Debentures shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Debenture Trustee or any
Holder.
At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as hereinafter provided in this Article, the Holders of a majority in aggregate principal amount of the Outstanding Exchange Debentures, by written notice to the Company and the Debenture Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Debenture Trustee a sum sufficient to pay
(A) all overdue interest on all Outstanding Exchange Debentures,
(B) all unpaid principal of (and premium, if any, on) any Outstanding Exchange Debentures that has become due otherwise than by such declaration of acceleration together with interest on such unpaid principal at the rate borne by such Exchange Debentures,
(C) to the extent that payment of such interest is lawful, interest on overdue interest and overdue principal at the rate borne by such Exchange Debentures, and
(D) all sums paid or advanced by the Debenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of principal (or premium, if any, on) or interest on Exchange Debentures which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
The Company covenants that if
(1) default is made in the payment of any installment of interest on any Exchange Debenture when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Exchange Debenture at the Maturity thereof,
then the Company will, upon demand of the Debenture Trustee, pay to the Debenture Trustee for the benefit of the Holders of such Exchange Debentures, the whole amount then due and payable on such Exchange Debentures for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by such Exchange Debentures, and, in addition thereto, 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 Debenture Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the Debenture Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any Subsidiary Debenture Guarantor (in accordance with the applicable Debenture Guarantee) or any other obligor upon such Exchange Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, any Subsidiary Debenture Guarantor or any other obligor upon such Exchange Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Debenture Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Exchange Indenture of the Debenture Guarantees by such appropriate judicial proceedings as the Debenture Trustee shall deem most effectual to protect and enforce any such rights, including seeking recourse against any Subsidiary Debenture Guarantor, whether for the specific enforcement of any covenant or agreement in this Exchange Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy, including, without limitation, seeking recourse against any Subsidiary Debenture Guarantor.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor, including any Subsidiary Debenture Guarantor, upon the Exchange Debentures or the property of the Company or of such other obligor or their creditors, the Debenture Trustee (irrespective of whether the principal of the Exchange Debentures shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Debenture Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Exchange Debentures to take such other actions (including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter) and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Debenture Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Debenture Trustee and, in the event that the Debenture Trustee shall consent to the making of such payments directly to the Holders, to pay to the Debenture Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee, its agents and counsel, and any other amounts due the Debenture Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Debenture 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 Exchange Debentures or the rights of any Holder thereof or to authorize the Debenture Trustee to vote in respect of the claim of any Holder in any such proceeding.
All rights of action and claims under this Exchange Indenture, the Exchange Debentures or the Debenture Guarantees may be prosecuted and enforced by the Debenture Trustee without the possession of any of the Exchange Debentures or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Debenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Exchange Debentures in respect of which such judgment has been recovered.
Subject to Article Twelve, any money collected by the Debenture Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Debenture Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Exchange Debentures and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
of any kind, according to the amounts due and payable on such Exchange Debentures for principal (and premium, if any) and interest, respectively; and
No Holder of any Exchange Debenture shall have any right to institute any proceeding, judicial or otherwise, with respect to this Exchange Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Debenture Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Exchange Debentures shall have made a written request to the Debenture Trustee to institute proceedings in respect of such Event of Default in its own name as Debenture Trustee hereunder;
(3) such Holder or Holders have offered to the Debenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Debenture Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Debenture Trustee during such 30-day period by the Holders of a majority in principal amount of the Outstanding Exchange Debentures;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Exchange Indenture, any Exchange Debenture or any Debenture Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Exchange Indenture, any Exchange Debenture or any Debenture Guarantee, except in the manner herein provided and for the equal and ratable benefit of all Holders.
Notwithstanding any other provision in this Exchange Indenture, the Holder of any Exchange Debenture shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Eleven) and in such Exchange Debenture of the principal of (and premium, if any, on) and (subject to Section 307) interest on, such Exchange Debenture on the respective Stated Maturities expressed in such Exchange Debenture (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
If the Debenture Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Exchange Indenture or any Debenture Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Debenture Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, any Subsidiary Debenture Guarantor, any other obligor on the Exchange Debentures, the Debenture Trustee and the Holders of Exchange Debentures shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Debenture Trustee and the Holders shall continue as though no such proceeding had been instituted.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Exchange Debentures in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Debenture Trustee or to the Holders of Exchange Debentures is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
No delay or omission of the Debenture Trustee or of any Holder of any Exchange Debenture to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Debenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Debenture Trustee or by the Holders, as the case may be.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Exchange Debentures shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or with this Exchange Indenture,
(2) subject to Section 315 of the Trust Indenture Act, the Debenture Trustee may take any other action deemed proper by the Debenture Trustee which is not inconsistent with such direction, and
(3) the Debenture Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders of Exchange Debentures not consenting.
Subject to Sections 508, 902 and the last paragraph of Section 502, the Holders of not less than a majority in aggregate principal amount of the Outstanding Exchange Debentures (including consents obtained in connection with a tender offer or exchange offer for the Exchange Debentures) may on behalf of the Holders of all the Exchange Debentures waive any past default hereunder and its consequences under this Exchange Indenture or any Debenture Guarantee, except a default
(1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Exchange Debenture, or
(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Exchange Debenture affected.
Upon any such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Exchange Indenture and the Debenture Guarantees; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.
Each of the Company, the Subsidiary Debenture Guarantors and any other obligor on the Exchange Debentures covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company, any Subsidiary Debenture Guarantor or any such obligor from paying all or any portion of the principal of, premium, if any, or interest on the Exchange Debentures contemplated herein or in the Exchange Debentures or which may affect the covenants or the performance of this Exchange Indenture; and each of the Company, the Subsidiary Debenture Guarantors and any other obligor on the Exchange Debentures (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Debenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE DEBENTURE TRUSTEE
(a) Except during the continuance of a Default or an Event of Default,
(1) the Debenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Exchange Indenture, and no implied covenants or obligations shall be read into this Exchange Indenture against the Debenture Trustee; and
(2) in the absence of bad faith or willful misconduct on its part, the Debenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Debenture Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions, the Debenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Exchange Indenture, but not to verify the contents thereof.
(b) In case a Default or an Event of Default has occurred and is continuing of which a Responsible Officer of the Debenture Trustee has actual knowledge or of which written notice of such Default or Event of Default shall have been given to the Debenture Trustee by the Company, any other obligor of the Exchange Debentures or by any Holder, the Debenture Trustee
shall exercise such of the rights and powers vested in it by this Exchange 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.
(1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section;
(2) the Debenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Debenture Trustee was negligent in ascertaining the pertinent facts;
(3) the Debenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred upon the Debenture Trustee, under this Exchange Indenture; and
(4) no provision of this Exchange Indenture shall require the Debenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Exchange Indenture relating to the conduct or affecting the liability of or affording protection to the Debenture Trustee shall be subject to the provisions of this Section.
Within ten days after the earlier of receipt from the Company of notice of the occurrence of any Default or Event of Default hereunder or the date when such Default or Event of Default becomes known to the Debenture Trustee, the Debenture Trustee shall transmit, in the manner and to the extent provided in TIA Section 313(c), notice of such Default or Event of Default hereunder known to the Debenture Trustee, unless such Default or Event of Default shall have been cured or waived; provided, however, that, except in the case of a Default or Event of Default in the payment of the principal of (or premium, if any, on) or interest on any Exchange Debenture, the Debenture Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Debenture Trustee in good faith determine that the withholding of such notice is in the interest of the Holders.
Subject to the provisions of TIA Sections 315(a) through 315(d) (determined as if the TIA were applicable to this Exchange Indenture at all times):
(1) the Debenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(2) 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;
(3) whenever in the administration of this Exchange Indenture the Debenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Debenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate;
(4) the Debenture Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Debenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Exchange Indenture at the request or direction of any of the Holders of Exchange Debentures pursuant to this Exchange Indenture, unless such Holders shall have offered to the Debenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(6) the Debenture 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 Debenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and,
if the Debenture 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;
(7) the Debenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Debenture Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and
(8) the Debenture Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Exchange Indenture.
The Debenture Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The recitals contained herein and in the Exchange Debentures, except for the Debenture Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Debenture Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Debenture Trustee makes no representations as to the validity or sufficiency of this Exchange Indenture or of the Exchange Debentures, except that the Debenture Trustee represents that it is duly authorized to execute and deliver this Exchange Indenture, authenticate the Exchange Debentures and perform its obligations hereunder and that the statements made by it in its Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. Neither the Debenture Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Exchange Debentures or the proceeds thereof.
The Debenture Trustee, any Authenticating Agent, any Paying Agent, any Exchange Debenture Registrar or any other agent of the Company or of the Debenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Exchange Debentures and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Debenture Trustee, Authenticating Agent, Paying Agent, Exchange Debenture Registrar or such other agent.
All money received by the Debenture Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received. Money held by the Debenture Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Debenture Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.
The Company agrees:
(1) to pay to the Debenture Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the Debenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Debenture Trustee in accordance with any provision of this Exchange Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel and costs and expenses of collection), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Debenture Trustee or any predecessor Debenture Trustee and its agents for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Debenture Trustee) incurred without negligence or bad faith on its part, 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 any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the Debenture Trustee, to pay or reimburse the Debenture Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Debenture Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Exchange Indenture. As security for the performance of such obligations of the Company, the Debenture Trustee shall have a claim prior to the Exchange Debentures upon all property and funds held or collected by the Debenture Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Exchange Debentures.
When the Debenture Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(8) or Section 501(9), the expenses (including the
reasonable charges and expenses of its counsel) of and the compensation of the Debenture Trustee for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this Exchange Indenture.
There shall at all times be an Debenture Trustee hereunder which shall be eligible to act as Debenture Trustee under TIA Section 310(a)(1) and which shall have an office in The City of New York, and shall have a combined capital and surplus of at least $50,000,000. If the Debenture Trustee does not have an office in The City of New York, the Debenture Trustee may appoint an agent in The City of New York reasonably acceptable to the Company to conduct any activities which the Debenture Trustee may be required under this Exchange Indenture to conduct in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Debenture Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
(a) No resignation or removal of the Debenture Trustee and no appointment of a successor Debenture Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Debenture Trustee in accordance with the applicable requirements of Section 610.
(b) The Debenture Trustee may resign at any time with respect to the Exchange Debentures by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument executed by authority of the Board of Directors, a copy of which shall be delivered to the resigning Debenture Trustee and a copy to the successor trustee. If the instrument of acceptance by a successor Debenture Trustee required by Section 610 shall not have been delivered to the Debenture Trustee within 30 days after the giving of such notice of resignation, the resigning Debenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Debenture Trustee with respect to the Exchange Debentures.
(c) The Debenture Trustee may be removed at any time with respect to the Exchange Debentures by Act of the Holders of not less than a majority in principal amount of the
Outstanding Exchange Debentures, delivered to the Debenture Trustee and to the Company. If the instrument of acceptance by a successor Debenture Trustee required by Section 609 shall not have been delivered to the Debenture Trustee within 30 days after the giving of such notice of removal, the Debenture Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Debenture Trustee with respect to the Exchange Debentures.
(d) If at any time:
(1) the Debenture Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months, or
(2) the Debenture Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months, or
(3) the Debenture Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a Custodian of the Debenture Trustee or of its property shall be appointed or any public officer shall take charge or control of the Debenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the Debenture Trustee with respect to all Exchange Debentures, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Debenture Trustee with respect to all Exchange Debentures and the appointment of a successor Debenture Trustee or Debenture Trustees.
(e) If the Debenture Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Debenture Trustee for any cause, with respect to the Exchange Debentures, the Company, by a Board Resolution, shall promptly appoint a successor Debenture Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Debenture Trustee with respect to the Exchange Debentures shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Exchange Debentures delivered to the Company and the retiring Debenture Trustee, the successor Debenture Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Debenture Trustee with respect to the Exchange Debentures and to that extent supersede the successor Debenture Trustee appointed by the Company. If no successor Debenture Trustee with respect to the Exchange Debentures shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Debenture Trustee with respect to the Exchange Debentures.
(f) The Company shall give notice of each resignation and each
removal of the Debenture Trustee with respect to the Exchange Debentures and
each appointment of a successor Debenture Trustee with respect to the Exchange
Debentures to the Holders of Exchange Debentures in the manner provided for in
Section 106. Each notice shall include the name of the successor Debenture
Trustee with respect to the Exchange Debentures and the address of its Corporate
Trust Office.
(a) Each successor Debenture Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Debenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Debenture Trustee shall become effective and such successor Debenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Debenture Trustee; but, on the request of the Company or the successor Debenture Trustee, such retiring Debenture Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Debenture Trustee all the rights, powers and trusts of the retiring Debenture Trustee and shall duly assign, transfer and deliver to such successor Debenture Trustee all property and money held by such retiring Debenture Trustee hereunder.
(b) Upon request of any such successor Debenture Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Debenture Trustee all rights, powers and trusts referred to in paragraph (a) of this Section.
(c) No successor Debenture Trustee shall accept its appointment unless at the time of such acceptance, such successor Debenture Trustee shall be qualified and eligible under this Article.
Any corporation into which the Debenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Debenture Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Debenture Trustee, shall be the successor of the Debenture Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Exchange Debentures shall have been authenticated, but not delivered, by the Debenture Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Debenture Trustee may adopt such authentication and deliver the Exchange Debentures so authenticated with the same effect as if such successor Debenture Trustee had itself authenticated such Exchange Debentures. In case at that time any of the Exchange Debentures shall not have been authenticated, any successor Debenture Trustee may authenticate such Exchange Debentures either in the name of any predecessor hereunder or in the name of the successor Debenture Trustee. In all such cases such certificates shall have the full force and effect which this Exchange Indenture provides for, the certificate of authentication of the Debenture Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Debenture Trustee or to authenticate Exchange Debentures in the name of any predecessor Debenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
At any time when any of the Exchange Debentures remain Outstanding, the Debenture Trustee may appoint an Authenticating Agent or Agents with respect to the Exchange Debentures which shall be authorized to act on behalf of the Debenture Trustee to authenticate Exchange Debentures and the Debenture Trustee shall give written notice of such appointment to all Holders of Exchange Debentures with respect to which such Authenticating Agent will serve, in the manner provided for in Section 106. Exchange Debentures so authenticated shall be entitled to the benefits of this Exchange Indenture and shall be valid and obligatory for all purposes as if authenticated by the Debenture Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Debenture Trustee, and a copy of such instrument shall be promptly furnished to the Company. Wherever reference is made in this Exchange Indenture to the authentication and delivery of Exchange Debentures by the Debenture Trustee or the Debenture Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Debenture Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Debenture Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Debenture Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Debenture Trustee and to the Company. The Debenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Debenture Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give written notice of such appointment to all Holders of Exchange Debentures, in the manner provided for in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time such compensation for its services under this Section as shall be agreed in writing between the Company and such Authenticating Agent.
If an appointment is made pursuant to this Section, the Exchange Debentures may have endorsed thereon, in addition to the Debenture Trustee's certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Exchange Debentures designated therein referred to in the within-mentioned Exchange Indenture.
United States Trust Company of New York, as Debenture Trustee
By: ____________________________________ as Authenticating Agent
By: ____________________________________ Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY DEBENTURE TRUSTEE
AND COMPANY
The Company will furnish or cause to be furnished to the Debenture Trustee
(a) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Debenture Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Debenture Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content to that in Subsection (a) hereof as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Debenture Trustee shall be the Exchange Debenture Registrar, no such list need be furnished.
Every Holder of Exchange Debentures, by receiving and holding the same, agrees with the Company and the Debenture Trustee that none of the Company or the Debenture Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Debenture Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).
Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Exchange Debentures pursuant to this Exchange Indenture, the Debenture Trustee shall transmit to the Holders of Exchange Debentures (with a copy to the Company at the Place of Payment), in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company will not, in a single transaction or through a series of transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or Persons, unless at the time and immediately after giving effect thereto:
(a) either (1) the Company shall be the continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis (the "Surviving Entity") (i) will be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and (ii) will expressly assume, by an indenture supplemental hereto, executed and delivered to the Debenture Trustees, in form reasonably satisfactory to the Debenture Trustee, the Company's obligation for the due and punctual payment of the principal of (and premium, if any) and interest on all the Exchange Debentures and the performance and observance of every covenant of this Exchange Indenture on the part of the Company to be performed or observed;
(b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or any Restricted Subsidiary incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing;
(c) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the four-quarter period immediately prior to the consummation of such transaction or series of transactions with the appropriate adjustments with respect to the transaction or series of transactions being included in such pro forma calculations), the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Exchange Indenture), could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008;
(d) each Subsidiary Debenture Guarantor, if any, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Debenture Guarantee will apply to such Person's obligations hereunder and the Exchange Debentures;
(e) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1012 are complied with; and
(f) the Company or the Surviving Entity shall have delivered to the Debenture Trustee, in form and substance reasonably satisfactory to the Debenture Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Section 801 and that all conditions precedent herein provided for relating to such transaction have been satisfied.
Each Subsidiary Debenture Guarantor, if any (other than any Subsidiary
whose Debenture Guarantee is being released pursuant to the provisions of
Section 1309 as a result of such transaction), will not, and the Company will
not permit a Subsidiary Debenture Guarantor to, in a single transaction or
through a series of related transactions, merge or consolidate with or into any
other corporation or other entity (other than the Company or any Subsidiary
Debenture Guarantor), or sell, assign, convey, transfer, lease or otherwise
dispose of its properties and assets on a consolidated basis substantially as an
entirety to any entity (other than the Company or any Subsidiary Debenture
Guarantor) unless:
(a) either (1) such Subsidiary Debenture Guarantor shall be the continuing corporation or (2) the Person (if other than such Subsidiary Debenture Guarantor) formed by such consolidation or into which such Subsidiary Debenture Guarantor is merged or the entity which acquires by sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of such Subsidiary Debenture Guarantor, as the case may be, (i) shall be a corporation duly organized and validly existing under the laws of the United States, any state thereof or the District of Columbia, and (ii) shall expressly assume by an indenture supplemental hereto, executed and delivered to the Debenture Trustee, in form satisfactory to the Debenture Trustee, all
obligations of such Subsidiary Debenture Guarantor under the Exchange Debentures and the Exchange Indenture;
(b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or such Subsidiary Debenture Guarantor incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and
(c) such Subsidiary Debenture Guarantor or such Person shall have delivered to the Debenture Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, conveyance, transfer, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Section 802 and that all conditions precedent herein provided for relating to such transaction have been satisfied.
Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company or any Subsidiary Debenture Guarantor in accordance with Sections 801 and 802, the successor Person formed by such consolidation or into which the Company or such Subsidiary Debenture Guarantor, as the case may be, is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Subsidiary Debenture Guarantor, as the case may be, under this Exchange Indenture and/or the Debenture Guarantees, as the case may be, with the same effect as if such successor had been named as the Company or such Subsidiary Debenture Guarantor, as the case may be, herein and/or the Debenture Guarantees, as the case may be. When a Successor assumes all the obligations of its predecessor hereunder, the Exchange Debentures or a Debenture Guarantee, as the case may be, the predecessor shall be released from all obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal and interest or other obligations on the Exchange Debentures or a Debenture Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL EXCHANGE INDENTURES
Without the consent of any Holders, the Company or any Subsidiary Debenture Guarantor, when authorized by or pursuant to a Board Resolution, and the Debenture Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Debenture Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, a Subsidiary Debenture Guarantor or any other obligor on the Exchange Debentures, and the assumption by any such successor of the covenants of the Company or such obligor or Subsidiary Debenture Guarantor contained herein and in the Exchange Debentures and in any Debenture Guarantee in accordance with Article Eight;
(2) to add to the covenants of the Company, any Subsidiary Debenture Guarantor or any other obligor upon the Exchange Debentures for the benefit of the Holders or to surrender any right or power conferred upon the Company, or any Subsidiary Debenture Guarantor or any other obligor on the Exchange Debentures, as applicable, in this Exchange Indenture and in the Exchange Debentures or in any Debenture Guarantee;
(3) to cure any ambiguity, or to correct or supplement any provision herein, in the Exchange Debentures or in any Debenture Guarantee which may be defective or inconsistent with any other provision herein, in the Exchange Debentures or in any Debenture Guarantee or to make any other provisions with respect to matters or questions arising under this Exchange Indenture, the Exchange Debentures or any Debenture Guarantee; provided that, in each case, such provisions shall not adversely affect the interests of the Holders;
(4) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Exchange Indenture under the Trust Indenture Act;
(5) to add a Subsidiary Debenture Guarantor of the Exchange Debentures under this Exchange Indenture;
(6) to evidence and provide for the acceptance of the appointment of a successor Debenture Trustee under this Exchange Indenture; or
(7) to mortgage, pledge, hypothecate or grant a security interest in favor of the Debenture Trustee for the benefit of the Holders as additional security for the payment and performance of the Company's and any Subsidiary Debenture Guarantor's obligations under this Exchange Indenture, in any property, or assets, including any of which are required to be mortgaged, pledged or hypothecated, or in which a security interest is required to be granted to the Debenture Trustee pursuant to this Exchange Indenture or otherwise.
With the consent of the Holders of not less than a majority in principal amount of all Outstanding Exchange Debentures that are affected thereby, by Act of said Holders delivered to the Company, the Subsidiary Debenture Guarantors and the Debenture Trustee, the Company and the Subsidiary Debenture Guarantors, when authorized by or pursuant to their respective Board Resolutions, and the Debenture Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Exchange Indenture or of modifying in any manner the rights of the Holders of Exchange Debentures under this Exchange Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Exchange Debenture affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of interest on, any Exchange Debenture, or reduce the principal amount thereof, or premium, if any, or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Exchange Debenture or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date);
(2) amend, change or modify any of the provisions of Section 1013 or
Section 1014 including any definitions relating thereto in any manner
materially adverse to the Holders;
(3) reduce the percentage in principal amount of Outstanding Exchange Debentures, the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Exchange Indenture or certain defaults hereunder and their consequences provided for in this Exchange Indenture;
(4) modify any provisions of this Section, Section 1021 or Section 513, except to increase the percentage in principal amount of the Outstanding Exchange Debentures required to take any of the actions described therein or to provide that certain additional provisions of this Exchange Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Exchange Debenture affected thereby;
(5) except as otherwise permitted under Article Eight, consent to the assignment or transfer by the Company or any Subsidiary Debenture Guarantor of any of their rights or obligations under this Exchange Indenture;
(6) amend or modify any of the provisions of Article Thirteen in any manner adverse to the Holders; or
(7) modify any of the provisions of this Exchange Indenture relating to the subordination of the Exchange Debentures in a manner adverse to the Holders.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Exchange Indenture, the Debenture Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Exchange Indenture. The Debenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Debenture Trustee's own rights, duties or immunities under this Exchange Indenture or otherwise.
Upon the execution of any supplemental indenture under this Article, this Exchange Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Exchange Indenture for all purposes; and every Holder of Exchange Debentures theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
Exchange Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Debenture Trustee, bear a notation in form approved by the Debenture Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Exchange Debentures so modified as to conform, in the opinion of the Debenture Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Debenture Trustee in exchange for Outstanding Exchange Debentures.
Promptly after the execution by the Company, any Subsidiary Debenture Guarantor and the Debenture Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Exchange Debenture affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture.
No supplemental indenture shall adversely affect the rights of the holders of Senior Indebtedness and Senior Subordinated Indebtedness under Article Twelve of this Exchange Indenture without the consent of such holders affected thereby.
ARTICLE TEN
COVENANTS
The Company covenants and agrees for the benefit of the Holders of Exchange Debentures that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Exchange Debentures in accordance with the terms of the Exchange Debentures and this Exchange Indenture.
The Company will maintain in The City of New York an office or agency where Exchange Debentures may be presented or surrendered for payment (the "Place of Payment"), where Exchange Debentures may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Exchange Debentures and this Exchange Indenture may be served. The Company hereby designates the Corporate Trust Office as the Place of Payment.
The Company will give prompt written notice to the Debenture Trustee of the location, and any change in the location, of the Place of Payment. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Debenture Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Debenture Trustee, and the Company hereby
appoints the Debenture Trustee as its agent to receive such respective presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or agencies where the Exchange Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Exchange Debentures for such purposes. The Company will give prompt written notice to the Debenture Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
If the Company shall at any time act as its own Paying Agent with respect to the Exchange Debentures, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Exchange Debentures, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) 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 Debenture Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the Exchange Debentures, it will, prior to or on each due date of the principal of (and premium, if any, on) or interest on any Exchange Debentures, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Debenture Trustee) the Company will promptly notify the Debenture Trustee of its action or failure so to act.
The Company will cause each Paying Agent (other than the Debenture Trustee) to execute and deliver to the Debenture Trustee an instrument in which such Paying Agent shall agree with the Debenture Trustee, subject to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and premium, if any) and interest on the Exchange Debentures in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Debenture Trustee notice of any default by the Company (or any other obligor upon the Exchange Debentures) in the making of any payment of principal of (and premium, if any) or interest on the Exchange Debentures; and
(3) at any time during the continuance of any such default, upon the written request of the Debenture Trustee, forthwith pay to the Debenture Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Exchange Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Debenture Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Debenture Trustee upon the same trusts as those upon which sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Debenture Trustee, such Paying Agent shall be released from all further liability with respect to such sums.
Any money deposited with the Debenture Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Exchange Debenture and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Exchange Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Debenture Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Debenture Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.
Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory), licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that, subject to the other provisions of this Exchange Indenture, the Company shall not be required to preserve any such existence (except the Company), right, license or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not, and will not be, disadvantageous in any material respect to the Holders.
The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, would by law become a material liability or lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company) are being maintained in accordance with GAAP.
The Company will cause all material properties owned by the Company or any Restricted Subsidiary or used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Restricted Subsidiary and not adverse in any material respect to the Holders.
(a) The Company and each Subsidiary Debenture Guarantor will deliver to the Debenture Trustee, within 45 days after the end of each fiscal quarter and within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company or the Subsidiary Debenture Guarantor, as the case may be, during the preceding quarter or the preceding fiscal year, as the case may be, has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill its obligations under this Indenture and further stating, as to each such officer signing such certificate, that, to the best of his or her knowledge, the Company during such preceding quarter or the preceding fiscal year, as the case may be, has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill each and every such covenant contained in this Indenture and no Default or Event of Default occurred during such quarter or year, as the case may be, and at the date of such certificate there is no Default or Event of Default which has
occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Exchange Debentures is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. The Officers' Certificate shall also notify the Debenture Trustee should the Company elect to change the manner in which it fixes its fiscal year-end. For purposes of this Section 1007(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Exchange Indenture.
(b) When any Default or Event of Default has occurred and is continuing under this Exchange Indenture, or if the trustee for or the holder of any other evidence of Indebtedness of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness in the principal amount of less than $10,000,000), the Company shall deliver to the Debenture Trustee by registered or certified mail or by telegram, telex or facsimile transmission an Officers' Certificate specifying such event, notice or other action within five Business Days of its occurrence.
The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness; provided, however, that the Company and any Subsidiary Debenture Guarantor may incur Indebtedness (including Acquired Indebtedness) if at the time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness for which internal financial statements are available, taken as one period (and after giving pro forma effect to (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such four- quarter period, (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired on the first day of such four-quarter period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Indebtedness during such four-quarter period) and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four- quarter period, as if such acquisition or disposition occurred on the first day of such four-quarter period), would have been at least equal to 2.0 to 1.0.
(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to acquire such shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock of the Company or any Affiliate of the Company or any options, warrants or other rights to acquire such shares of Capital Stock (other than such options, warrants or rights owned by the Company or a wholly owned Restricted Subsidiary);
(iii) declare or pay any dividend on, or make any distribution to holders of, any shares of Capital Stock of any Restricted Subsidiary to any Person (other than to the Company or any of its wholly owned Restricted Subsidiaries or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis);
(iv) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Junior Subordinated Indebtedness of the Company or any Subsidiary Debenture Guarantor; or
(v) make any Investment (other than any Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur at least $ 1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008 and (3) the aggregate amount of all Restricted Payments declared or made after the Issuance Date shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period beginning on the first day of the Company's first fiscal quarter after the Issuance Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of shares of Qualified Capital Stock of the Company (including upon the exercise of options, warrants or fights) or warrants, options or rights to purchase shares of Qualified Capital Stock of the Company, plus
(C) the aggregate net cash proceeds received after the Issuance Date by the Company from the issuance or sale (other than to any Restricted Subsidiary) of debt securities or Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, to the extent such securities were originally sold for cash, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted Payment that was made after the Issuance Date is sold or is otherwise liquidated or repaid, an amount (to the extent not included in Consolidated Adjusted Net Income) equal to the sum of (I) the lesser of (x) the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) and (y) the initial amount of such Investment, and (II) with respect solely to any Restricted Payment to be made pursuant to clause (v) of this paragraph (a), the cash proceeds with respect to such Investment (less the cost of the disposition of such Investment and net of taxes) in excess of the amount in (I), plus
(E) $5,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v), (vi), (vii) and (viii) below) at the time of and after giving effect thereto no Default or Event of Default shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration the payment of such dividend would have complied with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Junior Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iv) the purchase of any Indebtedness that is expressly subordinated in right of payment to the Exchange Debentures at a purchase price not greater than 101% of the principal amount thereof in the event of a Change in Control in accordance with provisions similar to those of Section 1013; provided that prior to such purchase the Company has made the Change in Control Offer as provided in Section 1013 and has purchased all Exchange Debentures validly tendered for payment in connection with such Change in Control Offer;
(v) the repurchase, redemption or other acquisition or retirement for value of shares of Management Stock; provided that (1) the Company is required, by the terms of written agreements between the Company and each of Lloyd L. Ross and Jerry M. Smith as in effect on the Issuance Date, to effect such purchase, redemption or other acquisition or retirement for value of such shares and (2) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $25,000,000 in the aggregate;
(vi) the repurchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company from employees who have died (or their estates or beneficiaries) or whose employment has been terminated; provided that such payment shall not exceed $1,500,000 in any twelve month period, excluding any amounts used to repurchase, redeem, acquire or retire for value shares of Capital Stock of the Company pursuant to clause (v) above;
(vii) repurchases of Capital Stock of the Company (or warrants or options convertible into or exchangeable for such Capital Stock) deemed to occur upon exercise of stock options to the extent that shares of such Capital Stock (or warrants or options convertible into or exchangeable for such Capital Stock) represent a portion of the exercise price of such options;
(viii) the issuance by the Company of shares of Preferred Stock as dividends paid in kind on the Preferred Stock of the Company outstanding on the Issuance Date or on shares of Preferred Stock so issued as payment in kind dividends, such dividends made pursuant to the terms of the Certificate of Designation for such Preferred Stock as in effect on the Issuance Date; and
(ix) the purchase, redemption, defeasance or other acquisition or retirement for value of any Junior Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the net cash proceeds of a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, new Junior Subordinated Indebtedness so long as (A) the principal amount of such new Junior Subordinated Indebtedness does not exceed the principal amount (or, if such Junior Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, defeased, acquired or retired, plus either the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of such Indebtedness being refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus, in either case, the amount of reasonable expenses of the Company incurred in connection with such refinancing, (B) such new Junior Subordinated Indebtedness is pari passu or subordinated, as applicable, to the Exchange Debentures to the same extent as such Indebtedness so purchased, redeemed, defeased, acquired or retired and (C) such new Indebtedness has an Average Life longer than the Average Life of the Exchange Debentures and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Exchange Debentures.
The actions described in clauses (i), (ii), (iii), (iv), (v), (vi) and
(vii) of this paragraph (b) shall be Restricted Payments that shall be permitted
to be taken in accordance with this paragraph (b) but shall reduce the amount
that would otherwise be available for Restricted Payments under clause (3) of
paragraph (a) above and the actions described in clauses (viii) and (ix) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a).
(c) Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to, pay any cash dividends on any shares of Capital Stock of the Company which shall rank junior to the Senior Exchangeable Preferred Stock until such time as the Notes have received a rating from Moody's of at least "B1" or higher.
