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TOWN & COUNTRY CORPORATION
as Issuer,
STATE STREET BANK AND TRUST COMPANY
as Trustee
and
Certain Guarantor Parties Hereto
* * * *
INDENTURE
Dated as of September 15, 1997
$13,254,000 15% Senior Secured Notes Due February 15, 1998
* * * *
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TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE......................................................1
Section 1.1. Definitions...................................................................1
Section 1.2. Rules of Construction........................................................18
ARTICLE 2. THE SECURITIES.................................................................................19
Section 2.1. Form and Dating..............................................................19
Section 2.2. Denominations................................................................19
Section 2.3. Execution and Authentication.................................................19
Section 2.4. Registrar and Paying Agent...................................................20
Section 2.5. Paying Agent To Hold Money in Trust..........................................21
Section 2.6. Securityholder Lists.........................................................21
Section 2.7. Transfer and Exchange........................................................21
Section 2.8. Replacement Securities.......................................................22
Section 2.9. Outstanding Securities.......................................................22
Section 2.10. When Treasury Securities Disregarded.........................................23
Section 2.11. Temporary Securities.........................................................23
Section 2.12. Cancellation.................................................................23
Section 2.13. Defaulted Interest...........................................................23
Section 2.14. Home Office Payment Agreements...............................................24
ARTICLE 3. REDEMPTION.....................................................................................24
Section 3.1. Conditional Redemption.......................................................24
Section 3.2. Mandatory Redemption.........................................................24
Section 3.3. Notices to Trustee...........................................................26
Section 3.4. Selection of Securities To Be Redeemed.......................................26
Section 3.5. Notice of Redemption.........................................................26
Section 3.6. Effect of Notice of Redemption...............................................27
Section 3.7. Deposit of Redemption Price..................................................28
Section 3.8. Securities Redeemed in Part..................................................28
ARTICLE 4. COVENANTS......................................................................................28
Section 4.1. Payment of Securities........................................................28
Section 4.2. SEC Reports; Financial Statements............................................28
Section 4.3. Ranking......................................................................29
Section 4.4. Compliance Certificates......................................................29
Section 4.5. Maintenance of Consolidated Net Worth; Special Mandatory
Redemption Obligation......................................................31
Section 4.6. Limitation on Indebtedness and Disqualified Stock of
the Company................................................................34
(i)
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Section 4.7. Limitation on Liens..........................................................36
Section 4.8. Limitation on Sale and Leaseback.............................................38
Section 4.9. Limitation on Investments, Loans and Advances................................40
Section 4.10. Limitation on Restricted Payments............................................41
Section 4.11. Limitation on Sales of Assets and Subsidiary Stock...........................42
Section 4.12. Limitation on Transactions with Affiliates...................................45
Section 4.13. Change of Control............................................................45
Section 4.14. Ownership of Stock of Subsidiaries...........................................47
Section 4.15. Impairment of Security Interest; Removal of Liens............................47
Section 4.16. Limitation on Restrictions on Distributions from Subsidiaries................48
Section 4.17. Limitation on Business.......................................................49
Section 4.18. Special Covenants of the Guarantors; Guarantees..............................49
Section 4.19. Limitation of Plans of liquidation...........................................49
Section 4.20. Limitation on Amendment of Certain Agreements................................49
Section 4.21. Redemption of Solomon Brothers Investment....................................50
Section 4.22. Agreements Relating to Collateral............................................50
Section 4.23. Notices......................................................................50
Section 4.24. Corporate Existence; Maintenance of Properties...............................51
Section 4.25. Insurance....................................................................52
Section 4.26. Taxes........................................................................52
Section 4.27. Inspection of Properties and Books...........................................52
Section 4.28. Compliance with Laws, Contracts, Licenses, and Permits.......................52
Section 4.29. Employee Benefit Plans.......................................................53
Section 4.30. Use of Proceeds..............................................................53
Section 4.31. After Acquired Real Estate...................................................53
Section 4.32. Consignment Filings..........................................................54
Section 4.33. Change of Name...............................................................54
Section 4.34. Accrual of Interest for Income Tax Purposes..................................54
Section 4.35. Further Instruments and Acts.................................................54
ARTICLE 5. SUCCESSOR COMPANY..............................................................................54
Section 5.1. When Company or Guarantors May Merge or Transfer Assets......................54
ARTICLE 6. DEFAULTS AND REMEDIES..........................................................................55
Section 6.1. Events of Default............................................................56
Section 6.2. Acceleration.................................................................58
Section 6.3. Other Remedies...............................................................59
Section 6.4. Waiver of Past Defaults......................................................59
Section 6.5. Control by Majority..........................................................59
Section 6.6. Limitation on Suits..........................................................59
(ii)
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Section 6.7. Rights of Holders to Receive Payment.........................................60
Section 6.8. Collection Suits by Trustee..................................................60
Section 6.9. Trustee May File Proofs of Claim.............................................60
Section 6.10. Priorities...................................................................61
Section 6.11. Undertaking for Costs........................................................61
Section 6.12. Waiver of Stay or Extension Laws.............................................61
ARTICLE 7. TRUSTEE........................................................................................61
Section 7.1. Duties of Trustee............................................................61
Section 7.2. Rights of Trustee............................................................63
Section 7.3. Individual Rights of Trustee.................................................64
Section 7.4. Trustee's Disclaimer.........................................................64
Section 7.5. Notice of Defaults...........................................................64
Section 7.6. Reports by Trustee to Holders................................................64
Section 7.7. Compensation and Indemnity...................................................64
Section 7.8. Replacement of Trustee.......................................................65
Section 7.9. Successor Trustee by Merger..................................................66
Section 7.10. Eligibility; Disqualification................................................66
Section 7.11. Preferential Collection of Claims Against Company............................66
ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE.............................................................67
Section 8.1. Discharge of Liability on Securities; Defeasance.............................67
Section 8.2. Conditions to Defeasance.....................................................67
Section 8.3. Application of Trust Money...................................................68
Section 8.4. Repayment to Company.........................................................68
Section 8.5. Indemnity for Trust Costs....................................................69
Section 8.6. Reinstatement................................................................69
ARTICLE 9. AMENDMENTS.....................................................................................69
Section 9.1. Without Consent of Holders...................................................69
Section 9.2. With Consent of Holders......................................................70
Section 9.3. Revocation and Effect of Consents and Waivers................................70
Section 9.4. Notation on or Exchange of Securities........................................71
Section 9.5. Trustee to Sign Amendments...................................................71
Section 9.6. Payment for Consent..........................................................71
Section 9.7. Execution of Supplemental Indentures.........................................72
Section 9.8. Effect of Supplemental Indentures............................................72
ARTICLE 10. GUARANTEE......................................................................................72
Section 10.1. Guarantee....................................................................72
(iii)
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Section 10.2. Successors and Assigns.......................................................74
Section 10.3. No Waiver, Etc...............................................................74
Section 10.4. Modifications, Etc...........................................................74
Section 10.5. Execution and Delivery of Guaranty...........................................74
ARTICLE 11. SECURITY DOCUMENTS.............................................................................75
Section 11.1. Security Documents...........................................................75
Section 11.2. Recording, Etc...............................................................75
Section 11.3. Suits to Protect the Collateral..............................................76
Section 11.4. Certain Matters Regarding Pledge of Essex Shares.............................77
Section 11.5. Certain Matters Regarding Pledge of Anju Shares..............................77
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................77
Section 12.1. Organization; Good Standing; Etc.............................................77
Section 12.2. Capitalization; Capital Stock of Subsidiaries................................78
Section 12.3. SEC Documents................................................................78
Section 12.4. Accountants..................................................................78
Section 12.5. Financial Statements.........................................................78
Section 12.6. Due Authorization; Enforceability............................................79
Section 12.7. No Changes...................................................................79
Section 12.8. Litigation...................................................................79
Section 12.9. No Conflicts.................................................................80
Section 12.10. Properties...................................................................80
Section 12.11. No Consents..................................................................80
Section 12.12. ERISA........................................................................80
Section 12.13. Taxes........................................................................82
Section 12.14. Security Documents...........................................................82
Section 12.15. Investment Company Act.......................................................82
Section 12.16. Certain Fees.................................................................82
ARTICLE 13. MISCELLANEOUS..................................................................................82
Section 13.1. Notices......................................................................82
Section 13.2. Certificate and Opinion as to Conditions Precedent...........................84
Section 13.3. Statement Required in Officer's Certificate or Opinion of Counsel............84
Section 13.4. When Securities Disregarded..................................................85
Section 13.5. Rules by Trustee, Paying Agent and Registrar.................................85
Section 13.6. Legal Holidays...............................................................85
Section 13.7. Governing Law................................................................85
Section 13.8. No Recourse Against Others...................................................85
Section 13.9. Successors...................................................................85
(iv)
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Section 13.10. Multiple Originals...........................................................86
Section 13.11. Table of Contents; Headings..................................................86
Exhibit A Form of Security
Exhibit B Description of Certain Collateral
(v)
INDENTURE dated as of September 15, 1997, by and among TOWN & COUNTRY
CORPORATION, a Massachusetts corporation, State Street Bank and Trust Company, a
Massachusetts banking corporation, as trustee, and the Guarantors (as
hereinafter defined) listed on the signature pages hereof. The definitions of
certain terms used herein appear in Section 1.1 hereof.
WHEREAS, the Company has duly authorized the issuance of its 15% Senior
Secured Notes due February 15, 1998 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;
WHEREAS, each Guarantor has duly authorized its guarantee of the
Company's obligations under the Securities, and to provide therefor, has duly
authorized the execution and delivery of this Indenture;
WHEREAS, all necessary actions have been taken to make the Securities,
when executed and duly issued by the Company and authenticated by the Trustee
and delivered hereunder, the valid obligations of the Company and each Guarantor
and to make this indenture a valid agreement of the Company and each Guarantor,
in accordance with its terms;
WHEREAS, the Company has previously issued $30,000,000 of 11-1/2%
Senior Secured Notes due September 15, 1997 of the Company issued under an
Indenture dated May 14, 1993 with Shawmut Bank, N.A., as Trustee (the "Old
Notes"), $57,000,000 of 13% Senior Subordinated Notes due May 31, 1998 (the
"Senior Subordinated Notes"), $39,400,000 of Exchangeable Preferred and up to
10,650,000 shares of Class A Common Stock of the Company, all pursuant to
certain exchange offers (the "Exchange Offers") described in the prospectus (the
"Prospectus") constituting part of the Registration Statement of the Company and
the Borrowing Subsidiaries on Form S-4 under the Securities Act (Reg. No.
33-49028), as amended (the "Registration Statement"); and
WHEREAS, $13,254,000 principal amount of Old Notes remain outstanding
and mature on September 15, 1997 and the proceeds received by the Company from
the issuance and sale of the Securities hereunder shall be used to refund and
refinance all such outstanding Old Notes.
NOW, THEREFORE, each party hereto agrees, for the benefit of the other
parties and for the equal and ratable benefit of holders of the Securities, as
follows:
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions
"Additional Mortgages" has the meaning set forth in Section 4.31.
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such person. For the
purposes of this definition, "control' when used with respect to any person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, for the purposes of
this definition, in no event shall the Holders or any of their Affiliates be
deemed an Affiliate of the Company or of any of the Subsidiaries.
"Affiliate Transaction" has the meaning set forth in Section 4.12.
"Annual Redemption Date" means May 14 of each year.
"Asset Disposition" means any direct or indirect sale, conveyance,
transfer, lease or other disposition to any person other than the Company or a
Subsidiary in one transaction or a series of related transactions, of any
Capital Stock or other interests (including partnership interests) of any
Subsidiary (other than directors' qualifying shares) or any other property or
asset of the Company or any Subsidiary (each referred to for purposes of this
definition as a "disposition"), including any disposition by means of a merger,
consolidation or similar transaction. For the purposes of this Indenture, the
term "Asset Disposition" shall not include (i) the use of cash in the ordinary
course of business, (ii) dispositions of inventory in the ordinary course of
business, (iii) licenses by the Company or a Subsidiary of intellectual property
in the ordinary course of business, (iv) isolated dispositions of Capital Stock
or other interests (including partnership interests) or any other Property or
asset of the Company or any Subsidiary which do not exceed $175,000
individually, (v) sales of assets determined by management of the Company (or if
such assets then have a GAAP book value in excess of $250,000, determined by the
Board of Directors) to be worn-out or obsolete, (vi) any disposition of
properties and assets of the Company or any Subsidiary that is governed under
and complies with the requirements set forth in Section 5.1, (vii) the delivery
of Exchange Property upon an exchange of any shares of the Exchangeable
Preferred, (viii) dispositions of the Solomon Brothers Investment or
dispositions of proceeds from or related to the Solomon Brothers Investment or
Zale Bankruptcy Claim, (ix) dispositions of the Capital Stock or assets of any
Foreign Subsidiary or the disposition of proceeds from or related to the sale of
the Capital Stock or assets of any Foreign Subsidiary or (x) the sale of
Non-cash Collateral Proceeds pursuant to Section 3.2(b).
"Asset Sale Offer" has the meaning set forth in Section 4.11.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the greater of (i) the Fair Market Value of the
property subject to such Sale/Leaseback Transaction (as determined in good faith
by the Board of Directors) or (ii) the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
2
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law relief for debtors.
"Board of Directors" means the Board of Directors of the Company or any
Subsidiary, as the case may be.
"Board Resolution" means a copy of a resolution certified by the Clerk,
the Secretary, an Assistant Clerk or an Assistant Secretary of the Company or
any Subsidiary, as the case may be, to have been duly adopted by such Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Borrowing Subsidiaries" means Town & Country Fine Jewelry Group, Inc.,
a Massachusetts corporation, L.G. Balfour Company, Inc., a Delaware corporation,
and GL, Inc., a Massachusetts corporation, all of which are Subsidiaries.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment, of a
penalty.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, Participation or other equivalents of or interests
in (however designated and whether voting or nonvoting) corporate stock,
including any Preferred Stock.
"Cash Equivalents" means (i) any U.S. Government Obligations with a
maturity of 180 days or less; (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the United States Federal Reserve System having combined capital and surplus and
undivided profits of not less than $500,000,000; (iii) commercial paper with a
maturity of 180 days or less issued by a corporation (except the Company, any
Subsidiary or any Affiliate of the Company or any Subsidiary), bank, trust
company or national banking association organized under the laws of any state of
the United States or the District of Columbia and rated at least A- I by
Standard & Poor's Corporation or at least P-I by Moody's Investors Service,
Inc. (or if neither such organization shall rate such commercial paper at any
time, by any nationally recognized rating organization in the United States);
and (iv) repurchase' agreements and reverse repurchase agreements relating to
marketable U.S. Government Obligations, in each case maturing within one year
from the date of acquisition; provided however, that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency.
3
"Certificate of Designation" means the Certificate of Vote of Directors
Establishing Series of Exchangeable Preferred Stock of the Company pursuant to
Section 26 of Chapter 156B of the General Laws of The Commonwealth of
Massachusetts which vote creates and sets forth the terms, rights and
preferences of the Exchangeable Preferred.
"Change of Control" means the occurrence of any of the following
events:
(i) the sale or transfer of all or substantially all of the
assets of the Company as an entirety to any person or related group of
persons other than an Affiliate or Affiliates of the Company;
(ii) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than (A) C.
William Carey; (B) any relative or spouse of C. William Carey, or any
relative of such spouse, who has the same principal residence as C.
William Carey; or (C) any trust or other estate in which (x) C. William
Carey or (y) any relative or spouse of C. William Carey, or any
relative of such spouse, who has the same principal residence as C.
William Carey, has a substantial beneficial interest or as to which he
or she, as the case may be, serves as trustee or in a similar fiduciary
capacity, is or becomes the beneficial owner (as defined in Rules 13d-
3 and 13d-5 under the Exchange Act), directly or indirectly, of 50% or
more of the Voting Stock of the Company;
(iii) the Company engages in any merger, consolidation, sale
of Capital Stock, or any other transaction with any other person, with
the effect that the stockholders of the Company immediately prior
thereto own, directly or indirectly, in the aggregate, less than 50% of
the Voting Stock of (x) the Company if the Company is the surviving
entity or (y) the surviving or resulting entity if the Company is not
the surviving entity, in each such case immediately after such
transaction; or
(iv) the Company or any Significant Subsidiary is liquidated,
dissolved, or adopts a plan of liquidation pursuant to any Bankruptcy
Law.
"Claimants" has the meaning set forth in the Intercreditor Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, all the property and assets that are
from time to time subject to the Security Documents.
"Collateral Agent" has the meaning ascribed to such term in the
Intercreditor Agreement.
"Collateral Proceeds" means any cash proceeds (including current income
or disposition proceeds), other than Liquidation Proceeds, from or relating to
the Solomon Brothers Investment,
4
the sale of the Capital Stock or any assets of any Foreign Subsidiary or the
Zale Bankruptcy Claim received by the Company or any Subsidiary, plus all
Minimum Liquidation Proceeds plus any Collateral Proceeds Interest, in each case
net of all taxes and charges paid or required to be accrued as a liability under
GAAP in respect of the realization of such proceeds and net of all reasonable
and customary expenses paid to persons who are not Affiliates of the Company,
the Subsidiaries or any of their respective Affiliates to the extent reasonably
required to realize such proceeds.
"Collateral Proceeds Calculation Period" means, with respect to each
Collateral Redemption Date, the period beginning on the date 30 days prior to
the last Collateral Redemption Date on which a redemption pursuant to Section
3.2 was actually made (or, if no redemptions pursuant to Section 3.2 have been
made, the date of issuance of the Securities) and ending on the date 30 days
prior to such Collateral Redemption Date.
"Collateral Proceeds Interest" means any interest earned on Collateral
Proceeds which have been invested in Permitted Investments prior to being used
to make redemptions pursuant to Section 3.2.
"Collateral Redemption Date" means any Interest Payment Date if on such
date the Company holds unapplied Collateral Proceeds which are required to be
applied by the Company to the mandatory redemption of Securities pursuant to
Section 3.2 hereof.
"Company" means Town & Country Corporation, a Massachusetts
corporation, until a successor replaces it in accordance with the terms hereof
and, thereafter, means the successor and, for purposes of any provision
contained herein, each other obligor on the Securities.
"Consolidated" or "consolidated", with reference to any term defined
herein, shall mean that term as applied to the accounts of the Company and the
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated EBIT" means, with respect to any period, the Consolidated
Net Income for such period increased (to the extent already deducted therefrom)
by the sum, on a consolidated basis, of (i) all income taxes paid or accrued by
the Company and the Subsidiaries for such period, and (ii) all Consolidated
Fixed Charges for such period, in each case determined in accordance with GAAP.
"Consolidated Fixed Charge Ratio" to be determined on any date means
the ratio of (i) Consolidated EBIT for the Reference Period to (ii) Consolidated
Fixed Charges for the Reference Period.
"Consolidated Fixed Charges" means the sum of (a) the aggregate amount
of interest (other than interest on the Senior Subordinated Notes which is to be
paid in additional Senior Subordinated Notes) required to be paid on
Indebtedness (other than Indebtedness incurred for the
5
acquisition from the New Gold Lenders of gold or other precious metals pursuant
to the New Gold Agreements) of the Company and the Subsidiaries, plus (b) the
imputed portion of rental expense representing the interest factor of lease
payments of the Company and the Subsidiaries, plus (c) the aggregate amount of
distributions required to be paid under the terms of any Disqualified Stock or
Preferred Stock of the Company, including the Exchangeable Preferred that may
not be deferred at the option of the Company, plus (d) the net interest expense
and consignment fees associated with the New Gold Agreements, plus (e) the net
interest expense and consignment fees associated with the consignment of foreign
Subsidiaries of gold and other precious metals and precious or semi-precious
stones.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and the Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period; provided, however, that there shall not be
included in such Consolidated Net Income:
(i) any net income (loss) of any person if such person is not
a Subsidiary, except that the Company's equity in the net income of any
such person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
person during such period to the Company or a Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution to a Subsidiary, to the limitations contained in clause
(ii) of this definition);
(ii) any net income (loss) of any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions, loans or advances
by such Subsidiary, directly or indirectly, to the Company (or on the
ability of the Company to receive or retain any such dividend,
distribution, loan or advance), except that the Company's equity in the
net income of any such Subsidiary during such period shall be included
in Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during any such period to the Company or
another Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution to another Subsidiary, to the
limitation contained in this clause and in clause (v) of definition);
(iii) any net income (loss) realized upon a sale or other
disposition of any property, plant or equipment of the Company or any
Subsidiary which is not sold or otherwise disposed of in the ordinary
course of business;
(iv) any gain or loss realized upon the sale or other
disposition of any Capital Stock of a Subsidiary; and
(v) the cumulative effect of a change in accounting
principles.
"Consolidated Net Worth" means the sum, on a consolidated basis, of the
shareholders' equity of the Company and the Subsidiaries, determined in
accordance with GAAP, after
6
eliminating intercompany items, less all amounts representing any write-up in
the book value of any assets of the Company and the Subsidiaries resulting from
a re-evaluation thereof subsequent to February 29, 1992 excluding (i)
adjustments to translate foreign assets and liabilities for changes in foreign
exchange rates, and (ii) adjustments in the value of marketable securities based
upon the actual market value thereof.
