-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZlko+CfHTMSd88Q2E706pQVz+H0eGSgYj85sErIiEbMHVUObtC/QMPu/jvRyqtZ SNlRRlH3WCtkzEH/dS2UqA== 0000950117-97-001898.txt : 19971117 0000950117-97-001898.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950117-97-001898 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971004 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 954032739 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10857 FILM NUMBER: 97718099 BUSINESS ADDRESS: STREET 1: 90 PARK AVE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126611300 MAIL ADDRESS: STREET 1: 90 PARK AVENUE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: W ACQUISITION CORP /DE/ DATE OF NAME CHANGE: 19861117 10-Q 1 THE WARNACO GROUP, INC. 10-Q ________________________________________________________________________________ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 4, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________ COMMISSION FILE NUMBER 1-10857 ------------------------ THE WARNACO GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 95-4032739 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.) OF INCORPORATION OR ORGANIZATION)
90 PARK AVENUE NEW YORK, NEW YORK 10016 (ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) (212) 661-1300 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) COPIES OF ALL COMMUNICATIONS TO: THE WARNACO GROUP, INC. 90 PARK AVENUE NEW YORK, NEW YORK 10016 ATTENTION: VICE PRESIDENT AND GENERAL COUNSEL ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No _______ The number of shares outstanding of the registrant's Class A Common Stock as of November 12, 1997 is as follows: 57,369,721. ________________________________________________________________________________ ________________________________________________________________________________ PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
OCTOBER 4, JANUARY 4, 1997 1997 ---------- ---------- (IN THOUSANDS OF DOLLARS) (UNAUDITED) ASSETS Current Assets: Cash............................................................................. $ 11,685 $ 11,840 Accounts receivable -- net....................................................... 271,964 211,038 Inventories: Finished goods.............................................................. 310,793 227,929 Work in process............................................................. 112,524 76,445 Raw materials............................................................... 107,434 82,944 ---------- ---------- Total inventories...................................................... 530,751 387,318 Other current assets.................................................................. 41,495 40,313 ---------- ---------- Total current assets................................................... 855,895 650,509 Property, plant and equipment (net of accumulated depreciation of $100,069 and $85,244, respectively).............................................................. 135,050 121,537 Other assets: Intangibles and other assets -- net.............................................. 392,544 370,898 ---------- ---------- $1,383,489 $1,142,944 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowing under revolving credit facility........................................ $ -- $ 146,960 Borrowing under foreign credit facilities........................................ 19,547 19,185 Current portion of long-term debt................................................ 11,881 49,281 Accounts payable and accrued liabilities......................................... 252,784 224,272 Accrued income taxes............................................................. 3,771 195 ---------- ---------- Total current liabilities.............................................. 287,983 439,893 ---------- ---------- Long-term debt........................................................................ 561,172 215,805 Other long-term liabilities........................................................... 11,362 11,532 Stockholders' equity Preferred Stock; $.01 par value.................................................. -- -- Common Stock; $.01 par value..................................................... 580 524 Capital in excess of par value................................................... 583,326 575,691 Cumulative translation adjustment................................................ (8,607) (3,307) Accumulated deficit.............................................................. (14,878) (69,667) Treasury stock, at cost.......................................................... (20,935) (12,030) Notes receivable for common stock issued and unearned stock compensation......... (16,514) (15,497) ---------- ---------- Total stockholders' equity............................................. 522,972 475,714 ---------- ---------- $1,383,489 $1,142,944 ---------- ---------- ---------- ----------
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 2 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ------------------------ OCTOBER 4, OCTOBER 5, OCTOBER 4, OCTOBER 5, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- (IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA) (UNAUDITED) Net revenues.................................................... $333,413 $292,010 $875,143 $721,295 Cost of goods sold(a)........................................... 209,410 201,636 559,093 510,742 ---------- ---------- ---------- ---------- Gross profit.................................................... 124,003 90,374 316,050 210,553 Selling, administrative and general expenses(b)................. 61,707 71,909 175,401 236,186 ---------- ---------- ---------- ---------- Income (loss) before interest and income taxes.................. 62,296 18,465 140,649 (25,633) Interest expense................................................ 11,484 8,936 31,999 23,852 ---------- ---------- ---------- ---------- Income (loss) before provision (benefit) for income taxes....... 