The Company (i) shall not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a wholly owned Restricted Subsidiary) and (ii) shall not permit any Person (other than the Company or a wholly owned Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary; provided, however, that this Section 1010 shall not prohibit (a) the issuance and sale of all, but not less than all, of the issued and outstanding Capital Stock of any Restricted Subsidiary owned by the Company or any of its Restricted Subsidiaries in compliance with the other provisions of this Exchange Indenture, (b) the ownership by other Persons of Qualified Capital Stock (other than Preferred Stock) issued prior to the time such
Restricted Subsidiary became a Subsidiary of the Company that was neither issued in contemplation of such Subsidiary becoming a Subsidiary nor acquired at that time or (C) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company or any Restricted Subsidiary (other
than the Company or a Restricted Subsidiary) (collectively, "Interested
Persons"), unless (i) such transaction or series of transactions are on terms
that are no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could have been able to be obtained in an arm's-
length transaction with third parties that are not Interested Persons, (ii) with
respect to any transaction or series of related transactions involving aggregate
consideration equal to or greater than $1,000,000, the Company has delivered an
Officers' Certificate to the Debenture Trustee certifying that such transaction
or series of transactions complies with clause (i) above and (iii) with respect
to any transaction or series of related transactions involving aggregate
consideration equal to or greater than $5,000,000, such transaction or series of
related transactions (x) has been approved by the Board of Directors of the
Company (including a majority of the Disinterested Directors of the Company) or
(y) the Company has obtained a written opinion from a nationally recognized
investment banking or valuation firm certifying that such transaction or series
of related transactions is fair to the Company or its Restricted Subsidiary, as
the case may be, from a financial point of view; provided, however, that this
Section 1011 shall not restrict (1) the Company from paying reasonable and
customary regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary, (2) the payment of management fees to Permitted Holders in an
aggregate amount not to exceed $500,000 per year, (3) loans and advances to
officers, directors and employees of the Company or any Restricted Subsidiary in
the ordinary course of business in accordance with the past practices of the
Company or any Restricted Subsidiary not to exceed $3,000,000 in the aggregate
outstanding at any time, (4) any transactions made in compliance with Section
1009, (5) the issuance and sale of Qualified Capital Stock of the Company to
Persons who are stockholders of the Company at the time of such issuance and
sale and (6) the performance of any written agreement as in effect on the
Issuance Date and as amended from time to time, provided that any such amendment
is not less favorable in any material respect to the Company or any Restricted
Subsidiary than the terms of such agreement as in effect on the Issuance Date.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Pari Passu Indebtedness or Junior Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or indebtedness of any Restricted Subsidiary, whether owned at the Issuance Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Company, the Exchange Debentures are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Junior Subordinated Indebtedness of the Company, the Exchange Debentures are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
(b) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Junior Subordinated Indebtedness of such Restricted Subsidiary on or with respect to any such Restricted Subsidiary's properties or assets, including any shares of stock or Indebtedness of any Subsidiary of such Restricted Subsidiary, whether owned at the Issuance Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness of the Restricted Subsidiary, such Debenture Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Subordinated Indebtedness of the Restricted Subsidiary, such Debenture Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien.
(a) If a Change in Control shall occur at any time, then each Holder of Exchange Debentures will have the right to require that the Company purchase such Holder's Exchange Debentures, in whole or in part in integral multiples of $1,000, at a purchase price (the "Change in Control Purchase Price") in cash in an amount equal to 101% of the principal amount thereof, plus accrued interest, if any, to the date of purchase (the "Change in Control Purchase Date"), pursuant to the offer described below (the "Change in Control Offer") and the other procedures set forth in this Exchange Indenture.
(b) Within 30 days following any Change in Control, the Company shall notify the Debenture Trustee thereof and give written notice of such Change in Control Offer to each Holder by first-class mail, postage prepaid, at the address of such Holder appearing in the Exchange Debenture Register, stating, among other things, (i) the Change in Control Purchase Price and the Change in Control Purchase Date, which shall be a Business Day no earlier than 30
days nor later than 75 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Exchange Debenture not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Change in Control Purchase Price, any Exchange Debentures accepted for payment pursuant to the Change in Control Offer shall cease to accrue interest after the Change in Control Purchase Date; and (iv)that Holders electing to have any Notes purchased pursuant to a Change in Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change in Control Purchase Date; (v) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change in Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vi) that Holders whose Exchange Debentures are being purchased only in part shall be issued new Exchange Debentures equal in principal amount to the unpurchased portion of the Exchange Debentures surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; (vii) the instructions that the Holders of Exchange Debentures must follow in order to tender their Exchange Debentures; and (viii) the circumstances and relevant facts regarding such Change in Control.
(c) The Company shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change in Control Offer.
(d) The Company shall not, and shall not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement or under Indebtedness as in effect on the Issuance Date) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Exchange Debentures or, if such Change in Control Offer is made, to pay for the Exchange Debentures tendered for purchase.
(e) Prior to complying with the provisions of this Section 1013, but
in any event within 30 days following a Change in Control, the Company shall
either terminate all commitments and repay in full all Indebtedness under the
Senior Credit Agreement and the Notes, respectively, and or obtain the requisite
consents, if any, under the Senior Credit Agreement and the Notes Indenture to
permit the purchase of the Exchange Debentures as provided for under this
Section 1013.
(f) The Company shall not, and shall not permit any Restricted Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under the Senior Credit Agreement, the Notes Indenture or under Indebtedness as in effect on the
Issuance Date) that would materially impair the ability of the Company to make a Change in Control Offer to purchase the Exchange Debentures or, if such Change in Control Offer is made, to pay for the Exchange Debentures tendered for purchase.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly, or indirectly, consummate any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) at least 75% of such consideration consists of cash or Cash Equivalents. The amount of any (I) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Debenture Guarantor or any Senior Indebtedness of the Company or any Subsidiary Debenture Guarantor that is actually assumed by the transferee in such Asset Sale and from which the Company and the Restricted Subsidiaries are fully released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries (excluding any liabilities that are incurred in connection with or in anticipation of such Asset Sale) and (II) notes or other similar obligations received by the Company or any Restricted Subsidiary from such transferee that are converted, sold or exchanged within 30 days of the related Asset Sale by the Company or the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount equal to the net cash proceeds realized upon such conversion, sale or exchange for purposes of determining the percentage of cash consideration received by the Company or the Restricted Subsidiaries.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after
such Asset Sale, to (i) permanently repay or prepay any then outstanding Senior
Indebtedness or Senior Subordinated Indebtedness of the Company or any
Restricted Subsidiary (and to correspondingly reduce commitments with respect
thereto) or (ii) invest (or enter into a legally binding agreement to invest) in
other properties or assets to replace the properties or assets that were the
subject of the Asset Sale or in properties and assets that will be used in
businesses of the Company or its Restricted Subsidiaries, as the case may be,
existing at the time such assets are sold. If any such legally binding
agreement to invest such Net Cash Proceeds is terminated, then the Company may,
within 90 days of such termination or within 12 months of such Asset Sale,
whichever is later, invest such Net Cash Proceeds as provided in clause (i) or
(ii) (without regard to the parenthetical contained in such clause (ii)) above.
The amount of such Net Cash Proceeds not so used as set forth above in this
paragraph (b) shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall, within 30 Business Days, make an offer to purchase (an "Excess Proceeds Offer") from all holders of Exchange Debentures, on a pro rata basis, in accordance with the procedures set forth below, the maximum principal amount (expressed as an integral multiple of $1,000) of
Exchange Debentures that may be purchased with the Excess Proceeds. The offer price as to each Exchange Debenture shall be payable in cash in an amount equal to 100% of the principal amount of such Exchange Debenture plus accrued interest, if any (the "Offered Price"), to the date such Excess Proceeds Offer is consummated (the "Offer Date"). To the extent that the aggregate principal amount of Exchange Debentures tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency for any lawful purposes. If the aggregate principal amount of Exchange Debentures validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Exchange Debentures to be purchased will be selected on a pro rata basis. Upon completion of such Exceeds Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
(d) Whenever the Excess Proceeds received by the Company exceed
$10,000,000, such Excess Proceeds shall be set aside by the Company in a
separate account pending (i) deposit with the Debenture Trustee or a paying
agent of the amount required to purchase the Exchange Debentures tendered in an
Excess Proceeds Offer, (ii) delivery by the Company of the Offered Price to the
holders of the Exchange Debentures tendered in an Excess Proceeds Offer and
(iii) application, as set forth above, of Excess Proceeds for any lawful
purposes. Such Excess Proceeds may be invested in Cash Equivalents, provided
that the maturity date of any investment shall not be later than the Offer Date.
The Company shall be entitled to any interest or dividends accrued, earned or
paid on such Cash Equivalents.
(e) If the Company becomes obligated to make an Excess Proceeds Offer pursuant to clause (c) above, the Exchange Debentures shall be purchased by the Company, at the option of the Holders thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 30 days and not later than 60 days from the date the notice is given to holders, or such later date as may be necessary for the Company to comply with the requirements under the Exchange Act, subject to proration in the event the amount of Excess Proceeds is less than the aggregate Offered Price of all Exchange Debentures tendered.
(f) Within 15 days after the obligation of the Company to make an Excess Proceeds Offer arises, the Company shall notify the Debenture Trustee thereof and give written notice of such Excess Proceeds Offer to each Holder of Exchange Debentures by first-class mail, postage prepaid, at the address of such Holder appearing in the Exchange Debenture Register, stating, (i) the Offered Price and the Offer Date, which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Exchange Debenture not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Offered Price, any Exchange Debentures accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest after the date of purchase; (iv) that Holders electing to have any Exchange Debentures purchased pursuant to an Excess Proceeds Offer shall be required to surrender the Exchange Debentures, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Exchange Debentures
completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Offer Date; (v) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Offer Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Exchange Debentures delivered for purchase, and a statement that such Holder is withdrawing its election to have such Exchange Debentures purchased; (vi) that Holders whose Exchange Debentures are being purchased only in part shall be issued new Exchange Debentures equal in principal amount to the unpurchased portion of the Exchange Debentures surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; (vii) the instructions that the Holders of Exchange Debentures must follow in order to tender their Exchange Debentures; and (viii) the circumstances and relevant facts regarding such Excess Proceeds Offer.
(g) The Company shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with an Excess Proceeds Offer.
(a) The Company will not permit any Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Indebtedness of the Company unless (i) (A) if such Restricted Subsidiary is not a Subsidiary Debenture Guarantor, such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture, in form satisfactory to the Debenture Trustee, providing for a guarantee of the Exchange Debentures by such Restricted Subsidiary and delivers to such Debenture Trustee an Opinion of Counsel reasonably satisfactory to such Debenture Trustee to the effect that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary and is in compliance with the terms of this Exchange Indenture and (B) with respect to any guarantee by a Restricted Subsidiary of Junior Subordinated Indebtedness of the Company, any such guarantee shall be subordinated to such Restricted Subsidiary's Debenture Guarantee at least to the same extent as such guaranteed Indebtedness is subordinated to the Exchange Debentures and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Debenture Guarantee.
(b) Notwithstanding the foregoing, any guarantee of the Exchange Debentures created pursuant to the provisions described in the foregoing paragraph (a) will provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's Capital Stock in, or all or substantially all the assets of, the applicable Subsidiary Debenture
Guarantor (which sale, exchange or transfer is otherwise in compliance with this Exchange Indenture) or (ii) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of this Exchange Indenture.
The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary (other than customary restrictions on transfers of property subject to a Lien permitted under this Exchange Indenture that would not materially adversely affect the Company's ability to satisfy its obligations under the Exchange Debentures and this Exchange Indenture) or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary provisions restricting subletting or assignment of any lease or assignment of any other contract to which the Company or any Restricted Subsidiary is a party or to which any of their respective properties or assets are subject, (iii) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (iv) encumbrances and restrictions in effect on the Issuance Date pursuant to the Senior Credit Facility and its related documentation, (v) any encumbrance or restriction contained in contracts for sales of assets permitted by Section 1014 with respect to the assets to be sold pursuant to such contract and (vi) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (iii) and (iv); provided that the terms and conditions of any such encumbrances or restrictions are not materially less favorable to the Holders than those under or pursuant to the agreement so extended, renewed, refinanced or replaced.
The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction with respect to any property or assets (whether now owned or hereafter acquired), unless (i) the sale or transfer of such property or assets to be leased is treated as an Asset Sale and the Company complies with Section 1014 and (ii) the Company or such Restricted Subsidiary would be permitted to incur Indebtedness under
Section 1008 in the amount of the Capitalized Lease Obligations incurred in
respect of such Sale and Leaseback Transaction; provided, however, that the
Company and its Restricted Subsidiaries will not be required to comply with
Section 1017 with respect to the sale and leaseback of the Headquarters
Facility.
Neither the Company nor any Restricted Subsidiary shall incur, create, assume, guarantee or in any other manner become directly or indirectly liable with respect to or responsible for, or permit to remain outstanding, any Indebtedness, other than the Exchange Debentures, that is subordinate or junior in right of payment to any Senior Subordinated Indebtedness unless such Indebtedness is also pari passu with, or subordinate in right of payment to, the Exchange Debentures pursuant to subordination provisions substantially similar to those contained in this Exchange Indenture.
The Company shall not make, and shall not permit any of its Restricted
Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the
time thereof, the aggregate amount of such Investments would exceed the amount
of Restricted Payments then permitted to be made pursuant to Section 1008. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
Section 1019 (i) shall be treated as the making of a Restricted Payment in
calculating the amount of Restricted Payments made by the Company or a
Restricted Subsidiary and (ii) may be made in cash or property.
The Company shall file on a timely basis with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13 or 15 of the Exchange Act. The Company shall also (a) file with the Debenture Trustee, and provide to each Holder of Exchange Debentures (at their respective addresses set forth in the Exchange Debenture Register), without cost to such Holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required, and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request.
Delivery of such reports, information and documents to the Debenture Trustee is for informational purposes only and the Debenture 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 Debenture Trustee is entitled to rely exclusively on Officers' Certificates).
The Company and the Restricted Subsidiaries may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1007 to 1012, inclusive, and 1015 to 1019, inclusive, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of all Outstanding Exchange Debentures affected by such term, provision or covenant, by Act of such Holders, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company, the Restricted Subsidiaries and the duties of the Debenture Trustee, as applicable, in respect of any such term, provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF EXCHANGE DEBENTURES
The Exchange Debentures may or shall be, as the case may be, redeemed, as a whole or from time to time in part, subject to the conditions and the Redemption Prices specified in the form of Exchange Debenture, together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive interest due on Interest Payment Date), on the Redemption Date.
Redemption of Exchange Debentures at the election of the Company or otherwise, as permitted or required by any provision of this Exchange Indenture, shall be made in accordance with the terms of such Exchange Debentures and in accordance with this Article Eleven.
The election of the Company to redeem any Exchange Debentures pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Debenture Trustee), notify the
Debenture Trustee of such Redemption Date and of the principal amount of Exchange Debentures to be redeemed and shall deliver to the Debenture Trustee such documentation and records as shall enable the Debenture Trustee to select the Exchange Debentures to be redeemed pursuant to Section 1104.
If less than all the Exchange Debentures are to be redeemed, the particular Exchange Debentures to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Debenture Trustee, from the Outstanding Exchange Debentures not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Exchange Debentures are listed, or, if such Exchange Debentures are not so listed, on a pro rata basis, by lot or by such other method as the Debenture Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Exchange Debentures; provided, however, that no such partial redemption shall reduce the portion of the principal amount of an Exchange Debenture not redeemed to less than $1,000.
The Debenture Trustee shall promptly notify the Company in writing of the Exchange Debentures selected for redemption and, in the case of any Exchange Debentures selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Exchange Indenture, unless the context otherwise requires, all provisions relating to redemption of Exchange Debentures shall relate, in the case of any Exchange Debenture redeemed or to be redeemed only in part, to the portion of the principal amount of such Exchange Debenture which has been or is to be redeemed.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Exchange Debentures to be redeemed. The Debenture Trustee
shall give notice of redemption in the Company's name and at the Company's
expense; provided, however, that the Company shall deliver to the Debenture
Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate
requesting that the Debenture Trustee give such notice and setting forth the
information to be stated in such notice as provided in the following items.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Exchange Debentures are to be redeemed, the identification of the particular Exchange Debentures to be redeemed, as well as the aggregate principal amount of Exchange Debentures to be redeemed and the aggregate principal amount of Exchange Debentures to be outstanding after such partial redemption,
(4) in case any Exchange Debenture is to be redeemed in part only, the notice which relates to such Exchange Debenture shall state that on and after the Redemption Date, upon surrender of such Exchange Debenture, the holder will receive, without charge, a new Exchange Debenture or Exchange Debentures of authorized denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 1107) will become due and payable upon each such Exchange Debenture, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Exchange Debentures called for redemption (or the portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Exchange Debentures are to be surrendered for payment of the Redemption Price and accrued interest, if any,
(7) the name and address of the Paying Agent,
(8) that Exchange Debentures called for redemption must be surrendered to the Paying Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Exchange Debentures, and
(10) the paragraph of the Exchange Debentures pursuant to which the Exchange Debentures are to be redeemed.
Prior to 10:00 A.M. on any Redemption Date, the Company shall deposit with the Debenture Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, all the Exchange Debentures which are to be redeemed on that date.
Notice of redemption having been given as aforesaid, the Exchange Debentures so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Exchange Debentures shall cease to bear interest. Upon surrender of any such Exchange Debenture for redemption in accordance with said notice, such Exchange Debenture shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Exchange Debentures, or one or more Predecessor Exchange Debentures, registered as such at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, according to their terms and the provisions of Section 307.
If any Exchange Debenture called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate of interest set forth in the Exchange Debenture.
Any Exchange Debenture which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at a Place of Payment therefor (with, if the Company or the Debenture Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Debenture Trustee duly executed by, the Holder thereof or such Holders attorney duly authorized in writing), and the Company shall execute, and the Debenture Trustee shall authenticate and deliver to the Holder of such Exchange Debenture without service charge, a new Exchange Debenture or Exchange Debentures, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Exchange Debenture so surrendered, provided, that each such new Exchange Debenture will be in a principal amount of $1,000 or integral multiple thereof.
ARTICLE TWELVE
SUBORDINATION OF EXCHANGE DEBENTURES
The Company covenants and agrees, and each Holder of a Exchange Debenture, by its acceptance thereof, likewise covenants and agrees, for the benefit of the holders, from time to time, of Senior Indebtedness and Senior Subordinated Indebtedness that, to the extent and in the manner hereinafter set forth in this Article, the Indebtedness represented by the Exchange Debentures and the payment of the principal of (and premium, if any) and interest on each and all of the Exchange Debentures are hereby expressly made subordinate and subject in right of payment as provided in this Article to the prior payment in full in cash or cash equivalents of all Senior Indebtedness and Senior Subordinated Indebtedness; provided, however, that the Exchange Debentures, the Indebtedness represented thereby and the payment of the principal of (and premium, if any) and interest on the Exchange Debentures in all respects shall rank equally with, or prior to, all existing and future senior subordinated indebtedness (including, without limitation, Indebtedness) of the Company that is subordinated to Senior Indebtedness or Senior Subordinated Indebtedness.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or other marshalling of
assets or liabilities of the Company (except in connection with the
consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
Article Eight), then and in any event:
(1) the holders of Senior Indebtedness and Senior Subordinated Indebtedness shall first be entitled to receive payment in full in cash or cash equivalents of all Senior Indebtedness and Senior Subordinated Indebtedness, or provision shall be made for such payment in full, before the Holders will be entitled to receive any payment or distribution of any kind or character (other than any payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Indebtedness and Senior Subordinated Indebtedness that may at the time be outstanding to at least the same extent as the Exchange Debentures are so subordinated as provided in this
Indenture (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities") and any payment made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Debenture Trustee) on account of principal of (or premium, if any) or interest on the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures; and
(2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities and any payment made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Debenture Trustee), by set-off or otherwise, to which the Holders or the Debenture Trustee would be entitled but for the provisions of this Indenture shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness and Senior Subordinated Indebtedness or their representative ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness and Senior Subordinated Indebtedness to the extent necessary to make payment in full of all Senior Indebtedness and Senior Subordinated Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness and Senior Subordinated Indebtedness.
The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight.
(a) Unless Section 1202 shall be applicable, upon the occurrence of a Payment Default, no payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Debenture Trustee), shall be made by or on behalf of the Company on account of principal of (or premium, if any) or interest on the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures unless and until such
Payment Default shall have been cured or waived in writing from the Agent Bank or any other representative of a holder of Designated Senior Indebtedness or shall have ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full in cash or cash equivalents, after which the Company shall resume making any and all required payments in respect of the Exchange Debentures, including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence of a Non-Payment Default and (2) receipt by the Debenture Trustee of written notice thereof from the Agent Bank or any other representative of a holder of Designated Senior Indebtedness, then no payment or distribution of any assets of the Company of any kind or character, whether in cash, property or securities (other than Permitted Junior Securities and payments made pursuant to Article Fourteen from monies or U.S. Government Obligations previously deposited with the Debenture Trustee), shall be made by or on behalf of the Company on account of any principal of (or premium, if any) or interest on the Exchange Debentures or on account of the purchase, redemption or other acquisition of Exchange Debentures for a period ("Payment Blockage Period") commencing on the date of receipt by the Debenture Trustee of written notice from the Agent Bank or such other representative and ending on the earliest of (i) 179 days thereafter (provided that any Designated Senior Indebtedness as to which notice was given shall not theretofore have been accelerated, in which case the provisions of paragraph (a) shall apply), (ii) the date on which such Non-Payment Default is cured, waived or ceases to exist or such Designated Senior Indebtedness is discharged or paid in full in cash or cash equivalents or (iii) the date on which such Payment Blockage Period shall have been terminated by written notice to the Debenture Trustee or the Company from the Agent Bank or such other representative initiating such Payment Blockage Period, after which the Company will resume making any and all required payments in respect of the Exchange Debentures, including any missed payments. In any event, not more than one Payment Blockage Period may be commenced during any period of 360 consecutive days. No event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period will be, or can be, made the basis for the commencement of a subsequent Payment Blockage Period, unless such default has been cured or waived for a period of not less than 90 consecutive days subsequent to the commencement of such initial Payment Blockage Period. In no event will a Payment Blockage Period extend beyond 179 days.
In the event that, notwithstanding the foregoing and the provisions of
Section 1202, any payments or distribution shall be made to the Debenture
Trustee (and not paid over to the Holders of the Exchange Debentures) which is
prohibited by the foregoing provisions of this Section and the provisions of
Section 1202, then and in such event such payment shall be paid over and
delivered forthwith by the Debenture Trustee to the Agent Bank and any other
representative of holders of Designated Senior Indebtedness, as their interests
may appear, to the extent necessary to pay in full, in cash or cash equivalents
all Designated Senior Indebtedness.
Nothing contained in this Article or elsewhere in this Exchange
Indenture or in any of the Exchange Debentures shall prevent the Company, at any
time except during the pendency of any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshalling of assets and liabilities of the Company referred to in
Section 1202 or under the conditions described in Section 1203, from making
payments at any time of principal of, and premium, if any, or interest on the
Exchange Debentures.
Subject to the payment in full of all Senior Indebtedness and Senior Subordinated Indebtedness, the Holders of the Exchange Debentures shall be subrogated (equally and ratably with the holders of all Pari Passu Indebtedness of the Company) to the rights of the holders of such Senior Indebtedness and Senior Subordinated Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness and Senior Subordinated Indebtedness. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness and Senior Subordinated Indebtedness of any cash, property or securities to which the Holders of the Exchange Debentures or the Debenture Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness and Senior Subordinated Indebtedness by Holders of the Exchange Debentures or on their behalf or by the Debenture Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and Senior Subordinated Indebtedness, and the Holders of the Exchange Debentures, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness and Senior Subordinated Indebtedness; it being understood that the provisions of this Article are intended solely for the purpose of determining the relative rights of the Holders of the Exchange Debentures, on the one hand, and the holders of Senior Indebtedness and Senior Subordinated Indebtedness, on the other hand.
The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness and Senior Subordinated Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Exchange Indenture or in the Exchange Debentures is intended to or shall (a) impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of (and premium, if any) and interest on the Exchange Debentures as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness
and Senior Subordinated Indebtedness; or (c) prevent the Debenture Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Exchange Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness and Senior Subordinated Indebtedness.
Each Holder of an Exchange Debenture by its acceptance thereof
authorizes and directs the Debenture Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article and appoints the Debenture Trustee his attorney-in-fact for any and
all such purposes. If the Debenture Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 504 hereof at least 30 days before the expiration of the time to file
such claim, the Agent Bank (if the Senior Credit Agreement is still outstanding)
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of the Exchange Debentures.
(a) No right of any present or future holder of any Senior Indebtedness or Senior Subordinated Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Exchange Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this Section, the holders of Senior Indebtedness and Senior Subordinated Indebtedness may, at any time and from time to time, without the consent of or notice to the Debenture Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of Senior Indebtedness or Senior Subordinated Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or Senior Subordinated Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness or Senior Subordinated Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness or Senior Subordinated Indebtedness; (3) release any Person liable in any manner for the collection of Senior Indebtedness or Senior Subordinated Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person.
Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness and Senior Subordinated Indebtedness, the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in this Article Twelve, the Debenture Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Debenture Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and Senior Subordinated Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other acts pertinent thereto or to this Article Twelve.
(a) The Company shall give prompt written notice to the Debenture Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Debenture Trustee in respect of the Exchange Debentures. Notwithstanding the provisions of this Article or any other provision of this Exchange Indenture, the Debenture Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Debenture Trustee in respect of the Exchange Debentures, unless and until the Debenture Trustee shall have received written notice thereof from the Company, the Agent Bank or a holder of Senior Indebtedness or Senior Subordinated Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Debenture Trustee, subject to TIA Sections 315(a) through 315(d), shall be entitled in all respects to assume that no such facts exist; provided, however, that, if the Debenture Trustee shall not have received the notice provided for in this Section at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of, and premium, if any, or interest on any Exchange Debenture), then, anything herein contained to the contrary notwithstanding, the Debenture Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the Debenture Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing itself to be a holder of Senior Indebtedness and Senior Subordinated Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness and Senior Subordinated Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Debenture Trustee determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness and Senior Subordinated Indebtedness to participate in any payment or distribution pursuant to this Article, the Debenture Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Debenture Trustee as to the amount of Senior Indebtedness and Senior Subordinated 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 and, if such evidence is not furnished, the Debenture Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Debenture Trustee, subject to TIA Sections 315(a) through
315(d), and the Holders of the Exchange Debentures shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Debenture Trustee or to the
Holders of Exchange Debentures, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of 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; provided that such court, trustee,
receiver, custodian, assignee, agent or other Person has been apprised of, or
the order, decree or certificate makes reference to, the provisions of this
Article.
The Debenture Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Indebtedness
and Senior Subordinated Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness and Senior Subordinated
Indebtedness, and nothing in this Exchange Indenture shall deprive the Debenture
Trustee of any of its rights as such holder. Nothing in this Article shall
apply to claims of, or payments to, the Debenture Trustee under or pursuant to
Section 607.
In case at any time any Paying Agent other than the Debenture Trustee shall have been appointed by the Company and be then acting hereunder, the term "Debenture Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the
Debenture Trustee; provided, however, that Section 1212 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Nothing contained in this Article shall limit the right of the Debenture Trustee or the Holders of Exchange Debentures to take any action to accelerate the maturity of the Exchange Debentures pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law, except as provided in Article Five.
Notwithstanding anything contained herein to the contrary, payments from cash or the proceeds of U.S. Government Obligations held in trust under Article Fourteen hereof by the Debenture Trustee (or other qualifying trustee) and which were deposited in accordance with the terms of Article Fourteen hereof and not in violation of Section 1203 hereof for the payment of principal of (and premium, if any) and interest on the Exchange Debentures shall not be subordinated to the prior payment of any Senior Indebtedness or Senior Subordinated Indebtedness or subject to the restrictions set forth in this Article Twelve, and none of the Holders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or Senior Subordinated Indebtedness or any other creditor of the Company.
The Debenture Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness or Senior Subordinated Indebtedness and shall not be liable to any such holders if the Debenture Trustee shall mistakenly, in the absence of gross negligence or willful misconduct, pay over or distribute to Holders of Exchange Debentures or to the Company or to any other person cash, property or securities to which any holders of Senior Indebtedness or Senior Subordinated Indebtedness shall be entitled by virtue of this Article or otherwise. With respect to the holders of Senior Indebtedness and Senior Subordinated Indebtedness, the Debenture Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Debenture Trustee.
ARTICLE THIRTEEN
GUARANTEES
Each Subsidiary Debenture Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably guarantees the Exchange Debentures and obligations of the Company hereunder and thereunder, and guarantees to each Holder of an Exchange Debenture authenticated and delivered by the Debenture Trustee, and to the Debenture Trustee on behalf of such Holder, that: (a) the principal of (and premium, if any) and interest on the Exchange Debentures will be paid in full when due, whether at Stated Maturity, by acceleration or otherwise (including, without limitation, the amount that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Law), together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company to the Holders or the Debenture Trustee hereunder or thereunder will be paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Exchange Debentures or of any such other obligations, the same will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise, subject, however, in the case of clauses (a) and (b) above, to the limitations set forth in Section 1305 hereof.
Each Subsidiary Debenture Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Exchange Debentures or this Exchange Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Exchange Debentures with respect to any provisions hereof or thereof, any release of any other Subsidiary Debenture Guarantor, 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 Subsidiary Debenture Guarantor hereby waives (to the extent permitted by law) the benefits of diligence, presentment, demand for 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 or any other Person, protest, notice and all demands whatsoever and covenants that the Debenture Guarantee of such Subsidiary Debenture Guarantor shall not be discharged as to any Exchange Debenture except by complete performance of the obligations contained in such Exchange Debenture and such Debenture Guarantee. Each Subsidiary Debenture Guarantors acknowledges that the Debenture Guarantee is a guarantee of payment and not of collection. Each of the Subsidiary Debenture Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Exchange Debenture, whether at its Stated Maturity, by acceleration, purchase or otherwise, legal proceedings may be
instituted by the Debenture Trustee on behalf of, or by, the Holder of such Exchange Debenture, subject to the terms and conditions set forth in this Exchange Indenture, directly against each of the Subsidiary Debenture Guarantors to enforce such Subsidiary Debenture Guarantor's Debenture Guarantee without first proceeding against the Company or any other Subsidiary Debenture Guarantor. Each Subsidiary Debenture Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Debenture Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Exchange Debentures, to collect interest on the Exchange Debentures, or to enforce or exercise any other right or remedy with respect to the Exchange Debentures, such Subsidiary Debenture Guarantor will pay to the Debenture Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Debenture Trustee or any of the Holders.
If any Holder or the Debenture Trustee is required by any court or
otherwise to return to the Company or any Subsidiary Debenture Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
either the Company or any Subsidiary Debenture Guarantor, any amount paid by any
of them to the Debenture Trustee or such Holder, the Debenture Guarantee of each
of the Subsidiary Debenture Guarantors, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Subsidiary Debenture
Guarantor further agrees that, as between each Subsidiary Debenture Guarantor,
on the one hand, and the Holders and the Debenture Trustee, on the other hand,
(x) subject to this Article Thirteen, the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Five hereof for the purposes of
the Debenture Guarantee of such Subsidiary Debenture Guarantor, 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 Five hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Debenture Guarantor for the purpose of the Debenture
Guarantee of such Subsidiary Debenture Guarantor.
Each Debenture Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Exchange Debentures are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Exchange Debentures, whether as a "voidable preference", "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Exchange Debentures shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
In case any provision of any Debenture 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.
If the Company or any of its Restricted Subsidiaries acquires or forms a Restricted Subsidiary organized in the United States, the Company will cause any such Restricted Subsidiary (and any other Restricted Subsidiary as required pursuant to Section 1015) to (i) execute and deliver to the Debenture Trustee a supplemental indenture in accordance with the provisions of Article Nine of this Exchange Indenture pursuant to which such Restricted Subsidiary shall guarantee all of the obligations on the Exchange Debentures, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under Bankruptcy Law, whether or not such interest is allowed as a claim after such filing in any proceeding under such law) and other amounts due in connection therewith (including any fees, expenses and indemnities), on a senior unsecured subordinated basis, and (ii) deliver to such Debenture Trustee an Opinion of Counsel reasonably satisfactory to such Debenture Trustee to the effect that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary and is in compliance with the terms of this Exchange Indenture. Upon the execution of any such supplemental indenture, the obligations of the Subsidiary Debenture Guarantors and any such Restricted Subsidiary under their respective Debenture Guarantees shall become joint and several and each reference to the "Subsidiary Debenture Guarantor" in this Indenture shall, subject to Section 1308, be deemed to refer to all Subsidiary Debenture Guarantors, including such Restricted Subsidiary.
The Debenture Guarantee issued by any Subsidiary Debenture Guarantor will be unsecured subordinated obligations of such Subsidiary Debenture Guarantor, ranking pari passu with all other existing and future subordinated indebtedness of such Subsidiary Debenture Guarantor, if any. The Indebtedness evidenced by such Debenture Guarantee will be subordinated on the same basis to Debenture Guarantor Senior Indebtedness and Debenture Guarantor Senior Subordinated Indebtedness of such Subsidiary Debenture Guarantor as the Exchange Debentures are subordinated to Senior Indebtedness and Senior Subordinated Indebtedness under Article Twelve.