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest Rate" means an interest rate equal to 17% per
annum.
"defeasance option" has the meaning set forth in Section 8.1(b).
"Disqualified Stock" means, with respect to any person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities.
"Environmental Law" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances and similar provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
terms and conditions of any environmental permit issued to the Company by any
governmental authority, all contractual obligations and common law concerning
public health or safety, worker health or safety or pollution or protection of
the environment, now or hereafter in effect and as amended, including without
limitation those relating to any emissions, discharges or releases of hazardous
materials to ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, control, clean-up or handling of Hazardous Materials.
"ERISA Event" means (A) a Reportable Event with respect to a Pension
Plan; (B) a withdrawal by the Company or any Subsidiary from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001 (a) (2) of ERISA); (C) a
complete or partial withdrawal by the Company or any Subsidiary from a
Multiemployer Plan; (D) the filing of a notice of intent to terminate, the
treatment of a plan amendment as a termination under Section 4041 of ERISA or
the commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan subject to Title IV of ERISA; (E) a failure timely to make
required contributions to a Pension Plan or Multiemployer Plan; (F) an event or
condition which could constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer
7
Plan; (G) the imposition of any liability under Title IV of ERISA other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any Subsidiary; (H) an application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code with
respect to any Pension Plan; (1) the Company or any Subsidiary engages in or
otherwise becomes liable for a non-exempt prohibitive transaction; or (J) a
violation of the applicable requirements of Section 404 or 405 of ERISA or the
exclusive benefit rule under Section 401 (a) of the Code by any fiduciary With
respect to any Pension Plan for which the Company or any Subsidiary is liable.
"ERISA" means the Employee Retirement Income and Security Act of 1974,
as amended.
"Essex" means Essex International Company Limited, a Thailand
corporation and a Subsidiary.
"Essex Pledge Agreement" has the meaning set forth in Section 11.4.
"Event of Default" has the meaning set forth in Section 6.1.
"Excess Cash Flow" means, for any fiscal year of the Company, an amount
equal to Consolidated Net Income for such fiscal year, increased by the sum (on
a consolidated basis and without duplication) of the following: (a) to the
extent deducted as an expense in determining Consolidated Net Income,
consolidated total depreciation and amortization expense related to assets and
liabilities of the Company and the Subsidiaries, plus (b) minority interest
expense, plus (c) any decrease in Working Capital for such fiscal year, plus (d)
any decrease in assets classified as "other" on the consolidated balance sheet
of the Company for such fiscal year, plus (e) the increase, if any, of the
outstanding principal balance under the New Credit Agreement from the last day
of the immediately preceding fiscal year to the last day of the then ended
fiscal year, plus (f) any increases in long term Indebtedness, long term
deferred taxes, and liabilities classified as "other" on the consolidated
balance sheet of the Company for such fiscal year, plus (g) to the extent
deducted as an expense in determining Consolidated Net Income, the non-cash
portion of interest and dividend expense, plus (h) any Collateral Proceeds
received by the Company and the Subsidiaries during such fiscal year not already
included in determining Consolidated Net Income, plus (i) any cash proceeds
received from the sale or other disposition of property, plant, equipment or the
capital stock of a Subsidiary, plus (j) any cash proceeds received by the
Company or the Subsidiaries from the issuance of capital stock; and decreased by
the sum (on a consolidated basis and without duplication) of the following: (1)
all cash dividends paid to the holders of Exchangeable Preferred during such
fiscal year, plus (2) all capital expenditures made during such fiscal year,
plus (3) any increase in Working Capital for such fiscal year, plus (4) any
increase in assets classified as "other" on the consolidated balance sheet of
the Company for such fiscal year, plus (5) the decrease, if any, of the
outstanding principal balance under the New Credit Agreement from the last day
of the immediately preceding fiscal year to the last day of the then ended
fiscal year, plus (6) any decreases in long term Indebtedness, long term
deferred taxes, and liabilities classified as "other" on the consolidated
balance sheet of the Company for such fiscal year, plus
8
(7) all cash dividends paid to minority shareholders of Subsidiaries during such
fiscal year, plus (8) all cash payments of principal on or redemptions of
Indebtedness (including mandatory redemptions of Securities pursuant to Section
3.2 hereof) of the Company and the Subsidiaries in respect of Funded
Indebtedness permitted under this Indenture (other than Indebtedness under the
New Credit Agreement), plus (9) to the extent included in Consolidated Net
Income, the non-cash portion of interest and dividend expense, plus (10) the
aggregate amount of Collateral Proceeds received by the Company and the
Subsidiaries not required to be applied to redeem Securities pursuant to Section
3.2 of this Indenture, plus (11) the outstanding principal balance under the New
Credit Agreement, if any, as of the last day of such fiscal year, plus (12) all
cash and cash equivalents held by any foreign Subsidiary as of the last day of
such fiscal year, plus (13) the sum of $2,000,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offers" has the meaning set forth in the recitals hereto.
"Exchange Property" has the meaning ascribed to such term in the
Certificate of Designation.
"Exchangeable Preferred" means up to 2.7 million shares of Exchangeable
Preferred Stock of the Company with a liquidation value of $14.59 per share plus
accrued and unpaid dividends, which is being issued pursuant to the Exchange
Offers.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value
shall be determined by the Board of Directors acting in good faith and shall be
evidenced by a Board Resolution delivered to the Trustee, unless, for all
purposes other than the valuation of inventory returned to the Company in
respect of the Zale Bankruptcy Claim, management of the Company or the relevant
Subsidiary, as the case may be, in good faith determines that the Fair Market
Value of the relevant asset or property is less than $750,000, in which case a
determination of the Board of Directors shall not be required.
"fiscal year" of the Company shall mean the fifty-two or fifty-three
week period, as the case may be, ending on the last Sunday in February each
year.
"Foreign Subsidiary" means, as the context requires, any one or more of
Anju Jewelry Limited, Anju Jewelry (N.A.) Limited and Essex International
Company Limited.
"Form 10-K" has the meaning set forth in Section 12.4.
9
"Funded Indebtedness" means any Indebtedness which is due and payable
in more than one year from the date of determination or which may be extended
beyond such one-year period without the consent of the party which is lending
the funds.
"GAAP" means the United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which were used by the Company
in the preparation of its audited financial statements as of and for the period
ended February 23, 1997, included in the Form 10-K.
"Guarantee" means the guarantee of the Guarantors set forth in the
Security and in Article 10 hereof.
"Guarantors" means any of the Borrowing Subsidiaries until a successor
replaces it and, thereafter, means the successor; and 'Guarantors' means all of
the Borrowing Subsidiaries until a successor replaces any of them and thereafter
shall include such successor instead of the person replaced by such successor.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, polychlorinated biphenyls, and radon gas; (b)
any chemicals, materials or substances defined as or included in the definition
of "hazardous substance," "hazardous wastes," "hazardous materials," "extremely
hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "contaminants" or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Inactive Subsidiaries" means (i) Gleamrich Jewelry (N.A.) Limited, a
Hong Kong company, (ii) TOCO Sunjay International Private Limited, an India
corporation, (iii) Dara Gold Creations, a Hong Kong company (iv) GM Jewelry
Factory, a Hong Kong company (v) Essex Jewelry Manufacturing Company Limited, a
Thailand company and (vi) Gleanuich Jewelry Limited, a Hong Kong company.
"Indebtedness" of any person means, without duplication,
(i) all obligations, unconditional or contingent, of such
person for money borrowed (whether or not recourse is to the whole of
the assets of such person or 'a
10
portion thereof or evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such person is
responsible or liable);
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property or services, all conditional sale
obligations of such person and all obligations of such person under any
title retention agreement (but excluding trade accounts payable and
obligations in respect of consignments of goods arising in the ordinary
course of business);
(iv) all obligations of such person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course of
business of such person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by
such person of a demand for reimbursement following payment on the
letter of credit);
(v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons and all dividends of other persons
for the payment of which, in either case, such person is responsible or
liable as obligor, guarantor or otherwise; and
(vi) all obligations of the type referred to in clauses (i)
through (v) above of other persons secured by any Lien on any property
or asset of such person (whether or not such obligation is assumed by
such person), the amount of such obligations being deemed to be the
lesser of the value of such property or asset or the amount of the
obligations so secured.
"Indenture" means this Indenture as amended or supplemented from time
to time in accordance with the terms hereof.
"Intercreditor Agreement" means the Collateral Agency and Intercreditor
Agreement, dated as of May 14, 1993, as amended from time to time, among the
Company, the Guarantors, the Collateral Agent, the representative of the
Securityholders (which initially shall be the Trustee), the New Bank Lenders,
the New Gold Lenders, the representative of the holders of the Old Notes and the
representative of the holders of the Senior Subordinated Notes (which initially
shall be the trustee in respect of the Senior Subordinated Notes) and the other
parties signatory thereto.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities as set forth in Exhibit A hereto.
11
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Subsidiary against
fluctuations in interest rates.
"Investments" has the meaning set forth in Section 4.9.
"issue" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Disqualified Stock of a
person existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
"Legal Holiday" has the meaning set forth in Section 13.6.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and- including but not
limited to any lien, security interest, mortgage, encumbrance, pledge, charge,
claim, hypothecation, assignment for security, deposit arrangement, conditional
sale or trust receipt, a lease, consignment or bailment for security purposes or
other security agreement of any kind or nature whatsoever. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, lease and other title exceptions and
encumbrances (including, with respect to stock, stockholder agreements, voting
trust agreements, buy-back agreements and all similar arrangements) affecting
property. For purposes of this Indenture, a person shall be deemed to own
subject to a Lien any property or asset which 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 relating to such property or
asset.
"Liquidation Proceeds" has the meaning set forth in Section 3.2(b).
"Material Adverse Effect" shall mean a material adverse effect on the
condition (financial or otherwise), assets, business, results of operations or
prospects of the Company and the Subsidiaries taken as a whole.
"Minimum Liquidation Proceeds" has the meaning set forth in Section
3.2(b).
"Minimum Net Worth" means, as of any date, an amount equal to negative
$15,000,000.
"Mortgage" means each of the mortgage instruments required to be
delivered by the Company and the Subsidiaries under the Security Documents and
securing the Securities with respect to any Real Property.
"Net Cash Proceeds" from an Asset Disposition means proceeds from such
Asset Disposition (net of all legal, title and recording tax expenses,
commissions and other fees and
12
expenses incurred and all taxes and other charges required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition) which, to the
extent provided in the Intercreditor Agreement, are to be applied to repurchase
Securities in accordance with Section 4.11 hereof.
"New Bank Lenders" means Foothill Capital Corporation, a California
corporation, until a successor replaces it and thereafter, means such successor.
"New Credit Agreement" means the Loan Agreement, dated as of July 3,
1996, among the Company, the Borrowing Subsidiaries and the New Bank Lenders, as
amended by Amendment Number One to Loan Agreement, dated as of October 31, 1996,
Amendment Number Two to Loan Agreement, dated as of May 30, 1997, and Amendment
Number Three to Loan Agreement, dated as of September 15, 1997.
"New Gold Agreements" means, the Second Amended and Restated
Consignment Agreement by and between the New Gold Lenders, on the one hand, and
the Company and the Borrowing Subsidiaries on the other hand, dated as of July
3, 1996.
"New Gold Lenders" means Fleet Precious Metals, Inc. until a successor
replaces it and thereafter means such successor.
"New Real Property" has the meaning set forth in Section 4.31.
"Non-cash Collateral Proceeds" has the meaning set forth in Section
3.2(b).
"Obligations" has the meaning set forth in Section 10.1.
"Officer" means the Chairman of the Board, the President, any Vice
President, Chief Financial officer, the Treasurer, Assistant Treasurer, the
Clerk or Secretary, as the case may be, or the Assistant Clerk or Assistant
Secretary, as the case may be, of the Company or a Subsidiary.
"Officer's Certificate" means a certificate signed by two Officers and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion in form and substance
reasonably acceptable to the Trustee from legal counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to the Company or the
Trustee.
"Outstanding Amount" has the meaning set forth in Section 4.7.
"Paying Agent" has the meaning set forth in Section 2.4.
13
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to the functions thereof.
"Pension Plans" means all "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) and all "employee welfare benefit plans" (as defined
in Section 3(l) of ERISA) of the Company and the Subsidiaries.
"Permitted Investments" means (i) U.S. Government Obligations with a
maturity of one year or less; (ii) certificates of deposit or acceptances with a
maturity of one year or less of any financial institution that is a member of
the United States Federal Reserve System having combined capital and surplus
undivided profits of not less than $500,000,000; (iii) commercial paper with a
maturity of one year or less issued by a corporation (except the Company, any
Subsidiary or any Affiliate of the Company or any Subsidiary), bank, trust
company or national banking association organized under the laws of any state of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's Corporation or at least P-1 by Moody's Investor Services,
Inc. (or if neither such organization shall rate such commercial paper at any
time, by any rationally recognized rating organization in the United States of
America); and (iv) debt of any State or political subdivision that is rated A or
better by Standard & Poor's Corporation or by Moodys Investor Services, Inc.,
and matures within one year.
"Permitted Liens" means, with respect to any person, any Lien arising
by reason of (i) any judgment, decree or order of any court, so long as such
Lien is being contested in good faith and is adequately bonded, and any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have expired;
(ii) taxes not yet due and payable; (iii) security for payment of workers'
compensation or other insurance; (iv) deposits to secure public or statutory
obligations, or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business; (v) Liens imposed by
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent and which, in the aggregate,
do not exceed $500,000; (vi) security for surety or appeal bonds which, in the
aggregate, do not exceed $1,500,000; and (vii) easements, rights-of-way, zoning
and similar covenants and restrictions and other similar encumbrances or minor
title defects which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Company or any Subsidiary.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Pledged Collateral" has the meaning set forth in Section 4.7.
14
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Public Documents" means, collectively, (i) the Company's Annual Report
on Form 10-K for its fiscal year ended February 23, 1997 filed with the SEC,
(ii) the Company's quarterly reports on Form 10-Q as filed with the SEC for all
fiscal quarters of the Company ended subsequently to February 23, 1997 and (iii)
all other documents and reports filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act since January 1, 1997, in each case as
amended, supplemented or otherwise updated by subsequent filings or releases
through the date of issuance of the Securities hereunder.
"Real Property" means all parcels of real property at any time owned or
leased (as lessee or sublessee) by the Company and the Subsidiaries.
"Record Date" means the record date set forth on the face of the
securities as set forth in Exhibit A hereto.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Securities.
"Reference Period" means, with respect to any computation of the
Consolidated Fixed Charge Ratio, the most recent four fiscal quarters ending at
least 45 days prior to the date of determination of the Consolidated Fixed
Charge Ratio.
"Refinancing Agreement" means any credit agreement or other agreement
pursuant to which the Company or any Subsidiary replaces, renews, refinances or
extends borrowings under either of the Revised Debt Agreements, any other
revolving credit arrangement or another Refinancing Agreement; provided that the
Securities are pari passu or senior in right of payment to such agreements or
arrangements.
"Registrar" has the meaning set forth in Section 2.4.
"Regulations" has the meaning set forth in Section 12.3.
"Reportable Event" means any of the events described in Section 4043(b)
of ERISA or the regulations thereunder, a withdrawal from a plan described in
Section 4063 of ERISA or a cessation operations described in Section 4062(e) of
ERISA.
15
"Restricted Investments" has the meaning set forth in Section 4.9.
"Restricted Payment" has the meaning set forth in Section 4.10.
"Revised Debt Agreements" means, collectively, the New Credit Agreement
and the New Gold Agreements.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by the Company or a Subsidiary whereby the
Company or a Subsidiary sells or transfers such property to a person and leases
it back from such person.
"SEC" means the Securities and Exchange Commission.
"Securities" means any of the Company's 15% Senior Secured Notes due
February 15, 1998 that are issued under this Indenture, as amended or
supplemented from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Documents" has the meaning ascribed to such term in the
Intercreditor Agreement.
"Senior Subordinated Notes" means the 13% Senior Subordinated Notes Due
May 31, 1998 of the Company.
"Significant Subsidiary" of any person means any Subsidiary or group of
Subsidiaries which would, individually or in the aggregate, be a "Significant
Subsidiary" as defined in Rule 1.2 of Regulation S-X under the Securities Act.
For all purposes of this Indenture, each Guarantor shall be deemed a Significant
Subsidiary.
"Solomon Brothers" means Solomon Brothers, Limited, a Bahamas
corporation.
"Solomon Brothers Investment" means the Company's investment in the
Capital Stock of Solomon Brothers.
"Special Mandatory Redemption Date" has the meaning set forth in
Section 4.5.
"Special Mandatory Redemption Offer" or "Special Offer" has the meaning
set forth in Section 4.5.
"Special Offer Date" has the meaning set forth in Section 4.5.
16
"Stated Maturity" means, with respect to any indebtedness or security,
the date specified in such security as the fixed date on which the final amount
of principal of such security is due and payable, including pursuant to any
mandatory redemption provision.
"Subagent" has the meaning ascribed to such term in the Intercreditor
Agreement.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the date of this Indenture or thereafter incurred) which
is subordinate or junior in right of payment to the Securities.
"subsidiary" means, as to any particular parent corporation, any
corporation, association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
parent corporation. "Subsidiary" means any subsidiary of (i) the Company, (ii)
the Company and one or more of its subsidiaries or (iii) one or more of the
Company's subsidiaries.
"Thailand Stock Exchange Agreement" means an agreement between the
Thailand Stock Exchange and Essex which requires certain dividends to be paid by
Essex.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as amended by the Trust Indenture Reform Act of 1990 and in effect
on the date of this Indenture.
"Trust Agreement" has the meaning set forth in Section 4.9.
"Trustee" means State Street Bank and Trust Company, a Massachusetts
banking corporation, as trustee under this Indenture, until a successor replaces
it in accordance with the terms hereof and, thereafter, means such successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Unfunded Pension Liability" means with respect to a Pension Plan that
is subject to Title IV of ERISA, the excess, if any, of the present value of all
vested and nonvested accrued benefits under such Pension Plan over the market
value of such Pension Plan's assets as determined using the actuarial
assumptions set forth in the most recent actuarial report for such Pension Plan,
which assumptions must be reasonable.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
in effect from time to time.
17
"United States" means the United States of America (including the
states thereof and the District of Columbia), its territories and possessions
and other areas subject to its jurisdiction.
"U.S. Government obligations" means direct obligations (or certificates
representing an ownership interest in such obligation) or obligations fully
guaranteed or insured by the United States of America (including any agency or
instrumentality thereof), in each case, for the payment of which the full faith
and credit of the United States is pledged and which are not callable at the
issuer's option.
"Voting Stock" with respect to any person means all classes of Capital
Stock of such person then outstanding and normally entitled to vote in elections
of directors of such person. Any reference to a percentage of Voting Stock shall
refer to the percentage of votes eligible to be cast for the election of
directors which are attributable to the applicable shares of Voting Stock.
"Working Capital" means, as of the date of any determination thereof,
the excess of (i) all assets of the Company and the Subsidiaries which are
classified as current assets in accordance with GAAP, other than cash and cash
equivalents, after eliminating all intercompany items, over (ii) all liabilities
of the Company and the Subsidiaries maturing on demand or within one year from
the date as of which such liabilities are determined and such other liabilities
(including taxes accrued or estimated, other than deferred taxes) as may
properly be classified as current liabilities in accordance with GAAP (but not
including any current liability associated with the New Credit Agreement), after
eliminating intercompany items.
"Zale Bankruptcy Claim" means the claim of the Company filed in the
chapter 11 bankruptcy proceedings for the Zale Companies in the initial
aggregate amount of approximately $40,000,000 representing the outstanding
balance of the trade accounts receivable, the wholesale value to the Company of
certain consignment inventory and certain other claims as of the date of the
filing of the Zale Companies' bankruptcy petition. The Zale Bankruptcy Claim
includes without limitation any claims of the Company or any Borrowing
Subsidiary with respect to consigned inventory, including without limitation any
claims to ownership thereof, or of a security interest or lien therein.
"Zale Companies" means Zale Corporation, a Delaware corporation,
together with its subsidiaries and Affiliates.
Section 1.2. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
18
(4) "including" means including, without limitation;
(5) words of the masculine gender shall mean and include
correlative words of the feminine and neuter genders and words in the
singular include the plural and words in the plural include the
singular;
(6) unsecured debt shall not be deemed to be subordinate or
junior to secured debt merely by virtue of its nature as unsecured
debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP and accretion of principal on such
security shall be deemed to be the issuance of Indebtedness; and
(8) the principal amount of any Disqualified Stock that
constitutes Redeemable Stock shall be the greater of (i) the maximum
liquidation value of such Redeemable Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Redeemable Stock; and with respect to any Disqualified Stock that does
not constitute Redeemable Stock, the principal amount thereof shall be
the greater of (a) the maximum liquidation value thereof or (b) the
maximum value of any debt or the principal amount of any Redeemable
Stock into which such Disqualified Stock may be exchanged or converted.
ARTICLE 2. THE SECURITIES
Section 2.1. Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, usage or agreements to which the Company is subject, if any,
which are not inconsistent herewith. Each of the Securities shall be dated the
date of its authentication.