50,812 9,529 108,650 (49,485) Provision (benefit) for income taxes............................ 18,731 3,718 41,288 (15,031) ---------- ---------- ---------- ---------- Net income (loss)............................................... $ 32,081 $ 5,811 $ 67,362 $(34,454) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) per share..................................... $ 0.59 $ 0.11 $ 1.24 $ (0.64) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average number of shares of common stock outstanding... 54,630 53,357 54,311 53,489 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ------------ (a) Includes approximately $11,748,000 and $37,969,000 of non-recurring items in the three and nine month periods ended October 5, 1996. See Note 4 of Notes to Consolidated Condensed Financial Statements. (b) Includes approximately $19,413,000 and $100,621,000 of non-recurring and special items in the three and nine month periods ended October 5, 1996. See Note 4 to Consolidated Condensed Financial Statements. This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 3 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED --------------------------------------- OCTOBER 4, OCTOBER 5, 1997 1996 ---- ---- (IN THOUSANDS OF DOLLARS) (UNAUDITED) Cash flow from operations: Net income (loss)...................................................................... $ 67,362 $ (34,454) Non cash items included in net income (loss): Depreciation and amortization..................................................... 22,492 20,107 Amortization of unearned stock compensation....................................... 2,486 1,813 Increase in deferred tax assets -- net............................................ -- (15,031) Non cash portion of non-recurring items........................................... -- 95,688 Income taxes paid................................................................. (5,573) (2,335) Other changes in operating accounts............................................... (165,602) (132,520) ------------ ------------ Net cash used in operations before non-recurring items................................. (78,835) (66,732) Payment of accruals related to exiting the Hathaway business, consolidating and realigning the intimate apparel division and other items............................. (3,994) -- ------------ ------------ Net cash used in operations............................................................ (82,829) (66,732) Cash flow from investing activities: Net proceeds from sale of fixed assets............................................ 610 69 Purchase of property, plant & equipment........................................... (32,086) (20,572) Payment for purchase of acquired assets........................................... (15,027) (87,000) Increase in intangible and other assets........................................... (15,400) (14,168) ------------ ------------ Net cash used in investing activities.................................................. (61,903) (121,671) ------------ ------------ Cash flow from financing activities: Borrowing under revolving credit facilities....................................... 351,197 144,121 Net proceeds from the exercise of options and payment of notes receivable from employees........................................................................ 4,188 1,026 Proceeds from other financing..................................................... -- 71,000 Repayments of debt................................................................ (189,828) (5,860) Purchase of Treasury Stock........................................................ (8,120) -- Dividends paid.................................................................... (12,074) (10,888) Increase in deferred financing costs.............................................. (786) (330) ------------ ------------ Net cash provided from financing activities............................................ 144,577 199,069 ------------ ------------ Increase (decrease) in cash............................................................ (155) 10,666 Cash at beginning of period............................................................ 11,840 6,162 ------------ ------------ Cash at end of period.................................................................. $ 11,685 $ 16,828 ------------ ------------ ------------ ------------ Other changes in operating accounts: Accounts receivable............................................................... $ (60,926) $ (64,146) Inventories....................................................................... (143,433) (19,268) Other current assets.............................................................. (1,182) (2,570) Accounts payable and accrued liabilities.......................................... 37,306 (48,258) Accrued income taxes.............................................................. 6,447 1,482 Other............................................................................. (3,814) 240 ------------ ------------ $ (165,602) $ (132,520) ------------ ------------ ------------ ------------
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 4 THE WARNACO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles and Securities and Exchange Commission rules and regulations for interim financial information. Accordingly, they do not contain all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, the accompanying consolidated condensed financial statements contain all the adjustments (all of which were of a normal recurring nature, except as discussed in Note 4 below) necessary to present fairly the financial position of the Company as of October 4, 1997 as well as its results of operations and cash flows for the periods ended October 4, 1997 and October 5, 1996. Operating results for interim periods may not be indicative of results for the full fiscal year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 4, 1997. Certain amounts for prior periods have been reclassified to be comparable with