Each Subsidiary Debenture Guarantor and by its acceptance hereof each Holder confirms that it is the intention of all such parties that the guarantee by each such Subsidiary
Debenture Guarantor pursuant to its Debenture Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law or the provisions of its local law relating to fraudulent transfer or conveyance. To effectuate the foregoing intention, the Holders and each such Subsidiary Debenture Guarantor hereby irrevocably agree that the obligations of such Subsidiary Debenture Guarantor under its Debenture Guarantee shall be limited to the maximum amount that will not, after giving effect to all other contingent and fixed liabilities of such Subsidiary Debenture Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Debenture Guarantor in respect of the obligations of such other Subsidiary Debenture Guarantor under its Debenture Guarantee or pursuant to Section 1305 hereof, result in the obligations of such Subsidiary Debenture Guarantor under its Debenture Guarantee constituting such fraudulent transfer or conveyance.
In order to provide for just and equitable contribution among the Subsidiary Debenture Guarantors, the Subsidiary Debenture Guarantors agree, inter se, that in the event any payment or distribution is made by any Subsidiary Debenture Guarantor (a "Funding Guarantor") under a Debenture Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Subsidiary Debenture Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined below) of each Subsidiary Debenture Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Exchange Debentures or any other Subsidiary Debenture Guarantor's obligations with respect to the Debenture Guarantee of such Subsidiary Debenture Guarantor. "Adjusted Net Assets" of such Subsidiary Debenture Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Subsidiary Debenture Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Debenture Guarantee of such Subsidiary Debenture Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Subsidiary Debenture Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Subsidiary Debenture Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), excluding debt in respect of the Debenture Guarantee of such Subsidiary Debenture Guarantor, as they become absolute and matured.
Each Subsidiary Debenture Guarantor shall be subrogated to all rights of Holders against the Company in respect of any amounts paid by any Subsidiary Debenture Guarantor pursuant to the provisions of Section 1301; provided, however, that, if an Event of Default has occurred and is continuing, no Subsidiary Debenture Guarantor shall be entitled to enforce or
receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Company under this Exchange Indenture or the Exchange Debentures shall have been paid in full.
Each Subsidiary Debenture Guarantor hereby agrees (and each Person who becomes a Subsidiary Debenture Guarantor shall agree) that the Debenture Guarantee provided for in Section 1301 shall continue to be effective or be reinstated, as the case may be, if at any time, payment, or any part thereof, of any obligations or interest thereon is rescinded or must otherwise be restored by a Holder to the Company upon the bankruptcy or insolvency of the Company or any Subsidiary Debenture Guarantor.
(a) If no Default exists or would exist under this Exchange Indenture, the Debenture Guarantee issued by any Subsidiary Debenture Guarantor under this Exchange Indenture shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer to any Person not an Affiliate of the Company or a Restricted Subsidiary of all of the Company's Capital Stock in, or all or substantially all the assets of, such Subsidiary Debenture Guarantor (which sale, exchange or transfer is not prohibited by this Exchange Indenture).
(b) Concurrently with the discharge of the Exchange Debentures under
Section 401, the defeasance of the Exchange Debentures under Section 1402
hereof, or the covenant defeasance of the Exchange Debentures under Section 1403
hereof, the Subsidiary Debenture Guarantors shall be released from all their
obligations under their Debenture Guarantees under this Article Thirteen.
Each Subsidiary Debenture Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Exchange Indenture and that its guarantee and waivers pursuant to its Debenture Guarantee are knowingly made in contemplation of such benefits.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, effect defeasance of the Exchange Debentures under Section 1402, or covenant defeasance of the Exchange Debentures under Section 1403, in accordance with the terms of the Exchange Debentures and in accordance with this Article.
Upon the Company's exercise under Section 1401 of the option
applicable to this Section 1402, the Company and the Subsidiary Debenture
Guarantors shall be deemed to have been discharged from their obligations with
respect to the Outstanding Exchange Debentures and the Debenture Guarantees,
respectively, on the date the conditions set forth in Section 1404 are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company and the Subsidiary Debenture Guarantors shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Exchange
Debentures, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 1405 and the other Sections of this Exchange Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under the Exchange Debentures and this Exchange Indenture insofar as
the Exchange Debentures are concerned (and the Debenture Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Outstanding Exchange Debentures to
receive, solely from the trust fund described in Section 1404 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest on such Exchange Debentures when such payments are due, (B)
the Company's obligations with respect to such Exchange Debentures under
Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties
and immunities of the Debenture Trustee hereunder, and the Company's obligations
in connection therewith and (D) this Article Fourteen. Subject to compliance
with this Article Fourteen, the Company may exercise its option under this
Section 1402 notwithstanding the prior exercise of its option under Section 1403
with respect to such Exchange Debentures.
Upon the Company's exercise under Section 1401 of the option applicable to this Section 1403, the Company and the Subsidiary Debenture Guarantors shall be released from their obligations under Section 801, 802 and Sections 1008 through 1019 with respect to the Outstanding Exchange Debentures on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such Exchange Debentures shall thereafter
be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Exchange Debentures, the Company and any Subsidiary Debenture Guarantor, as applicable, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(3) or 501(4) or otherwise, as the case may be, but, except as specified above, the remainder of this Exchange Indenture and such Exchange Debentures shall be unaffected thereby.
The following shall be the conditions to application of either Section 1402 or Section 1403 to the Outstanding Exchange Debentures:
(1) The Company shall irrevocably have deposited or caused to be deposited with the Debenture Trustee (or another trustee satisfying the requirements of Section 608 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Exchange Debentures, (A) an amount in cash, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal (including any premium) and interest, if any, on such Exchange Debentures, money in an amount, or (C) a combination thereof, in each case in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Debenture Trustee, to pay and discharge, and which shall be applied by the Debenture Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any, on) and interest on such Outstanding Exchange Debentures on the Stated Maturity of such principal (and premium, if any) or installment of interest; provided that the Debenture Trustee (or such qualifying trustee) shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to such Exchange Debentures.
(2) No Default or Event of Default with respect to such Exchange Debentures shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs (8) and (9) of Section 501 are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any material agreement to which the Company or any Subsidiary Debenture Guarantor is a party or by which it is bound.
(4) In the case of an election under Section 1402, the Company shall
have delivered to the Debenture Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the Issuance Date, there
has been a change in the applicable federal income tax law or
interpretation of such federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Holders of the Outstanding Exchange Debentures will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred.
(5) In the case of an election under Section 1403, the Company shall have delivered to the Debenture Trustee an Opinion of Counsel to the effect that the Holders of such Exchange Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.
(6) In the case of defeasance under Section 1402 or covenant defeasance under Section 1403, the Company shall have delivered to the Debenture Trustee an Opinion of Counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Senior Indebtedness or Senior Subordinated Indebtedness under Article Twelve hereof, and (B) after the 91st day following the deposit or after the date such opinion is delivered, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.
(7) The Company shall have delivered to the Debenture Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Exchange Debentures or any Debenture Guarantee over the other creditors of either the Company or any Subsidiary Debenture Guarantor with the intent of hindering, delaying or defrauding creditors of either the Company or any Subsidiary Debenture Guarantor.
(8) The Company shall have delivered to the Debenture Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 1402 or the covenant defeasance under Section 1403, as the case may
be, have been complied with.
Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Debenture Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the "Debenture Trustee") pursuant to Sections 1404 and 1406 in respect of such Outstanding Exchange Debentures shall be held in trust and applied by the Debenture Trustee, in accordance with the provisions of such Exchange Debentures and this Exchange Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Debenture Trustee may determine, to the Holders of such Exchange Debentures of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Twelve.
The Company shall pay and indemnify the Debenture Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1404 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 such Outstanding Exchange Debentures.
Anything in this Article Fourteen to the contrary notwithstanding, the Debenture Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Debenture Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article.
If the Debenture Trustee or any Paying Agent is unable to apply any money in accordance with Section 1405 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Exchange Indenture and such Exchange Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Debenture Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1405; provided, however, that if the Company makes any payment of principal of (or premium, if any) or interest on any such Exchange Debenture following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Exchange Debentures to receive such payment from the money held by the Debenture Trustee or Paying Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Exchange Indenture to be duly executed as of the day and year first above written.
TUESDAY MORNING CORPORATION
By:_________________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
TMI HOLDINGS, INC.
By:_________________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
TUESDAY MORNING, INC.
By:_________________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
FRIDAY MORNING, INC.
By:________________________________________
Name: Jerry M. Smith
Title: President and Chief Operating
Officer
TMIL CORPORATION
By:_________________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
United States Trust Company of New York, as Debenture Trustee
By:_________________________________________ Name:
Title:
TUESDAY MORNING CORPORATION
13 1/4% [Series B]/1/ Subordinated Exchange Debentures due 2009
No.__________
CUSIP No.__________________________________________________________________
$ __________
[Interest Rate: 13 1/4% per annum.]/1/
Interest Payment Dates: March 15, June 15, September 15 and December
15 of each year commencing on the first such
date after the Exchange Date.
Regular Record Dates: March 1, June 1, September 1 and December 1
of each year.
Reference is hereby made to the further provisions of this Exchange Debenture set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
/1/ Include only for New Exchange Debentures.
IN WITNESS WHEREOF, the Company has caused this Exchange Debenture to be signed manually or by facsimile by its duly authorized officers.
Date:________________ TUESDAY MORNING CORPORATION
By: _______________________
Name:
Title:
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(Form of Debenture Trustee's Certificate of Authentication)
This is one of the 13 1/4% [Series B]/2/ Subordinated Exchange Debentures due 2009 referred to in the within-mentioned Exchange Indenture.
United States Trust Company of New York, as Debenture Trustee
Dated: __________ By: _________________________
Authorized Signatory
___________________
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/2/ Include only for New Exchange Debenture.
[REVERSE SIDE OF EXCHANGE DEBENTURE]
TUESDAY MORNING CORPORATION
13 1/4% [Series B]/1/ Subordinated Exchange Debentures due 2009
The Company will pay the principal of this Exchange Debenture on December 15, 2009.
The Company promises to pay interest on the principal amount of this
Exchange Debenture on each Interest Payment Date, as set forth below, at the
rate of 13 1/4% per annum [(subject to adjustment as provided below)]/2/ [except
that interest accrued on this Exchange Debenture pursuant to the fourth
paragraph of this Section 1 for periods prior to the applicable Exchange Date
(as such term is defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Exchange Debentures from time to
time during such periods]./1/
Interest will be payable quarterly (to the Holders of record of the Exchange Debentures (or any Predecessor Exchange Debentures) at the close of business on the March 1, June 1, September 1 or December 1 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing on the first such date after the Exchange Date.
[The Holder of this Exchange Debenture is entitled to the benefits of
the Registration Rights Agreement, dated December 29, 1997, among the Company,
the Subsidiary Debenture Guarantors and the Initial Purchaser named therein (the
"Registration Rights Agreement"). In the event that either (a) the Exchange
Offer Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 45th calendar day following the date of original issue of the Exchange
Debentures, (b) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) has not been declared effective on
or prior to the 120th calendar day following the date of original issue of the
Exchange Debentures or (c) the Exchange Offer is not consummated or a Shelf
Registration Statement (as such terms are defined in the Registration Rights
Agreement) is not declared effective on or prior to the 150th calendar day
following the Issuance Date, the interest rate borne by this Exchange Debenture
shall be increased by one-quarter of one percent per annum following such 45-day
period in the case of (a) above, following such 120-day period in the case of
(b) above or following such 150-day period in the case of (c) above, which rate
will be increased by an additional one-quarter of one
/2/ Include only for Initial Exchange Debenture.
percent per annum for each 90-day period that any additional interest continues
to accrue; provided that the aggregate increase in such annual interest rate
shall in no event exceed one percent. Upon (x) the filing of the Exchange Offer
Registration Statement after the 45-day period described in clause (a) above,
(y) the effectiveness of the Exchange Offer Registration Statement after the
120-day period described in clause (b) above or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 150-day period described in clause (c) above, the
interest rate borne by this Exchange Debenture from the date of such filing,
effectiveness or the consummation, as the case may be, will be reduced to the
interest rate set forth above; provided, however, that, if after any such
reduction in interest rate, a different event specified in clause (a), (b) or
(c) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.]/1/
Interest on this Exchange Debenture will accrue from the most recent date to which interest has been paid [on this Exchange Debenture or the Exchange Debenture surrendered in exchange herefor]/2/ or, if no interest has been paid, from the Exchange Date; provided that, if there is no existing default in the payment of interest and if this Exchange Debenture is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Exchange Debentures.
The indebtedness evidenced by the Exchange Debentures is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness and Senior Subordinated Indebtedness, and this Exchange Debenture is issued subject to such provisions. Each Holder of this Exchange Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Debenture Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Debenture Trustee its attorney-in-fact for such purpose.
The Company will pay interest (except defaulted interest) on the principal amount of the Exchange Debentures on each March 15, June 15, September 15 and December 15 to the Persons who are Holders (as reflected in the Exchange Debenture Register at the close of business on the March 1, June 1, September 1 and December 1 immediately preceding the Interest Payment Date), in each case, even if the Exchange Debenture is cancelled on
/2/ Include only for New Exchange Debenture
registration of transfer or registration of exchange after such Regular Record Date; provided that, with respect to the payment of principal, the Company will make payment to the Holder that surrenders this Exchange Debenture to any Paying Agent on or after December 15, 2009.
On or prior to December 15, 2002, interest is payable in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest, or, at the option of the Company, in cash. Thereafter, all interest will be payable only in cash.
The Company will pay principal (premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal (premium, if any) and interest by its check payable in such money. The Company may pay interest on the Exchange Debentures either (a) by mailing a check (or, if Exchange Debentures have been issued as payment of interest in lieu of monies, by such Exchange Debentures) for such interest to a Holder's registered address (as reflected in the Exchange Debenture Register) or (b) by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period.
Initially, the Debenture Trustee will act as Paying Agent and Debenture Registrar. The Company may change any Paying Agent or Debenture Registrar upon written notice thereto. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Debenture Registrar or co- registrar.
The Exchange Debentures may be issued under an Exchange Indenture dated as of December 29, 1997 (the "Exchange Indenture"), among the Company, the Subsidiary Debenture Guarantors and United States Trust Company of New York, as trustee (the "Debenture Trustee"). Capitalized terms herein are used as defined in the Exchange Indenture unless otherwise indicated. The terms of the Exchange Debentures include those stated in the Exchange Indenture and those made part of the Exchange Indenture by reference to the Trust Indenture Act. The Exchange Debentures are subject to all such terms, and Holders are referred to the Exchange Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Exchange Debenture and the terms of the Exchange Indenture, the terms of the Exchange Indenture shall control.
The Exchange Indenture limits the aggregate principal amount of the Exchange Debentures to $50,000,000.
Redemption
Year Price
---- ----------
2002............................... 109.938%
2003............................... 106.625%
2004............................... 103.313%
2005 and thereafter................ 100.000%
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In addition to the optional redemption of the Exchange Debentures in accordance with the provisions of the preceding paragraph, at any time prior to December 15, 2001, the Company may redeem for cash all, but not less than all, of the Outstanding Exchange Debentures originally issued under the Exchange Indenture within 20 days of a Public Equity Offering with the net proceeds of such offering at a redemption price equal to 113.25% of the principal amount thereof, together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of holders of record on relevant record dates to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date).
If less than all the Notes are to be redeemed pursuant to the first paragraph, the Trustee shall select the Notes or portions thereof to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Notes being redeemed are listed, or if the Notes are not so listed, on a pro rata basis, by lot or by such other method the Trustee shall deem fair and appropriate; provided that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000.
Notice of a redemption will be mailed, first-class postage prepaid, at least 30 days but not more than 60 days before the Redemption Date to each Holder to be redeemed at such Holder's last address as it appears in the Exchange Debenture Register. Exchange Debentures in original denominations larger than $1,000 may be redeemed in part in integral multiples of $1,000. On and after the Redemption Date, interest ceases to accrue on Exchange Debentures or portions of Exchange Debentures called for redemption, unless the Company defaults in the payment of the Redemption Price.
Upon the occurrence of (a) a Change in Control, the Holders of the Exchange Debentures will have the right to require that the Company purchase such Holders outstanding Exchange Debentures, in whole or in part, at a price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase and (b) Asset Sales, the Company may be obligated to make offers to purchase Exchange Debentures with a portion of the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.
The Exchange Debentures are in registered form without coupons, in denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Exchange Debentures in accordance with the Exchange Indenture. The Exchange Debenture Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Exchange Indenture. The Exchange Debenture Registrar need not register the transfer or exchange of any Exchange Debentures selected for redemption (except the unredeemed portion of any Exchange Debenture being redeemed in part).
A Holder may be treated as the owner of an Exchange Debenture for all purposes.
If money for the payment of principal (premium, if any) or interest remains unclaimed for two years, the Debenture Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Debenture Trustee and such Paying Agent with respect to such money shall cease.
If the Company irrevocably deposits, or causes to be deposited, with the Debenture Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of (premium, if any) and accrued interest on the Exchange Debentures (a) redemption or maturity, the Company will be discharged from the Exchange Indenture and the Exchange Debentures, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company will be discharged from certain covenants set forth in the Exchange Indenture.
Subject to certain exceptions, the Exchange Indenture or the Exchange Debentures may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Exchange Debentures then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Exchange Debentures then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Exchange Indenture or the Exchange Debentures to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not adversely affect the rights of any Holder.
The Exchange Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Capital Stock of
Restricted Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi)
purchase of Exchange Debentures upon a Change of Control; (vii) disposition of
proceeds of Asset Sales; (viii) guarantees of Indebtedness by Restricted
Subsidiaries; (ix) dividend and other payment restrictions affecting Restricted
Subsidiaries; (x) merger and certain transfers of assets; and (xi) limitation on
Unrestricted Subsidiaries. Within 120 days after the end of each fiscal year
and within 45 days after each fiscal quarter, the Company must report to the
Debenture Trustee on compliance with such limitations.
When a successor person or other entity assumes all the obligations of its predecessor under the Exchange Debentures and the Exchange Indenture, the predecessor person will be released from those obligations.
If an Event of Default, as defined in the Exchange Indenture, occurs and is continuing, the Debenture Trustee or the Holders of not less than 25% in aggregate principal amount of the Exchange Debentures then outstanding may declare all the Exchange Debentures to be immediately due and payable; provided that so long as the Senior Credit Agreement shall be in full force and effect, if an Event of Default shall have occurred and be continuing (other than with respect to certain bankruptcy or insolvency defaults with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (x) five Business Days following delivery of a written notice of such acceleration of the Exchange Debentures to the Agent Bank under the Senior Credit Agreement and (y) the acceleration of any indebtedness under the Senior Credit Agreement. If a bankruptcy or insolvency default with respect to the Company or any of its Significant Subsidiaries occurs and is continuing, the Exchange Debentures automatically become immediately due and payable. Holders may not enforce the Exchange Indenture or the Exchange Debentures except as provided in the Exchange Indenture. The Debenture Trustee may require indemnity satisfactory to it before it enforces the Exchange Indenture or the Exchange
Debentures. Subject to certain limitations, Holders of at least a majority in aggregate principal amount of the Exchange Debentures then outstanding may direct the Debenture Trustee in its exercise of any trust or power.
The Company's obligations under the Exchange Debentures are fully, irrevocably and unconditionally guaranteed on a subordinated unsecured basis, to the extent set forth in the Exchange Indenture, by each of the Subsidiary Debenture Guarantors.
The Debenture Trustee under the Exchange Indenture, in its individual or any other capacity, may become the owner or pledgee of Exchange Debentures and may make loans to, accept deposits from, perform services for, and otherwise deal with, the Company and its Affiliates as if it were not the Debenture Trustee.
This Exchange Debenture shall not be valid until the Debenture Trustee signs the certificate of authentication on the other side of this Exchange Debenture.
Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Exchange Indenture. Requests may be made to
Tuesday Morning Corporation, 14621 Inwood Road, Dallas, Texas 75244, Attention:
Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Exchange Debenture occurring prior to the date which is the earlier of the date of an effective Registration Statement or July 9, 1999, the undersigned confirms that without utilizing any general solicitation or general advertising that:
[Check One]
---------
[_] (a) this Exchange Debenture is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
--
[_] (b) this Exchange Debenture is being transferred other than in accordance
with (a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Exchange Debenture and the
Exchange Indenture.
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If none of the foregoing boxes is checked, the Debenture Trustee or other Debenture Registrar shall not be obligated to register this Exchange Debenture in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Sections 311 and 312 of the Exchange Indenture shall have been satisfied.
Date:_________________________
Signature Guarantee:_________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Exchange Debenture Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Exchange Debenture Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this Exchange Debenture for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Dated:_______________________ ________________________________________ NOTICE: To be executed by an executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Exchange Debenture purchased by the Company pursuant to Section 1013 or Section 1014 of the Exchange Indenture, check the Box: [_].
If you wish to have a portion of this Exchange Debenture purchased by the Company pursuant to Section 1013 or Section 1014 of the Exchange Indenture, state the amount (in original principal amount) below:
$_____________________.
Date:________________________
Your Signature:______________
(Sign exactly as your name appears on the other side of this Exchange Debenture)
Signature Guarantee:_______________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Exchange Debenture Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Exchange Debenture Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
SCHEDULE A
Indebtedness under Pacific Atlantic Systems Leasing, Inc. Capital Lease outstanding as of the Closing Date (monthly payment: $20,928.65).
Real Estate mortgages with Compass Bank outstanding as of the Closing Date.
EXHIBIT 4.5
TUESDAY MORNING CORPORATION,
as Borrower
and
THE GUARANTORS PARTY HERETO
$200,000,000
CREDIT AGREEMENT
Dated as of December 29, 1997
MERRILL LYNCH & CO.,
as Arranger and Syndication Agent
and
FLEET NATIONAL BANK,
as Administrative Agent
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
Page
----
Section 1. Definitions, Accounting Matters and Rules of Construction............................ 1
1.01. Certain Defined Terms.................................................................. 1
1.02. Accounting Terms and Determinations.................................................... 28
1.03. Classes and Types of Loans............................................................. 28
1.04. Rules of Construction.................................................................. 28
Section 2. Commitments, Loans, Notes, Prepayments, Replacement of Lenders and Annual Cleandown.. 29
2.01. Loans.................................................................................. 29
2.02. Borrowings............................................................................. 31
2.03. Letters of Credit...................................................................... 31
2.04. Termination and Reductions of Commitments.............................................. 35
2.05. Fees................................................................................... 36
2.06. Lending Offices........................................................................ 36
2.07. Several Obligations of Lenders......................................................... 36
2.08. Notes; Register........................................................................ 36
2.09. Optional Prepayments and Conversions or Continuations of Loans......................... 37
2.10. Mandatory Prepayments.................................................................. 37
2.11. Replacement of Lenders................................................................. 40
2.12. Annual Cleandown....................................................................... 41
Section 3. Payments of Principal and Interest................................................... 41
3.01. Repayment of Loans..................................................................... 41
3.02. Interest............................................................................... 41
Section 4. Payments; Pro Rata Treatment; Computations; Etc...................................... 42
4.01. Payments............................................................................... 42
4.02. Pro Rata Treatment..................................................................... 43
4.03. Computations........................................................................... 43
4.04. Minimum Amounts........................................................................ 43
4.05. Certain Notices........................................................................ 43
4.06. Non-Receipt of Funds by the Administrative Agent....................................... 44
4.07. Right of Setoff; Sharing of Payments, Etc.............................................. 45
Section 5. Yield Protection, Etc................................................................ 46
5.01. Additional Costs....................................................................... 46
5.02. Limitation on Types of Loans........................................................... 46
5.03. Illegality............................................................................. 47
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Page
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5.04. Treatment of Affected Loans............................................................ 47
5.05. Compensation........................................................................... 48
5.06. Net Payments........................................................................... 48
Section 6. Guarantee............................................................................ 50
6.01. The Guarantee.......................................................................... 50
6.02. Obligations Unconditional.............................................................. 51
6.03. Reinstatement.......................................................................... 52
6.04. Subrogation; Subordination............................................................. 52
6.05. Remedies............................................................................... 52
6.06. Instrument for the Payment of Money.................................................... 52
6.07. Continuing Guarantee................................................................... 52
6.08. General Limitation on Guarantee Obligations............................................ 53
Section 7. Conditions Precedent................................................................. 53
7.01. Effectiveness and Initial Extension of Credit.......................................... 53
7.02. Initial and Subsequent Extensions of Credit............................................ 60
Section 8. Representations and Warranties....................................................... 60
8.01. Corporate Existence.................................................................... 61
8.02. Financial Condition; Etc............................................................... 61
8.03. Litigation............................................................................. 61
8.04. No Breach; No Default.................................................................. 61
8.05. Action................................................................................. 62
8.06. Approvals.............................................................................. 62
8.07. ERISA.................................................................................. 62
8.08. Taxes.................................................................................. 63
8.09. Investment Company Act; Public Utility Holding Company Act; Other Restrictions......... 63
8.10. Senior Subordinated Notes.............................................................. 63
8.11. Environmental Matters.................................................................. 63
8.12. Environmental Investigations........................................................... 64
8.13. Use of Proceeds........................................................................ 64
8.14. Subsidiaries........................................................................... 64
8.15. Properties............................................................................. 64
8.16. Security Interest; Absence of Financing Statements..................................... 65
8.17. Compliance with Laws................................................................... 65
8.18. True and Complete Disclosure........................................................... 65
8.19. Solvency............................................................................... 66
Section 9. Covenants............................................................................ 66
9.01. Financial Statements, Etc.............................................................. 66
9.02. Litigation, Etc........................................................................ 69
9.03. Existence; Compliance with Law; Payment of Taxes; Inspection Rights; Performance of
Obligations; Etc.................................................................... 69
9.04. Insurance.............................................................................. 70
9.05. Limitation on Lines of Business........................................................ 70
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Page
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9.06. Limitation on Fundamental Changes; Limitation on Acquisitions; Limitation on
Dispositions........................................................................ 70
9.07. Limitation on Liens and Related Matters................................................ 73
9.08. Limitation on Indebtedness............................................................. 76
9.09. Limitation on Investments; Limitation on Creation of Subsidiaries...................... 79
9.10. Limitation on Dividend Payments........................................................ 81
9.11. Financial Covenants.................................................................... 82
9.12. Pledge of Additional Collateral........................................................ 86
9.13. Security Interests..................................................................... 86
9.14. Compliance with Environmental Laws..................................................... 87
9.15. Limitation on Prepayments of Senior Subordinated Notes, Etc............................ 87
9.16. Limitation on Transactions with Affiliates............................................. 87
9.17. Limitation on Accounting Changes; Limitation on Investment Company Status.............. 88
9.18. Limitation on Modifications of Certain Documents, Etc.................................. 88
9.19. Warehouse Financing.................................................................... 88
9.20. Limitation on Certain Restrictions Affecting Subsidiaries.............................. 89
9.21. Additional Obligors.................................................................... 90
9.22. Limitation on Designated Senior Indebtedness........................................... 90
9.22. Limitation on Change of Principal Place of Business or Corporate Name.................. 90
Section 10. Events of Default................................................................... 90
Section 11. The Administrative Agent............................................................ 93
11.01. General Provisions.................................................................... 93
11.02. Indemnification....................................................................... 94
11.03. Consents Under Other Credit Documents................................................. 95
11.04. Collateral Sub-Agents................................................................. 95
Section 12. Miscellaneous....................................................................... 95
12.01. Waiver................................................................................ 95
12.02. Notices............................................................................... 95
12.03. Expenses, Indemnification, Etc........................................................ 95
12.04. Amendments, Etc....................................................................... 97
12.05. Successors and Assigns................................................................ 99
12.06. Assignments and Participations........................................................ 99
12.07. Survival.............................................................................. 100
12.08. Captions.............................................................................. 101
12.09. Counterparts; Interpretation; Effectiveness........................................... 101
12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc............................... 101
12.11. Confidentiality....................................................................... 101
12.12. Independence of Representations, Warranties and Covenants............................. 102
12.13. Severability.......................................................................... 102
Signatures....................................................................................... S-1
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ANNEX A - Commitments SCHEDULE 1.01(a) - Applicable Margins SCHEDULE 1.01(b) - Guarantors SCHEDULE 1.01(c) - Refinanced Debt SCHEDULE 1.01(d) - Specified Real Property Permitted to Be Sold SCHEDULE 3.01(b) - Amortization Schedule SCHEDULE 8.02 - Certain Contingent Obligations SCHEDULE 8.03 - Litigation SCHEDULE 8.08 - Certain Tax Matters SCHEDULE 8.11 - Environmental Matters SCHEDULE 8.14 - Subsidiaries of Borrower SCHEDULE 9.07 - Certain Existing Liens SCHEDULE 9.08 - Certain Indebtedness to Remain Outstanding SCHEDULE 9.09 - Investments SCHEDULE 9.16 - Existing Affiliate Agreements EXHIBIT A-1 - Form of Revolving Credit Note EXHIBIT A-2 - Form of Tranche A Term Loan Note EXHIBIT A-3 - Form of Tranche B Term Loan Note EXHIBIT A-4 - Form of Swing Loan Note EXHIBIT B - Form of Intercompany Note EXHIBIT C-1 - Form of Interest Rate Certificate EXHIBIT C-2 - Form of Borrowing Base Certificate EXHIBIT D - Form of Security Agreement EXHIBIT E-1 - Form of Opinion of Counsel to the Obligors EXHIBIT E-2 - Form of Local Counsel Opinion EXHIBIT F - Form of Notice of Assignment EXHIBIT G - Form of Mortgage EXHIBIT H - Form of Section 5.06 Certificate EXHIBIT I - Form of Notice of Borrowing EXHIBIT J - Form of Notice of Conversion/Continuation EXHIBIT K - Form of Subordination Provisions EXHIBIT L - Form of Joinder Agreement EXHIBIT M - Form of Officer's Solvency Certificate |
The parties hereto agree as follows:
signature pages hereof or such other office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and Borrower as the office by which its Loans of such Type are to be made and maintained.
=================================================================================================================
Tier APPLICABLE REVOLVING CREDIT
LEVERAGE RATIO FEE PERCENTAGE
-----------------------------------------------------------------------------------------------------------------
I greater than 4.50:1.0 0.500%
-----------------------------------------------------------------------------------------------------------------
II greater than 3.50:1.0 0.375%
but less than 4.50:1.0
-----------------------------------------------------------------------------------------------------------------
III greater than 3.00:1.0 0.250%
but = 3.50:1.0
-----------------------------------------------------------------------------------------------------------------
IV = 3.00:1.0 0.250%
=================================================================================================================
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Any change in the Leverage Ratio shall be effective to adjust the Applicable
Revolving Credit Fee Percentage as of the date of receipt by the Administrative
Agent of the Interest Rate Certificate most recently delivered pursuant to
Section 9.01(e). If Borrower fails to deliver the Interest Rate Certificates
and financial statements within the times specified in Sections 9.01(a), (b) and
(e), such ratio shall be deemed to be that set forth opposite Tier I above until
Borrower delivers such Interest Rate Certificates and financial statements.
other than Indebtedness under clauses (f) or (n) of Section 9.08), in each case
to the extent made from internally generated funds of Borrower and the
Subsidiaries, (iii) other than for purposes of Section 9.11(c), federal, state
and local income tax expense actually paid, (iv) other than for purposes of
Section 9.11(c), actual Capital Expenditures to the extent made from internally
generated funds of Borrower and the Subsidiaries, and (v) solely for purposes of
9.11(c), Consolidated Rental Expense. For purposes of this definition,
internally generated funds shall exclude the proceeds of Dispositions and Debt
Issuances and Equity Issuances (without regard to the exclusions from the
definitions thereof).
Commitments), if no Default or Event of Default has occurred and is continuing and the date of such increase is not prior to the one year anniversary of the Closing Date.
otherwise end after the Revolving Credit Commitment Termination Date, such
Interest Period shall end on the Revolving Credit Commitment Termination Date;
(ii) no Interest Period for any Term Loan may commence before and end after any
Principal Payment Date, unless, after giving effect thereto, the aggregate
principal amount of the Term Loans having Interest Periods that end after such
Principal Payment Date shall be equal to or less than the aggregate principal
amount of the Term Loans scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Principal Payment Date; (iii)
each Interest Period that would otherwise end on a day that is not a Business
Day shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iv) notwithstanding clauses (i) and (ii) above, no Interest
Period shall have a duration of less than one month and, if the Interest Period
for any LIBOR Loan would otherwise be a shorter period, such Loan shall not be
available hereunder as a LIBOR Loan for such period.
Property, including any easement, right-of-way or other encumbrance on title to Real Property, other than ordinary course rights of set-off of depositary banks. For purposes of the Credit Documents, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property.