Section 2.2. Denominations. The Securities shall be issuable only in
registered form without Coupons and only in denominations of $1,000 and any
integral multiple thereof.
Section 2.3. Execution and Authentication. Two Officers shall sign the
Securities for the Company, and two officers of each Guarantor shall execute
such Guarantor's Guarantee, in each case, by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
19
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be the conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of up to $13,254,000 upon a written order
of the Company signed by two Officers. Such order shall specify the amount of
the Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed that amount, except as provided in
Section 2.8.
The Trustee may in its discretion appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
Section 2.4. Registrar and Paying Agent. The Trustee shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Trustee may
appoint one or more co-Registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Trustee shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-Registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
agent. The Trustee shall notify the Company of the name and address of any such
agent. If the Trustee fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such. None of the Company, the Subsidiaries or any Affiliates of
the Company or the Subsidiaries may act as Paying Agent, Registrar or
co-Registrar. The Trustee shall initially serve as Registrar and Paying Agent in
connection with the Securities.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent (i) will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal or interest on the Securities, and (ii) will notify the
Trustee of any Default by the Company in making any such payment. While any such
notify fault continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent shall have no further liability for such money.
20
Section 2.5. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and that the Paying
Agent shall notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
Section 2.6. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of, and aggregate
principal amount held by, the Securityholders.
Section 2.7. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer in accordance with this Section 2.7. When a
Security is presented to the Registrar or a co-Registrar with a request to
register a transfer, the Registrar shall register the transfer as requested if
its requirements for such transfer are met. When Securities are presented to the
Registrar or a co-Registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if its requirements for such exchange are met. To
permit registration of transfers and exchanges, the Company shall execute, the
Trustee shall authenticate and each Guarantor shall endorse its Guarantee on the
Securities at the Registrar's or co-Registrar's request. Any exchange or
transfer shall be without any charge, except that the Company or any Guarantor
may require payment of a sum sufficient to pay all taxes, assessments other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Registrar may require a Securityholder, among other things, to
furnish appropriate endorsements and transfer documents. The Company shall not
be required to, and the Registrar need not (i) register the transfer or exchange
of any Securities for a period of 15 days before the date of the mailing of a
notice of redemption of Securities selected for redemption or (ii) transfer or
exchange any Securities so selected for redemption in whole or in part.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Guarantors, the Paying Agent, the
Registrar or any co-Registrar may deem and treat the person in whose name a
Security is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and none of
the Company, the
21
Guarantors, the Trustee, the Paying Agent, the Registrar or any co-Registrar
shall be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
Section 2.8. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if a Securityholder claims that the Security has
been destroyed, lost or stolen, the Company shall issue, each Guarantor shall
endorse its Guarantee thereon and the Trustee shall authenticate a replacement
Security if the Holder provides an indemnity bond or other security, sufficient
in the judgment of the Trustee, to protect the Company, the Trustee or any of
their agents from any loss which the Company, the Trustee or any of their agents
may suffer if a Security is replaced and the Holder satisfies any other
reasonable requirements of the Trustee.
Upon the issuance of any new Security under this Section 2.8, the
Company may require 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) connected therewith.
Every new Security, issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and any such new
Security, shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of like tenor, if any, 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 Securities.
Every replacement Security is an additional obligation of the Company
and each Guarantor and shall be subject to all applicable terms and conditions
of this Indenture and shall be entitled to an benefits thereof.
Section 2.9. Outstanding Securities. The Securities considered to be
outstanding at any time are all of the Securities authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation and
those described in this Section as not outstanding. Subject to Section 2.10, a
Security does not cease to be outstanding because the Company, a Subsidiary or
an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.8, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
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If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
to be redeemed or maturing, as the case may be, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
Section 2.10. When Treasury Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, amendment, waiver or consent, Securities owned by
the Company, any Guarantor, any Subsidiary or any of their respective Affiliates
shall be disregarded, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
The Company and the Guarantors shall promptly inform the Trustee, by an
Officers' Certificate, of any Security known by the Company or any Guarantor to
be owned by the Company, any Guarantor, any Subsidiary, or any of their
respective Affiliates.
Section 2.11. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may issue, each Guarantor may endorse, and the
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without unreasonable
delay, the Company shall issue, each Guarantor shall endorse, and the Trustee
shall authenticate definitive Securities and deliver them in exchange for
temporary Securities.
Section 2.12. Cancellation. The Company and the Guarantors at any time
may deliver Securities to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee for cancellation any Securities
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel and destroy (subject to the record
retention requirements of the Exchange Act) all Securities surrendered for
registration of transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Company unless the Company directs the
Trustee to deliver cancelled Securities to the Company. The Company may not
issue new Securities to replace Securities it has redeemed, paid or delivered to
the Trustee for cancellation.
Section 2.13. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay interest at a rate equal to
the Defaulted Interest Rate (plus, to the extent permitted by law, interest on
such defaulted interest at the Defaulted Interest Rate) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date, which date shall be at
least five Business Days prior to the payment date. The Company shall fix or
cause to be fixed any such special record date and payment date, and, at least
15 days before any such special record date, the Company shall mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
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Section 2.14. Home Office Payment Agreements. Notwithstanding any
provisions of this Indenture or of the Securities to the contrary, payments of
interest on, and all or any portion of the principal of any Security, in each
case in an amount in excess of $250,000, shall be made by the Trustee or Paying
Agent, as the case may be, directly to the Holder of such Security by federal
funds wire transfer if the Company has filed with the Trustee or Paying Agent,
as the case may be, a copy of an agreement between the Company and such Holder
(or the person for whom such Holder is nominee) (a) providing that (i) such
payment will be so made and (ii) such Holder (or the person such Holder is a
nominee) will, before selling, transferring or otherwise disposing of any such
Security, make a notation thereon, or submit the same to the Trustee or Paying
Agent for notation thereon, of the date to which interest has been paid thereon
and the amount of all redemptions previously made thereon, or surrender the same
to the Trustee or Paying Agent, as the case may be, in exchange for a Security
or Securities of the same series aggregating the same principal amount as the
unredeemed principal amount of the Securities surrendered and (b) designating
the bank account to which such payments shall be so made. The Company will
indemnify and hold the Trustee or Paying Agent, as the case may be, harmless
against any liability, loss or expense (including attorneys' fees) resulting
from any act or omission to act on the part of the Company or any such Holder in
connection with any such agreement or which the Trustee or paying Agent, as the
case may be, may incur as a result of making any payment in accordance with any
such agreement.
ARTICLE 3. REDEMPTION
Section 3.1. Conditional Redemption. In the event that from time to
time the Company receives cash proceeds from the sale of any Collateral
described in Exhibit B hereto, such cash proceeds shall be applied by the
Company to redeem the Securities within 30 days after receipt of such proceeds
by or for the account of the Company, subject to the applicable conditions of
the New Credit Agreement (specifically Amendment Number Three thereto).
Section 3.2. Mandatory Redemption.
(a) On each Collateral Redemption Date, the Company shall
redeem an aggregate principal amount of Securities equal to the aggregate amount
of Collateral Proceeds received by the Company during the applicable Collateral
Proceeds Calculation Period at a redemption price equal to 100% of the principal
amount of such Securities plus accrued and unpaid interest to and including the
applicable Collateral Redemption Date; provided, however, that no redemption
shall be made on a Collateral Redemption Date, if the aggregate amount of
Collateral Proceeds received by the Company during the applicable Collateral
Proceeds Calculation Period is less than $3,000, in which event such Collateral
Proceeds shall be held by the Company pursuant to the next sentence and shall be
used to make a redemption pursuant to this Section 3.2(a) on the next Collateral
Redemption Date at which the aggregate amount of Collateral Proceeds received by
the Company during the applicable Collateral Proceeds Calculation Period equals
at least $3,000. Pending application pursuant to this Section 3.2(a), any
Collateral
24
Proceeds received by the Company shall be invested in Permitted Investments and
held by the Company in trust for the Securityholders in a segregated and
restricted account. At least fifteen days prior to each Collateral Redemption
Date, the Company shall deliver to the Trustee an Officers' Certificate
detailing the calculation of the Collateral Proceeds received by the Company
during the applicable Collateral Proceeds Calculation Period.
(b) If the Company receives any non-cash proceeds (including
any current income or disposition proceeds) from or relating to the Solomon
Brothers Investment, the sale of the Capital Stock or the assets of any Foreign
Subsidiary or the Zale Bankruptcy Claim (including inventory returned to the
Company in respect of the Zale Bankruptcy Claim which has a Fair Market Value in
excess of $3,000 at the time of such return) (collectively, "Non-cash Collateral
Proceeds"), it will use its commercially reasonable best efforts to liquidate
such Non-cash Collateral Proceeds within six months after the receipt thereof,
except that the Company will use its commercially reasonable best efforts to
liquidate any inventory returned to the Company in respect of the Zale
Bankruptcy Claim which has a Fair Market Value in excess of $3,000 within nine
(9) months of such return. The Company shall, as soon as practicable (but in no
event later than five days) after receipt of cash proceeds from the liquidation
of Non-cash Collateral Proceeds (the "Liquidation Proceeds"), redeem an
aggregate principal amount of Securities equal to the aggregate amount of such
Liquidation Proceeds (plus any interest earned on such Liquidation Proceeds as a
result of being invested prior to being used to make a redemption pursuant to
this Section 3.2(b)) at a redemption price equal to 100% of the principal amount
of such Securities plus accrued and unpaid interest to and including the
applicable redemption date; provided, however, that if the aggregate amount of
such Liquidation Proceeds is less than $3,000 ("Minimum Liquidation Proceeds"),
no redemption shall be made at such time and such Minimum Liquidation Proceeds
shall be held by the Company pursuant to the next sentence and shall be treated
for all purposes of this Indenture as Collateral Proceeds and shall be used to
make redemptions pursuant to Section 3.2 (a). Any Liquidation Proceeds
(including, without limitation, Minimum Liquidation Proceeds) which are received
by the Company but, at the time of receipt, are not yet required to be used to
make a redemption pursuant to this Section 3.2 (b), shall be invested in
Permitted Investments and held by the Company in trust for the Securityholders
in a segregated and restricted account. Any inventory returned to the Company in
respect of the Zale Bankruptcy which has a Fair Market Value in excess of $3,000
at the time of such return shall be segregated from the Company's other
inventory and held by the Company in trust for the security until such inventory
has been liquidated. At least three Business Days prior to any redemption
pursuant to this Section 3.2(b), the Company shall deliver to the Trustee an
Officer's Certificate detailing the calculation of the amount of Liquidation
Proceeds (plus any interest earned thereon) to be used to make such redemption.
(c) On each Annual Redemption Date thereafter, the Company
shall redeem an aggregate principal amount of Securities equal to the sum of (i)
the lesser of (A) the Excess Cash Flow for then most recently ended fiscal year
of the Company and (B) the amount by which the aggregate principal amount of
Securities outstanding on the applicable redemption date before giving effect to
the redemption pursuant to this Section 3.2(c) exceeds $3,000,000, and (ii) to
the
25
extent the Excess Cash Flow for the then most recently ended fiscal year of the
Company exceeds the amount required to be applied pursuant to the preceding
clause (i), 50% of such excess. Redemptions pursuant to this Section 3.2(c)
shall be made at a redemption price equal to 100% the principal amount of the
Securities to be redeemed plus accrued and unpaid interest to and eluding the
applicable redemption date. At least fifteen days prior to each Annual
Redemption Date, the Company shall deliver to the Trustee an Officer's
Certificate detailing the calculation of the Excess Cash Flow for the then most
recently ended fiscal year of the Company and the amount be redeemed on such
Annual Redemption Date.
(d) Any redemption made pursuant to this Section 3.2, shall be
made pursuant to the provisions of this Article 3.
Section 3.3. Notices to Trustee. If the Company redeems Securities
pursuant to Section 3.2 above, it shall notify the Trustee in writing of the
redemption date and the principal amount of Securities to be redeemed.
Unless the Trustee consents to a shorter period, the Company shall give
each notice to the Trustee provided for in this Section 3.3 (i) at least 20 days
before the applicable redemption date in the case of Securities to be redeemed
pursuant to Section 3.2(a), (ii) at least three Business Days before the
applicable redemption date in the case of Securities to be redeemed pursuant to
Section 3.2(b), or (iii) at least 15 days before the applicable redemption date
in the case of Securities to be redeemed pursuant to Section 3.2(c). Such notice
shall be accompanied by an Officers' Certificate to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than 10 days after the date of notice to the Trustee in the case of
redemptions pursuant to Section 3.2(a), and two days after the date of notice to
the Trustee in the case of redemptions pursuant to Sections 3.2(b) or (c).
Section 3.4. Selection of Securities To Be Redeemed. If fewer than all
the Securities are redeemed, the Trustee shall select the Securities or portions
thereof to be redeemed pro rata or as nearly pro rata as practicable in the sole
discretion of the Trustee based on the principal amount of the then outstanding
Securities. Securities and portions of them the Trustee selects be in amounts of
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
Section 3.5. Notice of Redemption. At least 10 days but not more than
45 days before a date for redemption of Securities pursuant to Sections 3.2(a)
or (c), the Company shall mail a notice of redemption by first-class mail to
each Securityholder to be so redeemed. At least three days but not more than 30
days before a date for redemption of Securities pursuant to Section
26
3.2(b), the Company shall mail a notice of redemption by first-class mail to
each Holder of Securities to be so redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent,
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed, and that after the applicable redemption
date, upon surrender of such Security, a new Security or Securities in
Principal amount equal to the unredeemed portion will be issued;
(6) that, unless the Company defaults in making such
redemption payment, interest on Securities (or any portion thereof)
called for redemption ceases to accrue after the redemption date;
(7) the Section of this Indenture pursuant to which the
Securities called for redemption are being redeemed; and
(8) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed, and that after
the applicable redemption date, upon surrender Security or Securities
in principal amount equal to the unredeemed of such Security, a new
portion will be issued.
At the Company's request upon reasonable notice, the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense. In
such event, the Company shall provide the Trustee with the information required
by this Section.
Section 3.6. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities mailed for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued and unpaid interest to and including the
applicable redemption date. Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
27
Section 3.7. Deposit of Redemption Price. Prior to the redemption date,
the Company shall deposit with the Paying Agent money sufficient to pay the
redemption price of and accrued and unpaid interest on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
redemption which have been delivered by the Company to the Trustee for
cancellation.
Section 3.8. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company and each Guarantor shall execute and the
Trustee shall authenticate for the Holder (at the Company's expense) a new
Security equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE 4. COVENANTS
Section 4.1. Payment of Securities. The Company shall pay the principal
of and interest on the Securities on the dates and in the manner provided in the
Securities and in this Indenture. The Company shall deposit with the Trustee or
Paying Agent immediately available funds sufficient to pay the interest of and
principal on the Securities by no later than 3:00 p.m. New York time on the
Business Day before any such payment date. Principal and interest shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay all principal
and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law to the extent allowed by the bankruptcy
court presiding over the case) on overdue principal and, to the full extent
permitted by law, overdue interest at a rate equal to the Defaulted Interest
Rate.
Section 4.2. SEC Reports; Financial Statements.
(a) The Company shall file with the Trustee and provide
Securityholders, within 15 days after it files them with the SEC, copies of its
annual report and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
(b) If the Company is not required to file with the SEC such
reports and other information referred to in Section 4.2(a), the Company shall
file with the Trustee (i) within 105 days after the end of each fiscal year of
the Company, annual reports containing the information required to be contained
in Items 1, 2, 3, 5, 6, 7, 8 and 9 of Form 10-K promulgated under the Exchange
Act, or substantially the same information required to be contained in
comparable items of any successor form, (ii) within 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Company,
quarterly reports containing the information required to be contained in Form
10-Q promulgated under the Exchange Act, or substantially the same information
required to be contained in any successor form and (iii) promptly from the time
after
28
the occurrence of an event required to be therein reported, such other reports
containing information required to be contained in Form 8-K promulgated under
the Exchange Act, or substantially the same information required to be contained
in any successor form. The Company shall also make such reports available to
Holders of the Securities and to prospective purchasers of the Securities,
securities analysts and broker-dealers upon their request. The Trustee shall not
be liable for determining whether reports delivered under this Section 4.2
include all responses in accordance with applicable rules and regulations of the
SEC or for examining any such report to determine whether the Company is in
violation of any of the covenants and limitations set forth in this Indenture.
Section 4.3. Ranking. (i) The Indebtedness represented by the
Securities issued under this Indenture shall at all times be senior to or pari
passu in right of payment to all other Indebtedness of the Company, and all
other Indebtedness of each Guarantor, permitted hereunder; provided, however,
that the Indebtedness represented by the Securities shall at all times be pari
passu in right of payment to Indebtedness represented by the Revised Debt
Agreements and (ii) the Indebtedness represented by the Securities shall at all
times be senior in right of payment to: (a) Indebtedness evidenced by the Senior
Subordinated Notes (including the additional Senior Subordinated Notes issued,
after the date on which the Securities are originally issued, in lieu of the
payment of cash interest on the Senior Subordinated Notes); (b) Indebtedness of
the Company owed to or held by a Subsidiary; (c) the Exchangeable Preferred
together with accrued but unpaid dividends thereon; (d) Indebtedness or
Disqualified Stock of any Subsidiary issued to or held by the Company or any
Subsidiary; (e) Indebtedness which pursuant to its terms is expressly
subordinate to the Securities which Indebtedness shall be junior in right of
payment to the Securities.
Section 4.4. Compliance Certificates.
(a) The Company shall deliver to the Trustee and mail by first
class mail to each Holder of Securities, within 45 days after the end of each of
the first three fiscal quarters of each fiscal year of the Company and within
105 days after the end of each fiscal year of the Company, an Officers'
Certificate (i) stating that a review of the activities of the Company and the
Subsidiaries during the preceding fiscal quarter or fiscal year, as the case may
be, has been made under the supervision of the signing Officers, (ii) further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge, (A) the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture, (B) there is no
Default or Event of Default (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company has taken, is taking or proposes
to take with respect thereto), and (C) no event has occurred and remains in
existence by reason of which payments on account of the principal of or interest
on the Securities are prohibited (or if such event has occurred, a description
of such event and what actions the Company is taking or proposes to take with
respect thereto), and (iii) setting forth the Consolidated Net Worth as of the
last day of such fiscal quarter or fiscal year, as the case may be, the Excess
Cash Flow as of the last day of such fiscal year, the total amount of Restricted
29
Payments (other than dividends made by any Subsidiary to the Company or another
Subsidiary) made since the date hereof, total amount of Restricted Investments
outstanding on the last day of such fiscal quarter or fiscal year, as the case
may be, the total amount of Liens upon the property or assets of the Company and
the Subsidiaries (which Liens are of the type permitted under Section 4.7(b)(3))
outstanding on the last day of such fiscal quarter or fiscal year, as the case
may be, the total amount of Indebtedness of the Company and the Subsidiaries
outstanding on the last day of such fiscal quarter or fiscal year, as the case
may be, the Consolidated Net Income for such fiscal quarter or fiscal year, as
the case may be, and the Consolidated Fixed Charge Ratio as of the last day of
such fiscal quarter or fiscal year, as the case may be.
(b) The Company shall deliver to the Trustee and mail by first
class mail to each Holder of Securities prompt written notice, (i) in no event
later than three Business Days after becoming aware of the occurrence thereof,
of the existence of any Default or Event of Default, and (ii) within three
Business Days after a request by the Trustee, of the aggregate amount of and the
holders of Indebtedness and obligations outstanding under the Revised Debt
Agreements. With respect to the written notice required by clause (i) above,
such written notice shall be by an Officers' Certificate specifying such
Default, Event of Default, default or event of default, and what action the
Company is taking or proposes to take with respect thereto. One of the Officers
signing such Officers' Certificates shall be the chief financial officer of the
Company or, if the Company does not have a chief financial officer, the
principal officer of the Company in charge of financial matters. The Company
shall deliver to the Trustee prompt notice of the consummation of each Asset
Disposition or group of related Asset Dispositions in excess of $1,000,000,
which notice shall include a reasonable estimate of the proceeds and the Net
Cash Proceeds of such Asset Disposition or group of related Asset Dispositions,
and a statement with respect to the application of the proceeds arising from the
Asset Disposition(s). In addition, the Company shall deliver to the Trustee,
within forty-five (45) days following the end of each six month period during
the term of this Indenture, an Officers' Certificate to the effect that all
releases of Collateral from the liens of the Security Documents and the
Indenture during such six month period were made in the ordinary course of
business of the Company and its Subsidiaries and that all proceeds therefrom
have been applied by the Company as provided in the Intercreditor Agreement or
otherwise subjected to the terms of the Security Documents and this Indenture.
(c) The Company shall deliver to the Trustee and mail by first
class mail to each Holder of Securities within 105 days after the end of each
fiscal year of the Company, a certificate signed by the Company's independent
certified public accountants stating (i) that their audit examination has
included a review of the terms of this Indenture and the Securities as they
relate to accounting matters and (ii) if such certification is then permitted
under the principles of such firm of independent certified public accountants,
(A) whether, during the course of their audit examination, any Default or Event
of Default has come to their attention and if such a Default or Event of Default
has come to their attention, specifying the nature and period of existence
thereof and (B) specifying the Consolidated Net Worth as of the last day of such
fiscal year, the Excess Cash Flow as of the last day of such fiscal year, the
total Demount of Restricted Payments made since the date hereof, the total
amount of Restricted Investment outstanding on the last day of such
30
fiscal year, the total amount of Indebtedness of the Company and the
Subsidiaries outstanding on the last day of such fiscal year, the Consolidated
Net Income for such fiscal year, and the Consolidated Fixed Charge Ratio as of
the last day of such fiscal year.