the current period presentation. NOTE 2 -- ACQUISITION OF DESIGNER HOLDINGS LTD. On September 24, 1997 the Board of Directors of the Company approved a merger of a wholly owned subsidiary of the Company with and into Designer Holdings Ltd. ('Designer Holdings'). Designer Holdings develops, manufactures and markets designer jeanswear and sportswear for men, women, juniors and petites, and has a 40-year extendable license from Calvin Klein, Inc. to develop, manufacture and market designer jeanswear and sportswear collections in North, South and Central America under the Calvin Klein Jeans'r', CK/Calvin Klein Jeans'r' and CK/Calvin Klein/Khakis'r' labels. Pursuant to a merger agreement dated September 25, 1997, each stockholder of Designer Holdings will receive 0.324 shares of the Company's common stock for each share owned. On October 14, 1997, pursuant to a stock exchange agreement, the Company acquired from New Rio LLC and a former member of New Rio LLC 51.3% of the outstanding common stock of Designer Holdings in exchange for 5,340,773 newly issued shares of the Company's common stock, which equates to ownership of approximately 9% of the Company's shares. The number of shares of the Company's common stock to be issued was determined using the same exchange ratio used in the merger agreement. The completion of the merger is subject to the approval by the stockholders of the Company and Designer Holdings. Meetings of the stockholders of both the Company and Designer Holdings have been scheduled for December 12, 1997 to approve the merger and the issuance of shares by the Company. Upon approval of both company's stockholders, the Company will acquire the remaining outstanding common stock of Designer Holdings. The merger will be accounted for using the purchase method of accounting. It is estimated that the Company will issue a total of 10,413,144 shares of its common stock, resulting in a total purchase price of $353.4 million. The preliminary estimated allocation of the total purchase price to the fair value of the net assets acquired is summarized as follows (in millions): Cash...................................................................... $ 55.8 Accounts receivable....................................................... 107.6 Inventories............................................................... 92.3 Prepaid and other current assets.......................................... 25.0 Property and equipment.................................................... 15.8 Intangible and other assets............................................... 237.7 Accounts payable and accrued liabilities.................................. (79.8) Other liabilities......................................................... (0.5) Redeemable Preferred Securities........................................... (100.5) ------- Purchase Price....................................................... $ 353.4 ------- -------
5 THE WARNACO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED) The allocation of purchase price is subject to revision when additional information concerning the asset and liability valuations becomes available. Accordingly, the final purchase price allocation could be different from the amounts previously shown. The following summarizes the unaudited pro forma combined financial information of Warnaco's results for nine months ended October 4, 1997 and October 5, 1996 with Designer Holdings' results for its nine months ended September 30, 1997 and 1996, giving effect to the merger as if it had occurred as of January 7, 1996 and assuming the acquisition of the remaining stock of Designer Holdings by the end of fiscal 1997. The unaudited pro forma information does not reflect any cost savings or other benefits anticipated by the Company's management as a result of the merger.
NINE MONTHS ENDED NINE MONTHS ENDED OCTOBER 4, 1997 OCTOBER 5, 1996 ----------------- ----------------- Statement of Income Data: Net Revenues............................................. $ 1,240.2 $ 1,077.8 Income (loss) before extraordinary item.................. 65.1 (14.3) Net income (loss)........................................ 64.2 (16.6) Income (loss) per common share before extraordinary item................................................... 1.01 (0.22) Net income (loss) per share.............................. 0.99 (0.26)
The unaudited pro forma combined information is not necessarily indicative of the results of operations of the combined company had the acquisition occurred on the dates specified above, nor is it necessarily indicative of future results or financial position. NOTE 3 -- FOURTH QUARTER MERGER RELATED AND RESTRUCTURING CHARGE Following the announcement of the Designer Holdings acquisition, the Company immediately instituted an internal study to plan for the optimization of both companies' operating strategies and administration. Planned consolidations of facilities and staff, strategic redirection of marketing strategies and other cost savings actions are expected to result in some restructuring of the Warnaco operations, as well as those of Designer Holdings. As a result of these actions, it is anticipated that the Company will incur charges in the fourth quarter currently estimated to be between $35 - 45 million, net of tax. This includes the anticipated conclusion of the consolidation and restructuring actions announced last year. NOTE 4 -- STRATEGIC ACTIONS IN 1996 The acquisition of the GJM businesses in February, 1996 enhanced the Company's low cost manufacturing capacity and expanded the Company's product lines. The Company subsequently undertook a strategic review of its businesses and manufacturing facilities. The acquisitions of Bodyslimmers and Lejaby, later in 1996, were also considered. As a result, the Company took the following steps which resulted in total non-recurring charges in the second and third quarters of fiscal 1996 as summarized below (in millions):