(I) in the case of any Disposition Event, the amount of Net Cash Payments received by any Obligor or any of its Subsidiaries in connection with such Disposition Event less deductions for amounts applied to Indebtedness secured by Liens on the asset sold, taxes (including income taxes) and costs of sale;
(II) in the case of any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by any Obligor or any of its Subsidiaries in respect of such Casualty Event net of (A) reasonable expenses incurred by such Obligor and its Subsidiaries in connection therewith, (B) repayments of Indebtedness to the extent secured by a Lien on such Property and (C) any income and transfer taxes payable by any Obligor or any of its Subsidiaries in respect of such Casualty Event;
(III) in the case of any Equity Issuance or any Debt Issuance, the aggregate amount of all cash received by any Obligor and its Subsidiaries in respect thereof net of all reasonable investment banking fees, discounts and commissions, legal fees, consulting fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses, actually incurred and satisfactorily documented in connection therewith;
(IV) in the case of any Taking or Destruction, the Net Award or Net Proceeds, as applicable, resulting therefrom; and
(V) with respect to any loss of title to all or any portion of any Mortgaged Real Property or Real Property, any title insurance proceeds resulting therefrom less the amount of any expenses (including, without limitation, taxes) incurred in litigating, arbitrating, compromising or settling any claim arising out of such loss of title.
Part 221) and Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
United States Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.
registered exchange offer therefor made pursuant to the registration rights agreement entered into in connection with the issuance thereof on the Closing Date.
(C) In this Agreement unless the context clearly requires otherwise, any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or Schedule, as the case may be, attached to this Agreement and constituting a part hereof, and (ii) a Section or other subdivision is to a Section or such other subdivision of this Agreement.
(D) No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to any Credit Document.
Section 2. Commitments, Loans, Notes, Prepayments,
Loans and may Convert Revolving Credit Loans of one Type into Revolving Credit
Loans of another Type (as provided in Section 2.09) or Continue Revolving Credit
Loans of one Type as Revolving Credit Loans of the same Type (as provided in
Section 2.09).
Tranche A Term Loans that are repaid or prepaid may not be reborrowed.
Tranche B Term Loans that are repaid or prepaid may not be reborrowed.
(A) Borrower shall give the Administrative Agent at least three Business Days' irrevocable prior notice (effective upon receipt) specifying the date (which shall be no later than thirty days preceding the Revolving Credit Termination Date) each Letter of Credit is to be issued and describing in reasonable detail the proposed terms of such Letter of Credit (including the beneficiary thereof) (including whether such Letter of Credit is to be a commercial Letter of Credit or a standby Letter of Credit). Upon receipt of any such notice, the Administrative Agent shall advise the Issuing Lender of the contents thereof.
(B) On each day during the period commencing with the issuance by the Issuing Lender of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Revolving Credit Commitment of each Revolving Credit Lender shall be deemed to be utilized for all purposes hereof in an amount equal to such Lender's Revolving Credit Commitment Percentage of the then undrawn face amount of such Letter of Credit. Each Revolving Credit Lender (other than the Issuing
Lender) agrees that, upon the issuance of any Letter of Credit hereunder, it shall automatically acquire a participation in the Issuing Lender's liability under such Letter of Credit in an amount equal to such Lender's Revolving Credit Commitment Percentage of such liability, and each Revolving Credit Lender (other than the Issuing Lender) thereby shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and shall be unconditionally obligated to the Issuing Lender to pay and discharge when due, its Revolving Credit Commitment Percentage of the Issuing Lender's liability under such Letter of Credit. The Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount equal to its retained interest in the related Letter of Credit after giving effect to such acquisition by the Revolving Credit Lenders other than the Issuing Lender of their participation interests.
(C) Upon receipt from the beneficiary of any Letter of Credit of any demand for payment under such Letter of Credit, the Issuing Lender shall promptly notify Borrower (through the Administrative Agent) of the amount to be paid by the Issuing Lender as a result of such demand and the date on which payment is to be made by the Issuing Lender to such beneficiary in respect of such demand. Borrower hereby unconditionally agrees to pay and reimburse the Issuing Lender for the amount of each demand for payment under such Letter of Credit not later than the next Business Day after the date on which the Issuing Lender notifies Borrower that payment is to be made by the Issuing Lender to the beneficiary thereunder.
(D) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, Borrower shall advise the Issuing Lender whether or
not Borrower intends to borrow hereunder to finance its obligation to
reimburse the Issuing Lender for the amount of the related demand for
payment and, if it does, submit a notice of such borrowing as provided in
Section 4.05. In the event that Borrower fails to so advise the
Administrative Agent not later than one Business Day prior to the date
payment from Borrower is due to the Issuing Lender by virtue of a drawing
under a Letter of Credit, Borrower shall be deemed to have given notice of
borrowing for a Revolving Credit Loan which is an Alternate Base Rate Loan
in the exact amount owing to the Issuing Lender and the Administrative
Agent shall act accordingly. If Borrower has given such notice indicating
that it does not intend to borrow hereunder or if Borrower fails to
reimburse the Issuing Lender for a demand for payment under a Letter of
Credit by the date of notice of such payment (or the next Business Day if
received after 12:00 noon (New York time) on such date), the Administrative
Agent shall give each Revolving Credit Lender prompt notice of the amount
of the demand for payment, specifying such Lender's Revolving Credit
Commitment Percentage of the amount of the related demand for payment.
(E) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to the Administrative Agent for account of the Issuing Lender at
the Principal Office in Dollars and in immediately available funds, the
amount of such Lender's Revolving Credit Commitment Percentage of any
payment under a Letter of Credit upon notice by the Issuing Lender (through
the Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payments to the Administrative Agent for account of
the Issuing Lender under this clause (e), and the Issuing Lender's right to
receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including (i) the failure of any
other Revolving Credit Lender to make its payment under this clause (e),
(ii) the financial condition of Borrower or the existence of any Default or
(iii) the termination of the Commitments. Each such payment to the Issuing
Lender shall be made without any offset, abatement, withholding or
reduction whatsoever. Nothing in this clause (e) shall be deemed to
prejudice the right of any Revolving Credit Lender to recover from the
Issuing Lender in the event of a wrongful payment
of the kind described in the proviso of the last paragraph of this Section 2.03 or with respect to the issuance of a Letter of Credit in breach of any restriction on such issuance under Section 2.03.
(F) Upon the making of each payment by a Revolving Credit Lender to the Issuing Lender pursuant to clause (e) above in respect of any Letter of Credit, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a participation in an amount equal to such payment in the Reimbursement Obligation owing to the Issuing Lender by Borrower hereunder and under the Letter of Credit Documents relating to such Letter of Credit and (ii) a participation in a percentage equal to such Lender's Revolving Credit Commitment Percentage in any interest or other amounts payable by Borrower hereunder and under such Letter of Credit Documents in respect of such Reimbursement Obligation. Upon receipt by the Issuing Lender from or for the account of Borrower of any payment in respect of any Reimbursement Obligation or any such interest or other amounts (including by way of setoff or application of proceeds of any collateral security) the Issuing Lender shall promptly pay to the Administrative Agent for account of each Revolving Credit Lender entitled thereto, such Revolving Credit Lender's Revolving Credit Commitment Percentage of such payment, each such payment by the Issuing Lender to be made in the same money and funds in which received by the Issuing Lender. In the event any payment received by the Issuing Lender and so paid to the Revolving Credit Lenders hereunder is rescinded or must otherwise be returned by the Issuing Lender, each Revolving Credit Lender shall, upon the request of the Issuing Lender (through the Administrative Agent), repay to the Issuing Lender (through the Administrative Agent) the amount of such payment paid to such Lender, with interest at the rate specified in clause (i) of this Section 2.03.
(H) Promptly following the end of each calendar month, the Issuing Lender shall deliver (through the Administrative Agent) to each Revolving Credit Lender and Borrower a notice describing
the aggregate amount of all Letters of Credit outstanding at the end of such month. Upon the request of any Revolving Credit Lender from time to time, the Issuing Lender shall deliver any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding.
(J) The issuance by the Issuing Lender of any modification or supplement to any Letter of Credit hereunder that would extend the expiry date or increase the face amount thereof shall be subject to the same conditions applicable under this Section 2.03 to the issuance of new Letters of Credit, and no such modification or supplement shall be issued hereunder unless either (x) the respective Letter of Credit affected thereby would have complied with such conditions had it originally been issued hereunder in such modified or supplemented form or (y) each Revolving Credit Lender shall have consented thereto.
(K) Notwithstanding the foregoing, the Issuing Lender shall not be under any obligation to issue any Letter of Credit if at the time of such issuance, any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Lender is not otherwise compensated) not in effect on the date hereof.
of the Issuing Lender or which is not in accordance with the standard of care specified in the Uniform Commercial Code of the State of New York. To the extent that any provision of any Letter of Credit Document is inconsistent with the provisions of this Section 2.03, the provisions of this Section 2.03 shall control.
(II) The aggregate amount of the Term Loan Commitments shall be automatically and permanently reduced to zero immediately after the making of the Term Loans on the Closing Date.
(C) The Commitments once terminated or reduced may not be reinstated.
(B) Borrower shall pay to the Administrative Agent for its own account a nonrefundable administrative fee pursuant to the terms of the Administrative Agent's Fee Letter.
Notwithstanding the foregoing, and without limiting the rights and remedies of the Lenders under Section 10, in the event that any Event of Default shall have occurred and be continuing, the Administrative Agent may (and at the request of the Majority Lenders shall) suspend the right of Borrower to Convert any Loan into a LIBOR Loan, or to Continue any Loan as a LIBOR Loan, in which event all Loans shall be Converted (on the last day(s) of the respective Interest Periods therefor) or Continued, as the case may be, as Alternate Base Rate Loans.
Notwithstanding the foregoing, if the amount of any prepayment of
Loans required under this Section 2.10 shall be in excess of the amount of the
Alternate Base Rate Loans at the time outstanding, only the portion of the
amount of such prepayment as is equal to the amount of such outstanding
Alternate Base Rate Loans shall be immediately prepaid and, at the election of
Borrower, the balance of such required prepayment shall be either (i) deposited
in the Collateral Account and applied to the prepayment of LIBOR Loans on the
last day of the then next-expiring Interest Period for LIBOR Loans or (ii)
prepaid immediately, together with any amounts owing to the Lenders under
Section 5.05. Notwithstanding any such deposit in the Collateral Account,
interest shall continue to accrue on such Loans until prepayment. Interest on
such amount held in the Collateral Account shall be for the account of Borrower
(after deduction of reasonable fees and expenses).
Agreement as collateral security in the first instance for the Letter of Credit Liabilities) in an amount not to exceed the face amount of all unexpired Letters of Credit in respect of which such cover was required to be provided until such time as all Letters of Credit shall have been terminated and all of the Letter of Credit Liabilities paid in full.
(B) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and other overdue amounts owed by any Obligor under the Credit Documents shall bear interest at a rate per annum equal to (x) in the case of principal of any Loans, the rate which is 2% in excess of the rate then borne by such Loans, (y) in the case of interest, the rate which is 2% in excess of the rate otherwise applicable to Alternate Base Rate Loans which are Revolving Credit Loans from time to time and (z) in the case of such other amounts, the rate which is 2% in excess of the rate otherwise applicable to Alternate Base Rate Loans which are Revolving Credit Loans from time to time. Interest which accrues under this paragraph shall be payable on demand.
(C) Accrued interest on each Loan shall be payable (i) in the case of an Alternate Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months, at three-month intervals following the first day of such Interest Period and (iii) in the case of any LIBOR Loan, upon the payment or prepayment thereof or the Conversion of such Loan to a Loan of another Type (but only on the principal amount so paid, prepaid or Converted), except that interest payable at the rate set forth in Section 3.02(b) shall be payable from time to time on demand. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall give notice thereof to the Lenders to which such interest is payable and to Borrower.
New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).
(B) Borrower shall, at the time of making each payment under this Agreement or any Note for the account of any Lender, specify to the Administrative Agent (which shall so notify the intended recipient(s) thereof) the Loans, Reimbursement Obligations or other amounts payable by Borrower hereunder to which such payment is to be applied (and in the event that Borrower fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may distribute such payment to the Lenders for application in such manner as it or the Majority Lenders, subject to Section 4.02, may determine to be appropriate).
(C) Except to the extent otherwise provided in the second sentence of
Section 2.03(g), each payment received by the Administrative Agent under this
Agreement or any Note for the account of any Lender shall be paid by the
Administrative Agent to such Lender, in immediately available funds, (x) if the
payment was actually received by the Administrative Agent prior to 1:00 p.m.
(New York time) on any day, on such day and (y) if the payment was actually
received by the Administrative Agent after 1:00 p.m. (New York time) on any day,
on the following Business Day (it being understood that to the extent that any
such payment is not made in full by the Administrative Agent, the Administrative
Agent shall pay to such Lender, upon demand, interest at the Federal Funds Rate
from the date such amount was required to be paid to such Lender pursuant to the
foregoing clauses until the date the Administrative Agent pays such Lender the
amount).
(D) If the due date of any payment under this Agreement or any Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension.
the foregoing, for each day that the Alternate Base Rate is calculated by reference to the Federal Funds Rate, interest on Alternate Base Rate Loans and Reimbursement Obligations shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day).
NOTICE PERIODS
Notice Number of Business Days Prior
------ -----------------------------
Termination or reduction of Commitments
2
Borrowing or optional prepayment of, or Conversions
into, Alternate Base Rate Loans (including Swing
Loans) same day
Borrowing or optional prepayment of, Conversions
into, Continuations as, or duration of Interest
Periods for, LIBOR Loans
3
|
Each such notice of termination or reduction shall specify the amount
and the Class of the Commitments to be terminated or reduced. Each such notice
of borrowing, Conversion, Continuation or prepayment shall specify the Class of
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to
Section 4.04) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or prepayment (which
shall be a Business Day). Each such notice of the duration of an Interest
Period shall specify the Loans to which such Interest Period is to relate. The
Administrative Agent shall promptly notify the Lenders of the contents of each
such notice. In the event that Borrower fails to select the Type of Loan, or
the duration of any Interest Period for any LIBOR Loan, within the time period
and otherwise as provided in this Section 4.05, such Loan (if outstanding as a
LIBOR Loan) will be
automatically Converted into an Alternate Base Rate Loan on the last day of the then current Interest Period for such Loan or (if outstanding as an Alternate Base Rate Loan) will remain as, or (if not then outstanding) will be made as, an Alternate Base Rate Loan.
(I) if the Required Payment shall represent a payment to be made by
Borrower to the Lenders, Borrower and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate set forth in Section 3.02(b) (without
duplication of the obligation of Borrower under Section 3.02 to pay
interest on the Required Payment at the rate set forth in Section 3.02(b)),
it being understood that the return by the recipient(s) of the Required
Payment to the Administrative Agent shall not limit such obligation of
Borrower under Section 3.02 to pay interest at the rate set forth in
Section 3.02(b) in respect of the Required Payment and
(II) if the Required Payment shall represent proceeds of a Loan to be made by the Lenders to Borrower, the Payor and Borrower shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment pursuant to Section 3.02(a), it being understood that the return by Borrower of the Required Payment to the Administrative Agent shall not limit any claim Borrower may have against the Payor in respect of such Required Payment.
(B) Each of the Lenders agrees that, if it should receive (other than pursuant to Section 5) any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of
(C) Borrower agrees that any Lender so purchasing such a participation may exercise all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.
(D) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of any Obligor. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 4.07 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.07 to share in the benefits of any recovery on such secured claim.
(I) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit or any Lender's participation therein, any Letter of Credit Document or any LIBOR Loan made by it or change the basis of taxation of payments to such Lender in respect thereof by any Governmental Authority (except for taxes covered by Section 5.06 and changes in the rate of tax on the overall net income of such Lender by any Governmental Authority);
(II) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or
(III) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof then, in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional amounts pursuant to this subsection, it shall promptly
notify Borrower, through the Administrative Agent, of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
setting forth the calculation of such additional amounts pursuant to this
Section 5.01 submitted by such Lender, through the Administrative Agent, to
Borrower shall be conclusive in the absence of clearly demonstrable error. This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
(B) In the event that any Lender shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline regarding capital adequacy (or any change after the date hereof therein or in the interpretation or application thereof) or compliance by any Lender or any corporation controlling such Lender with any request or directive after the date hereof regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority or the NAIC, including, without limitation, the issuance of any final rule, regulation or guideline, does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.
(I) the Administrative Agent determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR Base Rate" in Section 1.01 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for LIBOR Loans as provided herein; or
(II) if the related Loans are Revolving Credit Loans, the Majority Revolving Credit Lenders or, if the related Loans are Tranche A Term Loans, the Majority Tranche A Term Loan Lenders or, if the related Loans are Tranche B Term Loans, the Majority Tranche B Term Loan Lenders, determine, which determination shall be conclusive, that the relevant rates of interest referred to in the definition of "LIBOR Base Rate" in Section 1.01 upon the basis of which the rate of interest for LIBOR Loans for such Interest Period is to be determined are not likely adequate to cover the cost to the applicable Lenders of making or maintaining LIBOR Loans for such Interest Period,
then the Administrative Agent shall give Borrower and each Lender prompt notice thereof, and so long as such condition remains in effect, the affected Lenders shall be under no obligation to make additional LIBOR Loans, to Continue LIBOR Loans or to Convert Alternate Base Rate Loans into LIBOR Loans and Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding LIBOR Loans, either prepay such Loans or Convert such Loans into Alternate Base Rate Loans in accordance with Section 2.09.
Continue, or to Convert Loans of any other Type into, LIBOR Loans shall be suspended until such time as such Lender may again make and maintain LIBOR Loans (in which case the provisions of Section 5.04 shall be applicable).
(I) to the extent that such Lender's LIBOR Loans have been so Converted, all payments and prepayments of principal which would otherwise be applied to such Lender's LIBOR Loans shall be applied instead to its Alternate Base Rate Loans; and
(II) all Loans which would otherwise be made or Continued by such Lender as LIBOR Loans shall be made or Continued instead as Alternate Base Rate Loans and all Alternate Base Rate Loans of such Lender which would otherwise be Converted into LIBOR Loans shall remain as Alternate Base Rate Loans.
certificate, absent manifest error, shall be conclusive. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.
be treated as a tax for which Borrower or any Guarantor is obligated to indemnify such Lender pursuant to this Section 5.06 without any exclusions or defenses; and (iii) nothing in this paragraph of this Section 5.06(a) shall require the Lender to disclose any confidential information to Borrower or any Guarantor (including, without limitation, its tax returns).
having effect after the date such representations or certifications were made. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 5.06 and except as set forth in Section 12.06(b), Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 5.06(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Covered Taxes.
(I) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(II) any of the acts mentioned in any of the provisions of this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be done or omitted;
(III) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement, the Notes or any other Credit Document or any other agreement or instrument referred to herein or therein shall be amended, modified or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;
(IV) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected; or
(V) the release of any other Guarantor.
The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against Borrower under this Agreement or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Lender upon this guarantee or acceptance of this guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this guarantee, and all dealings between Borrower and the Lenders shall likewise be conclusively presumed to have been had or consummated in reliance upon this guarantee. This guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Lenders, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Lenders or any other Person at any time of any right or remedy against Borrower or against any other Person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.
hereafter owing to any Guarantor by reason of any payment by such Guarantor under the Guarantee in this Section 6 is hereby subordinated to the prior indefeasible payment in full in cash of the Guaranteed Obligations. Each Guarantor agrees that it will not demand, sue for or otherwise attempt to collect any such indebtedness of Borrower to such Guarantor until the Obligations shall have been indefeasibly paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor shall prior to the indefeasible payment in full in cash of the Guaranteed Obligations collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Guarantor as trustee for the Administrative Agent and the Lenders and be paid over to the Administrative Agent on account of the Guaranteed Obligations without affecting in any manner the liability of such Guarantor under the other provisions of the guaranty contained herein.
Arranger in form and substance reasonably satisfactory to the Arranger with respect to the Solvency of Borrower and each other Obligor immediately after giving effect to the Transactions.
individually or in the aggregate, or any other transaction contemplated
hereunder, (ii) seeking to prohibit the ownership or operation by Borrower
or any Subsidiary of all or a material portion of any of their businesses
or assets or (iii) seeking to obtain, or having resulted in the entry of,
any judgment, order or injunction that (a) would restrain, prohibit or
impose materially adverse conditions on the ability of the Lenders to make
the Loans under the Credit Facilities, (b) could be reasonably expected to
result in a Material Adverse Change with respect to Newco or Borrower, as
the case may be (and before and after giving effect to the Transactions),
(c) could reasonably be expected to affect the legality, validity or
enforceability of any Credit Document or any documents relating thereto or
could reasonably be expected to have a Material Adverse Effect, or (d) is
seeking any material damages as a result thereof.
(1) UCC Financing Statements (Form UCC-1) in appropriate form for filing under the UCC and any other applicable law in each jurisdiction as may be necessary or appropriate to perfect the Liens created, or purported to be created, by the Security Documents;
(2) UCC, tax lien and judgment lien search reports, each of a recent date against each Obligor as debtor and that are filed in those jurisdictions in which any of the Collateral is located and the jurisdictions in which each Obligor's principal place of business is located;
(3) to the extent equipment or inventory is maintained on a leased premise, a copy of each lease or other agreement relating to such leased premise or, to the extent acceptable to Arranger, abstracts of such leases or other agreements; and
(i) a Mortgage encumbering each Mortgaged Real Property in favor of the Administrative Agent, for the benefit of the Lenders, in form for recording in the recording office of each jurisdiction where each such Mortgaged Real Property is situated, together with such other documentation as shall be required to create a lien under applicable law, and other similar instruments as are contemplated by the counsel opinions described in subsection 7.01(i)(3) hereof in respect of such Mortgage, all of which shall be in form and substance reasonably satisfactory to the Arranger, which Mortgage and other instruments shall be effective to create a first priority Lien on such Mortgaged Real Property subject to no Liens other than Prior Liens (or Permitted Liens) applicable to such Mortgaged Real Property;
(ii) with respect to each Mortgaged Real Property, Borrower shall use its best efforts to obtain such consents, approvals, estoppels, tenant subordination agreements or other instruments as reasonably necessary or as reasonably required by the Arranger to consummate the transactions contemplated hereby or to grant the Lien contemplated by the Mortgage; and
(iii) the following documents and instruments:
(1) with respect to each Mortgage, a policy (or
commitment to issue a policy) of title insurance insuring
(or committing to insure) the Lien of such Mortgage as a
valid first priority Lien (other than the Lien described in
clause (m) of the definition of Permitted Liens) on the
real property and fixtures described therein in an amount
not less than the fair market value thereof which policy
(or commitment) shall (a) be issued by the Title Company,
(b) include such reinsurance arrangements, if any (with
provisions for direct access), as shall be reasonably
acceptable to the Arranger, (c) have been supplemented by
such endorsements, to the extent available, as shall be
reasonably requested by the Arranger, (d) such affidavits
and instruments of
indemnification as shall be reasonably required to induce the Title Company to issue the policy or policies (or commitment) and endorsements contemplated in this subparagraph (iii) and (e) contain no exceptions to title other than exceptions for (x) Liens of the type described in clauses (a), (b), (c), (d), (f), (g), (h), (i), (m), (o) and (p) of the definition of Permitted Liens, (y) any Lien of the type described in clause (r) of the definition of Permitted Liens to the extent the original Lien is permitted hereunder and (z) the Prior Liens applicable to such Mortgaged Real Property;
(2) with respect to each Mortgaged Real Property, a Survey;
(3) with respect to each Mortgaged Real Property, policies or certificates of insurance as required by the Mortgage relating thereto;
(4) with respect to each Mortgaged Real Property, UCC, judgment and tax lien searches complying with Section 7.01(xxv) above and subclause (2) of Section 7.01 (xxviii) above;
(5) evidence acceptable to the Arrangers of payment by Borrower of all title insurance premiums, search and examination charges, survey costs, mortgage recording taxes and related charges required for the recording of the Mortgages and issuance of the title insurance policies referred to in subclause (iii)(1) of this Section 7.01(xxix) above;
(6) with respect to each Real Property or Mortgaged Real Property, copies of all Leases, subleases, leases in which Borrower holds the tenant's interest or other agreements relating to possessory interests or, to the extent acceptable to Arranger, abstracts of such leases or other agreements; to the extent any of the foregoing affect any Mortgaged Real Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Real Property, and shall otherwise be acceptable to the Arrangers; and
(7) with respect to each Mortgaged Real Property,
an Officer's Certificate or other evidence satisfactory to
the Arranger that as of the date thereof (a) there has been
issued and is in effect, to the extent required, a valid
and proper certificate of occupancy or local or foreign
equivalent for the use then being made of such Mortgaged
Real Property, (b) there has not occurred any material
Destruction of any Mortgaged Real Property that has not
been restored and there is not pending any Taking of any
Mortgaged Real Property and (c) to the best knowledge of
Borrower, except as may be disclosed in the Survey of such
Mortgaged Real Property delivered pursuant to subclause
(iii)(2) of this Section 7.01(xix) above, there are no
disputes regarding boundary lines, location, encroachment
or possession of such Mortgaged Real Property and no state
of facts existing which could give rise to any such claim.
(a) no Default or Event of Default shall have occurred and be continuing;
(b) the representations and warranties made by the Obligors in Section 8, and by each Obligor in each of the other Credit Documents to which it is a party, shall be true and complete in all material respects on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and
Each notice of borrowing or request for the issuance of a Letter of Credit by Borrower hereunder shall constitute a certification by Borrower to the effect set forth in clause (i) above (both as of the date of such notice or request and, unless Borrower otherwise notifies the Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance).
Each notice submitted by Borrower hereunder for an extension of credit hereunder shall constitute a representation and warranty by Borrower, as of the date of such notice and as of the relevant borrowing date or date of issuance of a Letter of Credit, as applicable, that the applicable conditions in Sections 7.01 and 7.02 have been satisfied in accordance with the terms hereof.
1993, December 31, 1994, December 31, 1995 and December 31, 1996, and the related statements of earnings, changes in stockholders' equity and cash flows for the fiscal years ended on those dates, together with reports thereon by KPMG Peat Marwick LLP, certified public accountants, and (B) the unaudited consolidated balance sheets of Borrower and the Subsidiaries as of September 30, 1997, and the related statements of earnings and cash flows for the fiscal periods ended on September 30, 1997. All of said financial statements, including in each case the related schedules and notes, are true, complete (in the case of year-end financial statements) and correct in all material respects, have been prepared in accordance with GAAP consistently applied and present fairly the financial position of Borrower and the Subsidiaries as of the respective dates of said balance sheets and the results of their operations for the respective periods covered thereby, subject (in the case of interim statements) to period- end audit adjustments and the absence of footnotes.
(C) Except as set forth in the financial statements referred to in
Section 8.02(a), since December 31, 1996 there has been no Material Adverse
Effect, or any event, change or circumstance which could reasonably be expected
to cause or evidence, either individually or together with any other events,
changes or circumstances, a Material Adverse Effect.
(B) No Obligor or any Subsidiary is in default under or with respect to any contractual obligation or any order, award or decree of any Governmental Authority or arbitrator binding upon it or any of its Property in any respect which would reasonably be expected to have a Material Adverse Effect.
(C) No Default or Event of Default has occurred and is continuing.
consummation of the transactions herein and therein contemplated have been duly authorized by all necessary corporate action on its part; and this Agreement has been duly and validly executed and delivered by each Obligor and constitutes, and each of the Notes, the other Credit Documents and the Documents to which it is a party when executed and delivered by such Obligor (in the case of the Notes, for value) will constitute, its legal, valid and binding obligation, enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws of general applicability from time to time in effect affecting the enforcement of creditors' rights and remedies and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
or has been threatened by any authority with respect to any such tax, fee or other charge, except where the existence of such would not (individually or in the aggregate) have a Material Adverse Effect. No Obligor or any Subsidiary has entered into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of any Obligor or any Subsidiary, except where the existence of such would not (individually or in the aggregate) have a Material Adverse Effect.
which any Obligor or any Subsidiary is bound, which would reasonably be expected
to prevent any Obligor's or any Subsidiary's compliance with any Environmental
Law, or which would reasonably be expected to give rise to any liability of any
Obligor or any Subsidiary under any Environmental Law, including, without
limitation, liability under CERCLA or similar state or foreign laws; (v) no Lien
has been asserted or recorded, or to the knowledge of the Obligors, threatened,
under any Environmental Law with respect to any asset, facility, inventory or
property currently owned, leased or operated by any Obligor or any Subsidiary;
(vi) there are no underground storage tanks or related piping at any Property
owned, operated or, to the knowledge of any Obligor or Subsidiary, at any
Property leased by any Obligor or any Subsidiary; (vii) to the knowledge of any
Obligor or any Subsidiary no such tanks or related piping has been removed from
such properties; and (viii) no Obligor or any Subsidiary is subject to any
Proceeding alleging the violation of, or liability under, any Environmental Law
and, to the knowledge of the Obligors, no such Proceeding is threatened.
with the appropriate Governmental Authorities or the taking of other appropriate action, depending upon the type of Collateral, perfected first priority security interest in and Lien upon all of the Collateral, superior to and prior to the rights of all third persons other than the holders of Prior Liens and subject to no other Liens except Prior Liens and other liens specifically permitted by the terms of the applicable Security Document.
Except with respect to Permitted Liens which are subordinate to the Liens of the Security Documents, Prior Liens and the Liens created by the Security Documents, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future Lien on, or security interest in, any assets or Property of Borrower or any Subsidiary or rights thereunder.
preliminary, unaudited statements will be delivered within the 25-day period with the final reports to be submitted as part of the information provided under Section 9.01(b);
in the Borrowing Base Certificate delivered by Borrower as at the end of such accounting period is accurate and complete in all material respects;
Borrower will furnish to the Administrative Agent and each of the Lenders, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate of a senior financial officer of Borrower (i) to the effect that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail and describing the action that Borrower has taken and proposes to take with respect thereto) and (ii) setting forth in reasonable detail the computations necessary to determine whether Borrower is in compliance with Sections 9.07, 9.08, 9.09, 9.10 and 9.11 as of the end of the respective quarterly fiscal period or fiscal year.
material respects in accordance with GAAP in effect from time to time or in all material respects as otherwise required by applicable rules and regulations of any Governmental Authority having jurisdiction over such Obligor or its Subsidiaries, as relevant. Borrower will confer with the Lenders in enforcing or waiving material rights of Borrower or any Subsidiary under any Document.
All policies of insurance required to be maintained by Borrower or any Subsidiary must name the Administrative Agent on behalf of Lenders as mortgagees (in the case of property insurance) or additional insured (in the case of liability insurance), as applicable, and must provide that no cancellation or modification of the policies will be made without thirty (30) days' prior written notice to the Administrative Agent.
Each policy of insurance obtained or maintained by Borrower or any Subsidiary shall: (i) be written by financially responsible companies selected by Borrower and having an A.M. Best rating of "A" or better and being in a financial size category of XII or larger, or by other companies reasonably acceptable to the Administrative Agent and the Arranger; (ii) waive all rights of subrogation of the insurers against the Creditors; (iii) waive any right of the insurers to set-off or counterclaim or to make any other deduction, whether by way of attachment or otherwise, as against any Creditor; (iv) waive all claims for insurance premiums or commissions or additional premiums or assessments against the Creditors; and (v) provide that, except in the case of third-party liability insurance, the proceeds of any loss affecting real or personal property or interests shall be applied in accordance with the terms of the applicable Security Document.
Borrower will advise the Administrative Agent promptly of any material policy cancellation, reduction or amendment.
Borrower will not and will not permit any Subsidiary to materially modify any of the provisions of any policy with respect to casualty insurance without delivering the original copy of the endorsement reflecting such modification to the Administrative Agent.
(A) purchases of inventory and other Property to be sold or used in the ordinary course of business (including Capital Expenditures permitted by Section 9.11(e));
(B) the pledge of the Collateral pursuant to the Security Documents;
(D) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its Property (upon voluntary liquidation or otherwise) to Borrower or to any Wholly Owned Subsidiary which is an Obligor or, if such Subsidiary effecting such transaction is not an Obligor, to another Subsidiary which is not an Obligor;
(E) Dispositions of used, worn out, obsolete or surplus Property by Borrower or any Subsidiary, all in the ordinary course of business, including the termination, sale or abandonment of leases for retail sites not favorable to Borrower, if in the ordinary course of business and on ordinary business terms;
(F) Borrower or any Subsidiary may sell or discount, in each case without recourse, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and may sell for less than face value notes or accounts receivables in connection with trade discounts in the ordinary course of business or consistent with past practice;
(H) Newco may merge with and into Borrower, on the Closing Date, with Borrower as the surviving corporation;
(I) Dispositions pursuant to Section 9.19;
(J) Investments permitted by Section 9.09;
(K) any Wholly Owned Subsidiary that is a Foreign Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to another Wholly Owned Subsidiary that is a Foreign Subsidiary;
(L) any Foreign Subsidiary may be merged or consolidated with or into any one or more Wholly Owned Subsidiaries that are Foreign Subsidiaries (provided that a Wholly Owned Subsidiary that is a Foreign Subsidiary shall be the continuing or surviving corporation);
form and substance to the Administrative Agent;
which is an Obligor and the Person acquired shall be merged with or into a Wholly Owned Subsidiary which is an Obligor or shall be at the time of consummation thereof a Wholly Owned Subsidiary which is an Obligor;
To the extent the Majority Lenders waive the provisions of this Section 9.06 with respect to the sale or other disposition of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 9.06, such Collateral in each case shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and the Administrative Agent shall take such actions as are appropriate in connection therewith.