The Trustee shall not be required, pursuant to this Section 4.4 to make
any independent investigation as to the matters set forth in paragraphs (A) and
(B) above and shall be entitled to assume that the Company is not aware of any
Default or Event of Default until delivery by the Company to the Trustee of such
Officers' Certificates described above.
Section 4.5. Maintenance of Consolidated Net Worth; Special Mandatory
Redemption Obligation.
(a) (1) In the event that the Company's Consolidated Net Worth
declines below the Minimum Net Worth at the end of each of two
consecutive fiscal quarters, the Company shall, on the date 45 days
after the end of the last of such two fiscal quarters (a "Special Offer
Date"), make an offer in accordance with this Section (a "Special
Mandatory Redemption Offer" or "Special Offer") to the Securityholders
to redeem an amount of Securities (the "Redemption Amount") equal to
7.5% of the principal balance of the Securities then outstanding at a
redemption price which shall be equal to 100% of the principal amount
thereof plus accrued and unpaid interest to and including the date of
redemption (regardless of whether on such day the Consolidated Net
Worth is above or below the Minimum Net Worth). The Company shall
continue to make Special Offers semiannually thereafter (on the dates
six and twelve months after the Special Offer Date in each year) until
such time as all outstanding Securities have been redeemed; provided,
however, that if the Company's Consolidated Net Worth is equal to or
above the Minimum Net Worth as at the last day of any fiscal quarter
subsequent to the end of such two fiscal quarters, the Company's
obligation to make Special Mandatory Redemption Offers on dates after
such quarter end shall terminate; and provided, further that if the
Company's Consolidated Net Worth shall thereafter be less than the
Minimum Net Worth as at the last day of each of two consecutive
subsequent fiscal quarters, the Company's semiannual Special Mandatory
Redemption Offers shall again commence on the date 45 days after the
end of the last of such two fiscal quarters.
(2) At its option the Company may reduce its obligations
to make a Special Mandatory Redemption Offer pursuant to this Section
4.5 by an amount equal to 100% of the principal amount of Securities
that the Company has delivered to the Trustee for cancellation through
its purchase or exchange (for securities other than the Securities).
(3) On or before the date 15 days prior to a Special
Offer Date, the Company shall deliver to the Trustee an Officers'
Certificate stating:
(A) the redemption price;
31
(B) the date fixed for redemption which shall be the
Business Day next succeeding the sixtieth day following the
date of the Special Offer (the "Special Mandatory Redemption
Date");
(C) the maximum aggregate principal amount of
Securities that may be redeemed;
(D) whether it elects to reduce the principal amount
of Securities to be included in the next succeeding Special
Mandatory Redemption Offer and, if it elects to make such a
reduction, setting forth the amount of the reduction and the
basis provided above for such reduction (including
identification of any previously cancelled Securities not
theretofore made the basis for the reduction of a Special
Mandatory Redemption Offer), together with any Securities
required to be delivered to the Trustee for cancellation as
provided above, which are to be made the basis for such
reduction of such Special Mandatory Redemption Offer; and
(E) whether it requests the Trustee to give notice to
each Securityholder as required under Section 4.5(b)(4).
(4) The Company shall make a Special Mandatory Redemption
Offer by mailing no later than the Special Offer Date notice by
first-class mail to each Securityholder.
The notice, which shall govern the terms of the Special Offer,
shall state:
(A) the redemption price;
(B) the Special Mandatory Redemption Date;
(C) the maximum aggregate Principal amount of
Securities that may be redeemed;
(D) the name and address of the Paying Agent;
(E) that any Security not tendered or not accepted
for payment continue to accrue interest;
(F) that Securities called for Special Mandatory
Redemption must be surrendered to the Paying Agent to collect
the redemption price;
(G) that any Security accepted for payment pursuant
to the Special Offer shall cease to accrue interest after the
Special Mandatory Redemption Date;
32
(H) the method by which the Securityholder may elect
to accept a Special Offer to redeem and that any
Securityholder electing to have a Security redeemed pursuant
to the Special Offer will be required to surrender the
Security duly endorsed in blank to the Paying Agent at the
address specified on the notice at least five days before the
Special Mandatory Redemption Date, together with a copy of
such Securityholder's election to accept the Company's offer
to redeem such Security;
(I) that Securityholders will be entitled to withdraw
their election if the Paying Agent receives, not later than
three days prior to the Special Mandatory Redemption Date, a
telegram, telex, facsimile transmission or letter setting
forth the name of the Securityholder, the principal amount of
any Securities the Securityholder delivered for redemption and
statement that such Securityholder is withdrawing his election
to have such Securities redeemed; and
(J) that Securityholders whose Securities were
accepted for payment only in part will be issued new
Securities equal 'in principal amount to the unredeemed
portion of the Securities surrendered.
At the Company's request, the Trustee shall give notice of a
Special Offer in the Company's name and at its expense.
A Securityholder receiving a Special Offer may elect to have
redeemed any or all Securities held by such Securityholder by providing
written notice thereof to the Trustee so as to be received by the
Trustee on or before the date 15 days preceding the Special Mandatory
Redemption Date.
In the event that Securities in an aggregate principal amount
in excess of the Redemption Amount are tendered and not withdrawn, then
the Company shall purchase Securities on a pro rata basis based on the
principal amount of Securities tendered. The Company shall notify each
Holder electing to have Securities redeemed at least three Business
Days prior to the Special Mandatory Redemption Date as to the principal
amount of Securities held by such Holder to be redeemed.
(5) Not less than one Business Day prior to the Special
Mandatory Redemption Date, if any Securityholders shall have
surrendered their Securities pursuant to the Special Offer, the Company
shall deposit with the Paying Agent in immediately available funds
money sufficient to pay the redemption price of and accrued and unpaid
interest on all Securities to be redeemed on that date up to the
maximum amount required under this Section. The Paying Agent shall
return to the Company any money not required for that purpose.
33
(6) On the Special Mandatory Redemption Date, Securities
surrendered to and accepted for payment by the Paying Agent shall be
paid at the redemption price, plus accrued and unpaid interest to and
including the Special Mandatory Redemption Date.
(7) Upon surrender of a Security that is redeemed in
part, the Company shall execute and issue, each Guarantor shall endorse
and the Trustee shall authenticate for the Securityholder (at the
Company's expense) a new Security equal in principal amount to the
unredeemed portion of the Security surrendered
Section 4.6. Limitation on Indebtedness and Disqualified Stock of the
Company.
(a) The Company shall not, and shall not permit any Subsidiary
to, directly or indirectly, create, incur or assume any Indebtedness or issue
any Disqualified Stock unless the Consolidated Fixed Charge Ratio, determined on
the date of creation of such Indebtedness or issuance of such Disqualified Stock
and after giving effect to (i) the creation of such Indebtedness or issuance of
such Disqualified Stock and (if applicable) the application of the net proceeds
thereof to repay other Indebtedness or Disqualified Stock as if such
Indebtedness or Disqualified Stock was issued and the application of such
proceeds occurred at the beginning of the Reference Period and (ii) the issuance
and retirement of any other Indebtedness or Disqualified Stock since the last
day of the most recent quarter contained in the Reference Period as if such
indebtedness or Disqualified Stock was issued or retired at the beginning of the
Reference Period, is greater than or equal to 1.8 to 1.
(b) Notwithstanding Section 4.6(a), the Company and the
Subsidiaries may issue the following Indebtedness or Disqualified Stock, as the
case may be:
(1) the Securities;
(2) Indebtedness issued or permitted to be issued on
the date on which the Securities are originally issued
pursuant to the Revised Debt Agreements and the Senior
Subordinated Notes including the unfunded portions of
revolving credit and consignment facilities;
(3) Indebtedness or Disqualified Stock of the Company
or any Subsidiary outstanding on the date on which the
Securities are originally issued (other than indebtedness
described in clause (1) or (2) above or clause (4) or (10)
below or indebtedness replaced, repaid or refinanced on such
date);
(4) Indebtedness or Disqualified Stock of a
Subsidiary issued and outstanding prior to the date on which
such Subsidiary was acquired by the Company (other than
Indebtedness or Disqualified Stock issued as consideration in,
or to provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was
acquired by
34
the Company); provided. however, that Indebtedness or
Disqualified Stock may only be issued pursuant to this clause
4.6(b)(4) if after giving effect to (i) the issuance of such
Indebtedness or Disqualified Stock as if such Indebtedness or
Disqualified Stock was issued at the beginning of the
Reference Period and (ii) the issuance and retirement of any
other Indebtedness since the last day of the most recent
quarter contained in the Reference Period as if such
Indebtedness was issued or retired at the beginning of the
Reference Period, the Consolidated Fixed Charge Ratio is
greater than 1.8 to 1;
(5) the Exchangeable Preferred originally issued
pursuant to the Exchange Offers together with accrued but
unpaid dividends thereon;
(6) Interest Rate Protection Agreements of the
Company covering indebtedness of the Company, or of a
Subsidiary covering Indebtedness of such Subsidiary (which
Indebtedness (i) bears interest at fluctuating interest rates
and (ii) is otherwise permitted to be issued under this
Section 4.6), in each case, only if the notional principal
amount of such Interest Rate Protection Agreement does not
exceed the principal amount of the Indebtedness to which the
Interest Rate Protection Agreement relates;
(7) Capital Lease Obligations with respect to the
acquisition of equipment after the original issuance of the
Securities (i) which do not exceed $3,000,000 in the aggregate
outstanding at any time or (ii) which are the result of any
Sale/Leaseback Transaction permitted pursuant to Section
4.8(c);
(8) Indebtedness not to exceed $1,500,000 in the
aggregate outstanding at any time arising under any appeal or
reimbursement obligation entered into with respect to any
judgment, which judgment does not constitute a Default;
(9) Indebtedness issued in exchange for, or the
proceeds of which are used to refinance or pay at maturity,
any Indebtedness or Disqualified Stock permitted by Section
4.6(a) above, clauses 4.6(b)(1), 4.6(b)(2), 4.6(b)(3) or
4.6(b)(4) above or clause 4.6(b)(14) below; provided, however;
that (i) except to the extent permitted under Section 4.6(a),
the principal amount of the Indebtedness so issued shall not
exceed an amount equal to the principal amount of the
Indebtedness or Disqualified Stock so exchanged, refinanced or
paid or, in the case of lines of credit or revolving credit
facilities, the amount available to be drawn thereunder, in
each case plus an amount equal to the amount of interest or
dividends, as the case may be, accrued during the last full
fiscal quarter immediately preceding such exchange,
refinancing or payment and (ii) the Indebtedness so issued
shall not require any principal payment, mandatory redemption,
amortization or sinking fund payment in an amount greater than
or at a time prior to the amounts and times specified in the
Indebtedness or Disqualified Stock so exchanged, refinanced or
paid;
(10) in the case of the Company, Indebtedness owed to
or held by a Subsidiary that is unsecured and subordinated in
right of payment to the Securities;
35
provided, however; that any subsequent issuance or transfer of
any Capital Stock which results in any such Subsidiary ceasing
to be a Subsidiary, or any transfer of such Indebtedness
(other than to a Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Indebtedness by the Company;
(11) in the case of any Subsidiary, Indebtedness or
Disqualified Stock issued to and held by the Company or any
Subsidiary; provided, however that any subsequent issuance or
transfer of (i) any Capital Stock which results in any such
Subsidiary ceasing to be a Subsidiary, or (ii) such
Indebtedness or Disqualified Stock (other than to the Company
or a Subsidiary), shall be deemed, in each case, to constitute
the issuance of such Indebtedness or Disqualified Stock by the
issuer thereof;
(12) Indebtedness incurred directly as a result of
the renewal, extension or renegotiation of any lease on
equipment or real estate of the Company or any Subsidiary, or
any Indebtedness to acquire any leased equipment or real
estate on the expiration of the applicable lease;
(13) Indebtedness not to exceed $5,000,000, in the
aggregate, that does not constitute Funded Indebtedness;
(14) Indebtedness secured by Liens permitted under
Section 4.7(b)(3); and
(15) Indebtedness evidenced by additional Senior
Subordinated Notes issued, after the date on which the
Securities are originally issued, in lieu of the payment of
cash interest on the Senior Subordinated Notes; and
(16) Indebtedness of foreign Subsidiaries for working
capital purposes in an aggregate principal amount not to
exceed $4,000,000.
(c) Notwithstanding Section 4.6(a) or 4.6(b) above, the
Company may not issue, and shall not permit any Subsidiary to issue, any
Indebtedness to which the Securities shall be junior or subordinate in right of
payment.
Section 4.7. Limitation on Liens.
(a) The Company shall not, and shall not permit any Subsidiary
to, create or suffer to exist any Lien upon any of its property or assets now
owned or hereafter acquired by it or on any Capital Stock or Indebtedness of the
Company or any Subsidiary, securing any obligation unless contemporaneously
therewith effective provision is made to grant the Securityholders a Lien prior
to the Lien securing such obligation (and any other obligation to be so secured)
for so long as such obligation is so secured.
36
(b) Notwithstanding Section 4.7(a) and without requirement
that the Company comply therewith, the Company and its Subsidiaries may create
or suffer to exist the following:
(1) Liens existing on the date on which the
Securities are originally issued (other than Liens in favor of
the New Gold Lenders and the New Bank Lenders pursuant to the
Revised Debt Agreements, and Liens created by this Indenture;
(2) Permitted Liens;
(3) Liens to secure the payment of all or a part of
the purchase price of assets or property acquired or
constructed in the ordinary course of business after the date
on which the Securities are originally issued; provided,
however that (i) the aggregate principal amount of
Indebtedness secured by such Liens shall not exceed the lesser
of cost or Fair Market Value of the assets or property so
acquired or constructed and shall not, in any event, exceed
$2,500,000 for all Liens under this clause (3), (ii) the
Indebtedness secured by such Liens shall have otherwise been
permitted to be issued under this Indenture and (iii) such
Liens shall not encumber any other assets or property of the
Company or any of the Subsidiaries and shall attach to such
assets or property within 90 days of the construction or
acquisition of such assets or property;
(4) Liens on the assets or property of a Subsidiary
existing at the time such subsidiary became a Subsidiary and
not incurred as a result of (or in connection with or in
anticipation of) such subsidiary becoming a Subsidiary;
provided, however that such Liens do not extend to or cover
any other property or assets of the Company or any of the
other Subsidiaries;
(5) Liens on the inventory or receivables of the
Company or any Subsidiary or on any note issued by the Company
and held by any Subsidiary or issued by any Subsidiary and
held by the Company or any other Subsidiary, which Liens
secure the obligations under any revolving credit arrangement,
including the Revised Debt Agreements and any Refinancing
Agreement; provided, however that the Indebtedness evidenced
by any such note shall have otherwise been permitted to be
issued under this Indenture;
(6) Any Lien pursuant to Capital Lease Obligations
permitted under Section 4.6(b) (6) hereof; provided, however
that such Liens do not extend to or cover any property or
assets of the Company or any of the Subsidiaries (other than
the property or assets subject to such Capital Lease
Obligations or proceeds from the sale thereof);
(7) Leases and subleases of Real Property which do
not interfere with the ordinary conduct of the business of the
Company or any of the Subsidiaries, and which are made on
customary and usual terms applicable to similar properties;
37
(8) Liens securing Indebtedness (including
Indebtedness issued pursuant to Section 4.6(a), if any) which
is issued to refinance Indebtedness which has been secured by
a Lien permitted under this Indenture and is permitted to be
refinanced under this Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the
Company or any of the Subsidiaries not securing the
Indebtedness so refinanced, other than the inventory or
receivables of any such person in the event that the
refinancing Indebtedness is a Refinancing Agreement; and
(9) Without limiting subsection 4.07(b)(8) above,
Liens to secure Indebtedness permitted under Section 4.6(a)
for the benefit of creditors which are parties to the
Intercreditor Agreement which Liens are junior in priority to
the Liens granted to the Collateral Agent for the benefit of
the Trustee on behalf of the holders of the Securities.
Section 4.8. Limitation on Sale and Leaseback.
(a) The Company shall not, and shall not Permit any Subsidiary
to, enter into any Sale/Leaseback Transaction unless at least one of the
following conditions is satisfied:
(i) the lease is between the Company and a Subsidiary or
between Subsidiaries; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Subsidiary ceasing to be
a Subsidiary shall be deemed for purposes of this Section to constitute the
entering into of such lease as of the time of such issuance or transfer with a
Person other than a Subsidiary;
(ii) under clauses (1) through (8) of Section 4.7(b), the
Company or such Subsidiary could create a Lien on the property to secure
Indebtedness in an amount at least equal to the Attributable Debt in respect of
such Sale/Leaseback Transaction; or
(iii) an amount equal to the Attributable Debt in respect
of such Sale/Leaseback Transaction is applied by the Company in accordance with
the terms of the Intercreditor Agreement.
(b) To the extent the Intercreditor Agreement provides that
any portion (the "Sale/Leaseback Redemption Amount") of the Attributable Debt in
respect of a Sale/Leaseback Transaction is to be applied to redeem Securities,
the Company shall promptly, but in no event later than 15 days after the receipt
of such portion of the Attributable Debt, redeem Securities at a redemption
price equal to 100% of the principal amount of such Securities plus accrued and
unpaid interest to and including the redemption date.
(c) (i) If the Company is obligated to redeem Securities
pursuant to this Section 4.8, it shall notify the Trustee in writing of the
redemption date and the principal amount of Securities to be redeemed.
38
(ii) Unless the Trustee consents to a shorter period,
the Company shall give each notice to the Trustee provided for in this Section
4.8 at least three Business Days before the applicable redemption date. Such
notice shall be accompanied by an Officers' Certificate to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than two days after the date Of notice to the Trustee.
(iii) If fewer than all the Securities are to be
redeemed, the Trustee shall select the Securities or portions thereof to be
redeemed pro rata (or as nearly pro rata as practicable in the sole discretion
of the Trustee based on the principal amount of the then outstanding
Securities). Securities and portions of them that the Trustee selects shall be
in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Section
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
of the Securities or portions of Securities to be redeemed.
(iv) At least three days but not more than thirty
days before a date for redemption of Securities pursuant to Section 4.8, the
Company shall mail a notice of redemption by first-class mail to each Holder of
Securities to be so redeemed.
(v) The notice shall identify the Securities to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(5) if fewer than all the outstanding Securities are
to be redeemed, the identification and principal amounts of
the particular Securities to be redeemed, and that after the
applicable redemption date, upon surrender of such Security, a
new Security or Securities in principal amount equal to the
unredeemed portion will be issued;
(6) that, unless the Company defaults in making such
redemption payment, interest on Securities (or any portion
thereof) called for redemption ceases to accrue after the
redemption date;
39
(7) the Section of this Indenture (and the
corresponding paragraph in the Securities) pursuant to which
the Securities called for redemption are being redeemed; and
(8) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed, and that after the applicable redemption date, upon
surrender of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion will be
issued.
(vi) At the Company's request upon reasonable notice, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. In such event, the Company shall provide the Trustee with the
information required by this Section.
(vii) Once notice of redemption is mailed, Securities
called for redemption become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price stated in the notice, plus
accrued and unpaid interest to and including the applicable redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder
(viii) Prior to the redemption date, the Company shall
deposit with the Paying Agent money sufficient to pay the redemption price of
and accrued and unpaid interest on all Securities to be redeemed on that date
other than Securities or portions of Securities called for redemption which have
been delivered by the Company to the Trustee for cancellation.
(ix) Upon surrender of a Security that is redeemed in
part, the Company and each Guarantor shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
Section 4.9. Limitation on Investments, Loans and Advances. Except to
the extent permitted under Section 4.10(b), the Company shall not make, and
shall not permit any Subsidiary to make, any capital contributions, transfers of
property, advances or loans to, or investments or purchases of Capital Stock in,
any person (collectively, "Investments"), except: (i) investments by the Company
in or to any Subsidiary (other than to an Inactive Subsidiary) and Investments
in or to the Company or a Subsidiary (other than to an Inactive Subsidiary) by
any Subsidiary; provided, however, that any subsequent issuance or transfer of
any Capital Stock which results in any such Subsidiary ceasing to be a
Subsidiary shall be deemed to constitute the making of an Investment as of the
time of such transfer in a person other than a Subsidiary in the amount of the
net investment as of such time after giving effect to the transactions relating
to such transfer; (ii) Investments represented by receivables created or
acquired in the ordinary course of business; (iii) advances to employees in the
ordinary course of business; (iv) Investments under or pursuant to Interest Rate
Protection Agreements otherwise permitted under this Indenture; (v) Permitted
40
Investments; (vi) advances to suppliers and customers in the ordinary course of
business; (vii) Investments in any securities issued to the Company in
connection with the Zale Bankruptcy Claim or the sale of the Capital Stock or
assets of any Foreign Subsidiary (the proceeds of which shall be applied to
redeem the Securities pursuant to Section 3.2); (viii) the Solomon Brothers
Investment or Investments in any Non-cash Collateral Proceeds relating thereto;
(ix) the shares of stock of Little Switzerland, Inc. owned by the Company as of
the date hereof and any distributions, non-cash dividends or proceeds relating
thereto; (x) Investments in obligations representing a portion of the proceeds
of an Asset Disposition permitted under Section 4.11 hereof; (xi) Investments
represented by the Exchange Property, if any, returned to the Company upon
termination of the trust established pursuant to the Trust Agreement (the "Trust
Agreement") dated as of May 14, 1993 between the Company and BayBank; and (xii)
loans to employees of the Company or the Subsidiaries, other than Francis X.