THIRD QUARTER TOTAL ------- ------ Loss related to the sale of the Hathaway business.................................... $ 7.3 $ 46.0 Charge for the consolidation and realignment of the intimate apparel division........ 17.1 72.1 Other items:......................................................................... 6.8 20.4 ------- ------ 31.2 138.5 Less: Income tax benefits............................................................ 12.2 49.7 ------- ------ $19.0 $ 88.8 ------- ------ ------- ------
6 THE WARNACO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED) The losses reported in the third quarter of fiscal 1996 above include inventory markdowns directly attributable to the decision to exit the Hathaway business and consolidation and realignment of the intimate apparel division. Accordingly, inventory markdowns, operating losses of Hathaway for the third quarter of 1996 (resulting from inventory liquidations at markdown prices) and settlement of insurance claims related to the 1994 California earthquake and other claims together aggregating $11.7 million are reflected in the Consolidated Condensed Statement of Operations within cost of goods sold. The remaining $19.4 million, consisting mainly of the write-down of assets to fair value, severance costs and other employee costs, is included in selling, administrative and general expenses (SA&G). For the nine months ended October 4, 1996, the cost of goods sold charge relative to inventory markdowns and other charges indicated above was $38.0 million, whereas the SA&G charge was $100.6 million. A complete description of the 1996 non-recurring items is contained in Note 4 to the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 4, 1997. NOTE 5 -- STOCK REPURCHASE PROGRAM During the first nine months of fiscal 1997, the Company repurchased 271,363 shares of its common stock at a cost of $8.9 million under its repurchase program. On May 14, 1997, the Company's Board of Directors authorized the repurchase of an additional 420,000 shares to supplement its previously announced 2 million share repurchase program. Also in 1997, the Company entered into equity option arrangements to purchase approximately 1.1 million shares of stock at an average price of $33.00. These option arrangements expire between November 1997 and June 1998. At expiration, the Company has the choice of settling these arrangements in stock, cash, or net shares. NOTE 6 -- RESTRICTED STOCK In May 1997, the Company's Board of Directors authorized the issuance of 122,210 shares of restricted stock to certain employees, including certain officers and directors of the Company. The restricted shares vest ratably over four years and will be fully vested in May 2001. The fair market value of the restricted shares was approximately $3.6 million at the date of grant. The Company will recognize compensation expense equal to the fair value of the restricted shares over the vesting period. NOTE 7 -- AMENDED BANK CREDIT AGREEMENT On August 12, 1997 the Company entered into an amended bank credit agreement which extends through the year 2002. Under the terms of the amended agreement, the Company will have available up to $900 million in a revolving credit facility and lines of credit which replace the Company's previous $750 million in availability. This agreement has improved terms and conditions which includes a lower borrowing rate and an extension of maturities. NOTE 8 -- NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, 'Earnings per Share,' which requires the dual presentation of Basic and Diluted Earnings per share. Pro-forma Basic and Diluted Earnings Per Share calculated in accordance with the standard would have resulted in income of $1.31 and $1.24 respectively, for the nine months ended October 4, 1997 and a (loss) of $(0.67) and $(0.64), respectively, for the nine months ended October 5, 1996. The Company will adopt this standard as of January 3, 1998 as required. Early adoption is not permitted. In June 1997, FASB also issued SFAS No. 130, 'Reporting Comprehensive Income' and SFAS No. 131, 'Disclosure about Segments of an Enterprise and Related Information'. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components and SFAS No. 131 establishes standards for the way public businesses report financial information about operating 7 THE WARNACO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED) segments. The Company will adopt both in fiscal 1998, as required. These statements will affect disclosure and presentation in the financial statements but will not have a material impact on the Company's consolidated financial position, liquidity, cash flows or results of operations. NOTE 9 -- CERTAIN STOCKHOLDER LITIGATION Shortly after the announcement of a proposed transaction between Designer Holdings and the Company, three stockholders of Designer Holdings, Jacob J. Spinner, Yaskov Glatter and Sherry Berman, as custodian for Jordan Berman, filed lawsuits in the Delaware Court of Chancery challenging the transaction. The named plantiff in each of the actions purports to maintain each individual action as a class action on behalf of Designer Holdings stockholders. On October 30, 1997 the Court of Chancery signed an order which consolidated the three actions. Now captioned as In re Designer Holdings Ltd. Shareholders Litigation, Consolidated Civil Action 15942, the consolidated complaint alleges that the directors of Designer Holdings breached their fiduciary duties to Designer Holdings' stockholders in approving the transaction. The complaint further alleges that the directors have a conflict of interest based on the price at which Designer Holdings shares were sold to the public in May 1996 relative to the transaction price. The plaintiffs also claim that the Company aided and abetted the directors of Designer Holdings in breaching their fiduciary duties. The plaintiffs seek injunctive relief to prohibit Designer Holdings from completing the merger, or in the alternative, monetary damages of an unspecified