(B) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of Borrower or the affected Subsidiary, as the case may be, in accordance with GAAP;
(C) Liens in respect of Property of Borrower or any Subsidiary (A) imposed by law, (B) to the extent such Liens exist as of the Closing Date, imposed by contract, or (C) to the extent such Liens are imposed by contract after the Closing Date (in which case Borrower shall use its best efforts to provide that any such Lien is created in a commercially reasonable amount and manner), in each case which were incurred in the ordinary course of business, such as carriers', warehousemen's, landlords' and mechanics' Liens and other similar Liens arising in the ordinary course of business, in each case for sums the payment of which is not delinquent or, if delinquent, is not then required by Section 9.03;
(D) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation or the deposits securing the liability to insurance carriers;
(E) pledges or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(F) easements, rights-of-way, restrictions or minor defects or irregularities in title incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Real Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Real Property subject thereto or interfere with the ordinary conduct of the business of Borrower or any Subsidiary; and precautionary UCC filings by lessors and bailees in the ordinary course of business;
(I) Liens (excluding Liens on Collateral) not otherwise permitted hereunder securing obligations not at any time exceeding in the aggregate $1.0 million;
(J) Liens securing obligations under Swap Contracts with any Lender or any Affiliate of a Lender so long as the Obligations are secured by the same collateral on a pari passu basis;
(K) Liens consisting of judgment or judicial attachment Liens (including prejudgment attachment) the enforcement of which is effectively stayed or payment of which is covered in full (subject to a customary deductible) by insurance or which do not otherwise result in an Event of Default under Section 10(h);
(L) Liens securing obligations in respect of Capital Leases solely on Property subject to such Capital Leases;
(M) Liens on the Existing Warehouse Facility securing only Indebtedness incurred pursuant to Section 9.19(A);
(N) Liens on the New Warehouse Facility securing only the New Warehouse Financing incurred pursuant to Section 9.19(B);
(P) Liens arising from filing UCC financing statements for precautionary purposes relating solely to true leases of personal property permitted by this Agreement under which Borrower or any of its Subsidiaries is a lessee;
(Q) Liens encumbering customary initial deposits and margin deposits, and other Liens incurred in the ordinary course of business that are within the general parameters customary in the industry;
(R) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Borrower or any Subsidiary in the ordinary course of business in accordance with past practices;
(T) interests of lessors under leases and restrictions and encumbrances on the interests of such lessors;
(U) Liens in favor of banks which arise under Article IV of the UCC on items in collection and the documents relating thereto and proceeds thereof;
(V) Liens in favor of customs and revenue authorities arising as a matter of law to secure customs duties in connection with the importation of goods; and
(W) interests of licensors of patents, trademarks and other intellectual property.
Except with respect to (i) specific Property encumbered pursuant to a Lien permitted to be incurred pursuant to this Section 9.07 or (ii) specific Property to be sold pursuant to an executed agreement with respect to a Disposition consummated in accordance with this Agreement, no Obligor will, nor will any of them permit any of their respective Subsidiaries to, directly or indirectly, enter into any agreement after the date hereof (other than the Credit Documents) prohibiting or restricting in any manner (directly or indirectly and including by way of covenant, representation or warranty or event of default) the creation or assumption of any Lien upon its Property, whether now owned or hereafter acquired except for customary restrictions on the creation of Liens contained in leases and licenses affecting the Property leased or licensed thereunder.
(A) Indebtedness under the Credit Documents;
(D) Indebtedness of Borrower and the Subsidiaries secured by Liens permitted under Section 9.07(g) or (l) not exceeding in the aggregate $2.0 million at any one time outstanding;
(E) Indebtedness of Borrower represented by the Senior Subordinated Notes in an aggregate principal amount of $100 million less any prepayments or repayments thereof and any senior subordinated guarantees thereof by Subsidiary Guarantors in accordance with the terms of the Senior Subordinated Note documents as in effect on the Closing Date;
(F) obligations to repurchase stock or stock options of Borrower pursuant to written agreements in effect on the Closing Date and permitted by Section 9.10;
(H) Indebtedness of Borrower in connection with the incurrence of a mortgage on the Existing Warehouse Facility so long as incurred as and when permitted by Section 9.19(A);
---- ----- -------- -------
the Replacement Indebtedness shall only be incurred
(I) on terms and conditions reasonably satisfactory to the
Majority Term Lenders;
|
(II) if all Revolving Loans, Swing Line Loans and Reimbursement Obligations shall have been repaid, or will simultaneously be repaid, in cash in full and each of the Revolving Facility Commitments, all outstanding Letters of Credit, and the Swing Loan Commitment have been permanently terminated (or have expired);
(III) if no Event of Default would result from the incurrence of the Replacement Indebtedness; and
(IV) the Revolving Credit Commitment Termination Date has occurred.
(K) unsecured Indebtedness incurred by any Foreign Subsidiary not to exceed $1.0 million in the aggregate at any time outstanding;
(M) unsecured Indebtedness of Borrower or any Subsidiary which is an Obligor in an aggregate principal amount not to exceed $5.0 million at any time outstanding;
(N) Indebtedness represented by amounts declared, payable as, or set apart for, Dividend Payments permitted by Section 9.10;
(O) Swap Contracts entered into in the ordinary course of business and designed to protect the Obligors against fluctuations in interest rates, currency exchange rates, commodity prices or similar risks;
(Q) the guarantee of the Obligations pursuant to Section 6 and guarantees by Subsidiary Guarantors of the Senior Subordinated Notes pursuant to the Senior Subordinated Note documents as in effect on the Closing Date;
(R) Contingent Obligations of Borrower or any Subsidiary in respect of Indebtedness or other liabilities of Borrower or any Wholly Owned Subsidiary which is an Obligor to the extent that the existence of such Indebtedness or other liabilities is not prohibited under this Agreement;
(S) Contingent Obligations in connection with Dispositions permitted under Section 9.06, arising in connection with indemnification and other agreements in respect of any contract relating to such Disposition, not to exceed the consideration received by Borrower or any Subsidiary in connection with such sale and excluding in all cases any Contingent Obligation with respect to any obligation of any third person incurred in connection with the acquisition of the Property which is the subject of such Disposition; and
(T) Acquired Indebtedness not to exceed $5.0 million in the aggregate.
Notwithstanding anything herein to the contrary, if Borrower mortgages the Existing Warehouse Facility pursuant to subsection (h) of this Section 9.08, the Administrative Agent is hereby authorized and required to release, at the request and sole cost and expense of Borrower, the Mortgage on the Existing Warehouse Facility securing the Obligations.
All intercompany debt shall be unsecured and subordinate in right of payment to the Obligations.
No Obligor shall directly or indirectly make any optional prepayment, redemption, retirement or defeasance, whether in cash, property, securities or a combination thereof, on account of the principal amount of any Indebtedness, other than (1) refinancings permitted by Section 9.08(p), (2) the Loans, and (3) the Existing Debt Repayment.
(A) operating deposit accounts and certificates of deposit with banks in the ordinary course of business;
(B) Permitted Investments;
(C) Investments by Borrower or any Subsidiary in any Wholly Owned Subsidiary that is an Obligor and Investments by any Subsidiary in Borrower;
(E) Investments that constitute Indebtedness permitted under Section 9.08;
(H) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business;
(I) pledges or deposits required in the ordinary course of business in connection with workmen's compensation, unemployment insurance and other social security or similar legislation;
(J) pledges or deposits in connection with (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases or statutory obligations, (ii) contingent obligations on surety or appeal bonds, and (iii) other non-delinquent obligations of a like nature, in each case incurred in the ordinary course of business;
(K) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
(L) Borrower and the Subsidiaries may hold additional Investments in any non-Wholly Owned Subsidiary or Foreign Subsidiary to the extent that such Investments reflect an increase in the stockholders' equity of such Subsidiary resulting from retained earnings of such Subsidiary;
(M) any Foreign Subsidiary may make Investments in or to any other Foreign Subsidiary;
(N) Capital Expenditures permitted by Section 9.11(e);
(Q) Borrower or any Subsidiary may hold the Equity Interests, partnership interests or other ownership or equity interest therein of any Subsidiary existing on the Closing Date or created or acquired thereafter in accordance with the provisions hereof and any additional Equity Interests, partnership interests or ownership or equity interests issued in exchange therefor or as a dividend thereon;
(T) Investments by Foreign Subsidiaries in high quality investments of the type similar to Permitted Investments made outside the United States;
(V) Investments in joint ventures controlled by Borrower or a Wholly Owned Subsidiary which are in the same line of business as Borrower and the Subsidiaries and Investments in suppliers of Borrower or the Subsidiaries, in each case so long as with respect to any such Investment made pursuant to this Section 9.09(v) (1) such Investment is made with the Cumulative Retained Portion Balance in
(B) Borrower may make Dividend Payments in the amounts payable on the Closing Date pursuant to the Merger Agreement as in effect on the date hereof;
(I) Such obligation is pursuant to a written agreement as in effect on the Closing Date;
(II) All such repurchases and redemptions made in any fiscal year shall not exceed the Annual Retained Portion Balance at such time;
(III) Such repurchases and redemptions shall not exceed, in the aggregate, $2.0 million in Borrower's fiscal year ending December 31, 1999, $6.5 million in Borrower's fiscal year ending December 31, 2000, $9.0 million in Borrower's fiscal year ending December 31, 2001 and $11.0 million in Borrower's fiscal year ending December 31, 2002; and
(IV) Such repurchases and redemptions shall not exceed, in the aggregate, $25.0 million since the Closing Date; and
(D) so long as no Default or Event of Default then exists or would arise therefrom, Borrower may repurchase, redeem or otherwise acquire or retire for value shares of Equity Interests or Equity Rights of Borrower from employees who have died (or their estates or beneficiaries) or whose
DATE RATIO ---- ----- September 30, 1998 6.50: 1.00 December 31, 1998 6.25: 1.00 March 31, 1999 6.25: 1.00 June 30, 1999 6.25: 1.00 September 30, 1999 6.25: 1.00 December 31, 1999 5.75: 1.00 March 31, 2000 5.75: 1.00 June 30, 2000 5.75: 1.00 September 30, 2000 5.75: 1.00 December 31, 2000 5.25: 1.00 March 31, 2001 5.25: 1.00 June 30, 2001 5.25: 1.00 September 30, 2001 5.25: 1.00 December 31, 2001 4.75: 1.00 March 31, 2002 4.75: 1.00 June 30, 2002 4.75: 1.00 September 30, 2002 4.75: 1.00 December 31, 2002 4.25: 1.00 March 31, 2003 and each March 31, June 30, September 30 and December 31 thereafter 4.25: 1.00 |
DATE RATIO ---- ----- March 31, 1998 1.25: 1.00 June 30, 1998 1.25: 1.00 September 30, 1998 1.25: 1.00 |
December 31, 1998 1.30: 1.00 March 31, 1999 1.30: 1.00 June 30, 1999 1.30: 1.00 September 30, 1999 1.30: 1.00 December 31, 1999 1.40: 1.00 March 31, 2000 1.40: 1.00 June 30, 2000 1.40: 1.00 September 30, 2000 1.40: 1.00 December 31, 2000 1.50: 1.00 March 31, 2001 1.50: 1.00 June 30, 2001 1.50: 1.00 September 30, 2001 1.50: 1.00 December 31, 2001 1.55: 1.00 March 31, 2002 1.55: 1.00 June 30, 2002 1.55: 1.00 September 30, 2002 1.55: 1.00 December 31, 2002 1.60: 1.00 March 31, 2003 and each March 31, June 30, September 30 and December 31 thereafter 1.60: 1.00 |
DATE RATIO ---- ----- March 31, 1998 1.20: 1.00 June 30, 1998 1.20: 1.00 September 30, 1998 1.20: 1.00 December 31, 1998 1.20: 1.00 March 31, 1999 1.20: 1.00 June 30, 1999 1.20: 1.00 September 30, 1999 1.20: 1.00 December 31, 1999 1.20: 1.00 March 31, 2000 1.20: 1.00 June 30, 2000 1.20: 1.00 September 30, 2000 1.20: 1.00 December 31, 2000 1.20: 1.00 |
March 31, 2001 1.20: 1.00 June 30, 2001 1.20: 1.00 September 30, 2001 1.20: 1.00 December 31, 2001 1.20: 1.00 March 31, 2002 1.20: 1.00 June 30, 2002 1.20: 1.00 September 30, 2002 1.20: 1.00 December 31, 2002 1.20: 1.00 March 31, 2003 and each March 31, June 30, September 30, December 31 thereafter 1.50: 1.00 |
DATE AMOUNT ---- ------ March 31, 1998 $35,000,000 June 30, 1998 35,000,000 September 30, 1998 35,000,000 December 31, 1998 38,000,000 March 31, 1999 38,000,000 June 30, 1999 38,000,000 September 30, 1999 39,000,000 December 31, 1999 42,000,000 March 31, 2000 42,000,000 June 30, 2000 42,000,000 September 30, 2000 43,000,000 December 31, 2000 45,000,000 March 31, 2001 45,000,000 June 30, 2001 45,000,000 September 30, 2001 46,000,000 December 31, 2001 47,000,000 March 31, 2002 47,000,000 June 30, 2002 47,000,000 September 30, 2002 48,000,000 December 31, 2002 49,000,000 March 31, 2003 and each March 31, June 30, September 30, December 31 thereafter 50,000,000 |
(2) Notwithstanding anything herein to the contrary, so long as no Default or Event of Default shall have occurred and be continuing, Borrower and the Subsidiaries may make Capital Expenditures with the Net
Available Proceeds of any Disposition effected in accordance with Section 9.06(g) or (n) to the extent that such Net Available Proceeds have not been otherwise expended by Borrower or any Subsidiary.
(3) Notwithstanding anything herein to the contrary, the aggregate
amount of Capital Expenditures calculated pursuant to clause (e)(1) of this
Section 9.11 shall not include (a) expenditures from Indebtedness incurred in
connection with a New Warehouse Financing pursuant to Section 9.08(i), and (b)
expenditures from any Proceeds Transaction effected in accordance with Section
9.19.
In the event that, after the Closing Date, Borrower or any Domestic Subsidiary acquires or holds a fee interest in any Real Property with a market or book value of $3.5 million or more (other than the Specified Real Property, the New Warehouse Facility or, if Indebtedness is incurred under Section 9.08(h), the Existing Warehouse Facility), the Obligors and each Wholly Owned Subsidiary shall reasonably promptly (i) take such actions and execute such documents as the Administrative Agent shall reasonably require to confirm the Lien of an existing Mortgage, if applicable, or to create a new Mortgage on such additional Real Property and (ii) cause to be delivered to the Administrative Agent, on behalf of the Lenders, the documents and instruments reasonably requested by the Administrative Agent, including, without limitation, the items set forth in Section 7.01 in respect of Mortgaged Real Property.
The costs of all actions taken by the parties in connection with the pledge of Additional Collateral or in connection with any Mortgage, including reasonable costs of counsel for the Administrative Agent, shall be paid by the Obligors promptly following written demand.
(B) Each Obligor and each Subsidiary shall deliver or cause to be delivered to the Administrative Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to the Administrative Agent as the Administrative Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral.
(1) At the time of consummation of such Proceeds Transaction:
(a) no Default or Event of Default then exists or would arise therefrom;
(b) Borrower is in compliance with all covenants in Section 9 and will be in compliance therewith on a pro forma basis after giving effect thereto, including Section 9.11 on a pro forma basis as if the Proceeds Transaction had occurred at the beginning of the Measurement Period most recently ended;
(c) Borrower's Senior Debt Leverage Ratio, on a pro forma basis, as of the Measurement Period most recently ended is less than 3.00:1.00;
(d) the Net Available Proceeds therefrom are held in the Collateral Account pending the application thereof contemplated by clauses (2) and (3) below of this clause (A); and
(e) if such Proceeds Transaction is to be consummated prior to the delivery of the audited financial statements in respect of the fiscal year ended December 31, 1998 required by Section 9.01(b), at September 30, 1998 the Senior Debt Leverage Ratio (as evidenced in an Officer's Certificate delivered to the Administrative Agent and the Lenders) after giving pro forma effect to the proposed Proceeds Transaction would be less than 3:00:1.0.
(2) Within 360 days of the Proceeds Transaction, the Net Available Proceeds therefrom are:
(a) used or committed to be used pursuant to written documents provided to the Administrative Agent for the construction of the New Warehouse Facility; or
(b) used to repay or prepay the New Warehouse Financing or the Term Loans.
(A) (i) Borrower shall default in the payment when due (whether at stated maturity upon prepayment or repayment or acceleration or otherwise) of any principal of any Loan, or (ii) Borrower shall default in the payment when due of interest on any Loan or any Reimbursement Obligation or any fee or any other amount payable by it hereunder or under any other Credit Document when due and such default under this clause (ii) shall have continued unremedied for five or more Business Days; or
purchase, offer to purchase or otherwise), prior to its stated maturity; or any Relevant Party shall default in the payment when due of any amount aggregating $1.0 million or more under any Swap Contract; or
(C) Any representation or warranty made or deemed made in any Credit Document (or in any modification or supplement thereto) by any Relevant Party or in any certificate furnished to any Creditor pursuant to the provisions thereof, shall prove to have been false or misleading as of the time made, deemed made or furnished in any material respect; or
(D) Any Obligor shall default in the performance of any of its obligations under any of Sections 9.01(f) or 9.05 through 9.12 and 9.14 through 9.23; or any Obligor shall default in the performance of any of its obligations under Section 5.02 of the Security Agreement; or Borrower shall default in the performance of its obligations under Section 9.01(e) or (k) and such default shall continue unremedied for five Business Days; or any Obligor shall default in the performance of any of its other obligations in this Agreement, the Security Documents or the Letter of Credit Documents and such default shall continue unremedied for a period of thirty days after written notice thereof to such Obligor or Borrower by the Administrative Agent; or
(E) Any Relevant Party shall not, or shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or
(F) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or readjustment of debts, (v) fail to controvert within 60
days or in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(G) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
such Relevant Party or of all or any substantial part of its assets, or
(iii) similar relief in respect of such Relevant Party under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and either (1) such proceeding shall
not be actively contested by such Relevant Party, or (2) such proceeding or
case shall continue undismissed, undischarged or unbonded, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against any Relevant Party shall be entered in
an involuntary case under the Bankruptcy Code; or
(H) A final judgment or judgments for the payment of money in excess of $5.0 million in the aggregate (exclusive of judgment amounts to the extent covered by insurance) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against any Relevant Party and the same shall not be discharged (or provision shall not be made for such discharge), vacated or bonded pending appeal, or a stay of execution thereof shall not be procured, within 45 days from the date of entry thereof and such Relevant Party shall not, within said period of 45 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or
(I) Any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $2.5 million which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could reasonably be expected to cause one or more members of the ERISA Group to incur a payment obligation in excess of $2.5 million; or
(J) Any Change of Control; or
(K) Any Security Document after delivery thereof at any time shall cease to be in full force and effect or shall for any reason fail to create or cease to maintain a valid and duly perfected first priority security interest in and Lien upon (subject to Prior Liens) any portion of the Collateral, except for (A) released Collateral or (B) any Collateral in which a security interest may not be perfected by the filing of UCC financing statements or by possession of such Collateral and possession of such Collateral by the Administrative Agent is not required by the Security Documents or this Agreement; or
(L) Any Guarantee ceases to be in full force and effect or any of the Guarantors repudiates, or attempts to repudiate, any of its obligations under any of the Guarantees (except Guarantors released from their obligations under Section 6.02); or
THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (f) or (g) of this Section 10, the Administrative Agent may, and upon written direction of the Majority Lenders shall, by notice to Borrower, terminate the Commitments and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by Borrower hereunder and under the Notes (including any amounts payable under Section 5.05 or 5.06) to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower, reduce any claim to judgment, take any other action permitted by law and/or take any action permitted to be taken by the Security Documents during the existence of an Event of Default; and (2) in the case of the occurrence of an Event of Default referred to in clause (f) or (g) of this Section 10, the Commitments shall automatically be terminated and the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by Borrower hereunder and under the Notes (including any amounts payable under Section 5.05 or 5.06) shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower.
In addition, Borrower agrees, upon the occurrence and during the continuance of any Event of Default if the Administrative Agent has declared the principal amount then outstanding of, and accrued interest
on, the Revolving Credit Loans, and all other amounts payable to the Revolving Credit Lenders hereunder and under the Notes evidencing such Loans to be due and payable, it may and shall, if requested by the Majority Revolving Credit Lenders through the Administrative Agent (and, in the case of any Event of Default referred to in clause (f) or (g) of this Section 10 with respect to any Relevant Party, forthwith, without any demand or the taking of any other action by the Administrative Agent or such Lenders) provide cover for the Letter of Credit Liabilities by paying to the Administrative Agent immediately available funds in an amount equal to the then aggregate undrawn face amount of all Letters of Credit, which funds shall be held by the Administrative Agent in the Collateral Account as collateral security in the first instance for the Letter of Credit Liabilities and be subject to withdrawal only as provided in the Security Agreement.
The Lender or other financial institution 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 with 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 herein. 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 or Event of 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 hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.04), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any Subsidiary that is communicated to or obtained by the financial institution 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 Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.04) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by 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 this Agreement or any other Credit Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Credit Document or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other Credit Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Section 7 or elsewhere herein, 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 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.
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 related agreement or any document furnished hereunder or thereunder.
(I) the Arranger and the Administrative Agent for all of their reasonable out-of-pocket costs and expenses (including the reasonable fees and expenses of counsel) in connection with (1) the negotiation, preparation, execution and delivery of the Credit Documents and the extension of credit hereunder and (2) the negotiation or preparation of any modification, supplement or waiver of any of the terms of any Credit Document (whether or not consummated or effective);
(II) each of the Lenders and the Administrative Agent for all reasonable out-of-pocket costs and expenses of the Lenders and the Administrative Agent (including the reasonable fees and expenses of legal counsel) in connection with (1) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom, including all manner of participation in or other involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (2) the enforcement of this Section 12.03; and
(III) each of the Lenders and the Administrative Agent for all reasonable costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Credit Document or any other document referred to therein.
To the extent that the undertaking to indemnify and hold harmless set forth in this Section 12.03 or any other provision of any Credit Document providing for indemnification is unenforceable because it is violative of any law or public policy or otherwise, the Obligors, jointly and severally, shall contribute the
maximum portion that each of them is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by any of the Persons indemnified hereunder.
The Obligors also agree that no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) for any Losses to any Obligor or any Obligor's security holders or creditors resulting from, arising out of, in any way related to or by reason of any matter referred to in any indemnification or expense reimbursement provisions set forth in this Agreement or any other Credit Document, except to the extent that any Loss resulted from the gross negligence or bad faith of such Indemnitee.
The Obligors agree that, without the prior written consent of the Administrative Agent, the Arranger and the Majority Lenders which consent shall not be unreasonably withheld, no Obligor will settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification is reasonably likely to be sought under the indemnification provisions of this Section 12.03 (whether or not any Indemnitee is an actual or potential party to such Proceeding), unless such settlement, compromise or consent includes an unconditional written release of each Indemnitee from all liability arising out of such Proceeding and does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnitee and does not involve any payment of money or other value by any Indemnitee or any injunctive relief or factual findings or stipulations binding on any Indemnitee.
(A) no amendment, modification, supplement or waiver shall, unless by
an instrument signed by all of the Lenders or by the Administrative Agent
acting with the written consent of each Lender (with Obligations directly
affected in the case of clause (I)): (I) extend the scheduled final
maturity of any Loan or Note, or extend the stated expiration date of any
Letter of Credit beyond the Revolving Credit Commitment Termination Date,
or reduce the rate of interest (other than any waiver of any increase in
the interest rate applicable to any of the Loans pursuant to clause (b) of
Section 3.02) or fees thereon, or extend the time of payment of interest or
fees thereon, or reduce the principal amount thereof, (II) extend the final
maturity of any of the Commitments (or reinstate any Commitment terminated
pursuant to Section 10), (III) change the currency in which any Obligation
is payable, (IV) amend the terms of this Section 12.04 or Section 4.07, 5
or 11.03, (V) reduce the percentages specified in the definition of the
term "Majority Lenders" or "Supermajority Lenders" or amend any provision
of any Credit Document requiring the consent of all the Lenders or reduce
any other percentage of the Lenders required to make any determinations or
waive any rights hereunder or to modify any provision hereof (it being
understood that, the Increased Facility Amount, if extended by any Lender,
shall be, and with the consent of the Majority Lenders, other additional
extensions of credit pursuant to this Agreement may be, included in the
determination of the Majority Lenders and Supermajority Lenders without
notice to or consent of any other Lender or Agent on substantially the same
basis as the Commitments (and related extensions of credit) are included on
the Closing Date), (VI) release any Guarantor from its obligations under
Section 6 (unless permitted by this Agreement), (VII) consent to the
assignment or transfer by any Obligor of any of its rights and obligations
under any Credit Document, (VIII) release all or substantially all the
Collateral or terminate the Lien under any Credit Document in respect of
all or substantially all the Collateral (except as permitted by the Credit
Documents, including as permitted by Section 9.06, Section 9.08 and Section
9.19 upon the incurrence
of a mortgage on the Existing Warehouse Facility) or agree to additional obligations (other than the Obligations and the Increased Facility Amount and Replacement Indebtedness) being secured by the Collateral, or (IX) amend Section 12.03 or any other indemnification and expense reimbursement provision set forth in any Credit Document (it being understood that any prepayment required by Section 2.10(a) may be modified, supplemented or waived by the Majority Lenders);
(B) no such amendment, modification, supplement or waiver shall increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that amendments, modifications or waivers of conditions precedent, covenants, Default or Events of Default shall not constitute an increase of the Commitment of any Lender);
(C) any modification or supplement of or waiver with respect to
Section 11 which affects the Administrative Agent or the Arranger in their
respective capacities as such shall require the consent of the
Administrative Agent and the Arranger;
(D) no consent of any Lender need be obtained, and the Administrative
Agent is hereby authorized, to release any Lien securing the Obligations on
Property which is the subject of any Disposition permitted by this
Agreement and the other Credit Documents or to release the Lien of the
Mortgage on the Existing Warehouse Facility upon the incurrence of a
mortgage thereon in accordance with Section 9.07(m), Section 9.08(h) and
Section 9.19(A);
(E) subject to clause (a)(I) above of this proviso to this Section 12.04(i), the consent of the Supermajority Lenders of the Affected Class as well as Supermajority Lenders shall be required with respect to any extension of any scheduled Amortization Payment or any reduction in the amount of any scheduled Amortization Payment (it being understood that, subject to clause (f) below of this Section 12.04, any prepayment required by Section 2.10 (a) may otherwise be modified, supplemented or waived by the Majority Lenders);
(F) no modification, supplement or waiver shall, unless by an instrument signed by the Supermajority Lenders of the Affected Class or by the Administrative Agent acting with the written consent of the Supermajority Lenders of the Affected Class, change the timing of the receipt or the application of mandatory prepayments hereunder as between the Tranche A Term Loans and the Tranche B Term Loans or the order in which any such prepayment is applied to the Tranche A Term Loans or Tranche B Term Loans (although any required prepayment set forth in Section 2.10(a) may be modified, supplemented or waived by the Majority Lenders);
(G) no reduction of the percentage specified in the definition of "Majority Revolving Credit Lenders," "Majority Tranche A Term Loan Lenders" or "Majority Tranche B Term Loan Lenders" shall be made without the consent of each Revolving Credit Lender, each Tranche A Term Loan Lender or each Tranche B Term Loan Lender, respectively (it being understood that only the Class of such Loan to which such definition relates need consent to any such reduction and that the Increased Facility Amount, if extended by any Lender, shall be, and with the consent of the Majority Lenders, other additional extensions of credit pursuant to this Agreement may be, included in any such definition without notice to or consent of any other Lender or Agent on substantially the same terms as the Commitments (and related extensions of credit) are included on the Closing Date);
(H) no reduction of the percentage specified in the definition of (I)
"Majority Term Lenders" shall be made without the consent of the Majority
Tranche A Term Loan Lenders and the Majority Tranche B Term Loan Lenders or
(II) "Supermajority Lenders of the Affected Tranche" shall be made
without the consent of each Term Loan Lender (it being understood that, with the consent of the Majority Lenders, additional extensions of credit pursuant to this Agreement may be included in either such definition without notice to or consent of any other Lender or Agent on substantially the same terms as the Commitments (and related extensions of credit) are included on the Closing Date);
(I) no amendment, modification or waiver shall make any change to
Section 2.01(e) or the definitions of "Swing Loan Commitment", "Swing Loan
Maturity Date" or "Swing Loans" or the Swing Loan Note without the consent
of the Swing Loan Lender; and
(J) no amendment, modification or waiver shall affect the rights or duties of the Issuing Lender in its capacity as such or alter the obligation of any Revolving Credit Lender pursuant to Section 2.03(e) or 2.03(f) without the consent of the Issuing Lender.
(D) In addition to the assignments and participations permitted under the foregoing provisions of this Section 12.06, any Lender may assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank and, in the case of a Lender that is an investment fund, any such Lender may assign or pledge any portion of its Loans and its Notes to its trustee in support of its obligations to its trustee, without notice to or consent of Borrower or the Administrative Agent. No such assignment shall release the assigning Lender from its obligations hereunder.
(E) A Lender may furnish any information concerning Borrower or any Subsidiary in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) subject, however, to the provisions of Section 12.11. In addition, each of the Administrative Agent and the Arranger may furnish any information concerning any Obligor or any of its Affiliates in the Administrative Agent's or the Arranger's possession to any Affiliate of the Administrative Agent or the Arranger. The Obligors shall assist any Lender (at such Lender's cost and expense, except as provided in the Commitment Letter in respect of syndication) in effectuating any assignment or participation pursuant to this Section 12.06 (including during syndication) in whatever manner such Lender reasonably deems necessary, including participation in meetings with prospective transferees.
registered or certified mail (or any substantially similar form of mail), postage prepaid, to Borrower at its address set forth in Section 12.02 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; and (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.
(B) Each Obligor hereby irrevocably appoints and designates CT Corporation System, whose address is 1633 Broadway, New York, New York 10019, as its true and lawful attorney and duly authorized agent for service of legal process of such Obligor.
-------- -------
12.11.
12.12. Independence of Representations, Warranties and Covenants.
---------------------------------------------------------
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The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exception be deemed to permit any action or omission that would be in contravention of applicable law.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
TUESDAY MORNING CORPORATION
By: ___________________________________________
Name: Benjamin Chereskin
Title:
Address for Notices:
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75224
Attention: Benjamin Chereskin
Telecopier No.: (312) 895-1306
Telephone No.: (312) 895-1320
|
TMI HOLDINGS, INC.
By: ___________________________________________
Name: Benjamin Chereskin
Title:
Address for Notices:
c/o Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75224
Attention: Benjamin Chereskin
Telecopier No.: (312) 895-1306
Telephone No.: (312) 895-1320
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TUESDAY MORNING, INC.
By: ___________________________________________
Name: Benjamin Chereskin
Title:
Address for Notices:
c/o Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75224
Attention: Benjamin Chereskin
Telecopier No.: (312) 895-1306
Telephone No.: (312) 895-1320
|
FRIDAY MORNING, INC.
By: ___________________________________________
Name: Benjamin Chereskin
Title:
Address for Notices:
c/o Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75224
Attention: Benjamin Chereskin
Telecopier No.: (312) 895-1306
Telephone No.: (312) 895-1320
|
TMIL CORPORATION
By: ___________________________________________
Name: Benjamin Chereskin
Title:
Address for Notices:
c/o Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75224
Attention: Benjamin Chereskin
Telecopier No.: (312) 895-1306
Telephone No.: (312) 895-1320
|
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
as Arranger and Syndication Agent
By: ___________________________________________
Name: Brian O'Callahan
Title: Vice President
Address for Notices:
World Financial Center
c/o Merrill Lynch & Co.