Correra, in aggregate principal amount at any time outstanding not in excess of
$500,000. Investments other than those permitted by the foregoing clauses (i)
through (xii) are referred to herein as "Restricted Investments."
Anything contained in this Indenture to the contrary notwithstanding.
in no event shall the Company or any Subsidiary, directly or indirectly, acquire
any further beneficial interest in (including stock, partnership interest or
other securities of), or make any loan, advance or capital contribution to, or
transfer any property or assets to, one or more of the Inactive Subsidiaries.
Section 4.10. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any
Subsidiary, directly or indirectly, to, (i) declare or pay any dividend or make
any other distribution on Capital Stock of the Company or any Subsidiary or make
any payment to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Company or any Subsidiary; provided, however, that the
Company or any such Subsidiary may declare (w) so long as the Consolidated Fixed
Charge Ratio is greater than 1.25 to 1 at the time of such declaration,
dividends payable to holders of the Exchangeable Preferred, (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), (y) in the case of a Subsidiary, dividends or distributions
payable to the Company or to a Subsidiary and, with respect to any such
Subsidiary making such a dividend or distribution which became a Subsidiary
after the date on which the Securities were originally issued and which has
minority stockholders, a pro rata dividend or distribution to such minority
stockholders, or (z) dividends that are required to be paid by Essex pursuant to
the Thailand Stock exchange Agreement; (ii) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company or any Subsidiary;
(iii) make any principal payment on, or purchase, defease, repurchase, redeem or
otherwise acquire or retire for value, any Subordinated Obligations (other than
(A) Subordinated Obligations acquired in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition, or (B) subject to the subordination
provisions contained in the Indenture relating to the Senior Subordinated Notes
(the "Subordinated Indenture"), redemptions of Senior
41
Subordinated Notes required under Sections 4.4 and 4.12 of the Subordinated
Indenture); (iv) make any Restricted Investment or guarantee any Restricted
Investment in any person (any such dividend, distribution, payment, purchase,
redemption, defeasance, repurchase, other acquisition or retirement, Restricted
Investment or guarantee described in clauses (i) through (iv) above being
hereinafter referred to as a "Restricted Payment").
(b) The provisions of Section 4.10(a) and Section 4.9 shall
not prohibit:
(1) the payment of any dividend in respect of the
Company's Capital Stock within 60 days after the date of
declaration thereof, if at such date of declaration such
payment complied with the provisions hereof and provided that
at the time of payment no other Default has occurred and is
continuing;
(2) any purchase or redemption of the Capital Stock
of the Company or Subordinated Obligations of the Company made
solely by exchange for, or solely out of the net proceeds of
the substantially concurrent sale (other than to a Subsidiary
or to an employee stock ownership plan that funds its purchase
through the issuance of Indebtedness) of Capital Stock of the
Company (other than any Disqualified Stock);
(3) the exchange of Exchange Property for shares of
Exchangeable Preferred as and to the extent required under the
Certificate of Designation and the Trust Agreement;
(4) payments by the Company to the holders of the
Exchangeable Preferred on account of the return of
Extraordinary Dividends (as defined in the Trust Agreement) as
and to the extent required under Section 6(c) of the Trust
Agreement; or
(5) the Company or any such Subsidiary from
purchasing, redeeming or otherwise acquiring or retiring for
value, in one or more related or unrelated transactions in
compliance with applicable rules and regulations of the
Thailand Stock Exchange, Capital Stock of Essex International
Company Limited that the Company and its Subsidiaries do not
own so long as the aggregate cash consideration paid by the
Company and its Subsidiaries in connection with such purchase,
redemption, acquisition or retirement does not exceed $3.5
million; provided that any such Capital Stock that the Company
acquires shall be pledged to the Collateral Agent pursuant to
the Security Documents.
Section 4.11. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Subsidiary
to, make any Asset Disposition unless (i) such Asset Disposition is for Fair
Market Value, (ii) the proceeds therefrom consist of at least 85% cash or Cash
Equivalents, (iii) such Asset Disposition shall not involve any of the
Collateral unless the Company complies with Sections 4.11(c) and (d) below
42
and (iv) the Company shall apply the proceeds of such Asset Disposition to
redeem or prepay Indebtedness secured by the assets which are the subject of
such Asset Disposition in accordance with the terms of the Intercreditor
Agreement.
(b) The Company shall apply an amount equal to 100% of the Net
Cash Proceeds received from an Asset Disposition within 15 days of receipt
thereof to redeem Securities at a price equal to 100% of the principal amount
plus accrued and unpaid interest to and including the redemption date, pursuant
to this Section 4.11. All redemptions of Securities pursuant to this Section
4.11 shall be made on a pro rata basis among the Securityholder's based upon the
outstanding principal amount of Securities as of the record date of such
redemption.
(c) (1) If the Company is obligated to redeem Securities
pursuant to this Section 4.11, it shall notify the Trustee in writing of the
redemption date and the principal amount of Securities to be redeemed.
(2) Unless the Trustee consents to a shorter period,
the Company shall give each notice to the Trustee provided for
in this Section 4.11 at least three Business Days before the
applicable redemption date. Such notice shall be accompanied
by an Officers' Certificate to the effect that such redemption
will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to
such redemption shall be selected by the Company and given to
the Trustee, which record date shall be not less than two days
after the date of notice to the Trustee.
(3) If fewer than all the Securities are to be
redeemed, the Trustee shall select the Securities or portions
thereof to be redeemed pro rata (or as nearly pro rata as
practicable in the sole discretion of the Trustee based on the
principal amount of the then outstanding Securities).
Securities and portions of them that the Trustee selects shall
be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Section that apply to Securities called for
redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of
the Securities or portions of Securities to be redeemed.
(4) At least three days but not more than thirty days
before a date for redemption of Securities pursuant to Section
4.11, the Company shall mail a notice of redemption by
first-class mail to each Holder of Securities to be so
redeemed.
(5) The notice shall identify the Securities to be
redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
43
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must
be surrendered to the Paying Agent to collect the
redemption price;
(v) if fewer than all the outstanding Securities
are to be redeemed, the identification and principal
amounts of the particular Securities to be redeemed,
and that after the applicable redemption date, upon
surrender of such Security, a new Security or
Securities in principal amount equal to the
unredeemed portion will be issued;
(vii) that, unless the Company defaults in making
such redemption payment, interest on Securities (or
any portion thereof) called for redemption ceases to
accrue after the redemption date;
(viii) the Section of this indenture (and the
corresponding paragraph in the Securities) pursuant
to which the Securities called for redemption are
being redeemed; and
(ix) if any Security is being redeemed in part,
the portion of the principal amount of such Security
to be redeemed, and that after the applicable
redemption date, upon surrender of such Security, a
new Security or Securities in principal amount equal
to the unredeemed portion will be issued.
(6) At the Company's request upon reasonable notice,
the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. in such event,
the Company shall provide the Trustee with the information
required by this Section.
(7) Once notice of redemption is mailed, Securities
called for redemption become due and payable on the redemption
date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid
at the redemption price stated in the notice, plus accrued and
unpaid interest to and including the applicable redemption
date. Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any
other Holder.
(8) Prior to the redemption date, the Company shall
deposit with the Paying Agent money sufficient to pay the
redemption price of and accrued and unpaid interest on all
Securities to be redeemed on that date other than Securities
or portions of Securities called for redemption which have
been delivered by the Company to the Trustee for cancellation.
44
(9) Upon surrender of a Security that is redeemed in
part, the Company and each Guarantor shall execute and the
Trustee shall authenticate for the Holder (at the Company's
expense) a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
the Asset Sale Offer. To the extent that the provisions of any securities laws
or regulations conflict with provisions of this Section 4.11, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.11 by virtue
thereof.
Section 4.12. Limitation on Transactions with Affiliates. The Company
shall not, and shall not permit, cause or suffer any Subsidiary to, conduct any
business or enter into any transaction or series of transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of the Company or any
Subsidiary (each an "Affiliate Transaction"), except in good faith and on terms
that are set forth in writing and that are no less favorable to the Company or
such Subsidiary, as the case may be, than those that could have been obtained in
a comparable transaction on an arm's-length basis from a person not an Affiliate
of the Company or such Subsidiary. All Affiliate Transactions (and each series
of related Affiliated Transactions which are similar or part of a common plan),
involving aggregate payments or other value in excess of $100,000 shall be
approved by the Board of Directors, such approval to be evidenced by a Board
Resolution stating that the Board of Directors has determined that such
transaction complies with the provisions of this Section 4.12. Notwithstanding
the foregoing, the restrictions set forth in this Section 4.12 shall not apply
to (i) the payment of reasonable and customary directors fees to directors who
are not employees of the Company, (ii) the purchase of property or services from
an Affiliate of the Company or any Subsidiary by the Company or any Subsidiary
or sales of property or services to an Affiliate of the Company or any
Subsidiary by the Company or any Subsidiary which are in the ordinary course of
business and consistent with past practice and do not involve aggregate payments
or other value in excess of $100,000 in a single transaction or series of
related transactions, or (iii) the performance by the Company of its obligations
under the Registration Effectiveness Agreement or the Securities Purchase
Agreement dated as of May 14, 1993 by and among the Company and the investment
manager of certain funds named therein. Anything contained in this Indenture to
the contrary notwithstanding, the Company shall not, and shall not permit any
Subsidiary to, engage in any Affiliate Transaction with or for the benefit of
the Inactive Subsidiaries.
Section 4.13. Change of Control.
(a) Upon a Change of Control, each Holder shall have the right
to require that the Company repurchase such Holder's Securities, in whole or in
part, at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest to and including
45
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant Interest Payment
Date), in accordance with the terms contemplated in Section 4.13(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that
such Holder has the right to require the Company to purchase
such Holder's Securities at a purchase price in cash equal to
100% of the principal amount thereof plus accrued and unpaid
interest to and including the date of repurchase (subject to
the right of Holders of record on the relevant record date to
receive interest due on the relevant Interest Payment Date);
(2) the circumstances and relevant facts regarding
such Change of Control (including information with respect to
pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control);
(3) the repurchase date (which shall be no earlier
than 15 days nor later than 60 days from the date such notice
is mailed);
(4) the date until which the Holders may elect to
have their Securities repurchased (such date to be determined
in accordance with clause 4.13((c) below);
(5) the date until which electing Holders may
withdraw their election to have their Securities repurchased
(such date to be determined in accordance with clause 4.13(c)
below); and
(6) the instructions determined by the Company,
consistent with this Section 4.13, that a Holder must follow
in order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least five Business Days
prior to the repurchase date. Holders will be entitled to withdraw their
election if the Trustee and the Company receive not later than three Business
Days prior to the purchase date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security which was delivered for purchase by the Holder and a statement that
such Holder is withdrawing his election to have such Security purchased. Holders
whose Securities are repurchased only in part will be issued new Securities
equal in principal amount to the unpurchased portion of the Securities
surrendered.
(d) On the repurchase date, all Securities repurchased by the
Company under this Section 4.13 shall be delivered by the Trustee for
cancellation, and the Company shall pay the
46
purchase price plus accrued and unpaid interest to and including the date of
repurchase to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.13. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.13, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.13 by virtue
thereof.
Section 4.14. Ownership of Stock of Subsidiaries. The Company shall at
all times maintain, and cause each Subsidiary to maintain, the percentage
ownership (as listed in Schedule 4.14 attached hereto) of each class of voting
securities of, and all other equity securities (other than Preferred Stock which
is not Disqualified Stock) of each Subsidiary existing on the date on which the
Securities are originally issued, except any Subsidiary that shall be (i)
disposed of in its entirety in accordance with Section 4.11 or (ii) consolidated
or merged with or into the Company in accordance with Section 5.1 or with or
into another wholly-owned (directly or indirectly) Subsidiary, except that the
Guarantors shall not be permitted to merge with or into any Subsidiary which is
not a Guarantor unless such merger complies with Section 5.1.
Section 4.15. Impairment of Security Interest; Removal of Liens.
(a) Except as expressly permitted by the terms of this
Indenture, the Security Documents or the Intercreditor Agreement, the Company
shall not, and shall not permit any Subsidiaries to, take or knowingly or
negligently or otherwise omit to take any action, which action or omission might
or would have the result of materially impairing the security interest in favor
of the Collateral Agent on behalf of the Securityholders with respect to the
Collateral.
(b) On the date hereof, the Company shall deliver, and shall
cause each Subsidiary to deliver, to the Trustee evidence, in form and substance
satisfactory to the Trustee and the Holders, that no financing statement,
security agreement, chattel mortgage, real estate mortgage or other document is
filed or recorded with respect to any of the Collateral other than Liens
permitted under Section 4.7. Promptly upon the Company or any Subsidiary
becoming aware of any financing statement, security agreement, chattel mortgage,
real estate mortgage or other document being filed or recorded with respect to
the Collateral which is not a Lien permitted under Section 4.7, the Company or
any such Subsidiary shall immediately take all appropriate actions to terminate
and remove such filing or recording and shall diligently pursue the termination
or removal of such filing or recording.
(c) The release of any Collateral from the terms hereof and of
the Security Documents and the Intercreditor Agreement will not be deemed to
impair the security under this Indenture in contravention of the provisions
hereof if and to the extent such Collateral is released pursuant to the Security
Documents and the Intercreditor Agreement. Each of the Holders
47
acknowledges and agrees that a release of Collateral in accordance with the
terms of the Security Documents and the Intercreditor Agreement will not be
deemed for any purpose to be an impairment of the security under this Indenture
in contravention of the provisions hereof.
Section 4.16. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restrictions on the ability of any Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company except:
(a) any encumbrance or restriction pursuant to the Revised
Debt Agreements, or the Senior Subordinated Notes as limited by the
Intercreditor Agreement or any other agreement in effect at or entered into on
the date on which the Securities were originally issued;
(b) any encumbrance or restriction with respect to a
Subsidiary pursuant to an agreement relating to any Indebtedness issued by such
Subsidiary on or prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness issued as consideration in, or to provide all
or any portion of the funds utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Company) and outstanding on such date;
(c) any encumbrance or restriction pursuant to an agreement
effecting a refinancing of Indebtedness issued pursuant to an agreement referred
to in clause (a) or (b) of this Section or contained in any amendment to an
agreement referred to in clause (a) or (b) of this Section; provided, however,
that the encumbrances and restrictions contained in any such refinancing
agreement or amendment are not more restrictive than the encumbrances and
restrictions contained in the agreements so refinanced or amended;
(d) any encumbrance or restriction with respect to a foreign
Subsidiary imposed by the country under whose laws such Subsidiary is organized
or a country in which such Subsidiary is doing business provided that (i) the
encumbrance or restriction was imposed despite the commercially reasonable best
efforts of the Company and such Subsidiary to avoid such imposition and (ii) the
Company and such Subsidiary have used and are using commercially reasonable best
efforts to promptly remove such encumbrance or restriction;
(e) customary net worth provisions contained in leases and
other agreements entered into by a Subsidiary in the ordinary course of
business, or
(f) customary provisions in instruments or agreements relating
to a Lien prohibiting the transfer of the property subject to such Lien.
48
Section 4.17. Limitation on Business. The Company shall not, and shall
not permit any of the Subsidiaries to, engage in any business other than the
business in which it is engaged on the date hereof.
Section 4.18. Special Covenants of the Guarantors; Guarantees.
(a) The Guarantors shall comply with each of the covenants
contained in this Indenture that impose restrictions or obligations on the
Guarantors notwithstanding that the text of such covenant is worded as a
restriction on or obligation of the Company with respect to the Guarantors.
(b) The Company and the Guarantors shall at all times ensure
that the Guarantee shall remain in full force and effect and shall not be
subordinated in right of payment to any indebtedness of the Guarantors.
Section 4.19. Limitation of Plans of liquidation. The Company shall not
adopt any plan of liquidation (other than such a plan in connection with a
permitted merger, consolidation, sale of assets or other similar transaction as
set forth in Section 5.1) which provides for, contemplates, or the effectuation
of which is preceded by (a) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company other than substantially
as an entirety in accordance with Section 5.1, and (b) the distribution of an
the proceeds of such sale, lease, conveyance or other disposition unless the
Company makes adequate provision for the satisfaction of the Company's
obligations hereunder and under the Securities as to the payment of principal
and interest under the Securities. The Company shall not make any liquidating
distribution unless it shall deliver to the Trustee an Officers' Certificate at
least 5 Business Days prior to the making of such liquidating distribution to
the effect that the Company has complied with this Section 4.19.
Section 4.20. Limitation on Amendment of Certain Agreements.
(a) Subject to the terms of the Intercreditor Agreement, the
Company may not, and shall cause the Subsidiaries to not, amend, modify or
terminate any of the Revised Debt Agreements, any Refinancing Agreement or any
other material agreement in any way which adversely affects the Collateral or
the priority of the Lien of the Holders of the Securities in and to the
Collateral; provided, however, that if an Event of Default (other than an Event
of Default solely arising under Section 6.1(e)) has occurred and continues to
exist, the Company may not, and shall cause the Subsidiaries to not, amend,
modify or terminate the Revised Debt Agreements, any Refinancing Agreement or
any other material agreement in any way.
(b) The Company will not, and will not permit any Subsidiary
to, amend or modify, or permit or consent to any amendment or modification of,
the Security Documents or the Intercreditor Agreement in any way which would be
adverse to the Securityholders.
49
Section 4.21. Redemption of Solomon Brothers Investment. On or before
the dates set forth below, the Company shall give written notice to Solomon
Brothers (and shall not rescind such notice), pursuant to the terms of the
Solomon Brothers' Participating Preferred Class B Stock, in order to effectuate
the redemption for cash by Solomon Brothers of the number of shares of Solomon
Brothers' Participating Preferred Class B Stock owned by the Company set forth
below opposite such date (the proceeds of which shall be applied to redeem the
Securities pursuant to Section 3.2):
Number of Shares of
Solomon Brothers'
Participating Preferred
Notice Date Class B Stock
----------- -----------------------
March 1, 1994 70,000
March 1, 1995 55,000
March 1, 1996 55,000
March 1, 1997 55,000
March 1, 1998 55,000
March 1, 1999 37,000
Section 4.22. Agreements Relating to Collateral. The Company and each
Guarantor jointly and severally represent and warrant to each Holder and to the
Trustee that prior to the initial issuance of Securities under this Indenture
(i) the Company and the Guarantors shall have filed financing statements on form
UCC-1 with respect to the Collateral other than Real Property and mortgages or
deeds of trust with respect to the Collateral which is Real Property that are
necessary to grant to the Collateral Agent perfected first priority liens
therein (other than Permitted Liens) and (ii) the Company and the Guarantors
shall deliver evidence of such filings to the Trustee and each Holder.
Section 4.23. Notices.
(a) The Company will promptly give notice to the Trustee (i)
of any violation of any Environmental Law that the Company or any Subsidiary
reports in writing or is reportable by such person in writing (or for which any
written report supplemental to any oral report is made) to any federal, state or
local environmental agency, (ii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, or any federal, state or local
environmental agency or board, that has the Potential to affect the assets,
liabilities, financial conditions or operations of the Company or any
50
subsidiary, or the Collateral Agent's security interests on behalf of the
Securityholders and (iii) the taking of any removal or remedial action in
response to the actual or alleged presence of Hazardous materials on the Real
Property. All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action and
the Company's and its Subsidiaries' response thereto. Copies of all written
communications with any governmental agency or other persons and any reports
generated in connection therewith shall be provided to the Trustee forthwith.
(b) The Company will, immediately upon becoming aware thereof,
notify the Trustee and the Collateral Agent in writing of any setoff, claims
(including, with respect to the Real Property, environmental claims),
withholdings or other defenses to which any of the Collateral, or the Collateral
Agent's rights with respect to the Collateral, are subject.
(c) The Company will, and will cause each Subsidiary to, give
notice to the Trustee in writing within fifteen days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Company or any Subsidiary or to which the Company or
any Subsidiary is or becomes a party involving an uninsured claim against the
Company or any Subsidiary that could have a Material Adverse Effect on the
Company or any Subsidiary and stating the nature and status of such litigation
or proceedings. The Company will, and will cause each Subsidiary to, give notice
to the Trustee, in writing, in form and detail satisfactory to the Trustee,
within ten days of any judgment not covered by insurance, final or otherwise,
against the Company or any Subsidiary in an amount in excess of $500,000.
(d) The Company will, and will cause each Subsidiary to, give
prompt written notice to the Trustee upon the termination of any employee
benefit plan.
(e) The Company will, and will cause each Subsidiary to, give
prompt notice to the Trustee of any default under or termination of, any of the
Revised Debt Agreements or Refinancing Agreements or the Senior Subordinated
Notes.
Section 4.24. Corporate Existence; Maintenance of Properties. The
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises and those
of the Subsidiaries. The Company (a) will cause all of its properties and those
of the Subsidiaries used or useful in the conduct of its business or the
business of the Subsidiaries to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment, ordinary wear and
tear excepted, (b) 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, and (c)
will, and will cause each of the Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided that
nothing in this Section 4.23 shall prevent the Company from discontinuing the
operation and maintenance of any of its properties or any of those of the
51
Subsidiaries if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its or any of the Subsidiaries' businesses.
Section 4.25. Insurance. The Company shall maintain, and shall cause
each of the Subsidiaries to maintain, with financially sound and reputable
insurers insurance with respect to their properties and business against such
casualties and contingencies as shall. be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas (which may include reasonable self insurance). Without limiting the
foregoing, the Company and each of the Subsidiaries will (i) keep all of its
physical property, including, without limitation, inventory, insured against
theft, fire, flood and extended coverage risks in amounts and with deductibles
equal to those generally maintained by businesses engaged in similar activities
in similar geographic areas, (ii) maintain all such workers' compensation or
similar insurance as may be required by law, and (iii) maintain, in amounts and
with deductibles equal to those generally maintained by businesses engaged in
similar activities in similar geographic areas, general public liability
insurance against bodily injury, death or property damage occurring on, in or
about the properties of the Company and the Subsidiaries, business interruption
insurance and product liability insurance.
Section 4.26. Taxes. The Company shall, and shall cause each Subsidiary
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue and subject to penalty or interest, all taxes, assessments
and other governmental charges imposed upon it, the Real Property, its sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a Lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate. proceedings
and if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and provided further, that the Company and each
Subsidiary will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any Lien that may
have attached as security therefor.
Section 4.27. Inspection of Properties and Books. The Company shall
permit, and shall cause each Subsidiary to permit, the Trustee (or the Trustee's
designated representative), at the expense of the Company or the Subsidiaries,
as the case may be, to visit and inspect any of the properties of the Company
and the Subsidiaries, at least as frequently as once during each fiscal quarter,
to examine the books of account of the Company and the Subsidiaries (and to make
copies thereof and extracts therefrom), and to discuss the affairs, finances and
accounts of the Company and the subsidiaries with, and to be advised as to the
same by, the Officers and the officers of the Subsidiaries, all at such
reasonable times and intervals as the Trustee may reasonably request.
Section 4.28. Compliance with Laws, Contracts, Licenses, and Permits.
The Company shall comply, and shall cause each Subsidiary to comply, with (a)
the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws, (b) the provisions of its charter documents
and by-laws, (c) all agreements and instruments by which it
52
or any or its properties may be bound and (d) all applicable decrees, orders and
judgments, except to the extent that any such noncompliance would not have a
Material Adverse Effect. If any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Company or any Subsidiary may
fulfill any of its obligations hereunder, any of the Revised Debt Agreements or
Refinancing Agreements, or the Security Documents to which it is a party, the
Company shall, or (as the case may be) shall cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Company or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Trustee with evidence thereof.
Section 4.29. Employee Benefit Plans. The Company shall, and shall
cause each Subsidiary to, (i) promptly upon filing the same with the Department
of Labor or Internal Revenue Service, furnish to the Trustee a copy of the most
recent actuarial statement required to be submitted under ss. 103(d) of ERISA
and Annual Report, Form 5500, with all required attachments, in respect of each
Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Trustee
any notice, report or demand sent or received in respect of a Pension Plan under
ss.ss. 302, 4041, 4042, 4043, 4063, 4065, 4066 or 4068 of ERISA, or in respect
of a Multiemployer Plan (as such term is defined in Section 4001(a)(3) of
ERISA), under ss.ss. 4041A, 4202, 4219, 4242, or 4245 of ERISA.
Section 4.30. Use of Proceeds. The Company will use the proceeds from
the issuance and sale of the Securities to refinance and refund the Old Notes.
Section 4.31. After Acquired Real Estate. The Company shall, and shall
cause each Subsidiary to, promptly notify the Trustee and the Collateral Agent
of any Real Property located in the United States which it may hereafter
acquire, whether as owner or lessee ("New Real Property"). Subject to the
applicable restrictions of the lease arrangement with respect to New Real
Property which is leased, and subject to the terms of the Intercreditor
Agreement, the Company and each Subsidiary at their expense, will upon the
request of the Collateral Agent (a) execute, deliver, and perform all such
mortgages, deeds of trust, Uniform Commercial Code fixture filings, collateral
assignments, and all such other instruments, and take all such actions, as shall
be reasonably necessary or appropriate to grant to the Collateral Agent a
security interest in such New Real Property and any fixtures and personal
property located thereon and to record, and perfect a lien on such New Real
Property, as security for the obligations due under this Indenture and the other
indebtedness secured pursuant to the Security Documents, all in form and
substance reasonably satisfactory to the Collateral Agent (collectively, the
"Additional Mortgages"), and furnish the Collateral Agent with a policy of
mortgage title insurance with respect thereto in an amount of coverage, from an
insurer, and in form and substance reasonably satisfactory to the Collateral
Agent; (b) pay any and all applicable title insurance premiums, survey charges,
recording fees and mortgage taxes relating to the Additional Mortgages; and (c)
furnish the Collateral Agent with such other records of corporate proceedings
with respect thereto and related legal opinions in form and substance reasonably
satisfactory to the Collateral Agent as the Collateral Agent may reasonably
request to carry out the provisions of this Section 4.31; provided,
53
however, that the provisions of this sentence shall not apply to any leasehold
interest with annual rental payments less than or equal to $100,000.
Section 4.32. Consignment Filings. The Company shall cause, and shall
cause each Subsidiary to cause, to be executed, delivered, filed and maintained
in full force and effect all appropriate Uniform Commercial Code financing
statements necessary for the continued perfection of the Company's or each
Subsidiary's ownership or other interests in any inventory consigned by such
Company or Subsidiary.
Section 4.33. Change of Name. The Company shall, and shall cause each
Subsidiary to, immediately notify the Trustee of any change in its name and will
duly execute and deliver appropriate financing statements and other documents
necessary to enable the Collateral Agent to maintain continuously perfected any
security interests granted under Article 11 and the Security Documents.
Section 4.34. Accrual of Interest for Income Tax Purposes. The Company
covenants and agrees for the benefit of each Holder of Securities that (i) the
Company will not claim any deduction for or otherwise report any accrual of
interest (including original issue discount) on the Securities at a rate other
than the stated interest rate compounded monthly in any Federal income tax
return, claim for refund, or other statement, report or submission made to the
Internal Revenue Service (except to the extent that there may be no reasonable
basis in the law to do otherwise); and (ii) the Company will make any election
(or take any similar action) which may become necessary to comply with clause
(i). At the reasonable request of any Holder of Securities (at the expense of
such Holder), the Company will join in the submission to the Internal Revenue
Service of a request for a ruling that interest (including original issue
discount) will accrue on the Securities at a rate equal to the stated interest
rate compounded monthly. In addition the Company will reasonably cooperate with
any Holder of Securities in any litigation, appeal, or other proceeding relating
to the accrual of interest (including original issue discount) on the
Securities. To the extent possible, the principles of this Section 4.34 shall
also apply with respect to state and local income taxes (including franchise
taxes based on income).
Section 4.35. Further Instruments and Acts. Upon request of the
Trustee, the Company and the Guarantors will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
ARTICLE 5. SUCCESSOR COMPANY
Section 5.1. When Company or Guarantors May Merge or Transfer Assets.
Neither the Company nor the Guarantors shall consolidate with or merge with or
into any other person, or sell, convey, lease, transfer or otherwise dispose of
all or substantially all its properties and assets to any person in any
transaction or series of transactions, unless:
54
(a) the resulting, surviving or transferee person (if not the
Company or the Guarantors, as the case may be) shall be a person organized and
existing under the laws of the United States, any State thereof or the District
of Columbia.
(b) such person shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of the Company or the Guarantors, as the
case may be, under the Securities, this Indenture, including, without
limitation, the Guarantee under Article 10 hereof, and the Security Documents;
(c) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the resulting, surviving or transferee Person or any Subsidiary
as a result of such transaction as having been issued by such person or such
Subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing;
(d) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the resulting, surviving or transferee person or any Subsidiary
as a result of such transaction as having been issued by such person or
Subsidiary at the time of such transaction), the resulting, surviving or
transferee person (whether or not such person is the Company or a Guarantor, as
the case may be) shall be able to issue $1.00 of additional Indebtedness in
accordance with Section 4.6(a); and
(e) the Company shall have delivered to the Trustee prior to
the consummation of the proposed transaction an Officers' Certificate to the
foregoing effect and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture comply with
this Indenture and that the supplemental indenture constitutes the legal, valid
and binding obligation of the successor or surviving corporation enforceable in
accordance with its terms, subject to customary exceptions.
In the case of any consolidation, merger, sale, conveyance, lease,
transfer, other disposition involving the Company or the Guarantors, the
resulting, surviving or transferee person shall become the successor Company or
a successor Guarantor, as the case may be, and shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or the
Guarantors, respectively, under this indenture, but the predecessor Company and
Guarantors in the case of a sale, conveyance, lease, transfer or other
disposition shall not be released from its obligation to pay the principal of
and interest on the Securities.
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ARTICLE 6. DEFAULTS AND REMEDIES
Section 6.1. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, and such default continues for a
period of ten days; or
(b) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, upon any offer to purchase such Security required
hereunder or otherwise; or
(c) the Company or the Guarantors fail to comply with Section
5.1; or
(d) the Company or the Guarantors fail to comply with any of
its agreements in the Securities or this Indenture (other than those referred to
in clauses (a), (b), or (c) above) or the Security Documents and such failure
continues for 30 days after the notice specified below; or
(e) a default under, or acceleration prior to the maturity of,
or failure to pay at the Stated Maturity of, any Indebtedness (other than
Securities) of the Company, the Guarantors, or any Subsidiary aggregating in
excess of $1,000,000 whether such Indebtedness now exists or shall be hereafter
created; or
(f) the Company, any Guarantor or any Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(1) becomes insolvent or bankrupt;
(2) is generally not paying its debts as they become
due;
(3) commences a voluntary case;
(4) consents to the entry of an order for relief
against it in an involuntary case;
(5) consents to the appointment of a custodian of it
or for any substantial part of its property; or
(6) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to insolvency; or
56
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company, any Guarantor
or any Subsidiary in an involuntary case;
(2) appoints a Custodian of the Company, any
Guarantor or any Subsidiary or for any substantial part of its
property; or
(3) orders the winding up or liquidation of the
Company, any Guarantor or any Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree
remains unstayed and in effect for 60 days; or
(h) (1) any of the provisions contained in Article 11 or
the Security Documents shall cease to be in full force and effect or shall cease
to give the Collateral Agent in any material respect the Liens, rights, powers
and privileges purported to be created thereby (including a perfected security
interest in and Lien on all of the Collateral to the extent provided for in
Article 11 or the Security Documents in favor of the Collateral Agent for the
benefit of the parties thereto subject to no other Liens other than Liens
permitted hereunder), and, in each case, such state of facts continues for 10
days after the notice specified below; or
(2) the Guarantees shall cease to be in full force
and effect in any material respect or any provision of Article 10 shall cease to
be in full force and effect in any material respect, or any Guarantor or any
person acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor s obligations thereunder in any material respect, and, in each case,
such state of facts continues for ten days after the notice specified below; or
(i) any judgment or decree for the payment of money in excess
of $1,500,000 (excluding amounts covered by insurance as to which the insurer
has not denied liability), whether individually or in an aggregate amount, is
rendered against the Company, any Guarantor or any Subsidiary or any of their
respective properties and is not discharged and either (1) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree or
(2) there is a period of 60 days following such judgment or decree during which
such judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of subclause (2), such default continues for ten days
after the notice specified below;
(j) any representation or warranty made by the Company, any
Guarantor or any Subsidiary herein, in the Securities or in the Security
Documents, or made by the Company, any Guarantor or any Subsidiary in any
statement or certificate furnished by the Company in connection with the sale,
issuance or delivery of the Securities or furnished by the Company, any
57
Guarantor or any Subsidiary pursuant hereto, pursuant to the Securities or
pursuant to the Security Documents is untrue in any material respect as of the
date of issuance or making thereof; or
(k) the Company fails to comply with Section 11.4.
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
A Default under clauses (d), (h) or (i) of this Section 6.1 is not an
Event of Default until the Trustee or the Holders of at least 51% in principal
amount of the Securities then outstanding notify the Company and the Trustee of
the Default and the Company does not cure such Default within the time specified
after receipt of such notice. Such notice must specify the Default, demand that
it be remedied and state that such notice is a "Notice of Default."
The Company shall promptly deliver to the Trustee, and in no event
later than 3 Business Days after becoming aware of the occurrence thereof,
written notice in the form of an Officers' Certificate of any event which with
the giving of notice or the lapse of time or both would become an Event of
Default under clauses (d), (e), (f), (h), (i) or (j) of this Section 6.1, its
status and what action the Company is taking or proposed to take with respect
thereto.
Section 6.2. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.1(f) or (g) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 51% in principal amount of the outstanding Securities by written
notice to the Company and the Trustee, may declare all unpaid principal and
accrued and unpaid interest on all the Securities to be due and payable. Upon
such a declaration, such principal and accrued and unpaid interest shall be due
and payable immediately If an Event of Default specified in Section 6.1(f) or
(g) with respect to the Company occurs, the unpaid principal and accrued unpaid
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Securityholders. Upon payment in full of such amounts and all other amounts
to which the Trustee or any Holder is entitled under this Indenture or the
Securities, all of the Company's obligations under the Securities and this
Indenture shall terminate. The Holders of a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if (i) all existing Events of Default, other
than the non-payment of the, principal of and interest on the Securities and of
interest on defaulted interest which has become due solely by such declaration
of acceleration, have been cured or waived, (ii) to the extent the payment of
such interest is lawful, interest on overdue installments of accrued and unpaid
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iii) the rescission would not
conflict with any judgment or decrees of a court of competent jurisdiction and
(iv) all payments due to the Trustee and any predecessor
58
Trustee under Section 7.7 have been made; but no such rescission shall extend to
or affect any subsequent Event of Default or impair any right Consequent
thereto.
Section 6.3. Other Remedies. If an Event of Default occurs and is
continuing, subject to the provisions of the Intercreditor Agreement relating to
the exercise of remedies against the Collateral, the Trustee may pursue any
available remedy to collect the payment of principal of or accrued and unpaid
interest on the Securities or to enforce the performance of any provision of the
Securities, the Guarantees or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the light or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.4. Waiver of Past Defaults. The Holders of at least 51% in
principal amount of the Securities by written notice to the Trustee may waive an
existing Default or Event of Default and its consequences except (i) a Default
or Event of Default in the payment of the principal of (other than principal due
by reason of acceleration) and accrued and unpaid interest on a Security or (ii)
a Default or Event of Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected. When a
Default or Event of Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right thereto.
Section 6.5. Control by Majority. The Holders of at least 51% in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law, this Indenture or the
Intercreditor Agreement or, subject to Section 7.1, that the Trustee determines
is unduly prejudicial to the rights of other Securityholders or would involve
the Trustee in personal liability; provided, however; that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
Section 6.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture, the Guarantees or the Securities unless:
(1) the Holder has previously given to the Trustee written
notice stating that an Event of Default is continuing;
(2) the Holders of at least 51% in principal amount of the
then outstanding Securities make a written request to the Trustee to
pursue the remedy;
59
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity reasonably satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of at least 51% in principal amount of the
then outstanding Securities do not give the Trustee a written direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.7. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and accrued and unpaid interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.8. Collection Suits by Trustee. If an Event of Default in
payment of interest or principal specified in Section 6.1 (a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company or the Guarantors for the whole amount
of principal and accrued and unpaid interest (together with interest on such
unpaid interest at the Defaulted Interest Rate to the extent permitted by law)
and the amounts provided for in Section 7.7.
Section 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company (or any other
obligor of the Securities), or any of its creditors or its property and, unless
prohibited by law or applicable regulations, may vote on behalf of the Holders
in any election of a trustee in bankruptcy or other person performing similar
functions and shall be entitled to and empowered to collect, receive or
distribute any moneys or other property payable or deliverable on any such
claims, and any Custodian in such judicial proceeding is hereby authorized by
each Holder to make payments to the Trustee and, in the event that the Trustee
shall consent to the making of such Payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.7. Nothing contained herein shall
be deemed to authorize the Trustee to authorize, or consent to, or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or Holders thereof.
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Section 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7.
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest (including overdue interest),
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a written
notice that states the record date, the payment date and amount to be paid.
Section 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonably attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in principal amount of the then outstanding Securities.
Section 6.12. Waiver of Stay or Extension Laws. The Company and the
Guarantors (to the extent permitted by law) shall not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company and the Guarantors (to the extent that it may lawfully do so)
hereby expressly waive all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7. TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and
61
skill in their exercise as a prudent person would exercise or use under the
circumstance in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of
clause (b) of this Section 7.1;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts;
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.5;
(4) the Trustee shall not be deemed to know of any
Default or Event of Default (other than an Event of Default
described in Section 6.1(a) or (b)) or any fact or
circumstance upon the occurrence of which it might be required
to take action hereunder unless one of its Trust Officers has
actual knowledge thereof or it has received written notice
thereof at its corporate trust office; and
(5) the Trustee shall not be responsible for
overseeing the performance of its duties by the Collateral
Agent or for any act or omission of the Collateral Agent.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to clauses (a), (b) and (c) of this Section 7.1.
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(e) The Trustee may refuse to perform any duty or exercise any
right or power under this Indenture at the request of the Holders unless it
receives indemnity satisfactory to it against any loss, cost, liability or
expense from such Holders.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company
(g) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(h) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(i) 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.
(j) The Trustee shall enter into the Intercreditor Agreement
as, and shall perform all obligations of, the Senior Note Claimants'
Representative (as defined in the Intercreditor Agreement) thereunder and shall,
in the performance thereof, have all of the protections and immunities available
to it as Trustee hereunder.
Section 7.2. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate and/or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however that the Trustee's conduct does not
constitute willful misconduct, negligence or bad faith.
63
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
Section 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-Registrar
or co-Paying Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in the Indenture or in any document issued in connection with the
sale of the Securities or in the Securities other than the Trustee's certificate
of authentication.
Section 7.5. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder notice of the Default or Event of Default within 15
days after it occurs. Except in the case of a Default or Event of Default in
payment of principal of or interest on any Security, the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Securityholders.
Section 7.6. Reports by Trustee to Holders. Within 60 days after May 15
of each year beginning with the May 15 following the date of this Indenture, the
Trustee shall mail to each Securityholder a brief report dated as of April 1
with respect to the matters set forth in TIA ss. 313 (a).
Section 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing for all services rendered by it hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify and hold harmless the Trustee or any
predecessor Trustee against any and all loss, liability, damage, claim or
expense (including attorneys' fees and taxes other than taxes based upon, or
measured or determined by reference to, the income of the Trustee) incurred by
it in connection with the administration of this trust and the performance of
its duties hereunder. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not
64
relieve the Company of its obligations hereunder. The Company shall defend the
claim with the cooperation of the Trustee. The Trustee may, at its option, have
separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith. The Company need not pay for any
settlement made without its written consent which consent shall not be
unreasonably withheld.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.1(f) or (g), the expenses are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee. The Trustee may resign at any time
by so notifying the Company. The Holders of at least 51% in principal amount of
the then outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company in writing and may appoint a successor Trustee. The
Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.9;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of at least 51% in principal amount of the then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately thereupon,
the resignation or removal of the remaining Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of its
65
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.6.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the then outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.9, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.6 shall continue for the
benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In the event that at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor Trustee, and deliver such Securities so
authenticated, any successor to the Trustee may authenticate such Securities
either in the name of any predecessor hereunder or in the name of the successor
to the Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that
the certificate of the Trustee shall have.
Section 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b), including the optional provision permitted by the second sentence of
TIA ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
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ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all
outstanding Securities (other than Securities replaced pursuant to Section 2.8)
for cancellation or (ii) all outstanding Securities have become due and payable
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity all outstanding Securities, including interest thereon (other than
Securities replaced pursuant to Section 2.8), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Sections 8.1(c) and 8.6, cease to be of further effect. The Trustee
shall acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at
any time may terminate all its obligations under the Securities and this
Indenture ("defeasance option"). If the Company exercises its defeasance option,
payment of the Securities may not be accelerated because of an Event of Default.
Upon satisfaction of the conditions set forth herein and upon request of the
Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in paragraphs 2 and 10 and the first sentence of paragraph I of the
Securities and Sections 2.4, 2.5, 2.6, 2.7, 2.8, 4.1, 7.7, 7.8, 8.5 and 8.6 of
this Indenture and the obligations of the Guarantors under Article 10 of this
Indenture in respect thereof shall survive until the Securities have been paid
in full. Thereafter, the Company's obligations in Sections 7.7, 8.5 and 8.6 of
this Indenture and the obligations of the Guarantors under Article 10 of this
Indenture in respect thereof shall survive.