North Tower
250 Vesey Street
New York, New York 10281-1307
Attention: Christopher Reilly
Telecopier No.: (212) 449-2372
Telephone No.: (212) 449-8405
FLEET NATIONAL BANK,
as Administrative Agent
By: ___________________________________________
Name:
Title:
Address for Notices:
Attention:
Telecopier No.:
Telephone No.:
MERRILL LYNCH CAPITAL CORPORATION,
as a Lender
By: ___________________________________________
Name: Brian O'Callahan
Title: Vice President
Lending Office for all Loans:
World Financial Center
c/o Merrill Lynch & Co.
North Tower - 7th Floor
250 Vesey Street
New York, New York 10281-1307
Address for Notices:
World Financial Center
c/o Merrill Lynch & Co.
North Tower
250 Vesey Street
New York, New York 10281-1307
Attention: Christopher Reilly
Telecopier No.: (212) 449-2372
Telephone No.: (212) 449-8405
FLEET NATIONAL BANK,
as a Lender
By: ___________________________________________
Name:
Title:
Lending Office for all Loans:
Address for Notices:
Attention:
Telecopier No.:
Telephone No.:
TUESDAY MORNING ALLOCATIONS
(dollars in millions)
Allocation
------------------------------------------------------------------------------------
REVOLVING CREDIT TRANCHE A TERM TRANCHE B TERM
INSTITUTION COMMITMENTS LOAN COMMITMENT LOAN COMMITMENT TOTAL
------------------------------ ---------------------- -------------------- ------------------ ------------------
Merrill Lynch 13.8400 4.1600 45.000
Capital Corporation
Fleet National Bank 8.5000 4.0000
Heller Financial, Inc. 8.5000 4.0000
Credit Lyonnais 8.5000 4.0000
National Westminster Bank 7.8200 3.6800
Credit Agricole Indosuez 7.8200 3.6800
Bank Leumi 6.8000 3.2000
LaSalle National Bank 6.8000 3.2000
Union Bank of California 6.8000 3.2000
Prime Income Trust 12.5000
Pilgrim America 12.5000
---------------------- -------------------- ------------------ ------------------
Total $90.0000 $40.0000 $70.0000 $200.0000
====================== ==================== ================== ==================
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REVOLVING CREDIT LOANS AND TRANCHE A TERM LOANS
Alternate
Tier Leverage Ratio LIBOR Loans Base Rate Loans
---- -------------- ----------- ---------------
I (greater than) 5:00:1.0 2.500% 1.500%
II (greater than) 4.50:1.0 but (less than) 5.00:1.0 2.250% 1.250%
III (greater than) 4:00:1.0 but (less than) 4.50:1.0 2.000% 1.000%
IV (greater than) 3.50:1.0 but (less than) 4.00:1.0 1.750% 0.750%
V (greater than) 3.00:1.0 but (less than) 3.50:1.0 1.500% 0.5000%
VI (less than or equal to) 3.00:1.0 1.250% 0.250%
-------------------------------------------------------------------------------------------------------------------------------
TRANCHE B TERM LOANS
Tier Leverage Ratio LIBOR Loans Base Rate Loans
---- -------------- ----------- ---------------------------------
I (greater than) 5.00 1.0 3.000% 2.000%
II (greater than) 4.00:1.0 but (less than) 5.00:1.0 2.750% 1.750%
III (less than or equal to) 4.00:1.0 2.500% 1.500%
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GUARANTORS
REFINANCED DEBT
TRANCHE A TRANCHE B
DATE TERM LOAN TERM LOAN
---- --------- ---------
October 15, 1998 $ 1,000,000 $ 350,000
January 15, 1999 1,000,000 350,000
April 15, 1999 600,000 105,000
July 15, 1999 600,000 105,000
October 15, 1999 800,000 140,000
January 15, 2000 2,000,000 350,000
April 15, 2000 1,200,000 105,000
July 15, 2000 1,200,000 105,000
October 15, 2000 1,600,000 140,000
January 15, 2001 4,000,000 350,000
April 15, 2001 1,800,000 105,000
July 15, 2001 1,800,000 105,000
October 15, 2001 2,400,000 140,000
January 15, 2002 6,000,000 350,000
April 15, 2002 2,100,000 105,000
July 15, 2002 2,100,000 105,000
October 15, 2002 2,800,000 140,000
December 29, 2002 7,000,000 0
January 15, 2003 0 350,000
April 15, 2003 0 105,000
July 15, 2003 0 105,000
October 15, 2003 0 140,000
January 15, 2004 0 350,000
April 15, 2004 0 16,450,000
July 15, 2004 0 16,450,000
October 15, 2004 0 16,450,000
December 29, 2004 0 16,450,000
----------- -----------
$40,000,000 $70,000,000
=========== ===========
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Exhibit 4.6
SECURITY AGREEMENT
To induce said lenders to enter into the Credit Agreement and to extend credit thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Debtor (as hereinafter defined) has agreed to pledge, mortgage and grant a security interest in the Pledged Collateral (as hereinafter defined) as security for the Secured Obligations (as hereinafter defined). Accordingly, the parties hereto agree as follows:
past, present and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto.
for past or future infringements thereof, the right to sue for past, present and future infringements thereof, and all rights corresponding thereto throughout the world.
(a) Such Debtor is the sole beneficial (and, with respect to the Pledged Securities, record) owner of, or holds valid and subsisting leases or licenses to, the Pledged Collateral in which it purports to grant a security interest pursuant to Section 3 hereof and no Lien exists or will exist upon such Pledged Collateral at any time (and no right or option to acquire the same (other than those, if any, arising in the ordinary course of business with respect to Dispositions permitted under the Credit Agreement) exists in favor of any other Person), except for Prior Liens, Permitted Encumbrances and the pledge and security interest in favor of the Administrative Agent for the benefit of the Lenders created or provided for herein, which pledge and security interest shall constitute a first priority perfected pledge and security interest in and to all of such Pledged Collateral (except with respect to Pledged Collateral as to which perfection is not presently required) subject only to Prior Liens and except for permitted dispositions each Debtor will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Prior Liens, Permitted Encumbrances and the Lien pursuant hereto; and, subject to Section 5.04 hereof, will cause any and all Pledged Securities, to the extent certificated, whether for value paid by any Debtor or otherwise, to be forthwith deposited with the Administrative Agent and pledged or assigned hereunder.
tion, or any restriction under the charter or by-laws of the respective Issuer of such Pledged Stock, upon the transfer of such Pledged Stock (except for any such restriction contained herein or in the Credit Agreement or as permitted by the Credit Agreement).
(h) Any goods now or hereafter produced by such Debtor or any of its Subsidiaries included in the Pledged Collateral have been and will be produced by such Debtor in compliance with the applicable requirements of the Fair Labor Standards Act of 1938, as amended, except where the failure to comply could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(j) Each Debtor has the corporate power and authority to grant the security interest in the Pledged Collateral pursuant to this Agreement and has taken all necessary corporate action to grant the security interest in the Pledged Collateral pursuant to this Agreement.
(k) None of the Pledged Stock constitutes margin stock, as defined in Regulation G or Regulation U of the Board of Governors of the Federal Reserve System.
(l) Other than Prior Liens and Permitted Encumbrances, no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or part of the Pledged Collateral is on file or of record in any public office, except such as may have been or will be filed in favor of the Administrative Agent in favor of the Creditors pursuant to this Agreement.
lateral from such Debtor, except as enforcement of such security interest may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or general equitable principles (whether considered in a proceeding in equity or at law), and except that the priority of any security interest is subject to the priority rules established by the Uniform Commercial Code and the enforceability of any security interest against other creditors and purchasers is subject to the provisions of the Uniform Commercial Code and of the Credit Agreement and other Credit Documents that provide in certain circumstances for purchasers and other creditors to take free of a prior perfected or unperfected security interest or otherwise limit the enforceability, priority or effect of any such security interest.
(n) The Interests in each LLC and the Partnership Interests in each Partnership are not represented by certificates.
(p) No consent or approval of any Governmental Authority or any securities exchange or any other Person was or is necessary for the validity of the security interest granted herein and the pledge effected hereby.
(q) By virtue of the execution and delivery by the Debtors of this Agreement, when the Pledged Securities, certificates, instruments or other documents representing or evidencing such Pledged Securities are delivered to the Administrative Agent in accordance with this Agreement, duly endorsed or, in the case of Pledged Securities constituting uncertificated securities, when the steps required by Articles 8 and 9 of the Uniform Commercial Code have been taken to perfect the Administrative Agent's security interest therein, the security interest created by this Agreement in the Pledged Securities to the extent provided in the Uniform Commercial Code is enforceable in accordance with its terms against all creditors of such Debtor and any Person purporting to purchase any such Pledged Collateral from such Debtor, except as enforcement of such security interest may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or general equitable principles (whether considered in a proceeding in equity or at law), and except that the priority of any security interest is subject to the priority rules established by the Uniform Commercial Code and the enforceability of any security interest against other creditors and purchasers is sub-
ject to the provisions of the Uniform Commercial Code and of the Credit Agreement and other Credit Documents that provide in certain circumstances for purchasers and other creditors to take free of a prior perfected or unperfected security interest or otherwise limit the enforceability, priority or effect of any such security interest.
(r) There are no restrictions upon the voting rights associated with, or upon the transfer of, any of the Pledged Securities. The Pledged Securities are not subject to any put, call, option or other right in favor of any other Person whatsoever.
(s) Neither the execution and delivery of this Agreement by each Debtor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates any Debtor's, or any of its Subsidiaries', charter or by-laws or any organizational or other organic document of any Issuer, LLC or Partnership, (ii) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which any Debtor, or any of its Subsidiaries, is a party, or by which any of them may be bound or to which any of their Property may be subject, which violation or conflict, individually or in the aggregate, would have a Material Adverse Effect, or a material adverse effect on the value of the Pledged Collateral taken as a whole or a material adverse effect on the security interests hereunder (it being understood that each Debtor makes no representation that upon foreclosure the fair market value or fair value or any particular value would be realized), or (iii) conflicts with any law, order, rule or regulation applicable to any Debtor, or any of its Subsidiaries, of any Governmental Authority having jurisdiction over any Debtor, or any of its Subsidiaries, or their Property, or (iv) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Property now owned or hereafter acquired by any Debtor, or any of its Subsidiaries.
(t) Upon reasonable request to a Debtor, the Administrative Agent shall have full and free access during normal business hours to all of the books, correspondence and records of such Debtor relating to the Pledged Collateral, and the Administrative Agent and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and such Debtor agrees to render to the Administrative Agent, at such Debtor's cost and expense, such clerical and other assistance as may be reasonably requested by the Administrative Agent with regard thereto.
(u) In the event that the Administrative Agent desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Administrative Agent, each Debtor agrees to use its diligent best efforts to assist and aid the Administrative Agent to obtain as soon as practicable any necessary Approvals for the exercise of any such remedies, rights and powers.
(v) There are no voting trusts or other agreements or understandings to which any Debtor is a party or by which it may be bound
with respect to voting, managerial consent, election or other rights of any Debtor relating to the Pledged Securities.
(w) Such Debtor is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which such Debtor is a party relating to its Interests or Partnership Interests, and such Debtor is not in violation of any other material provisions of any such agreement to which such Debtor is a party, or otherwise in default or violation thereunder; no Interest or Partnership Interest is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Debtor by any Person with respect thereto and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the operating agreements, partnership agreements and certificates, if any, delivered to the Administrative Agent) which evidence any Interest or Partnership Interest of such Debtor.
(b) all shares, securities, moneys or Property representing a dividend on any of the Pledged Stock, or representing a distribution or return of capital upon or in respect of the Pledged Stock, or resulting from a split-up, revision, reclassification or other like change of the Pledged Stock or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Stock;
(e) without affecting the obligations of such Debtor under any provision prohibiting such action hereunder or under the Credit Agreement, in the event of any consolidation or merger in which an Issuer, LLC or Partnership is not the surviving corporation, all shares of each class of the capital stock of the successor corporation or interests or certificates of the successor limited liability company or partnership owned by the Debtors (unless such successor is such Debtor itself) formed by or resulting from such consolidation or merger;
(g) all instruments, chattel paper or letters of credit (each as defined in the Uniform Commercial Code) of such Debtor evidencing, representing, arising from or existing in respect of, relating to, or securing or otherwise supporting the payment of, any of the Accounts,
(i) all intellectual property and all other accounts or general intangibles (each as defined in the Uniform Commercial Code) which is not otherwise within the definition of Intellectual Property or Accounts;
(k) all Contracts;
(m) all rights, claims and benefits of such Debtor against any Person arising out of, relating to or in connection with Inventory or Equipment purchased by such Debtor, including, without limitation, any such rights, claims or benefits against any Person storing or transporting such Inventory or Equipment;
(n) the balance from time to time in the Collateral Account;
(o) all other tangible and intangible personal property and fixtures of such Debtor, including, without limitation, all proceeds, products, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of such Debtor described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by any Debtor in respect of any of the items listed above) and, to the extent related to any property described in said clauses or such proceeds, products and accessions, all books, correspondence, credit files, records, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Debtor or any computer bureau or service company from time to time acting for such Debtor; and
(p) all Intellectual Property.
Notwithstanding the foregoing, the Pledged Collateral does not and shall not include any Contract, lease or license (or any property subject to any
such lease or license) to which any Debtor is a party which would be rendered void or unenforceable by reason of its being included as part of the Pledged Collateral or which is not assignable by its terms, or any property subject to a purchase money security interest permitted under the Credit Agreement which under the terms of such purchase money security interest or related documentation may not be further encumbered or transferred, unless a consent to the assignment has been received by such Debtor and/or the Administrative Agent.
(c) Each Debtor hereby delivers to the Administrative Agent all of the certificates evidencing the Pledged Stock owned by such Debtor which is represented by certificates, endorsed in blank or accompanied with appropriate undated stock powers executed in blank. If at any time any Pledged Stock which is not represented by a certificate shall be represented by one or more certificates, then each Debtor shall promptly deliver the same to the Administrative Agent accompanied by stock powers duly executed in blank, with signature properly guaranteed. All other shares of Pledged Stock subsequently acquired by each Debtor shall be pledged to the Administrative Agent and if represented by a certificate, certificates representing the same shall be delivered to the Administrative Agent contemporaneously with the acquisition thereof, accompanied by stock powers duly executed in blank, with signature properly guaranteed.
(d) Each Debtor has executed and delivered to the Administrative Agent such financing statements as the Administrative Agent has requested with respect to that portion of the Pledged Collateral in which a Lien may be perfected by the filing of a financing statement against such Debtor. Each Debtor has caused the Lien of the Administrative Agent in and to the Interests and the Partnership Interests to be registered upon the books of the issuers of such Interests and Partnership Interests. If at any time any Interests or Partnership Interests shall be represented by one or more certificates or by any documents that are instruments (as defined in the Uniform Commercial Code), then the appropriate Debtor shall promptly deliver the same to the Administrative Agent accompanied by duly executed transfer powers endorsed in blank respecting such certificates or documents, with signature properly guaranteed.
(e) Each Debtor hereby delivers to the Administrative Agent all of the promissory notes, instruments and agreements evidencing the Pledged Obligations held by such Debtor in suitable form for transfer by endorsement and delivery or accompanied by duly executed instruments of transfer or assignment in blank. If any Debtor shall become entitled to receive or shall receive any promissory notes, instruments or agreements constituting Pledged Collateral after the date hereof (including, without limitation, any certificate representing any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of the obligor on any Pledged Obligations) in respect of the Pledged Obligations, such Debtor agrees: (i) to accept the same as the agent of the Administrative Agent, (ii) to hold the same in trust on behalf of and for the benefit of the Ad-
ministrative Agent, and (iii) to deliver any and all promissory notes, instruments or agreements evidencing the same to the Administrative Agent within ten (10) days following the receipt thereof by such Debtor, in the exact form received, with the endorsement in blank of such Debtor when necessary and with an appropriate undated instrument of transfer or assignment duly executed in blank (with signature properly guaranteed), to be held by the Administrative Agent subject to the terms of this Agreement, as additional Pledged Collateral.
(f) Each delivery of such Pledged Securities or Pledged Obligations after the date hereof shall be accompanied by a schedule describing the securities and/or indebtedness theretofore and then being pledged hereunder, which schedule shall be attached hereto and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered.
in the Collateral Account in respect of any Disposition effected pursuant to
Section 9.06(g) or (h) or 9.19(A)(i)(d) of the Credit Agreement or Casualty
Events or Takings, Destructions or loss of title with respect to Real Property
shall be disbursed to the relevant Debtor in periodic installments upon
submission of reasonable evidence that such amount is to be applied as permitted
by Section 2.10(a) or 9.19 of the Credit Agreement, and any amounts deposited in
the Collateral Account in respect of prepayments or reductions of Loans or
Commitments under Section 2.10 of the Credit Agreement which are to be applied
to LIBOR Loans as provided in the penultimate sentence of Section 2.10(b) of the
Credit Agreement shall be held by the Administrative Agent until the end of the
respective Interest Periods of such LIBOR Loans at which time, whether or not an
Event of Default has occurred, the Administrative Agent shall cause such monies
to be applied to such LIBOR Loans. However, at any time following the occurrence
and during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 11.03 of the Credit
Agreement, shall) in its (or their) sole and absolute discretion apply or cause
to be applied (subject to collection) the balance from time to time outstanding
to the credit of the Collateral Account to the payment of the Secured
Obligations in the manner specified in Section 5.09 hereof. The balance from
time to time in the Collateral Account shall be subject to withdrawal only as
provided herein.
(c) If requested by Borrower and agreed to by any Lender that is an Original Lender, and subject to documentation reasonably satisfactory to the Administrative Agent and such Lender, the Administrative Agent shall designate such Lender as a collateral sub-agent for the Administrative Agent in respect of all or any portion of the Collateral Account and provide written notice to Borrower of such designation.
(a) if there shall be received by such Debtor any of the above-
described shares, securities or property required to be pledged by such
Debtor under clauses (a), (b), (c), (d) and (e) of Section 3 hereof or any
distribution of capital shall be made on or in respect of the Pledged
Interests or any Property shall be distributed upon or with respect to the
Pledged Interests pursuant to the recapitalization or reclassification of
the capital of any LLC or Partnership, or pursuant to the reorganization
thereof, forthwith either (x) transfer and deliver to the Administrative
Agent such shares, capital, Property or securities so received by such
Debtor (together with the certificates for any such shares and securities
duly endorsed in blank or accompanied by undated stock powers duly executed
in blank), all of which thereafter shall be held by the Administrative
Agent, pursuant to the terms of this Agreement, as part of the Pledged
Collateral, or (y) take such other action as the Administrative Agent shall
reasonably deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, capital or Property in said clauses
(a), (b), (c), (d) and (e) and until such time of transfer hold such
shares, securities, money, property or capital in trust for the sole
benefit of the Lenders, segregated from the other property of each Debtor;
(c) maintain the security interest created by this Agreement as a first priority perfected security interest subject only to Prior Liens and Permitted Encumbrances and except to the extent perfection is not required hereunder and defend such security interest against claims and demands of all Persons whomsoever and give, execute, deliver, file and/or record any financing statement, continuation statement, notice, instrument, document, agreement or other papers that may be necessary or desirable (in the reasonable judgment of the Administrative Agent) to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the Administrative Agent to exercise and enforce its rights hereunder with respect to such pledge and security interest (and each Debtor authorizes the Administrative Agent to file any such financing or continuation statement without the signature of each Debtor to the extent permitted by applicable law), including, without limitation, after the occurrence and during the continuance of an Event of Default, causing any or all of the Securities Collateral to be transferred of record into the name of the Administrative Agent or its nominee (and the Administrative Agent agrees that if any Securities Collateral is transferred into its name or the name of its nominee, the Administrative Agent will thereafter promptly give to the respective Debtor copies of any notices and communications received by it with respect to the Securities Collateral) and if any amount payable under or in connection with any of the Interests or Partnership Interests shall be or become evidenced by any instrument (including any promissory note) or chattel paper (in each case as defined in the Uniform Commercial Code), such instrument or chattel paper shall be immediately delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be held as Pledged Collateral pursuant to this Agreement;
(d) keep full and accurate books and records relating to the Pledged Collateral, and stamp or otherwise mark all such material books and records in such manner as the Administrative Agent may reasonably require in order to reflect the security interests granted by this Agreement;
(e) furnish to the Administrative Agent upon its request, but not more than quarterly, statements and schedules further identifying and describing the material Copyright Collateral, the material Patent Collateral and the material Trademark Collateral, respectively, and such other reports in connection with such Copyright Collateral, Patent Collateral and Trademark Collateral, as the Administrative Agent may reasonably request, all in reasonable detail;
(g) permit representatives of the Administrative Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Pledged Collateral;
(h) upon the occurrence and during the continuance of any Event of Default, permit representatives of the Administrative Agent to be present at such Debtor's place of business to receive copies of all communications and remittances relating to the Pledged Collateral, and forward copies of any notices or communications received by such Debtor with respect to the Pledged Collateral, all in such manner as the Administrative Agent may require;
(i) upon the occurrence and during the continuance of any Event of Default, upon request of the Administrative Agent, promptly notify (and such Debtor hereby authorizes the Administrative Agent so to notify) each account debtor in respect of any Accounts or Instruments that such Pledged Collateral has been assigned to the Administrative Agent for the benefit of the Lenders hereunder, and that any payments due or to become due in respect of such Pledged Collateral are to be made directly to the Administrative Agent; and
(j) to the extent permitted by law, pay, and save the Administrative Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Pledged Collateral or in connection with any of the transactions contemplated by this Agreement.
the Pledged Collateral or the Administrative Agent's rights in the Pledged Collateral. The Administrative Agent shall not be required to take steps necessary to preserve any rights against prior parties to any of the Pledged Collateral.
(1) The Debtors will cause the Pledged Stock to constitute at all times, with respect to (x) any Issuer other than a Foreign Subsidiary, all of the shares of each class of capital stock of each such Issuer then owned by any Debtor, and (y) any first tier Foreign Subsidiary, such amount of the shares of capital stock of each such Issuer as will (subject to Section 3(a) hereof) result in not less than (nor greater than) 65% of the total combined voting power of all classes of capital stock of any such Issuer.
(3) Subject to Section 5.04(a)(4) below, the Debtors shall be entitled to receive and retain any dividends or distributions on the Pledged Securities to the extent that the payment of such dividends is permitted by the Credit Agreement.
(5) The Administrative Agent, on behalf of the Lenders, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Debtor, endorsed or assigned in blank or in favor of the Administrative Agent. The applicable Debtor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Administrative Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any reasonable purpose consistent with this Agreement.
(7) So long as no Event of Default has occurred and be continuing, and to the extent not prohibited by the Credit Agreement, each Debtor shall be entitled to receive and retain principal and interest payments, if any, paid on the Pledged Obligations.
(8) Upon the occurrence and during the continuance of an Event of Default, (i) all rights of each Debtor to receive or demand, as the case may be, principal and interest payments which such Debtor is authorized to receive or demand pursuant to Section 5.04(a)(7) shall cease,
and all such rights shall thereupon become vested in the Administrative Agent,
which shall have the sole and exclusive right and authority to receive or
demand, as the case may be, and retain such principal and interest payments (and
all other payments in respect of the Pledged Obligations); in addition, all
principal and interest payments (and all other payments in respect of the
Pledged Obligations) which are received by any Debtor contrary to the provisions
of this Section 5.07(a)(8) shall be received in trust for the benefit of the
Administrative Agent, shall be segregated from other property or funds of such
Debtor and shall be forthwith delivered to the Administrative Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement), and
(ii) all rights of each Debtor to exercise any rights and powers (including the
right to receive and retain payments on the Pledged Obligations) which it would
otherwise be entitled to exercise pursuant to Section 5.04(a)(7) shall cease,
and all such rights shall thereupon become vested in the Administrative Agent,
which shall have the sole and exclusive right and authority to exercise all such
rights and powers until such Event of Default shall have been cured or waived in
accordance with the Credit Agreement, at which time all such rights shall
thereupon become revested in such Debtor and amounts not applied to Loans shall
be remitted to such Debtor. Any and all money and other Property paid over to or
received by the Administrative Agent as Pledged Collateral and retained by the
Administrative Agent pursuant to the provisions of this Section 5.04(a)(8) shall
be retained by the Administrative Agent in the Collateral Account upon receipt
of money or other property and shall be applied in accordance with the
provisions of Section 5.09 hereof. Upon the occurrence and during the
continuance of an Event of Default, each Debtor further agrees that so long as
the Pledged Obligations continue to be Pledged Collateral under this Agreement,
such Debtor will not permit any of the notes, instruments or other agreements
evidencing the Pledged Obligations to be amended, modified or changed in any
way, nor will such Obligor accept any waiver, indulgence, modification or other
departure by any obligor under such Pledged Obligations from any provision of
the Pledged Obligations, without first obtaining written consent of the
Administrative Agent.
(9) Each Debtor hereby represents and warrants that it has made its own arrangements for keeping informed of changes or potential changes affecting the Pledged Securities and the Pledged Obligations (including, without limitation, rights to convert, rights to subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights of the Pledged Securities), and each Debtor agrees that the Administrative Agent shall have no responsibility or liability for informing such Debtor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto.
(10) The Administrative Agent may, upon the occurrence and during the continuation of an Event of Default, without notice and at its option, transfer or register the Pledged Securities and the Pledged Obligations or any part thereof, into its or its nominee's name, or endorse any of the Pledged Obligations for negotiation, without any indication that such Pledged Collateral is subject to the security interest hereunder.
(1) For the purpose of enabling the Administrative Agent, during the
continuance of an Event of Default, to exercise rights and remedies under
Section 5.05 hereof at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, and for no
other purpose, each Debtor hereby grants to the Administrative Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by such Debtor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but subject to the provisions of Section 9.06 of the Credit Agreement that limit the right of the Debtors to dispose of their respective property, so long as no Event of Default shall have occurred and be continuing, the Debtors will be permitted to exploit, use, enjoy, protect, license, sublicense, assign, abandon, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of the business of the Debtors. In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing, the Administrative Agent shall from time to time, upon the request of the respective Debtor, execute and deliver any instruments, certificates or other documents, in the form so requested, that such Debtor shall have certified are appropriate (in its judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to Section 5.04(b)(1) as to any specific Intellectual Property). Further, upon the payment in full of all of the Secured Obligations (other than contingent obligations and indemnities which survive) and cancellation or termination of the Commitments and Letter of Credit Liabilities or earlier expiration of this Agreement or release of the Pledged Collateral, the Administrative Agent shall grant back to the Debtors the license granted pursuant to Section 5.04(b)(1). The exercise of rights and remedies under Section 5.05 hereof by the Administrative Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by the Debtors in accordance with the first sentence of this Section 5.04(b)(2).
(a) each Debtor shall, at the request of the Administrative Agent, assemble the Pledged Collateral owned by it at such place or places in the contiguous United States, reasonably convenient to both the Administrative Agent and such Debtor, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Pledged Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms, of any of the Pledged Collateral;
(c) the Administrative Agent shall have all of the rights and remedies with respect to the Pledged Collateral of a secured party
under the Uniform Commercial Code (whether or not the Uniform Commercial Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Pledged Collateral as if the Administrative Agent were the sole and absolute owner thereof (and each Debtor agrees to take all such action as may be appropriate to give effect to such right);
(d) the Administrative Agent in its sole and absolute discretion may, in its name or in the name of the Debtors or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Pledged Collateral, but shall be under no obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior written notice to the Debtors of the time and place, with respect to the Pledged Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Administrative Agent, the Lenders or any of their respective agents, sell, lease, assign or otherwise dispose of all or any part of such Pledged Collateral, at such place or places as the Administrative Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Administrative Agent or any Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Pledged Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Debtors, any such demand, notice and right or equity being hereby expressly waived and released. In the event of any sale, assignment, or other disposition of any of the Trademark Collateral, the goodwill connected with and symbolized by the Trademark Collateral subject to such disposition shall be included, and the Debtors shall supply to the Administrative Agent or its designee, for inclusion in such sale, assignment or other disposition, all Intellectual Property relating to such Trademark Collateral. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned, subject to notice as may be required by law. In case any sale of all or any part of the Pledged Collateral is made on credit or for future delivery, the Pledged Collateral so sold may be retained by the Administrative Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Collateral so sold and, in case of any such failure, such Pledged Collateral may be sold again upon like notice. For purposes hereof, (i) a written agreement to purchase the Pledged Collateral or any portion thereof
shall be treated as a sale thereof, (ii) the Administrative Agent shall be free to carry out such sale pursuant to such agreement, and (iii) no Debtor shall be entitled to the return of the Pledged Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Administrative Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose upon the Pledged Collateral and to sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court appointed receiver. Any sale pursuant to the provisions of this Section 5.05 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-504(3) of the Uniform Commercial Code or its equivalent in other jurisdictions. If under mandatory requirements of applicable law, the Administrative Agent shall be required to make disposition of the Pledged Collateral within a period of time that does not permit the giving of notice to the Debtors as herein before provided, the Administrative Agent need give the Debtors only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of law.
The proceeds of each collection, sale or other disposition under this Section 5.05, including by virtue of the exercise of the license granted to the Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance with Section 5.09 hereof.
The Debtors recognize that, by reason of certain prohibitions contained in the Securities Act, and applicable state securities laws, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Pledged Securities or Pledged Obligations, to limit purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Debtors acknowledge that any such private sales may be at prices and on terms less favorable to the Administrative Agent and the Debtors than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agree that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Securities or Pledged Obligations for the period of time necessary to permit the respective Issuer or issuer thereof to register it for public sale.
Anything herein to the contrary notwithstanding, in any such event the Administrative Agent, in its sole and absolute discretion, (i) may proceed to make a private sale of the Pledged Securities notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Administrative Agent shall incur no responsibility or liability to any Debtor for selling all or any part of the Pledged Securities at a price which the Administrative Agent may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until the registration as aforesaid.
Each of the Debtors further agrees to use its diligent best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Securities or Pledged Obligations pursuant to this Section 5.05 valid and binding and in compliance with any and all other applicable Requirements of Law, but none of the Debtors shall have an obligation to register or qualify such sale under any federal or state securities laws. Each of the Debtors further agrees that a breach of any of the covenants contained in this Section 5.05 will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 5.05 shall be specifically enforceable against such Debtor, and, to the extent permitted by law, such Debtor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.
proceeds of any collection, sale or other realization of all or any part of the Pledged Collateral pursuant hereto, and any other cash at the time held by the Administrative Agent under Section 4 hereof or this Section 5, shall be applied by the Administrative Agent:
(b) The receipt by the Administrative Agent, or by any Person authorized under any judicial proceedings to make such sale, of the proceeds of any such sale shall be a sufficient discharge to any purchaser of the Pledged Collateral, or of any part thereof, sold as aforesaid; and no such purchaser shall be bound to see to the application of such proceeds, or be bound to inquire as to the authorization, necessity or propriety of any such sale. In the event that, at any such sale, any Lender is the successful purchaser, it shall be entitled, for the purpose of making settlement or payment, to use and apply such Pledged Collateral to the Secured Obligations by crediting thereon the amount apportionable and applicable thereto out of the net proceeds of such sale.
6.13. [Intentionally Omitted]
(i) all damages occasioned by such taking of possession except any damages which are the direct result of the Administrative Agent's gross negligence, bad faith or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale or other requirements, with respect to the enforcement of the Administrative Agent's rights and powers hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay, marshaling of assets, extension or moratorium, existing at law or in equity, by statute or otherwise, now or hereafter in force, in order to prevent or delay the enforcement of this Agreement or the sale or other disposition of the Pledged Collateral or any portion thereof, and each Debtor, for itself and all who may claim under it, insofar as it now or hereafter lawfully may, hereby waives all such rights.
(b) Each Debtor hereby waives notice of acceptance of this Agreement and of extensions of credit under the Credit Documents or under any other agreement, note, document or instrument now or at any time or times hereafter executed by such Debtor and delivered to the Administrative Agent or any Lender. Each Debtor further waives presentment and demand for payment of any of the Secured Obligations, protest and notice of dishonor or default with respect to any of the Secured Obligations, and all other notices to which such Debtor might otherwise be entitled, except as otherwise expressly provided in this Agreement or in the other Credit Documents.
(c) Each Debtor (to the extent that it may lawfully do so) covenants that it will not at any time insist upon or plead, or in any manner claim or take the benefit or advance of, any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force that, but for this waiver, might be applicable to any sale made under any judgment, order or decree based on this Agreement or any other Credit Document; and each Debtor (to the extent that it may lawfully do so) hereby expressly waives and relinquishes all benefit and advance of any and all such laws and hereby covenants that it will not hinder, delay or impede the execution of any power in this Agreement or therein granted and delegated to the Administrative Agent, but that it will suffer and permit the execution of every such power as though no such law or laws had been made or enacted.
vent the Administrative Agent from resorting to such additional collateral or security or to the Pledged Collateral, in any order without affecting the Administrative Agent's rights hereunder.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written.