Section 8.2. Conditions to Defeasance. The Company may exercise its
defeasance option only if:
(1) the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations for the payment of
principal of, and accrued and unpaid interest on, the Securities to
maturity or redemption and all other sums payable by it hereunder, as
the case may be;
(2) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts (but not more than such amounts) as will be
sufficient
67
to pay principal and interest when due on all the Securities to
maturity or redemption, as the case may be;
(3) 367 days pass after the deposit is made and
during the 367-day period no Default specified in Section 6.1 (f) or
(g) with respect to the Company occurs Which is continuing at the end
of the period;
(4) no Default has occurred and is continuing on the
date of such deposit and after giving effect thereto;
(5) the deposit does not constitute at default under
any other agreement binding on the Company;
(6) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940;
(7) the Company shall have delivered to the Trustee
an Opinion of Counsel stating that (i) the Company has received from,
or there has been published by, the internal Revenue Service a ruling,
or (ii) since the date of this Indenture there has been a change in the
applicable Federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
Securityholders 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; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article '3.
Section 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and accrued and unpaid interest on the Securities.
Section 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
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Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors
Section 8.5. Indemnity for Trust Costs. The Company shall pay and shall
indemnify the Trustee against any other expenses and costs incurred by the trust
created by this Article 8 including, without limitation, any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government obligations.
Section 8.6. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such money or U.S. Government Obligations is
able to be applied in accordance with this Article 8; provided, however, that,
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9. AMENDMENTS
Section 9.1. Without Consent of Holders. The Company, the Guarantors
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(3) to provide for the assumption of the Company's or
any of the Guarantors' obligations to the Holders in the case of a
merger or acquisition as set forth in Section 5.1;
(4) to add guarantees with respect to the Securities;
(5) to add to the covenants of the Company or the
Guarantors for the benefit of the Holders or to surrender any right or
power herein conferred upon the Company or the Guarantors; or
69
(6) to make any change that does not adversely affect
the rights of any Securityholder.
Upon the written request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, the
Trustee shall join with the Company in the execution of any supplemental
indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations which may be therein contained,
but the Trustee shall not be obligated to enter into such supplemental indenture
which adversely affects its own rights, duties or immunities under this
Indenture or otherwise.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment.
Section 9.2. With Consent of Holders. The Company, the Guarantors and
the Trustee may amend this Indenture or the Securities with the written consent
of the Holders of at least a majority in principal amount of the then
outstanding Securities and the Holders of at least 51% in principal amount of
securities then outstanding may waive compliance in a particular instance by the
Company or a Guarantor with any provision of this Indenture or the Securities
expect those provisions of this Indenture which relate to the Trustee's rights,
duties and immunities; provided, that, without the consent of each
Securityholder affected thereby such an amendment or waiver may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment or waiver;
(2) reduce the rate of or extend the time for payment
of interest on any Security;
(3) reduce the principal of or extend the Stated
Maturity of any Security;
(4) change the time at which or alter the amount of
which any Security may or shall be redeemed;
(5) make any Security payable in money other than
that stated in the Security; or
(6) make any change in Section 6.4 or 6.7 or this
Section 9.2.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to all of the Securityholders a notice briefly describing
such amendment or waiver.
Section 9.3. Revocation and Effect of Consents and Waivers. An
amendment or waiver becomes effective on the date on which the Trustee received
an Officers' Certificate
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certifying that the Holders of the requisite principal amount of Securities have
consented to the amendment or waiver. Until an amendment or waiver becomes
effective, a consent to an amendment, supplement or a waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of that Security or
portion of the Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent, supplement or waiver is not made on
the Security. However, any such Holder or subsequent Holder may revoke that
consent, supplement or waiver as to such Holder s Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment, supplement or waiver
becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent to
any amendment, supplement, or waiver or take any other action described above or
required or permitted to be taken pursuant to this Indenture. If a record date
is fixed, then notwithstanding the immediately preceding paragraph, those
persons who were Securityholders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to give such consent to any
amendment, supplement, or waiver or to revoke any such consent previously given
or to take any such action, whether or not such persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
Section 9.4. Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of a Security, the Trustee may require
the Holder of the Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security regarding the changed terms and return
it to the Holder and may place such notation on any Security thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue, and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make the
appropriate notation or to issue a new Security shall not affect the validity of
such amendment, supplement or waiver.
Section 9.5. Trustee to Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee need not sign it. In signing such amendment the Trustee
shall be entitled to receive indemnity reasonably satisfactory to it and to
receive, and (subject to Section 7.01) shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel stating that such amendment
is authorized or permitted by this Indenture.
Section 9.6. Payment for Consent. Neither the Company, any Affiliate of
the Company nor any Subsidiary shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or agreed to be paid to all Holders which so
consent, waive or
71
amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
Section 9.7. Execution of Supplemental Indentures. In executing or
accepting the additional trusts created by any supplemental indenture permitted
by this Article 9 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 and
that such supplemental indenture is a valid and legally binding obligation of
the Company enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally and to general equity principles.
Section 9.8. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article 9, 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 Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
ARTICLE 10. GUARANTEE
Section 10.1. Guarantee. Each Guarantor, jointly and severally, hereby
unconditionally and irrevocably guarantees to each Holder and to the Trustee and
its successors and assigns (a) the full ,and Punctual payment of principal of
and interest on the Securities when due (taking into account all applicable
grace periods provided hereunder, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
this Indenture and the Securities and (b) the full and punctual performance of
all other obligations of the Company under this Indenture, the Securities, and
the Security Documents (all the foregoing described in (a) and (b) being
hereinafter collectively called the "Obligations"). Each Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice or further assent from the Guarantors, and that such Guarantors
will remain bound under this Article 10 notwithstanding any extension or renewal
of any Obligation.
Each Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder, the Trustee or the Collateral Agent to any security held for payment of
the Obligations.
The Guarantors waive presentation to, demand of payment from and
protest to the Company of any of the Obligations and also waive notice of any
default under the Obligations. The obligations of the Guarantors - hereunder
shall not be subject to any reduction, limitation, impairment or termination for
any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim,
72
recoupment or termination whatsoever or by reason of the invalidity, illegality
or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of
the Guarantors hereunder shall not be discharged or impaired or otherwise
affected by (a) the failure of any Holder or the Trustee to assert any claim or
demand or to enforce any right or remedy against the Company or any other person
under this Indenture, the Securities, the Security Documents or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities, the Security Documents or any other
agreement; (d) the release of any security held by any Holder, the Trustee or
the Collateral Agent for the Obligations or any of them; (e) the failure of any
Holder or Trustee to exercise any right or remedy against any other guarantor of
the Obligations; (f) any change in the ownership of any Guarantor; (g) any
default, failure or delay, willful or otherwise, in the performance of the
Obligation; or (h) by any other act or thing or omission or delay to do any
other act or thing which may or might in any mariner or to any extent vary the
risk of the Guarantors or would otherwise operate as a discharge of the
Guarantors as a matter of law or equity.
Each Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Guarantors by virtue hereof, upon the failure of the Company to pay the
principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Guarantor hereby promises to
and will, upon receipt of written demand by the Trustee, forthwith pay, or cause
to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(iii) au other monetary Obligations of the Company to the Holders and the
Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guaranteed
hereby Each Guarantor further agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the Obligations guaranteed hereby may be accelerated as provided in Article 6
for the purposes of the Guarantor's Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6, such Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Section.
73
The Guarantors also agree, jointly and severally, to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Section.
Section 10.2. Successors and Assigns. This Article 10 shall be binding
upon each Guarantor and its successors and assigns and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested 'in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
Section 10.3. No Waiver, Etc. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article IO at law,
in equity, by statute or otherwise.
Section 10.4. Modifications, Etc. No modification, amendment or waiver
of any provision of this Article 10, nor the consent to any departure by the
Guarantors therefrom, shall be effective be effective unless the same shall be
in writing and signed by the Trustee and the Holders of at least a majority in
Principal amount of the Securities, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Guarantors in any case shall entitle the Guarantors
to any other or further notice or deemed in the same, similar or other
circumstances.
Section 10.5. Execution and Delivery of Guaranty. To evidence its
Guaranty set forth in Section 10.1, each of the Guarantors agrees that a
notation of such Guaranty substantially in the form contained in the form of
Security attached as Exhibit A hereto shall be endorsed and executed by two (2)
Officers of each Guarantor on each Security authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
an Officer.
Each of the Guarantors agrees that its Guaranty set forth in Section 1
0.1 shall remain in fun force and effect and apply to all outstanding Securities
notwithstanding any failure to endorse on each Security a notation of such
Guaranty.
If an Officer of a Guarantor whose facsimile signature is on a Security
or Guaranty no longer holds that office at the time the Trustee authenticates
the Security on which a Guaranty is endorsed, the Guaranty shall be valid
nevertheless.
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The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guaranty set forth in
this Indenture on behalf of the Guarantors.
ARTICLE 11. SECURITY DOCUMENTS
Section 11.1. Security Documents. In order to secure the due and
punctual payment of the principal of and interest on the Securities and all
other amounts payable by the Company and/or the Guarantors under the Indenture
and the Securities when and as the same shall be due and payable, whether at
maturity, by acceleration or otherwise, according to the terms of the Securities
and the Indenture, the Company and the Guarantors in the Security Documents have
concurrently with the execution of this Indenture and the issuance of the
Securities pledged and/or granted a security interest in or Lien on the
Collateral to the Collateral Agent pursuant to the Security Documents.
Each Securityholder, by accepting a Security, agrees to all of the
terms and provisions of the Security Documents and the Intercreditor Agreement,
including the Trustee's performance as Senior Note Claimants' Representative
under the Intercreditor Agreement, as the same may be amended from time to time
pursuant to the provisions of the Security Documents, the Intercreditor
Agreement and the terms hereof.
Section 11.2. Recording, Etc. The Company, at its own expense, shall
cause the Security Documents and this Indenture and all amendments or
supplements thereto, to be registered, recorded and filed or re-recorded,
re-filed and renewed in such manner and in such place or places, if any, as may
be required by law in order fully to preserve and protect the Liens of the
Security Documents and to effectuate and preserve the security therein of the
Securityholders and all rights of the Trustee.
The Company shall furnish to the Trustee and the Collateral Agent:
(i) promptly after the execution and delivery of the
Security Documents, an Opinion of Counsel either (a) to the effect
that, in the opinion of such counsel, this Indenture and the
assignments of the Collateral intended to be made by the Security
Documents and all other instruments of further assurance or amendment
have been properly recorded, registered and filed to, the extent
necessary to perfect the Liens intended to be created by the Security
Documents in that portion of the Collateral covered thereby in which a
security interest may be perfected by the filing of Uniform Commercial
Code Financing Statements and reciting the details of such action or
referring to prior Opinions of Counsel in which such details are given,
and further stating that all financing statements have been executed
and filed that are necessary fully to preserve and protect the rights
of the Securityholders and the Trustee with respect to the Liens
hereunder and under
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the Security Documents, or (b) to the effect that, in the opinion of
such counsel, no such action is necessary to perfect such Lien and make
such assignment effective; and
(ii) within 30 days after February 28 in each year
beginning with the year following the date hereof, an Opinion of
Counsel, dated as of such date, either (a) to the effect that, in the
opinion of such counsel, such action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and
refiling of all supplemental indentures, financing statements,
continuation statements or other necessary to maintain the perfected
Lien of the instruments of further assurance as is Security Documents
in that portion of the Collateral covered thereby in which a security
interest may be perfected by the filing of Uniform Commercial Code
Financing Statements and reciting with respect to such Liens the
details of such action or referencing to prior Opinions of Counsel in
which such details are given, and stating that all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the rights of the
Securityholders and the Trustee hereunder and under the Security
Documents with respect to the Liens, or (b) to the effect that, in the
opinion of such counsel, no such action is necessary to maintain such
perfected Lien and assignment.
The release of any Collateral from the terms hereof and of the Security
Documents and the Intercreditor Agreement or the release of, in whole or in
part, the Liens created by the Security Documents, will not be deemed to impair
the security under this Indenture in contravention of the provisions hereof if
and to the extent the Collateral or Liens are released pursuant to the Security
Documents and the Intercreditor Agreement or pursuant to the terms hereof. The
Trustee and each of the Securityholders acknowledge that a release of Collateral
or Liens in accordance with the terms of the Security Documents and the
Intercreditor Agreement or the terms hereof will not be deemed for any purpose
to be an impairment of the security under this Indenture. To the extent
applicable, the Company and each obligor on the Securities, including the
Guarantors, shall cause TIA ss. 314(d) relating to the release of property or
securities from the Lien of the Security Agreements to be complied with. Any
certificate or opinion required by TIA ss. 314(d) may be made by an Officer,
except in cases which TIA ss. 314(d) requires that such certificate or opinion
be made by an independent person.
Section 11.3. Suits to Protect the Collateral. Subject to the
provisions of the Intercreditor Agreement, the Trustee shall have power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of the Security Documents, the Intercreditor Agreement or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Securityholders in
the Collateral (including power to institute and maintain suits or proceedings
to restrain the enforcement of, or compliance with, any legislative or other
governmental enactment, rule or order that it may be unconstitutional or
otherwise invalid if the enforcement of or compliance with, such enactment, rule
or order would
76
impair the security hereunder or be prejudicial to the interests of the
Securityholders or the Trustee).
Section 11.4. Certain Matters Regarding Pledge of Essex Shares. The
Company represents and warrants to each Holder and the Trustee that the Company
has duly filed with the Stock Exchange of Thailand ("SET") as the company
registrar of Essex those documents in respect of entry of pledge of shares under
the Thailand Pledge Agreement (Essex International Company Limited), dated as of
May 14, 1993 (the "Essex Pledge Agreement"), between the Company and the
Collateral Agent named therein, as well as any supporting documents required
under the relevant SET regulation and the Company has taken all other actions
necessary in order (i) to enable Essex and the Company to perform the
obligations expressed to be assumed by them in the Essex Pledge Agreement, (ii)
to ensure that the obligations expressed to be assumed by Essex and the Company
are legal, valid and enforceable, (iii) to make the Essex Pledge Agreement
admissible in evidence in Thailand (except for being duly translated into the
Thai language and duly stamped under the laws of Thailand), and (iv) to enable
the Collateral Agent to have a perfected first priority security interest in
such shares for the benefit of the Holders.
Section 11.5. Certain Matters Regarding Pledge of Anju Shares. The
Company represents and warrants to each Holder and the Trustee that the Company
(a) has duly registered in the share register of Anju Jewelry Limited, a Hong
Kong company, the shares mortgaged to the Collateral Agent under the Share
Mortgage of certain of the shares of Anju Jewelry Limited dated as of May 14,
1993 between the Company and the Collateral Agent in accordance with such Share
Mortgage and (b) has duly registered in the share register of Anju Jewelry
(N.A.) Limited, a Hong Kong company, the shares mortgaged to the Collateral
Agent under the Share Mortgage of certain of the shares of Anju Jewelry (N.A.)
Limited dated as of May 14, 1993 between the Company and the Collateral Agent in
accordance with such Share Mortgage. The Company further represents and warrants
to each Holder and the Trustee that the Collateral Agent has a perfected first
priority security interest in such shares for the benefit of the Holders.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and each of the Guarantors, jointly and severally,
represent and warrant to the Trustee and each of the Holders of Securities that:
Section 12.1. Organization; Good Standing; Etc. The Company and each of
the Subsidiaries has been duly incorporated and is validly existing and in good
standing under the laws of the state of its incorporation, with power and
authority (corporate and other) to own, lease and operate its properties and to
conduct its business as described in the Public Documents. The Company and each
of the Subsidiaries are duly qualified to transact business and are in good
standing as foreign corporations in each jurisdiction in which the failure to so
qualify or be in good standing would result in a Material Adverse Effect. The
Company and each of the Subsidiaries is in possession of and operating in
compliance with all franchises, grants, authorizations, licenses,
77
permits, easements, consents, certificates and orders required for the conduct
of its business except for such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders the absence of which would
not have a Material Adverse Effect, all of which are valid and in full force and
effect, and neither the Company nor any of the Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
franchise, grant, authorization, license, permit, easement, consent, certificate
or order which, individually or in the aggregate, if determined adversely to the
Company or any Subsidiary would result in a Material Adverse Effect.
Section 12.2. Capitalization; Capital Stock of Subsidiaries.
(a) The authorized capital stock of the Company is as set
forth in the Public Documents. All of the outstanding shares of capital stock of
the Company were validly issued and are fully paid and nonassessable and free of
preemptive rights. Except as set forth on Schedule 4.14 hereto, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any of the
Subsidiaries or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any such capital stock, and
such convertible or exchangeable securities or any such rights, warrants or
options.
(b) All of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
nonassessable and, except as otherwise set forth on Schedule 4.14 hereto, is
owned by the Company, directly or through one or more of the Subsidiaries, free
and clear of any Lien and no holder of such stock is subject to personal
liability by reason of being such holder.
Section 12.3. SEC Documents. The Public Documents that consist of
reports filed with the SEC under the Exchange Act (i) complied at the time they
were so filed in all material respects with the requirements of the Exchange Act
and regulations thereunder (the "Regulations") and (ii) did not at the time they
were so filed contain any 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, in light of the circumstances in which they were made, not misleading.
Section 12.4. Accountants. The accountants who certified the
consolidated financial statements and supporting schedules included in the
Company's annual report on Form 10-k for the fiscal year ended February 23, 1997
as filed with the SEC (the "Form 10-K") are independent public accountants as
required by the Exchange Act and the Regulations.
Section 12.5. Financial Statements. The consolidated financial
statements (including the related notes and supporting schedules) and the
summary financial information included in the Form 10-K fairly present the
financial position and the results of operations and changes in financial
position of the entities purported to be shown thereby at the dates or for the
periods
78
specified therein subject in the case of unaudited financial statements to
normal year end adjustments. Such financial statements and related notes and
schedules have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved, except as set forth therein. The selected
financial and operating data set forth in the Form 10-K under the caption
"Selected Historical and Supplemental Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly presents, when read in conjunction with the Company's
financial statements and the related notes and on the basis stated therein, the
information set forth therein.
Section 12.6. Due Authorization; Enforceability. The Securities have
been duly authorized for issuance and sale and, when issued, authenticated and
delivered pursuant to the provisions of this Indenture, against payment
therefor, will be valid and legally binding obligations of the Company and the
Guarantors enforceable in accordance with their terms and entitled to the
benefits of this Indenture, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors and by the application of general principles of equity. This
Indenture has been duly authorized, executed and delivered by the Company and
the Guarantors and constitutes a valid and legally binding instrument
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors and by application of general principles of
equity.
Section 12.7. No Changes. Since the respective dates as of which
information is given in the Public Documents, except as otherwise stated therein
and herein, (a) there has not been a material adverse change in the condition
(financial or otherwise), assets, business, results of operations or prospects
of the Company and the Subsidiaries taken as a whole, (b) there have been no
transactions, entered into by the Company or the Subsidiaries, other than those
in the ordinary course of business, which are material with respect to the
Company and the Subsidiaries considered as one enterprise; (c) except for the
transactions contemplated by the Public Documents or this Indenture, there has
not been any change in the capital stock or long-term debt of the Company and
the Subsidiaries; and (d) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
Section 12.8. Litigation. Except as set forth in the Public Documents,
there is no action, suit or proceeding before any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary, which is required
to be disclosed in the Public Documents (other than as described therein), or
which, if determined adversely to the Company or any Subsidiary would
individually or in the aggregate result in a Material Adverse Effect or which
might materially and adversely affect the issuance of the Securities. All
pending legal or governmental proceedings to which the Company or any Subsidiary
is a party or to which any of their property is subject which are not described
in the Public Documents, including ordinary routine litigation incidental to the
business, are, considered in the aggregate, not material with respect to the
Company and the Subsidiaries considered as one enterprise.
79
Section 12.9. No Conflicts. Neither the Company nor any of the
Subsidiaries is in violation of its corporate charter or by-laws or in default
under any agreement, Indenture or Instrument, which violation or default would
result in a Material Adverse Effect. The issuance and sale of the Securities and
the execution, delivery and performance of this Indenture will not conflict
with, result in any breach which would constitute a default under, or result in
the creation or imposition of any Lien (except for Liens in favor of the
Collateral Agent) upon any of the assets of the Company or the Subsidiaries
pursuant to the terms of, any agreement, indenture or instrument, to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
may be bound or to which any of the property or assets of the Company or any
Subsidiary is subject, or result in a violation of the corporate charter or
by-laws of the Company or any Subsidiary (the effect of which conflict, Lien,
default or violation would result in a Material Adverse Effect or would
materially and adversely affect the ability of the Company or the Guarantors to
perform their respective obligations under this Indenture), nor will the
performance by the Company or the Guarantors of their respective obligations
under this Indenture violate any law, rule, administrative regulation or decree
of any court or governmental agency having jurisdiction over the Company or any
of the Subsidiaries or any of their properties.