TUESDAY MORNING CORPORATION
By:____________________________________
Name:
Title:
TMI HOLDINGS, INC.
By:____________________________________
Name:
Title:
TUESDAY MORNING, INC.
By:____________________________________
Name:
Title:
FRIDAY MORNING, INC.
By:____________________________________
Name:
Title:
TMIL CORPORATION
By:____________________________________
Name:
Title:
FLEET NATIONAL BANK,
as Administrative Agent
By:____________________________________
Name:
Title:
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
|
[NAME OF DEBTOR]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
|
[NAME OF DEBTOR]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
|
[Name of Debtor]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
|
[Name of Debtor] LLC Interests --- --------- Partnership Partnership Interests ----------- ---------------------- |
ANNEX 1B TO
SECURITY AGREEMENT
------------------
|
[Name of Debtor]:
Original Final
Name of Principal Date of Maturity
Obligor Amount Note Date
------- --------- ------- --------
|
ANNEX 2 TO
SECURITY AGREEMENT
------------------
|
State Filing Office Document Filed ----- ------------- -------------- |
SCHEDULE 2 TO
SECURITY AGREEMENT
------------------
|
INITIAL TRANSACTION STATEMENT
[Date]
To: Fleet National Bank, as Administrative Agent
[Address]
Attention: [Name]
This statement is to advise you that a pledge of the following uncertificated securities has been registered in the name of [Name], as Administrative Agent, as follows:
1. Uncertificated Securities:
The entire limited liability company interests of each of [Name Debtors] in the undersigned [limited liability company] [partnership].
2. Registered Owners:
[Name]
[Address]
Taxpayer Identification Number: [ ]
[Name]
[Address]
Taxpayer Identification Number: [ ]
3. Registered Pledgee:
[Name], as Administrative Agent
Taxpayer Identification Number: [ ]
4. There are no liens or restrictions of the undersigned limited liability company and no adverse claims to which the uncertificated securities are or may be subject known to the undersigned [limited liability company] [partnership].
5. The pledge was registered on [Date].
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE TIME OF ITS ISSUANCE. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.
Very truly yours,
[ ]
By: ______________________ Title:
ACKNOWLEDGMENT AND CONSENT
[Date] [ ]
By: ________________________
Title:
|
Address for notices:
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of December 29, 1997, by and among Tuesday Morning Corporation, a Delaware corporation (the "Company"), TMI Holdings, Inc. ("TMI"), Tuesday Morning, Inc. ("Tuesday Morning"), Friday Morning, Inc. ("Friday Morning") and TMIL Corporation ("TMIL"), as guarantors and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement dated December 15, 1997 among the Company, the Subsidiary Debenture Guarantors (as defined herein), and the Initial Purchaser (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchaser of an aggregate of 250,000 units consisting of 250,000 shares of the Company's 13 1/4% Senior Exchangeable Preferred Stock, par value $0.01 per share (the "Preferred Stock"), which will be mandatorily redeemable in 2009 (the "Shares"), as set forth in the Certificate of Designation of the Company (the "Certificate of Designation"), and will be exchangeable, at the option of the Company, in whole but not in part, into 13 1/4% Subordinated Exchange Debentures due 2009 (the "Exchange Debentures") to be issued, if applicable, pursuant to an Indenture dated as of December 29, 1997 (the "Exchange Debenture Indenture") among the Company, the Subsidiary Debenture Guarantors (as defined below) and the Trustee, and 250,000 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock").
The obligations of the Company under the Exchange Debentures, when issued, and the Exchange Debenture Indenture will be guaranteed by (i) TMI, Tuesday Morning, Friday Morning, TMIL and (ii) any future domestic subsidiaries of the Company which are Restricted Subsidiaries (as defined in the Exchange Debenture) (collectively, the "Subsidiary Debenture Guarantors"), on an unsecured subordinated basis pursuant to the terms of the Exchange Debenture Indenture (the "Debenture Guarantees"). In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company and the Subsidiary Debenture Guarantors have agreed to provide to the Initial Purchaser and its direct and indirect transferees and assigns the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
of liquidated damages thereon shall be eliminated), to be offered to Holders of Shares and PIK Shares in exchange for Shares and PIK Shares pursuant to the Exchange Offer.
disposed of pursuant to such Registration Statement, (ii) such Shares and
such PIK Shares shall have been sold to the public pursuant to Rule 144 (or
any similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Shares and such PIK Shares shall have ceased to be outstanding
or (iv) such Shares and such PIK Shares have been exchanged for Exchange
Shares upon consummation of the Exchange Offer.
Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
(iii) has no arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing the Exchange Shares) to trade such Exchange Shares from and after their receipt without any limitations or restrictions under the 1933 Act and without material restrictions under the securities laws of a reasonable number of the several states of the United States, such that a sufficient trading market for the Exchange Shares is available.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 business days after the date notice thereof is mailed to the Holders (or longer if required by applicable law);
(iii) use the services of the Depositary for the Exchange Offer with respect to Shares evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Shares at any time prior to the close of business, New York City time, on the last business day on which the Exchange Offer shall remain open, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Shares delivered for exchange, and a statement that such Holder is withdrawing its election to have such Shares exchanged; and
(v) otherwise comply in all respects with all applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the Company shall:
(i) accept for exchange Registrable Shares duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Transfer Agent for cancellation all Registrable Shares so accepted for exchange by the Company; and
(iii) cause the Transfer Agent promptly to authenticate and deliver Exchange Shares to each Holder of Registrable Shares equal in amount to the Registrable Shares of such Holder so accepted for exchange.
Dividends on each Exchange Share will accumulate from the last date on which dividends were paid on the Registrable Shares surrendered in exchange therefor or, if no dividends has been paid on the Registrable Shares, from December 29, 1997. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC. Each Holder of Registrable Shares (other than Participating Broker- Dealers) who wishes to exchange such Registrable Shares for Exchange Shares in the Exchange Offer shall have represented that (i) it is not an affiliate (as defined in Rule 405 under the 1933 Act) of the Company, (ii) any Exchange Shares to be received by it were acquired in the ordinary course of business, (iii) at the time of the commencement of the Exchange Offer it has no arrangement with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Shares and (iv) it is not acting on behalf of any person who could not make the representations in clauses (i) through (iii). The Company shall inform the Initial Purchaser of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchaser shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Shares in the Exchange Offer.
(A) as promptly as practicable, file with the SEC a Shelf Registration Statement relating to the offer and sale of the then outstanding Registrable Shares by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders of such Registrable Shares and set forth in such Shelf Registration Statement, and use their best efforts to cause such Shelf Registration Statement to be declared effective by the SEC by the 150th day after the date hereof (or promptly in the event of a request by any Initial Purchaser pursuant to clause (iv) above). In the event that the Company is required to file a Shelf Registration Statement upon the request of any Holder (other than an Initial Purchaser) not eligible to participate in the Exchange Offer pursuant to clause (iii) above or upon the request of any Initial Purchaser pursuant to clause (iv) above, the Company shall file and use its best efforts to have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Shares and a Shelf Registration Statement (which may be a Registration
Statement combined with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Shares held by such Holder or such Initial Purchaser after completion of the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the Closing Time (or one year from the date the Shelf Registration Statement is declared effective if such Shelf Registration Statement is filed upon the request of any Initial Purchaser pursuant to clause (iv) above) or such shorter period which will terminate when all of the Registrable Shares covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or all of the Registrable Shares become eligible for resale pursuant to Rule 144 under the 1933 Act without volume restrictions; and
(C) notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) below, to use all reasonable efforts to cause any such amendment to
become effective and such Shelf Registration to become usable as soon as
practicable thereafter and to furnish to the Holders of Registrable Shares
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
result in any such Registration Statement not being declared effective or in the Holders of Registrable Shares covered thereby not being able to exchange or offer and sell such Registrable Shares during that period unless (A) such action is required by applicable law or (B) such action is taken by the Company in good faith and for valid business reasons (but not including avoidance of the Company's obligations hereunder), including a material corporate transaction, so long as the Company promptly complies with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Exchange Shares pursuant to a Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Exchange Shares pursuant to such Registration Statement may legally resume.
aggregate, then the dividend rate borne by the Shares will be increased by one- quarter of one percent per annum following the date that such Shelf Registration Statement ceases to be usable beyond the period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum for each subsequent 90-day period that such additional dividends continue to accumulate; provided that the aggregate increase in such annual dividend rate may in no event exceed one percent. Upon the Company declaring that the Shelf Registration Statement is usable after the dividend rate has been increased pursuant to the preceding sentence, the dividend rate borne by the Shares will be reduced to the original dividend rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in dividend rate the Shelf Registration Statement again ceases to be usable beyond the period permitted above, the dividend rate will again be increased and thereafter reduced pursuant to the foregoing conditions.
(a) prepare and file with the SEC a Registration Statement, within the time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Shares by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form required by the SEC and include or incorporate by reference all financial statements required by the SEC to be filed therewith, and use their best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective amendments to (i) the Exchange Offer Registration Statement as may be necessary under applicable law to keep such Exchange Offer Registration Statement effective for the period required to comply with Section 2(a) (except to the extent the Company is unable to consummate the Exchange Offer and the Company complies with Section 2(b), subject in all respects to Section 3(f) hereof), and (ii) the Shelf Registration Statement as may be necessary under applicable law to keep such Shelf Registration Statement effective for the
period required pursuant to Section 2(b) hereof; cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Shares, at least ten days prior to filing, that a Shelf Registration Statement with respect to the Registrable Shares is being filed and advising such Holders that the distribution of Registrable Shares will be made in accordance with the method elected by the Majority Holders; and (ii) furnish to each Holder of Registrable Shares, to counsel for the Initial Purchaser, to counsel for the Holders and to each underwriter of an underwritten offering of Registrable Shares, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits (including those incorporated by reference) in order to facilitate the public sale or other disposition of the Registrable Shares; and (iii) subject to the last paragraph of Section 3, hereby consent to the use of the Prospectus, including each preliminary Prospectus, or any amendment or supplement thereto by each of the selling Holders of Registrable Shares in connection with the offering and sale of the Registrable Shares covered by the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable Shares under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Shares covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Shares shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with the Holders in connection with any filings required to be made with the NASD, keep each such registration or qualification effective during the period such Registration Statement is required to be effective and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d) or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of Registrable Shares and counsel for such Holders promptly and, if requested by such Holder or counsel, confirm such advice in writing promptly (i) when a Registration Statement has become
effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Shares covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Shelf Registration Statement or Prospectus in order to make the statements therein not misleading and (vii) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Shares for Exchange Shares for the resale of such Exchange
Shares, (ii) furnish to each broker-dealer who desires to participate in
the Exchange Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the Exchange Offer
Registration Statement a statement that any broker-dealer who holds
Registrable Shares acquired for its own account as a result of market-
making activities or other trading activities (a "Participating Broker-
Dealer"), and who receives Exchange Shares for Registrable Shares pursuant
to the Exchange Offer, may be a statutory underwriter and must deliver a
prospectus meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Shares, (iv) subject to the last paragraph of
Section 3, hereby consent to the use of the Prospectus forming part of the
Exchange Offer Registration Statement or any amendment or supplement
thereto, by any broker-dealer in connection with the sale or transfer of
the Exchange Shares covered by the Prospectus or any amendment or
supplement thereto, and (v) include in the transmittal letter or similar
documentation to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Shares. If the undersigned is a broker- dealer that will receive Exchange Shares for its own account in exchange for Registrable Shares, it represents that the Registrable Shares to be exchanged for Exchange Shares were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Shares pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the 1933 Act;"
and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in subclause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its best efforts to cause to be delivered at the request of an entity representing the Participating Broker-Dealers (which entity shall be the Initial Purchaser, unless it elects not to act as such representative) only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last date for which exchanges are accepted pursuant to the Exchange Offer and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (C) below;
(C) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its best efforts to maintain the effectiveness of the Exchange Offer Registration Statement for a period of one year following the closing of the Exchange Offer; and
(D) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement as would otherwise be contemplated by Section 3(b), or take any other action as a result of this Section 3(f), for a period exceeding 180 days after the last date for which exchanges are accepted pursuant to the Exchange Offer (as such period may be extended by the Company) and Participating Broker- Dealers shall not be authorized by the Company to, and shall not, deliver such Prospectus after such period in connection with resales contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for the Initial Purchaser and (B) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Shares copies of any request by the SEC or any state securities authority for
amendments or supplements to a Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable and provide notice as soon as practicable to each Holder of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of Registrable Shares, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Shares to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any restrictive legends; and cause such Registrable Shares to be in such denominations (consistent with the provisions of the Certificate of Designation) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least one business day prior to the closing of any sale of Registrable Shares;
(k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Section 3(e)(vi) hereof, use their best efforts to prepare a supplement or post- effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such numbers of copies of the Prospectus, as amended or supplemented, as such Holder may reasonably request;
(l) obtain CUSIP number for all Exchange Shares, or Registrable Shares, as the case may be, not later than the effective date of a Registration Statement; and provide the Transfer Agent with printed certificates for the Exchange Shares or the Registrable Shares, as the case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Exchange Debenture Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Shares, or Registrable Shares, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Exchange Debenture Indenture as may be required for the Exchange Debenture Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use their best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Exchange Debenture Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions (including those reasonably requested by the Majority Holders) in order to expedite or facilitate the disposition of such Registrable Shares and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:
(i) make such representations and warranties to the Holders of such Registrable Shares and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in liquidation preference of the Registrable Shares being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and will use best efforts to have such letters addressed to the selling Holders of Registrable Shares, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable
Shares, which agreement shall be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section; and
(vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Shelf Registration
Statement (and, if appropriate, each post-effective amendment thereto) and
(ii) each closing under any underwriting or similar agreement as and to the
extent required thereunder. In the case of any underwritten offering, the
Company shall provide written notice to the Holders of all Registrable
Shares of such underwritten offering at least 30 days prior to the filing
of a prospectus supplement for such underwritten offering. Such notice
shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than
10 days following the date of such notice, by which such Holder must inform
the Company of its intent to participate in such underwritten offering and
(z) include the instructions such Holder must follow in order to
participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for inspection
by representatives of the Holders of the Registrable Shares and any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any counsel or accountant retained by such
Holders or underwriters, upon reasonable notice, at reasonable times and in
a reasonable manner, all relevant financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by
any such persons, and cause the respective officers, directors, employees,
and any other agents of the Company to supply all relevant information
reasonably requested by any such representative, underwriter, special
counsel or accountant in connection with such Shelf Registration Statement;
provided, however, that such Persons shall first agree in writing with the
Company and the Subsidiary Debenture Guarantors that any information that
is reasonably and in good faith designated by the Company and the
Subsidiary Debenture Guarantors as confidential at the time of delivery of
such information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the
filing of such Shelf Registration Statement or use of any Prospectus),
(iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard such information by such Person or (iv) such information becomes available to such Person from a source other than the Company and the Subsidiary Debenture Guarantors and such source is not bound by a confidentiality agreement; and provided, further, that the foregoing investigation shall be coordinated on behalf of the Holders by one representative designated by and on behalf of such Holders and any such confidential information shall be available from such representative to such Holders so long as any Holder agrees to be bound by such confidentiality agreement.
(p) (i) a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to a Prospectus, provide copies of such document to the Initial Purchaser, and make such changes in any such document prior to the filing thereof as the Initial Purchaser or its counsel may reasonably request; provided, however, that the sole basis for such changes shall be to correct a material misstatement or omission in the Exchange Offer Registration Statement; (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Shares, to the Initial Purchaser, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Shares, if any, and make such changes in any such document prior to the filing thereof as the Holders of Registrable Shares, the Initial Purchaser on behalf of such Holders, their counsel and any underwriter may reasonably request; and (iii) cause the representatives of the Company to be available for discussion of such document as shall be reasonably requested by the Holders of Registrable Shares, the Initial Purchaser on behalf of such Holders or any underwriter and shall not at any time make any filing of any such document of which such Holders, the Initial Purchaser on behalf of such Holders, their counsel or any underwriter shall not have previously been advised and furnished a copy or to which such Holders, the Initial Purchaser on behalf of such Holders, their counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use its best efforts to cause all Registrable Shares to be listed on any securities exchange on which similar securities issued by the Company are then listed if requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Shares, if any;
(r) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(s) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Shares to furnish to the Company such information regarding such Holder and the proposed distribution by such Holder of such Registrable Shares as the Company may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section 3(e)(ii)-
(vi) hereof, such Holder will forthwith discontinue disposition of Registrable
Shares pursuant to a Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 3(k)
hereof, and, if so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Shares current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Shares pursuant to a Shelf Registration Statement as a result of the happening
of any event or the discovery of any facts, each of the kind described in
Section 3(e)(vi) hereof, the Company shall be deemed to have used their best
efforts to keep the Shelf Registration Statement effective during such period of
suspension provided that the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Shelf Registration Statement and shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders
shall have received copies of the supplemented or amended Prospectus necessary
to resume such dispositions.
No Holder of Registrable Shares may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Shares on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Shares or Registrable Shares were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 5(d) below) any such settlement is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any court or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 5(a);
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser, any Holder, including Participating Broker-Dealers, expressly for use in the Registration Statement (or any amendment or supplement thereto) or the Prospectus (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement contained in or any omission from a Prospectus shall not inure to the benefit of any Initial Purchaser, Holder (in its capacity as Holder), including Participating Broker-Dealers (or any person who controls such party within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act) from whom the person asserting any such loss, liability, claim, damage or expense purchased any of the Shares that are the subject thereof, was not sent or given a copy of such Prospectus (as amended or supplemented) by such Initial Purchaser or such selling Holder (in its capacity as Holder) to the extent such Initial Purchaser or such Holder (in its capacity as Holder) was required by law to deliver such Prospectus as amended or supplemented, at or prior to the written confirmation of the sale of such Shares and the untrue statement contained in or the omission from such Prospectus was corrected in such amended or supplemented Prospectus, unless such failure resulted from noncompliance by the Company with its obligations hereunder to furnish such Initial Purchaser or such Holder (in its capacity as Holder) as the case may be, with copies of such Prospectus as amended or supplemented.
(b) In the case of a Shelf Registration, each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Initial Purchaser and the other selling Holders and each of their respective directors and officers (including each officer of the Company who signed the Registration Statement) and each Person, if any, who controls the Company, any Initial Purchaser or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Holder, as the case may be, expressly for use in the Registration Statement (or any amendment thereto), or the Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Shares pursuant to such Shelf Registration Statement.
(c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such person (the "indemnified party") shall give notice as promptly as reasonably practicable to each person against whom such indemnity may be sought (the "indemnifying party"), but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 5 for any subsequent legal or other expenses incurred
pursuant to such action, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, selected by any indemnified party in the case of
Section 5(a), representing the indemnified parties under such paragraph (a) who
are parties to such action or actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified party or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 5 hereof (whether or not the indemnified parties are actual or potential
parties thereof), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Except with respect to fees and expenses not required to be reimbursed pursuant to the assumption of the defense of an action in accordance with Section 5(c) above, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) hereof effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other hand from the offering of the
Exchange Shares or Registrable Shares included in such offering or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of such indemnifying party or
parties on the one hand, and such indemnified party or parties on the other
hand, in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party or
parties on the one hand, and such indemnified party or parties on the other hand
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or parties and such indemnified party or parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Initial Purchaser and the Holders
of the Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Initial Purchaser was treated as one entity, and the Holders were
treated as one entity, for such purpose) or by another method of allocation
which does not take account of the equitable considerations referred to above in
Section 5. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
5 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by an governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1993 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each person, if any, who controls an Initial Purchaser or Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as such Initial Purchaser or Holder, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The parties hereto agree that any
underwriting discount or commission or
reimbursement of fees paid to any Initial Purchaser pursuant to the Purchase Agreement shall not be deemed to be a benefit received by any Initial Purchaser in connection with the offering of the Exchange Securities or Registrable Securities in such offering.
to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Shares unless consented to in writing by such Holder.
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Transfer Agent, at 114 West 47th Street, New York, NY 10036-1532, Attention: Corporate Trust Administration.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
TUESDAY MORNING CORPORATION
By: ________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
TMI HOLDINGS, INC.
By: ________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
TUESDAY MORNING, INC.
By: ________________________________
Name: Mark E. Jarvis
Title: Senior Vice President, Chief
Financial Officer and Secretary
FRIDAY MORNING, INC.
By: ________________________________
Name: Jerry M. Smith
Title: President and Chief Operating Officer
TMIL CORPORATION
By: ________________________________
Name: Alan L. Oppenheimer
Title: Senior Vice President, Secretary
and Treasurer
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: __________________________________________ Name:
Title:
EXHIBIT 10.1
WHEREAS, the Subscribers desire to subscribe to purchase, and the Company desires to sell to the Subscribers, shares of the Company's Securities;
NOW, THEREFORE, in consideration of the foregoing and the representations and warranties and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1A. The Company will authorize the issuance and sale to the Subscribers of an aggregate of :
(i) 283,964 shares of the Common, for a purchase price of $1.428574 per share;
(ii) 5,204.072 shares of the Junior Redeemable Preferred, for a purchase price of $1,000.00 per share; and
(iii) 1,929.763 shares of the Junior Perpetual Preferred, for a purchase price of $1,000.00 per share.
(i) if such Subscriber will pay the Purchase Price in shares of the TMC Common, such Subscriber owns, or will own as of no later than one day prior to the date of the Closing, beneficially and of record, the shares of the TMC Common set forth next to such Subscriber's name on the Schedule of Subscribers and that such shares will be transferred at the Closing to the Company free and clear of any claims, liens, charges, equities, and encumbrances or other restrictions;
(ii) such Subscriber has had an opportunity to ask questions and receive answers concerning the terms and conditions of the Securities purchased hereunder and has had full access to such other information concerning the Company (including access to the Merger Agreement, the Tuesday Morning's offering memoranda with respect to the offering of its senior subordinated notes and units, and the other financing documents relating to the Merger) as such Subscriber may have requested and that in making its decision to invest in the Securities being purchased hereunder such Subscriber is not in any way relying on the fact that any other Person has decided to be a Subscriber hereunder or to invest in the Securities;
(iii) such Subscriber is sophisticated in financial matters and is able to evaluate the merits and risks of investment in the Securities, is able to bear the economic risk of such investment and, at the present time, is able to afford a complete loss of such investment;
(iv) (a) such Subscriber has the requisite power and authority to purchase the Securities to be purchased by such Subscriber hereunder and has authorized the purchase of such Securities and (b) if the Subscriber is not an individual, the purchase of the Securities being purchased by it hereunder does not violate its charter, by-laws or other organizational documents;
(v) this Agreement constitutes the legal, valid and binding obligation of each Subscriber, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Subscriber do not and shall not conflict with, violate or cause a breach of any agreement, contract or instrument to which Subscriber is a party or any judgment, order or decree to which such Subscriber is subject; and
(vi) such Subscriber understands that at the effective time of the Merger, the Company will be merged with and into Tuesday Morning, pursuant to which, among other things, (i) each share of the Securities to be purchased hereunder shall be converted into and become one fully paid and nonassessable share of securities of like tenor of the Surviving Corporation, (ii) the separate corporate existence of the Company shall cease, and (iii) Tuesday Morning shall continue as the Surviving Corporation.
any provision of this Agreement or under any agreement contemplated hereby or under the certificate of incorporation or the bylaws shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement, any agreement referred to herein, the certificate of incorporation, or the bylaws in accordance with their terms.
(i) Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for any Subscriber's benefit as the purchaser or holder of Securities, as the case may be, are also for the benefit of and enforceable by any subsequent holder of such Subscriber's Securities.
(ii) If a sale, transfer, assignment or other disposition of any Securities is made in accordance with the provisions of this Agreement to any Person, such Person shall, at or prior to the time such common stock is acquired, execute a counterpart of this Agreement with such modifications thereto as may be necessary to reflect such acquisition, and such other documents as are necessary to confirm such Person's agreement to become a party to, and to be bound by, all covenants, terms and conditions of this Agreement as theretofore amended.
If to the Company:
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75244
Attention: Mark E. Jarvis
Facsimile: (972) 392-1558
With a copy to:
Carter W. Emerson, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement on the day and year first above written.
TUESDAY MORNING ACQUISITION CORP.
By______________________________________
Its:______________________________________
EXHIBIT 10.2
The parties hereby agree as follows:
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement on the day and year first above written.
TUESDAY MORNING CORPORATION
By______________________________________
Its:____________________________________
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By: Madison Dearborn Partners II, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
EXHIBIT 10.3
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
(b) Executive shall report to the Board and Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its subsidiaries. Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner.
(b) In addition to the Base Salary, the Board shall award a bonus to Executive following the end of each fiscal year during the Employment Period beginning in 1998 of up to 50% of the Base Salary for such fiscal year based upon performance relative to mutually acceptable goals (both financial and qualitative) determined at the beginning of the fiscal year.
(c) The Company shall reimburse Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses.
(a) Unless renewed by the mutual agreement of the Company and
Executive, the Employment Period shall end on December 31, 2000; provided that
(i) the Employment Period shall terminate prior to such date upon Executive's
resignation, death or permanent disability or incapacity (as determined by the
Board in its good faith judgment) and (ii) the Employment Period may be
terminated by the Company at any time prior to such date for Cause (as defined
below) or without Cause.
(b) If (i) the Employment Period is terminated by the Company without Cause prior to December 31, 2000 or (ii) the Employment Period terminates due to Executive's resignation following a directive by the Company to re-locate his residence outside the Dallas, Texas area, then Executive shall be entitled to receive, if Executive has not breached and does not breach the provisions of paragraphs 5 and 6 hereof, his Base Salary at the rate then in effect through December 31, 2000 and a bonus promptly after the first anniversary of such termination equal to the bonus to which he would have been entitled (based upon performance relative to goals as described in paragraph 3(b)) for the portion of the fiscal year in which termination occurs.
(c) If the Employment Period is terminated by the Company for Cause, Executive shall be entitled to receive his Base Salary through the date of termination.
(d) If the Employment Period is terminated pursuant to clause (a)(i) above, Executive or his estate's duly authorized representative shall be entitled to receive his Base Salary
for six months following such termination and a bonus promptly after such six- month period in an amount calculated as provided in clause (b) above.
(e) All of Executive's rights to benefits, except as required by law (such as "COBRA"), and, except as otherwise provided herein, to bonuses hereunder shall cease upon termination of the Employment Period. Upon such termination, the Company may offset any amounts Executive owes it or its subsidiaries against any amounts it owes Executive hereunder.
(b) During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any subsidiary to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or any subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any subsidiary at any time during the Employment Period or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any subsidiary to cease doing business with the Company or such subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any subsidiary (including, without limitation, making any negative statements or communications about the Company or its subsidiaries).
(c) If, at the time of enforcement of this paragraph 6, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Executive agrees that the restrictions contained in this paragraph 6 are reasonable.
(d) Because Executive's services are unique and because Executive has access to Confidential Information, the parties hereto agree that money damages would not be an adequate remedy for any breach of this Agreement. In the event of the breach or a threatened breach by Executive of any of the provisions of this paragraph 6, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event of an alleged breach or violation by Executive of this paragraph 6, the Noncompete Period shall be tolled until such breach or violation has been duly cured.
(b) upon the execution and delivery of this Agreement by Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms.
Mr. Jerry M. Smith
3250 Potomac
Dallas, TX 75205
Tuesday Morning Corporation
c/o Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Attention: William J. Hunckler, III
with a copy to:
Carter W. Emerson, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered or mailed.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.
TUESDAY MORNING CORPORATION
By_____________________________________
Its____________________________________
Exhibit 10.4
In consideration of the mutual covenants and agreements set forth herein, the Parties agree as follows:
(b) During the Consulting Period, Consultant shall serve as a director of the Company and as Chairman of the Board of the Company.
(d) Notwithstanding anything in this Agreement to the contrary, (i) Consultant's services to the Company shall be limited to 60 business days per year and (ii) Consultant's travel obligations shall be limited compared to his travel obligations prior to the Closing.
(b) Consultant shall be entitled to receive fringe benefits (including health insurance) and perquisites from the Company which are comparable to those he received prior to the Closing and an automobile allowance not to exceed $10,000 per annum.
(c) The Company shall reimburse Consultant for all reasonable expenses incurred by him in the course of performing his duties under this Agreement in accordance with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses.
(d) Consultant shall receive secretarial and administrative support services from the Company which are comparable to those he received prior to the Closing.
a passive owner or not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Consultant has no active participation in the business of such corporation.
(b) During the Noncompete Period, Consultant shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any subsidiary to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or any subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any subsidiary at any time during the Consulting Period or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any subsidiary to cease doing business with the Company or such subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any subsidiary (including, without limitation, making any negative statements or communications about the Company or its subsidiaries).
(c) If, at the time of enforcement of this paragraph 4, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Consultant agrees that the restrictions contained in this paragraph 4 are reasonable.
(d) Because Consultant's services are unique and because Consultant has access to Confidential Information, the parties hereto agree that money damages would not be an adequate remedy for any breach of this Agreement. In the event of the breach or a threatened breach by Consultant of any of the provisions of this paragraph 4, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event of an alleged breach or violation by Consultant of this paragraph 4, the Noncompete Period shall be tolled until such breach or violation has been duly cured.
in its sole discretion). The Company may assign or transfer its rights hereunder to any of its affiliates or to a successor corporation in the event of merger, consolidation or transfer or sale of all or substantially all of the assets of the Company.
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75244
Attention: President
with a copy to each of:
Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Attention: William J. Hunckler, III
and
Carter W. Emerson, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Mr. Lloyd L. Ross
Holiday House Island Road
Tondren Island, Milford Bay
Ontario, Canada POB 1EO
and
Mr. Lloyd L. Ross
c/o Kentfields
34580 Kentfields Lane
Middleburg, VA 2211
and
Mr. Lloyd L. Ross
5637 Prestwick Ln.
Dallas, TX 75252
or at such other address as such Party may designate by ten days advance written notice to the other Party.
* * * *
IN WITNESS WHEREOF, the undersigned have executed this Consulting and Employment Agreement as of the date first above written.
TUESDAY MORNING CORPORATION
By:________________________________
Its:_______________________________
EXHIBIT 10.5
The parties hereto agree as follows:
---------- ---
(b) A "Put Event" means:
---------
|
(i) any termination of Executive's employment with the Company prior to December 31, 2000 due to Executive's death, permanent disability or incapacity (as determined by the Board in its good faith judgment); or
(ii) any termination of Executive's employment with the Company prior to December 31, 2000 due to the Company's termination of Executive without Cause (as defined in the Employment Agreement, dated as of the date hereof, between the Company and Executive).
(i) the average of the closing prices of the sales of such security on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day; or
(ii) with respect to any security which is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market for the entire 21-day averaging period specified above, the fair value of such security as reasonably determined by the Board in good faith.
(g) Notwithstanding anything to the contrary in this Agreement, all repurchases by the Company pursuant to this Agreement shall be subject to any restrictions contained in the Company's Borrowing Documents and applicable law. If any such restrictions prohibit such repurchases which the Company is otherwise required to make, the time periods provided in this paragraph shall be suspended, and the Company shall make such repurchases as soon as it is permitted to do so under such restrictions.
(h) The right of Executive to require the Company to repurchase securities held by Executive and any Permitted Transferee of Executive will terminate immediately after the consummation of (i) a sale of the Company to an independent third party or group of independent third parties pursuant to which such party or parties acquire (A) all or substantially all of the capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Board (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (B) all or substantially all of the Company's assets determined on a consolidated basis (other than as a result of a sale in a public offering registered under the 1933 Act of shares of the Company's Common Stock) or (ii) a Qualified Public Offering.
(g) The share numbers referred to in this paragraph 1 shall be subject to adjustment for stock splits, stock combinations, stock dividends, recapitalizations, reorganizations and the like.
approved in writing by an authorized representative of such party. All issues concerning this agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Delaware.
* * * *
IN WITNESS WHEREOF, the parties have executed this Employment Put Agreement as of the date first written above.
TUESDAY MORNING CORPORATION
By: ________________________________
Its: ________________________________
Jerry M. Smith
EXHIBIT 10.6
The parties hereto agree as follows:
(e) Simultaneously with the Closing, Executive shall transfer or cause to be transferred all (but not less than all) of the shares of Common then held by Executive and any Permitted Transferee of Executive to the Company or MDCP, as the case may be, for no additional consideration.
(f) The right of Executive to require the Company or MDCP to repurchase securities held by Executive and any Permitted Transferee of Executive will terminate immediately after the consummation of (i) a sale of the Company to an independent third party or group of independent third parties pursuant to which such party or parties acquire (A) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Board (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (B) all or substantially all of the Company's assets determined on a consolidated basis (other than as a result of a sale in a public offering registered under the 1933 Act of shares of the Company's Common Stock) or (ii) a Qualified Public Offering.
of Delaware or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Delaware.
* * * *
IN WITNESS WHEREOF, the parties have executed this Term Put Agreement as of the date first written above.
TUESDAY MORNING CORPORATION
By: ________________________________
Its: _________________________________
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By __________________________
Its Vice President
LLOYD L. ROSS
EXHIBIT 10.7
NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, Pledgor and the Company hereby agree as follows:
* * * * *
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written.
TUESDAY MORNING CORPORATION
By:____________________________
Its:___________________________
JERRY M. SMITH
EXHIBIT 10.8
NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, Pledgor and the Company hereby agree as follows:
* * * * *
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written.
TUESDAY MORNING CORPORATION
By:___________________________
Its:___________________________
Exhibit 10.9
This plan shall be known as the Tuesday Morning Corporation 1997 Long-
Term Equity Incentive Plan (the "Plan"). The purpose of the Plan shall be to
promote the long-term growth and profitability of Tuesday Morning Corporation
(the "Company") and its Subsidiaries by (i) providing certain directors,
officers and key employees of, and certain other key individuals who perform
services for, the Company and its Subsidiaries with incentives to maximize
stockholder value and otherwise contribute to the success of the Company and
(ii) enabling the Company to attract, retain and reward the best available
persons for positions of substantial responsibility. Grants of incentive or
nonqualified stock options, stock appreciation rights ("SARs"), either alone or
in tandem with options, restricted stock, performance awards, or any combination
of the foregoing may be made under the Plan.
(i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries;
(ii conduct tending to bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute;
(iii) substantial and repeated failure to perform duties properly assigned or as reasonably directed by the Board, as determined by the Company;
(iv) gross negligence or willful misconduct with respect to the Company or any of its subsidiaries; or
(iv) breach of duty of loyalty to the Company or a Subsidiary or other act of fraud or dishonesty with respect to the Company or a Subsidiary.
(i) if any "person" or "group" as those terms are used in Sections 13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (A) which would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) by which the corporate existence of the Company is not affected and following which the Company's chief executive officer and directors retain their positions with the Company (and constitute at least a majority of the Board); or
(iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets, other than a sale to an Exempt Person.
(i) the average of the closing prices of the sales of such security on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day; or
(ii) with respect to any security which is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market for the entire 21-day averaging period specified above, the fair value of such security as reasonably determined by the Board in good faith.
or other entity entitled to elect the management thereof, or such lesser percentage as may be approved by the Committee, are owned directly or indirectly by the Company .
The Plan shall be administered by the Committee; provided that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee shall be
authorized to (i) select persons to participate in the Plan, (ii) determine the
form and substance of grants made under the Plan to each participant, and the
conditions and restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan, (iv) interpret the Plan
and grants made thereunder, (v) make any adjustments necessary or desirable in
connection with grants made under the Plan to eligible participants located
outside the United States and (vi) adopt, amend, or rescind such rules and
regulations, and make such other determinations, for carrying out the Plan as it
may deem appropriate. Decisions of the Committee on all matters relating to the
Plan shall be in the Committee's sole discretion and shall be conclusive and
binding on all parties. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal and state laws and rules and regulations promulgated
pursuant thereto. No member of the Committee and no officer of the Company
shall be liable for any action taken or omitted to be taken by such member, by
any other member of the Committee or by any officer of the Company in connection
with the performance of duties under the Plan, except for such person's own
willful misconduct or as expressly provided by statute.
The expenses of the Plan shall be borne by the Company. The Plan shall not be required to establish any special or separate fund or make any other segregation of assets to assume the payment of any award under the Plan, and rights to the payment of such awards shall be no greater than the rights of the Company's general creditors.
Subject to adjustments as provided in Section 15, an aggregate of 416,666 shares of Common Stock (the "Shares") may be issued pursuant to the Plan. Such Shares may be in whole or in part authorized and unissued, or shares which are held by the Company as treasury shares. If any grant under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited as to any Shares, such unpurchased or forfeited Shares shall thereafter be available for further grants under the Plan unless, in the case of options granted under the Plan, related SARs are exercised.
Without limiting the generality of the foregoing provisions of this
Section 4 or the generality of the provisions of Sections 3, 6 or 17 or any
other section of this Plan, the Committee may, at any time or from time to time,
and on such terms and conditions (that are consistent with and not in
contravention of the other provisions of this Plan) as the Committee may, in its
sole discretion, determine, enter into agreements (or take other actions with
respect to the options) for new options containing terms (including exercise
prices) more (or less) favorable than outstanding options.
Participation in the Plan shall be limited to those directors
(including Non-Employee Directors), officers (including non-employee officers)
and key employees of, and other key individuals performing services for, the
Company and its Subsidiaries selected by the Committee (including participants
located outside the United States). Nothing in the Plan or in any grant
thereunder shall confer any right on a participant to continue in the employ of
or the performance of services for the Company or shall interfere in any way
with the right of the Company to terminate the employment or performance of
services of a participant at any time. By accepting any award under the Plan,
each participant and each person claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or the
Committee.
Incentive Stock Options or Nonqualified Stock Options, SARs , alone or in tandem with options, restricted stock awards, performance awards, or any combination thereof, may be granted to such persons and for such number of Shares as the Committee shall determine (such individuals to whom grants are made being sometimes herein called "optionees" or "grantees," as the case may be). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such individuals are similarly situated. A grant of any type made hereunder in any one year to an eligible participant shall neither guarantee nor preclude a further grant of that or any other type to such participant in that year or subsequent years.
The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof;
provided that the Committee may grant Incentive Stock Options only to eligible
employees of the Company or its subsidiaries (as defined for this purpose in
Section 424(f) of the Code). The options granted shall take such form as the
Committee shall determine, subject to the following terms and conditions.
It is the Company's intent that Nonqualified Stock Options granted under the Plan not be classified as Incentive Stock Options, that Incentive Stock Options be consistent with and contain or be deemed to contain all provisions required under Section 422 of the Code and any successor thereto, and that any ambiguities in construction be interpreted in order to effectuate such intent. If an Incentive Stock Option granted under the Plan does not qualify as such for any reason, then to the extent of such nonqualification, the stock option represented thereby shall be regarded as a Nonqualified Stock Option duly granted under the Plan, provided that such stock option otherwise meets the Plan's requirements for Nonqualified Stock Options.
total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the exercise price may not be less that 110% of the Fair Market Value of a share of Common Stock as of the date of grant of the option, in each case unless otherwise permitted by Section 422 of the Code.
In the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (ii) above, (A) only a whole number of share(s) of Common Stock (and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock tendered in payment of the exercise price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (A) physical delivery of the certificate(s) for all such shares of Common Stock tendered in payment of the price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (B) direction to the grantee's broker to transfer, by book entry, such shares of Common Stock from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the exercise price is made by delivery of Common Stock, the difference, if any, between the aggregate exercise price payable with respect to the option being exercised and the Fair Market Value of the share(s) of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes).
In the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (iv) above, (A) only a whole number of Share(s) (and not fractional Shares) may be withheld in payment and (B) such grantee must present evidence acceptable to the Company that he or she has owned a number of shares of Common Stock at least equal to the number of Shares to be withheld in payment of the exercise price (and that such owned shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise. When payment of the exercise price is made by withholding of Shares, the difference, if any, between the aggregate exercise price payable with respect to the option being exercised and the
Fair Market Value of the Share(s) withheld in payment (plus any applicable taxes) shall be paid in cash. No grantee may authorize the withholding of Shares having a Fair Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes). Any withheld Shares shall no longer be issuable under such option.
(i) If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company and any Subsidiary due to death or Disability, (A) all of the participant's options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of one year from the date of such death or Disability, but in no event after the expiration date of the options or SARs; and (B) all of the participant's options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. Notwithstanding the foregoing, if the Disability giving rise to the termination of employment is not within the meaning of Section 422(e)(3) of the Code, Incentive Stock Options not exercised by such participant within 90 days after the date of termination of employment will cease to qualify as Incentive Stock Options and will be treated as Nonqualified Stock Options under the Plan if required to be so treated under the Code.
(ii) If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company and any Subsidiary upon the occurrence of his or her
Retirement, (A) all of the participant's options and SARs that were exercisable on the date of Retirement shall remain exercisable for, and shall otherwise terminate at the end of, a period of up to three years after the date of Retirement, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such three- year period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant's options and SARs that were not exercisable on the date of Retirement shall be forfeited immediately upon such Retirement. Notwithstanding the foregoing, Incentive Stock Options not exercised by such participant within 90 days after Retirement will cease to qualify as Incentive Stock Options and will be treated as Nonqualified Stock Options under the Plan if required to be so treated under the Code.
(iii) If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or a Subsidiary due to Cause, all of the participant's options and SARs shall be forfeited immediately upon such cessation, whether or not then exercisable.
(iv) Unless otherwise determined by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or a Subsidiary for any reason other than death, Disability, Retirement or Cause, (A) all of the participant's options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of such cessation, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 90-day period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant's options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation.
(v) If there is a Change in Control of the Company, all of the participant's options and SARs shall become fully vested and exercisable immediately prior to such Change in Control and shall remain so until the expiration date of the options and SARs.
The Committee shall have the authority to grant SARs under this Plan, either alone or to any optionee in tandem with options (either at the time of grant of the related option or thereafter by amendment to an outstanding option). SARs shall be subject to such terms and conditions as the Committee may specify.
No SAR may be exercised unless the Fair Market Value of a share of Common Stock of the Company on the date of exercise exceeds the exercise price of the SAR or, in the case of SARs granted in tandem with options, any options to which the SARs correspond. Prior to the exercise of the SAR and delivery of the cash and/or Shares represented thereby, the participant shall have no rights as a stockholder with respect to Shares covered by such outstanding SAR (including any dividend or voting rights).
SARs granted in tandem with options shall be exercisable only when, to the extent and on the conditions that any related option is exercisable. The exercise of an option shall result in an immediate forfeiture of any related SAR to the extent the option is exercised, and the exercise of an SAR shall cause an immediate forfeiture of any related option to the extent the SAR is exercised.
Upon the exercise of an SAR, the participant shall be entitled to a distribution in an amount equal to the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the exercise price of the SAR or, in the case of SARs granted in tandem with options, any option to which the SAR is related, multiplied by the number of Shares as to which the SAR is exercised. The Committee shall decide whether such distribution shall be in cash, in Shares having a Fair Market Value equal to such amount, in Other Company Securities having a Fair Market Value equal to such amount or in a combination thereof.
All SARs will be exercised automatically on the last day prior to the expiration date of the SAR or, in the case of SARs granted in tandem with options, any related option, so long as the Fair Market Value of a share of Common Stock on that date exceeds the exercise price of the SAR or any related option, as applicable. An SAR granted in tandem with options shall expire at the same time as any related option expires and shall be transferable only when, and under the same conditions as, any related option is transferable.
The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least six months except as otherwise provided in the third paragraph of this
Section 8), and the time or times at which such restrictions shall lapse with
respect to all or a specified number of Shares that are part of the grant.
The participant will be required to pay the Company the aggregate par value of any Shares of restricted stock (or such larger amount as the Board may determine to constitute capital under Section 154 of the Delaware General Corporation Law, as amended) within ten days of the date of grant, unless such Shares of restricted stock are treasury shares. Unless otherwise determined by the Committee, certificates representing Shares of restricted stock granted under the Plan will be held in escrow by the Company on the participant's behalf during any period of restriction thereon and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends and to vote, and any stock or other securities received as a distribution with respect to such participant's restricted stock shall be subject to the same restrictions as then in effect for the restricted stock.
Except as otherwise provided by the Committee, immediately prior to a Change in Control or at such time as a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries due to death, Disability or Retirement during any period of restriction, all restrictions on Shares granted to such participant shall lapse. At such time as a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or its Subsidiaries for any other reason, all Shares of restricted stock granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company.
Performance awards may be granted to participants at any time and from
time to time as determined by the Committee. The Committee shall have complete
discretion in determining the size and composition of performance awards so
granted to a participant and the appropriate period over which performance is to
be measured (a "performance cycle"). Performance awards may include (i)
specific dollar-value target awards (ii) performance units, the value of each
such unit being determined by the Committee at the time of issuance, and/or
(iii) performance Shares, the value of each such Share being equal to the Fair
Market Value of a share of Common Stock.
The value of each performance award may be fixed or it may be permitted to fluctuate based on a performance factor (e.g., return on equity) selected by the Committee.
The Committee shall establish performance goals and objectives for each performance cycle on the basis of such criteria and objectives as the Committee may select from time to time, including, without limitation, the performance of the participant, the Company, one or more of its Subsidiaries or divisions or any combination of the foregoing. During any performance cycle, the Committee shall have the authority to adjust the performance goals and objectives for such cycle for such reasons as it deems equitable.
The Committee shall determine the portion of each performance award that is earned by a participant on the basis of the Company's performance over the performance cycle in relation to the performance goals for such cycle. The earned portion of a performance award may be paid out
in Shares, cash, Other Company Securities, or any combination thereof, as the Committee may determine.
A participant must be a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries at the end of the performance cycle in order to be entitled to payment of a performance award issued in respect of such cycle.
Each employee to whom a grant is made under the Plan shall enter into a written agreement with the Company that shall contain such provisions, including without limitation vesting requirements, consistent with the provisions of the Plan, as may be approved by the Committee. Unless the Committee determines otherwise and except as otherwise provided in Sections 6, 7, 8 and 9 in connection with a Change of Control or certain occurrences of termination, no grant under this Plan may be exercised, and no restrictions relating thereto may lapse, within six months of the date such grant is made.
Unless the Committee determines otherwise, no option, SAR, performance award, or restricted stock granted under the Plan shall be transferable by a participant otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code. Unless the Committee determines otherwise, an option, SAR, or performance award may be exercised only by the optionee or grantee thereof or his guardian or legal representative; provided that Incentive Stock Options may be exercised by such guardian or legal representative only if permitted by the Code and any regulations promulgated thereunder.
If the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of Shares subject to any option, SAR, performance award or restricted stock grant is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares thereunder, no such option or SAR may be exercised in whole or in part, no such performance award may be paid out and no Shares may be issued unless such listing, registration or qualification is effected free of any conditions not acceptable to the Committee.
It is the intent of the Company that the Plan comply in all respects with Section 162(m) of the Code, that awards made hereunder comply in all respects with Rule 16b-3 under the Exchange Act, that any ambiguities or inconsistencies in construction of the Plan be interpreted to give effect to such intention and that if any provision of the Plan is found not to be in compliance with Section 162(m), such provision shall be deemed null and void to the extent required to permit the Plan to comply with Section 162(m), as the case may be.
The transfer of an employee from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another shall not be considered a termination of employment; nor shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered by the Committee as continuing intact the employment relationship.
In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustment as it deems appropriate in the number and kind of Shares or other property reserved for issuance under the Plan, in the number and kind of Shares or other property covered by grants previously made under the Plan, and in the exercise price of outstanding options and SARs. Any such adjustment shall be final, conclusive and binding for all purposes of the Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in
which a Change in Control is to occur, all of the Company's obligations regarding options, SARs performance awards, and restricted stock that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be assumed by the surviving or continuing corporation or canceled in exchange for property (including cash).
Without limitation of the foregoing, in connection with any transaction of the type specified by clause (iii) of the definition of a Change in Control in Section 2(c), the Committee may, in its discretion, (i) cancel any or all outstanding options under the Plan in consideration for payment to the holders thereof of an amount equal to the portion of the consideration that would have been payable to such holders pursuant to such transaction if their options had been fully exercised immediately prior to such transaction, less the aggregate exercise price that would have been payable therefor, or (ii) if the amount that would have been payable to the option holders pursuant to such transaction if their options had been fully exercised immediately prior thereto would be less than the aggregate exercise price that would have been payable therefor, cancel any or all such options for no consideration or payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be made in cash or, in the event that the consideration to be received in such transaction includes securities or other property, in cash and/or securities or other property in the Committee's discretion.
The Board of Directors or the Committee, without approval of the stockholders, may modify or terminate the Plan, except that no modification shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required for continued compliance with the performance-based compensation exception of Section 162(m) of the Code or any listing requirement of the principal stock exchange on which the Common Stock is then listed.
The terms of any outstanding award under the Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate (including, but not limited to, acceleration of the date of exercise of any award and/or payments thereunder or of the date of lapse of restrictions on Shares); provided that, except as otherwise provided in Section 15, no such amendment shall adversely affect in a material manner any right of a participant under the award without his or her written consent. The Committee may, in its discretion, permit holders of awards under the Plan to surrender outstanding awards in order to exercise or realize rights under other awards, or in exchange for the grant of new awards, or require holders of awards to surrender outstanding awards as a condition precedent to the grant of new awards under the Plan.
The date of commencement of the Plan shall be December 29, 1997, subject to approval by the shareholders of the Company. Unless previously terminated upon the adoption of
a resolution of the Board terminating the Plan, the Plan shall terminate at the close of business on December 29, 2007; provided that the Board may, prior to such termination, extend the term of the Plan for up to five years for the grant of awards other than Incentive Stock Options. No termination of the Plan shall materially and adversely affect any of the rights or obligations of any person, without his consent, under any grant of options or other incentives theretofore granted under the Plan.
EXHIBIT 10.10
TUESDAY MORNING CORPORATION
INCENTIVE STOCK OPTION AGREEMENT EVIDENCING
A GRANT OF AN INCENTIVE STOCK OPTION
THIS AGREEMENT (this "Agreement") is made as of the 29th day of December, 1997, between Tuesday Morning Corporation, a Delaware corporation (the "Company"), and Jerry M. Smith ("Grantee").
Cumulative Percentage of
Date option Shares Vested
---- --------------------
December 29, 1998 33 1/3%
December 29, 1999 66 2/3%
December 29, 2000 100%
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(a) Legal counsel for the Company must be satisfied at the time of exercise that the issuance of shares of Common Stock upon exercise will be in compliance with the Securities Act of 1933, as amended (the "Act"), and applicable United States federal, state, local and foreign laws;
(b) Grantee must pay at the time of exercise the full purchase price for the shares of Common Stock being acquired hereunder, by (i) paying in United States dollars by cash, (ii) tendering shares of Common Stock owned by Grantee which have a fair market value equal to the full purchase price for the shares of Common Stock being acquired, such fair market value to be determined by the Board of Directors of the Company in good faith or as may be required in order to comply with or conform to the requirements of any applicable or relevant laws or regulations, (iii) paying in such other form as the Board of Directors of the Company may determine in its sole discretion, or (iv) tendering a combination of the forms of payment provided for in Subparagraphs 4(b)(i) through 4(b)(iii) above; and
exercised and the option price per share shall be adjusted so as to reflect such change, all as determined by the Board of Directors of the Company. In the event of the proposed dissolution or liquidation of the Company, the option shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board of Directors of the Company.
acting under Paragraph 5 above), Grantee shall not be or have any of the rights or privileges of a stockholder of the Company with respect to shares of Common Stock acquirable upon exercise of the option. Except as set forth in Section 6, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued to Grantee.
of additional compensation by performance of services, Grantee shall have the same rights as other employees under general law.
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75244
Attention: Mark E. Jarvis
Facsimile: (972) 392-1558
and any notice hereunder to Grantee shall be addressed to Grantee at Grantee's last address on the records of the Company, subject to the right of either party to designate at any time hereafter in writing some other address. Any notice shall be deemed to have been duly given when delivered personally or enclosed in a properly sealed envelope, addressed as set forth above, and deposited (with first class postage prepaid) in the United States mail.
* * * * *
IN WITNESS WHEREOF, the Company and Grantee have executed this Option Agreement as of the date first above written.
TUESDAY MORNING CORPORATION
By: _____________________________
Its: Vice President
GRANTEE
Number of Shares Option Price
Subject to Option Per Share
----------------- ------------
125,000 $1.428574
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Form of Letter to be Used on Exercise of Incentive Stock Option
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75244
Attention: President
Dear Sir:
I wish to exercise the stock option granted on ____________, 199_ and evidenced by my Incentive Stock Option Agreement dated ____________, 199_ to the extent of ________ shares of the Common Stock of Tuesday Morning Corporation, at the option price of $1.428574 per share. My check in the amount of $________ in payment of the entire purchase price for these shares accompanies this letter.
Please issue a certificate for these shares in the following name:
Very truly yours,
Social Security Number
Exhibit 10.11
The Company and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) assuring continuity in the management and ownership of the Company, (ii) limiting the manner and terms by which the Executives' Stockholders Shares may be transferred, (iii) providing certain participation rights to Executives and (iv) providing certain registration rights to the Stockholders.
The parties to this hereby agree as follows:
(a) In the event of an Approved Sale, each holder of Stockholder Shares (including, without limitation, each Permitted Transferee) will consent to and raise no objections against the Approved Sale or the process pursuant to which the Approved Sale was arranged and waive any dissenter's rights and other similar rights. Such holder will take all necessary and desirable actions as directed by the Board or MDCP in connection with the consummation of any Approved Sale, including the execution and delivery of all documents and instruments as the Board or MDCP may reasonably request to effect the Approved Sale; provided, however, that no holder shall be required to incur indemnification obligations in excess of the net proceeds received by such holder.
(b) In connection with an Approved Sale, MDCP may require each holder of Stockholder Shares (including, without limitation, each Permitted Transferee) to sell, or cause to be sold, the same proportionate number of Stockholder Shares (and in the same proportion of Junior Preferred Stock and Common Stock) owned by each such holder as are proposed to be sold or transferred by MDCP for the same consideration per share and otherwise on the same terms and conditions obtained by MDCP in the Approved Sale. On the closing date of the sale of such Stockholder Shares under this paragraph 2, the consideration then due such holder of Stockholder Shares shall be paid in full to such holder against delivery of a certificate or certificates, as the case may be, representing the Stockholder Shares sold by such holder duly endorsed for transfer.
(c) Each holder of Stockholder Shares (including, without limitation, each Permitted Transferee) will bear such holder's pro rata share (based upon the number of shares sold) of the reasonable costs of any sale of Stockholder Shares pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all selling Stockholders and are not otherwise paid by the Company or the acquiring party. Costs incurred by any holder of Stockholder Shares on such holder's own behalf will not be considered costs of the transaction hereunder.
(d) The provisions of this paragraph 2 shall terminate immediately prior to the closing of any Qualified Public Offering.
prior to the closing of such Transfer. The Co-Sale Notice shall describe in reasonable detail the proposed Transfer including, without limitation, the name of, and the number (by class) of Stockholder Shares to be purchased by, the transferee, the purchase price of each Stockholder Share to be sold, the number of shares MDCP or its affiliate proposes to Transfer, any other significant terms of the proposed Transfer and the date the proposed Transfer will be consummated, it being understood that if such proposed Transfer by MDCP or its affiliates is in a Public Sale, the provisions of this paragraph 3 shall not apply. For purposes of this paragraph 3(a), a "25% MDCP Reduction" shall mean the Transfer or series of Transfers by MDCP or its affiliates of Stockholder Shares to persons other than affiliates and partners of MDCP representing 25% of the Stockholder Shares held by MDCP on the date of this Agreement. The share numbers referred to in this paragraph 3(a) shall be subject to adjustment for stock splits, stock combinations, stock dividends, recapitalizations, reorganizations and the like.
(c) MDCP or its affiliates shall use reasonable best efforts to obtain the agreement of the prospective transferee(s) to such participation of the Stockholders in any contemplated Transfer, and MDCP and its affiliates may not Transfer any of their respective Stockholder Shares to the prospective transferee(s) if the prospective transferee(s) declines to allow such participation of the Stockholders.
(d) Each Stockholder will bear its pro rata share (based upon the number of shares sold) of the reasonable costs of any sale of Stockholder Shares pursuant to a sale subject to this paragraph 3 to the extent such costs are incurred for the benefit of all selling Stockholders and are not otherwise paid by the Company or the acquiring party. Costs incurred by the Stockholders on their own behalf will not be considered costs of the transaction hereunder.
(e) The provisions of this paragraph 3 shall terminate immediately prior to the closing of any Qualified Public Offering.
(d) The closing of the purchase of the Available Shares pursuant to the Repurchase Option shall take place at the location and on the date designated by the Company in the Repurchase Notice, which date shall not be more than 90 days nor less than five days after the delivery of such notice. The Company will pay for the Available Shares to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds.
provided that in any event the Company will pay all Registration Expenses in connection with any registration initiated as an MDCP Demand Registration whether or not it is counted as one of the permitted MDCP Demand Registrations under this sentence.
(c) If a Piggyback Registration is an underwritten primary registration on behalf of the Company and the managing underwriter advises the Company that in its opinion the number of shares requested to be included in such registration exceeds the number of shares which can be sold in such offering, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of Stockholder Shares on the percentage of the outstanding Registrable Securities held by each such holder, provided that prior to the exercise of a demand registration right by the Equivalent Holders under the Common Stock Registration Rights Agreement, "Registrable Securities" and "Stockholder Shares" solely for purposes of this clause (ii) shall include shares of the Common Stock owned by the Equivalent Holders and (iii) third, the other securities requested to be included in such registration by stockholders exercising contractual piggyback registration rights (if any), pro rata among such holders on the basis of the number of shares requested to be included therein by each holder.
(d) If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities and the managing underwriter advises the Company that in its opinion the number of shares requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include in such registration the securities requested to be included therein by the holders initiating the registration and the Registrable Securities requested to be included in such registration, pro rata among the holders of such securities and such Registrable Securities based on the aggregate percentage of securities held by each such holder, provided that prior to the exercise of a demand registration right by the Equivalent Holders under the Common Stock Registration Rights Agreement, "Registrable Securities" solely for purposes of this paragraph (d) shall include shares of the Common Stock owned by the Equivalent Holders.
(f) Each Stockholder agrees not to effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten MDCP Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included (except as part of such underwritten registration) if so requested by the underwriters managing the registered public offering.
(g) The Company agrees (i) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten MDCP Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) to cause each holder of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree.
(a) Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares as defined herein after such transfer) shall be stamped or otherwise imprinted with legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 29, 1997 AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. A COPY OF SUCH STOCK HOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares in accordance with the provisions of this Agreement.
(b) Each certificate evidencing Stockholder Shares shall also bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON DECEMBER 29, 1997, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER."
No holder of Stockholder Shares may sell, transfer or dispose of any Stockholder Shares (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer.
(i) the average of the closing prices of the sales of such security on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day; or
(ii) with respect to any security which is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market for the entire 21-day averaging period specified above, the fair value of such security as reasonably determined by the Board in good faith.
Company shall not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose.
If to the Company:
Tuesday Morning Corporation
14621 Inwood Road
Dallas, TX 75244
Attention: Mark E. Jarvis
Facsimile: (972) 392-1558
With a copy to:
Carter W. Emerson, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
If to MDCP:
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza
Suite 3800
Chicago, Illinois 60602
Attention: William J. Hunckler III
Facsimile: (312) 895-1001
With a copy to:
Carter W. Emerson, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
If to Executives:
at the addresses set forth on the signature pages hereto
or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the day and year first above written.
TUESDAY MORNING CORPORATION
By ______________________________________
Its:__________________________________
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By Madison Dearborn Partners II, L.P.
Its General Partner
By Madison Dearborn Partners, Inc.
Its General Partner
By ______________________________
Benjamin D. Chereskin
Its Vice President
EXECUTIVES:
Dallas, TX 75252
Arlington, TX 76012
Coppell, TX 75019
Trophy Club, TX 76262
Lewisville, TX 75067
SCHEDULE I
SCHEDULE OF EXECUTIVES
Lloyd L. Ross
Jerry M. Smith
Mark E. Jarvis
George M. Anderson
Duane A. Huesers
Karen T. Costigan
Richard E. Nance
Alan L. Oppenheimer
William H. Kendall
Rebecca M. Gully
Stella M. Knable
Tom G. Gress
SPOUSAL SIGNATURE PAGE
I, the undersigned, being the spouse of an Executive, hereby acknowledge that I have read and understand the foregoing Stockholders Agreement, and I agree to be bound by the terms thereof, including, but not limited to, Section 1 thereof.
Signature: ______________________________
Please Print Name: ______________________
Exhibit 11.1
Tuesday Morning Corporation
Ratio of Earnings to Fixed Charges
Pro Forma Pro forma
Twelve Months Nine Months
9 months Ended Ended
Year Ended December 31 September 30 December 31 September 30
------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
Earnings 10,215 (2,572) 4,016 7,264 18,508 712 8,585 (4,175) (8,279)
-------------------------------------------------------------------------------------------------
Interest on debt 771 1,689 2,289 3,063 2,589 2,014 2,261 23,590 18,862
Interest on capitalized leases 169 267 178 133 69 178 69
Interest on operating leases 2,803 3,564 3,927 4,192 4,656 3,418 3,984 4,656 3,984
-------------------------------------------------------------------------------------------------
Total 3,574 5,253 6,385 7,522 7,423 5,565 6,314 28,424 22,915
-------------------------------------------------------------------------------------------------
Total available gross income 13,789 2,681 10,401 14,786 25,931 6,277 14,899 24,249 14,636
=================================================================================================
-------------------------------------------------------------------------------------------------
Ratio 3.9 0.5 1.6 2.0 3.5 1.1 2.4 0.9 0.6
-------------------------------------------------------------------------------------------------
|
Exhibit 11.2
TUESDAY MORNING CORPORATION
RATIOS OF EARNINGS COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS
Pro Forma Pro Forma
Twelve Months Twelve Months
9 months Ended Ended
Year Ended December 31 September 30 December 31 September 30
---------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
Earnings before taxes 10,215 (2,572) 4,016 7,264 18,508 712 8,585 (4,175) (8,279)
Preferred dividend - - - - - - - (11,033) (8,275)
----------------------------------------------------------------------------------------------------
Total 10,215 (2,572) 4,016 7,264 18,508 712 8,585 (15,208) (16,554)
----------------------------------------------------------------------------------------------------
Interest on debt 771 1,689 2,289 3,063 2,589 2,014 2,261 23,590 18,862
Interest on capitalized leases 169 267 178 133 69 178 69
Interest on operating leases 2,803 3,564 3,927 4,192 4,656 3,418 3,984 4,656 3,984
Preferred dividend - - - - - - - 11,033 8,275
----------------------------------------------------------------------------------------------------
Total fixed charges 3,574 5,253 6,385 7,522 7,423 5,565 6,314 39,457 31,190
----------------------------------------------------------------------------------------------------
Total available income 13,789 2,681 10,401 14,786 25,931 6,277 14,899 24,249 14,636
====================================================================================================
----------------------------------------------------------------------------------------------------
Ratio 3.9 0.5 1.6 2.0 3.5 1.1 2.4 0.6 0.5
----------------------------------------------------------------------------------------------------
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Exhibit 21.1
SUBSIDIARIES OF THE COMPANY AND EACH OF THE SUBSIDIARY GUARANTORS
----------------------------------------------------------------------
Corporation Subsidiary or Subsidiares
----------- -------------------------
----------------------------------------------------------------------
Tuesday Morning Corporation TMI Holdings, Inc.
(Delaware corporation) (Delaware corporation)
Tuesday Morning, Inc.
(Texas corporation)
Friday Morning, Inc.
(Texas corporation)
TMIL Corporation
(Delaware corporation)
----------------------------------------------------------------------
TMI Holdings, Inc. Tuesday Morning, Inc.
(Delaware corporation) (Texas corporation)
Friday Morning, Inc.
(Texas corporation)
TMIL Corporation
(Delaware corporation)
----------------------------------------------------------------------
Tuesday Morning, Inc. Friday Morning, Inc.
(Texas corporation) (Texas corporation)
TMIL Corporation
(Delaware corporation)
----------------------------------------------------------------------
Friday Morning, Inc. None
(Texas corporation)
----------------------------------------------------------------------
TMIL Corporation None
(Delaware corporation)
----------------------------------------------------------------------
|
Exhibit 23.1
[Letterhead of KPMG Peat Marwick LLP]
The Board of Directors
Tuesday Morning Corporation:
We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
February 6, 1998
|
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
| ARTICLE CT |
| This schedule contains summary financial information extracted from the Consolidated Balance Sheet and related consolidated statement of income of Tuesday Morning Corporation and subsidiaries as of September 30, 1997 and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JAN 01 1997 |
| PERIOD END | SEP 30 1997 |
| TOTAL ASSETS | 199,215 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 123 |
| OTHER SE | 81,090 |
| TOTAL LIABILITY AND EQUITY | 199,215 |
| TOTAL REVENUES | 179,058 |
| INCOME TAX | 3,219 |
| INCOME CONTINUING | 5,366 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 5,366 |
| EPS PRIMARY | .43 |
| EPS DILUTED | .43 |