Section 12.10. Properties. Except as otherwise described in the Public
Documents, (a) the Company and the Subsidiaries own, possess, currently have the
right to use or can acquire on reasonable terms, the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names presently employed by
them in connection with the businesses now operated by them, and neither the
Company nor any of the Subsidiaries have received any notice of infringement of
or conflict with asserted rights of others with respect to any of the foregoing
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect; and (b)
the Company and the Subsidiaries have good and marketable title to all real and
personal property, owned by them, free and clear of any Lien which would impair
the use, occupancy, value or marketability of title of the Property subject
thereto, except such as are permitted under Section 4.7 and do not interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries.
Section 12.11. No Consents. No consent, approval, authorization or
order of, or filing or registration with, any court or governmental agency is
required in connection with the execution and performance of this Indenture by
the Company and the Guarantors or the issuance by the Company of the Securities
under this Indenture, including without limitation no such filing or
registration required pursuant to the Securities Act, the Exchange Act, the TIA
or applicable state securities or "Blue Sky" laws of any jurisdiction.
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Section 12.12. ERISA.
(a) Each Pension Plan (and all related trusts, insurance
contracts and funds),have been maintained, administered and funded in compliance
in all material respects with all applicable laws, including, but not limited
to, ERISA and the Code.
(b) Each Pension Plan that is intended to be qualified under
Section 401 (a) of the Code, and each trust (if any) forming a part thereof, has
received a favorable determination letter from the Internal Revenue Service as
to the qualification under the Code of such Pension Plan and the tax exempt
status of such related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such
Pension Plan or the tax exempt status of such related trust.
(c) No Pension Plan provides health, life insurance, accident
or other welfare benefits beyond the date of a participant's termination of the
employment with the Company or the Subsidiaries, other than in accordance with
Section 4980B of the Code or applicable state continuation coverage law.
(d) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Pension Plan except to the extent that such occurrence
is not reasonably expected to have a Material Adverse Effect.
(e) There are no pending or, to the best knowledge of the
Company and the Subsidiaries, threatened claims, actions or lawsuits (other than
routine claims for benefits in the usual and ordinary course) with respect to
any Pension Plan except to the extent that any such claim, action or lawsuit is
not reasonably expected to have a Material Adverse Effect.
(f) Neither the Company nor the Subsidiaries hive incurred,
nor are they reasonably expected to incur, (i) any liability under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan or (11) any liability
under Title IV of ERISA (other than routine payment of premiums due and not
delinquent under Section 1007 of ERISA) with respect to any Pension Plan.
(g) Neither the Company nor the Subsidiaries have engaged in
any transaction that could reasonably be expected to subject the Company or the
Subsidiaries to liability under Section 4069 or 4212(c) of ERISA.
(h) Neither the Company nor the Subsidiaries, nor any other
person dealing with the Pension Plans, has engaged in a non-exempt prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in
connection with any Pension Plan except to the extent such prohibited
transaction has been corrected and all applicable excise taxes and penalties
have been paid.
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(i) None of the Pension Plans that are subject to Title IV of
ERISA has any Unfunded Pension Liability. No other Pension Plan has any material
unfunded liabilities.
Section 12.13. Taxes. All tax returns required to be filed by the
Company or any Subsidiary in any jurisdiction have been so filed (unless subject
to an extension obtained by the Company), and all taxes, assessments, fees and
other charges shown to be due and payable by the Company or any Subsidiary on
such returns have been paid, other than those being contested in good faith or
those currently payable without penalty or interest. There are no proposed
additional tax assessments against the Company or any Subsidiary which would
exceed, upon final determination, amounts reserved therefor on the latest
consolidated balance sheet of the Company and the Subsidiaries.
Section 12.14. Security Documents. As of the date hereof, the secured
party named in the Security Documents shall have, for the benefit of Holders of
Securities, a perfected security interest in the Collateral.
Section 12.15. Investment Company Act. None of the Company or any of
the Subsidiaries is registered as, nor will any of them be required to be
registered as, an "investment company" or is, or will be, a company "controlled"
by a company required to be registered as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
Section 12.16. Certain Fees. Except for fees payable to Triumph Capital
Group, Inc., which the Company shall pay, no fees or commissions will be payable
by the Company or any of the Subsidiaries to brokers, finders, investment
bankers, or banks with respect to the issuance and sale of the Securities.
ARTICLE 13. MISCELLANEOUS
Section 13.1. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
If to the Company:
Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: Chief Financial Officer
82
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Kevin M. Dennis, Esq.
if to the Guarantors:
Town & Country Fine Jewelry Group, Inc.
c/o Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: Chief Financial Officer
L.G. Balfour Company, Inc.
c/o Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: Chief Financial Officer
GL, Inc., formerly known as Gold Lance, Inc.
c/o Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: Chief Financial Officer
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Kevin M. Dennis, Esq.
if to the Trustee:
State Street Bank and Trust Company, as Trustee
Corporate Trust Department
Two International Place
Boston, MA 02110
83
with a copy to:
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110
Attn: James Hamons, Esq.
The Company, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notice,;
or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholder. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 13.2. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(i) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee and the Holders stating that, in
. the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have
been complied with; and
(ii) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee and the Holders stating that, in
the opinion of such counsel, all such conditions precedent have been
complied with.
Section 13.3. Statement Required in Officer's Certificate or Opinion of
Counsel. Each Officer's Certificate or Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:
(i) a statement that the person making such Officer's
Certificate or Opinion of Counsel has read such covenant or condition;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such Officer's Certificate or Opinion of Counsel are
based;
84
(iii) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion
of such person, such covenant or condition has been complied with.
Section 13.4. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, the Guarantors or
by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or the Guarantors shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
Section 13.5. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
Section 13.6. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions are not required to be open in The
Commonwealth of Massachusetts. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
Section 13.7. Governing Law. This indenture and the Securities shall be
governed by, and construed in accordance with the laws of The Commonwealth of
Massachusetts but without giving effect to applicable principles of conflicts of
law to the extent that the application of the laws of another jurisdiction would
be required thereby.
Section 13.8. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company or the Guarantors shall not have any
liability for any obligations of the Company or the Guarantors under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
Section 13.9. Successors. All agreements of the Company and the
Guarantors in this Indenture and the Securities shall bind their respective
successors. All agreements of the Trustee in this indenture shall bind its
successors.
85
Section 13.10. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One complete signed copy is enough to
prove this indenture.
Section 13.11. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
* * * * *
86
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
TOWN & COUNTRY CORPORATION
By: _______________________________
Title:
GUARANTORS:
TOWN & COUNTRY FINE JEWELRY
GROUP, INC.
By: _______________________________
Title:
L.G. BALFOUR COMPANY, INC.
By: _______________________________
Title:
GL, INC., formerly known as GOLD
LANCE, INC.
By: _______________________________
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: _______________________________
Title:
87
Exhibit A
FORM OF SECURITY
No. ______________ $______________
15% Senior Secured Note Due February 15, 1998
TOWN & COUNTRY CORPORATION, a Massachusetts corporation (the
"Company"), for value received hereby promises to pay _________________, or
registered assigns, the principal sum of ________________ Dollars on February
15, 1998.
Interest Payment Dates: The last day of each month beginning on
September 30, 1997, except that the final
payment of interest will be made on
February 15, 1998.
Record Dates: The 15th day of each month beginning on
September 15, 1997, except that, with respect
to the final interest payment, the record date
will be February 1, 1998.
Pursuant to the Indenture, the payment of principal of and interest on
this Security is unconditionally guaranteed by various guarantors named on the
signature pages of the Indenture (the "Guarantors"). The guarantees by the
Guarantors are each endorsed hereon.
Reference is made to the additional provisions of this Security set
forth on the other side of this Security, which will for all purposes have the
same effect as if set forth at this place.
88
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:
TOWN & COUNTRY CORPORATION
[SEAL]
By: ________________________________
President
ATTEST: ________________________________
Clerk
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
State Street Bank and Trust Company
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture referred to herein.
By: ___________________________
Authorized Signatory
89
REVERSE SIDE OF SECURITY
15% Senior Secured Note Due February 15, 1998
September 15, 1997
1. Interest
TOWN & COUNTRY CORPORATION, a Massachusetts corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate of 15% per annum, compounded
monthly. The Company will pay interest on the last day of each month beginning
on September 30, 1997, except for the final payment of interest which will be
made on February 15, 1998 (each such date is referred to as an "Interest Payment
Date"). Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from September
15, 1997. 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 at the rate
of 17% per annum, and, to the extent permitted by law, it shall pay interest on
overdue installments of interest at the rate of 17% per annum.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered Holders at the close of business on
the Record Date immediately preceding each Interest Payment Date even if
Securities are canceled after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. Subject to Section 2.14
of the Indenture (as defined below), the Company may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, the Trustee will act as Paying Agent and Registrar. The
Trustee may appoint one or more co-Registrars and one or more additional Paying
Agents. None of the Company, the Subsidiaries or any Affiliates of the Company
or the Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Defined Terms
The Company issued the Securities under an indenture dated as of
September 15, 1997 ("Indenture"), among the Company, various guarantors named on
the signature pages thereto ("Guarantors") and State Street Bank and Trust
Company, a Massachusetts banking corporation,
90
as trustee ("Trustee"). The terms of the Securities include those stated in the
Indenture and those made part of the Indenture. Capitalized terms used herein
and not defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture for a statement of those terms.
The Securities are senior secured obligations of the Company limited to
$13,254,000 aggregate principal amount (subject to Section 2.8 of the
Indenture). The Indenture imposes, among other things, certain limitations on
the issuance of debt and certain classes of stock by the Company and the
Subsidiaries, the creation of liens by the Company and the Subsidiaries, the
making of investments, loans and advances by the Company and the Subsidiaries,
sale and leaseback transactions, the payment of dividends and other
distributions and acquisitions or retirements of the Company's Capital Stock and
Subordinated Obligations, the sale or transfer of assets of the Company and the
Subsidiaries and Subsidiary stock, transactions with Affiliates, the ability of
the Company and the Subsidiaries to restrict distributions and dividends from
Subsidiaries, any plans of liquidation of the Company, the ability of the
Company to amend the Revised Debt Agreements, and the ability of the Company and
the Guarantors to merge with or into another entity. The limitations are subject
to a number of important qualifications and exceptions.
5. Redemption
(a) The Company will redeem a portion of the outstanding
Securities at 100% of principal amount plus accrued and unpaid interest upon
receipt of cash proceeds (including current income and disposition proceeds)
from or relating to (i) certain collateral identified in the Indenture, (ii) the
Solomon Brothers Investment, (iii) the sale of the Capital Stock or assets of
any of the Foreign Subsidiaries or (iv) the Zale Bankruptcy Claim; provided,
however, that no redemptions are required to be made on a particular redemption
date if the amount of cash proceeds received by the Company during the
applicable Collateral Proceeds Calculation Period is less than $3,000 in the
aggregate, in which event the Company shall hold such cash proceeds in trust for
the Securityholders and such proceeds shall be used on the next redemption date
at which the aggregate amount of proceeds received by the Company during the
applicable Collateral Proceeds Calculation Period equals at least $3,000. In
addition, if the Company receives certain non-cash proceeds from or relating to
(i) the Solomon Brothers Investment, (ii) the Zale Bankruptcy Claim (including
inventory returned to the Company in respect of the Zale Bankruptcy Claim which
has a Fair Market Value in excess of $3,000 at the time of such return) or (iii)
the sale of the Capital Stock or assets of any Foreign Subsidiary, it will use
commercially reasonable best efforts to liquidate such proceeds within six
months (or nine months in the case of returned inventory) of their receipt and,
upon such liquidation, the Company shall redeem an aggregate principal amount of
Securities equal to the amount of such liquidation proceeds, provided that if
such liquidation proceeds are less than $3,000, the Company will hold such
proceeds in trust for the Securityholders and shall aggregate such proceeds with
the cash proceeds described in the foregoing sentence and apply them as provided
in the foregoing sentence. All of the terms of the foregoing redemptions are
fully described in the Indenture.
91
(b) On May 14 of each year, the Company will redeem a portion
of the Securities equal to certain percentages of Excess Cash Flow of the
Company for the preceding fiscal year as more fully described in the Indenture.
(c) Section 4.8 of the Indenture provides that the Securities
or portions thereof will be redeemed in connection with certain Sale/Leaseback
Transactions, the terms of which are fully described in the Indenture. In
addition, Section 4.11 of the Indenture provides that the Securities or portions
thereof will be redeemed if net cash proceeds are available from Asset
Dispositions after certain priority applications of such proceeds, the terms of
which are more fully described in the Indenture.
(d) In the event that from time to time the Company receives
cash proceeds from the sale of any Collateral described in Exhibit B to the
Indenture, such cash proceeds shall be applied by the Company to redeem the
Securities within 30 days after receipt of such proceeds by or for the account
of the Company, subject to the applicable conditions of the New Credit Agreement
(specifically Amendment Number Three thereto).
6. Notice of Redemption
Notice of redemption will be mailed at least 15 days but not more than
45 days (or at least 3 days but not more than 30 days in the case of a
redemption pursuant to the second sentence of paragraph 5(a) above) before the
redemption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, after such date,
interest will cease to accrue on such Securities (or such portions thereof)
called for redemption.
7. Offers to Purchase
Section 4.5 of the Indenture provides that if certain Consolidated Net
Worth levels are not maintained, subject to certain conditions and limitations
contained therein, the Company will be required to make an offer to purchase
certain amounts of Securities in accordance with the procedures set forth in the
Indenture. Section 4.13 of the Indenture provides that if a Change of Control
occurs, subject to certain conditions and limitations contained therein, the
Company will be required to make an offer to purchase certain amounts of
Securities in accordance with the procedures set forth in the Indenture. In
addition, a Collateral Agency and Intercreditor Agreement dated as of May 14,
1993, as amended, governs the relationship among the Company's creditors
(including the Holders of Securities) with respect to their rights and
obligations in the Collateral.
8. Guarantee; Security; Certain Indemnification
92
The obligations of the Company under the Securities and the Indenture
are guaranteed by the Guarantors pursuant to the terms of the Indenture. In
addition, to secure the due and punctual payment of the principal and interest
on the Securities and all other amounts payable by the Company under the
Indenture and the Securities when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Company and the Guarantors have granted
security interests in the Collateral to the Collateral Agent for the benefit of
the Trustee on behalf of the Holders of Securities pursuant to the Security
Documents. The Liens of the Collateral Agent are governed by the terms of the
Intercreditor Agreement.
Each Holder by its acceptance of a Security hereby ratifies the
execution of the Intercreditor Agreement by the Trustee, as Senior Note
Claimants' Representative (as defined in the Intercreditor Agreement), and
authorizes the Trustee to act as such Senior Note Claimants' Representative for
all purposes of the Intercreditor Agreement. Each Holder by its acceptance of a
Security hereby agrees, as and to the extent provided in the Intercreditor
Agreement, to indemnify and hold the Collateral Agent (and its Subagents)
harmless (to the extent not reimbursed by the Company and the Borrowing
Subsidiaries), from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages, costs,
disbursements, or expenses (including attorneys' fees and expenses) of any kind
or nature whatsoever which are imposed on, incurred by, or asserted against the
Collateral Agent (or any Subagent) in its capacity as such in any way relating
to or arising out of the Intercreditor Agreement or the Security Documents, or
as a result of any action taken or omitted to be taken by the Collateral Agent
(or any Subagent) pursuant to the provisions of the Intercreditor Agreement or
of the Security Documents; provided that no Holder shall be required to
indemnify the Collateral Agent (or any Subagent) for matters relating solely to
transactions, events or occurrences that transpire after such Holder has ceased
to be a Holder. Without limiting the generality of the foregoing, each Holder
agrees, as and to the extent provided in and in accordance with the provisions
of the Intercreditor Agreement, to reimburse the Collateral Agent (and any
Subagent) for any out-of-pocket expenses (including the fees and expenses of any
attorneys, accountants, advisers, or experts retained or consulted by the
Collateral Agent (or any Subagent) in accordance with the provisions of the
Intercreditor Agreement) incurred by the Collateral Agent (or any Subagent) in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings, or otherwise) of, or legal advice in respect of its rights or
responsibilities under the Intercreditor Agreement or the Security Documents.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities
93
selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed) or any Securities for a
period of 15 days before a selection of Securities to be redeemed or for a
period of 15 days before an Interest Payment Date, as the case may be.
10. Persons Deemed Owners
The registered Holder may be treated as the owner of it for all
purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its request unless an abandoned property law designates another person. After
any such payment, Holders entitled to the money must look only to the Company
and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations
sufficient to pay principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least 51% in principal amount of the Securities then outstanding
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of at least 51% in principal amount of the
Securities then outstanding. Subject to certain exceptions set forth in Article
9 of the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to add additional covenants for the benefit of the
Holders or surrender Company rights, or to make any change that does not
adversely affect the rights of any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 10 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption, upon declaration or otherwise;
(iii) failure by the Company or the Guarantors to comply with other agreements
in the Indenture or the Securities, in certain cases subject to notice
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and lapse of time; (iv) certain defaults or accelerations (including failure to
pay within any grace period after final maturity) of other Indebtedness of the
Company, the Guarantors or any Subsidiary exceeding $1,000,000; (v) certain
events of bankruptcy or insolvency with respect to the Company, the Guarantors
or any Subsidiary; (vi) any Lien on any of the Collateral or the Guarantee
ceasing to be in full force and effect in any material respect, and continuation
thereof for 10 days after notice; (vii) certain judgments or decrees for the
payment of money in excess of $1,500,000 against the Company, the Guarantors or
any Subsidiary; and (viii) breaches of representations and warrants of the
Company, any Guarantor or any Subsidiary herein, in the Indenture, the Security
Documents or any other document issued in connection with the sale, issuance or
delivery of the Securities. If any Event of Default occurs and is continuing,
the Trustee or the Holders of at least 51% in principal amount of the Securities
then outstanding may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency with respect to the
Company are Events of Default which will result in the Securities being due and
payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of at least 51% in principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in their interest.
15. Trustee Dealings with the Company
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with and collect obligations owed to it by the Company, the Guarantors, the
Subsidiaries or any Affiliates of the Company, the Subsidiaries or the
Guarantors and may otherwise deal with the Company, the Guarantors, the
Subsidiaries or any Affiliates of the Company, the Guarantors or the
Subsidiaries with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company,
the Guarantors or the Trustee shall not have any liability for any obligations
of the Company or the Guarantors under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
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17. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent duly appointed by the Trustee) manually
signs the certificate of authentication on the other side of this Security.
18. Governing Law
The Indenture and this Security shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made to:
Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: Chief Financial Officer
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NOTATION ON SECURITY RELATING TO GUARANTEE
GUARANTEE
Town & Country Fine Jewelry Group, Inc., L.G. Balfour Company, Inc. and
GL, Inc. (formerly known as Gold Lance, Inc.) (hereinafter collectively referred
to as the "Guarantors" which term includes any successor person under the
Indenture referred to in the Security upon which this notation is endorsed),
have unconditionally and irrevocably guaranteed to each Holder and to the
Trustee and its successors and assigns (such guarantees by the Guarantors being
referred to herein as the "Guarantees") (a) the full and punctual payment of
principal of and interest on the Securities when due (taking into account all
applicable grace periods provided under the Indenture), whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under the Indenture and the Securities; and (b) the full and
punctual performance of all other obligations of the Company under the
Indenture, the Securities, and the Security Documents (all the foregoing
described in (a) and (b) being hereinafter collectively called the
"Obligations"). Each Guarantor has further agreed that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
the Guarantors, and that such Guarantors will remain bound under these
Guarantees notwithstanding any extension or renewal of any Obligation.
The obligations of each Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantees and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to such Indenture
for the precise terms of the Guarantees therein made.
The Guarantees shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture.
GUARANTORS:
TOWN & COUNTRY FINE JEWELRY GROUP,
INC.
By: ______________________________________
Name:
Title: President
By: ______________________________________
Name:
Title: Clerk
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L.G. BALFOUR COMPANY, INC.
By: ______________________________________
Name:
Title: President
By: ______________________________________
Name:
Title: Secretary
GL, INC., formerly known as GOLD LANCE,
INC.
By: ______________________________________
Name:
Title: President
By: ______________________________________
Name:
Title: Clerk
Dated:
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FORM OF ASSIGNMENT
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
-----------------------------------------------------
(Print or type assignee's name, address and zip code)
-----------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
Date: ______________ Your Signature: ___________________
(Sign exactly as your name appears on the other side of this Security)
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.5 of the Indenture, check below:
_____
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.5 of the Indenture, state the amount:
$_______
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.13 of the Indenture, check below:
_____
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.13 of the Indenture, state the amount:
$_______
Date: ______________ Your Signature: ___________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee: ____________________________________________
(Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements on and
after September 15, 1997 will include membership or participation in
the Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.)
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Exhibit B
CERTAIN ITEMS OF COLLATERAL
Balfour Ring Plant - means the real property owned by L.G. Balfour Company,
Inc., located at 30 Frank Mossberg Drive, Attleboro, Massachusetts.
Little Switzerland Stock - means all shares of stock of Little Switzerland,
Inc., a Delaware corporation, owned by Town & Country Corporation and/or its
Affiliates that have not been transferred on or prior to the date hereof by Town
& Country Corporation and/or its Affiliates into a trust for the benefit of Town
& Country Corporation and the holders of its exchangeable preferred stock.
101