amount. On November 13, 1997, the parties to this litigation reached an agreement in principle to settle this litigation on the following terms, subject to court approval: 1. the defendants permitted the plaintiffs' attorneys to review drafts of the Joint Proxy Statement/Prospectus relating to the transaction prior to mailing and have revised the disclosure therein in response to their comments; 2. the defendants agreed that they would reduce the termination fee payable to the Company in certain circumstances from $12.5 million to $6.25 million; and 3. Charterhouse Equity Partners II, L.P., which beneficially owns approximately 2.6 million shares of the Company as a result of the exchange of shares with New Rio, L.L.C., has agreed that during the 14-day period following the date on which Designer Holdings stockholders can sell the shares of the Company issued in the merger, but in no event extending past December 31, 1997, it will not sell, transfer or otherwise dispose of any shares of the Company, notwithstanding the existence of an effective registration statement for the resale of any such shares, unless the closing price for shares of the Company on the NYSE Composite Transactions Tape on any day within such 14-day period was more than 15% above or below such closing price on the trading day immediately preceding the effective time of the merger. Upon final approval of the settlement by the court, plaintiffs' counsel will petition the court for an award of attorney's fees and expenses, which will be paid by Designer Holdings. Plaintiffs' counsel has agreed to submit a request for, and the defendants have agreed not to oppose, a request for court approval of not more than $350,000 in attorney's fees and expenses. 8 THE WARNACO GROUP, INC. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS RESULTS OF OPERATIONS STATEMENTS OF OPERATIONS (SELECTED DATA)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- -------------------------- OCTOBER 4, OCTOBER 5, OCTOBER 4, OCTOBER 5, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (AMOUNTS IN MILLIONS OF DOLLARS) (UNAUDITED) Net revenues................................................ $ 333.4 $ 292.0 $ 875.1 $ 721.3 Cost of goods sold(1)....................................... 209.4 201.6 559.1 510.7 ----------- ----------- ----------- ----------- Gross profit................................................ 124.0 90.4 316.0 210.6 % of net revenues...................................... 37.2% 30.9% 36.1% 29.2% Selling, administrative and general expenses(2)............. 61.7 71.9 175.4 236.2 ----------- ----------- ----------- ----------- Income (loss) before interest and income taxes.............. 62.3 18.5 140.6 (25.6) % to net revenues...................................... 18.7% 6.3% 16.1% (3.6%) Interest expense............................................ 11.5 9.0 32.0 23.9 ----------- ----------- ----------- ----------- Income (loss) before Provision (benefit) for income taxes... 50.8 9.5 108.6 (49.5) Provision (benefit) for income taxes(3)..................... 18.7 3.7 41.2 (15.0) ----------- ----------- ----------- ----------- Net income (loss)(4)........................................ $ 32.1 $ 5.8 $ 67.4 $ (34.5) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------ (1) Cost of goods sold includes approximately $11.7 and $38.0 for the three and nine month periods ended October 5, 1996 in connection with inventory markdowns and other charges related to the 1996 Strategic Actions discussed below. Accordingly, these actions decreased Gross Profit percentage by 4.1 and 5.3 for the respective 1996 periods. (2) Selling, administrative and general expenses includes approximately $19.4 million and $100.6 million for the three and nine month periods ended October 5, 1996 for the write-down of assets to the fair value, severance costs and employee costs related to the Strategic Actions discussed below. (3) Provision (benefit) for income taxes includes a benefit of approximately $12.2 million and $49.7 million for the three and nine month periods ended October 5, 1996. See the 1996 Strategic Actions discussed below. (4) Net income was $0.59 per share and $1.24 per share for the three months and nine months ended October 4, 1997, compared to $0.47 per share and $1.02 per share, respectively, for the comparable 1996 periods before non-recurring items resulting from the 1996 Strategic Actions. 1996 STRATEGIC ACTIONS (See Note 4 to Consolidated Condensed Financial Statements) Following the acquisition of the GJM business in February, 1996 which significantly added to the Company's low cost manufacturing capacity, in addition to an immediate expansion of product lines, the Company undertook a strategic review of its businesses and manufacturing facilities. The acquisitions of Bodyslimmers and Lejaby later in 1996, were also considered. As a result of this review, the Company 9 took the following steps which resulted in non-recurring charges in the third quarter of fiscal 1996 as summarized below (in millions):
THIRD QUARTER TOTAL ------- ------ Loss related to the Hathaway business................................................ $ 7.3 $ 46.0 Charge for the consolidation and realignment of the intimate apparel division........ 17.1 72.1 Other items.......................................................................... 6.8 20.4 ------- ------ Total charges........................................................................ 31.2 138.5 Less: Income tax benefits............................................................ 12.2 49.7 ------- ------ $19.0 $ 88.8 ------- ------ ------- ------
In the accompanying consolidated condensed statement of operations, the total charge of $31.2 million for the third quarter of 1996 has been included in both costs of goods sold and selling, administrative and general expenses at $11.7 million and $19.4 million, respectively. The charges for the first three quarters of fiscal 1996 to cost of goods sold and selling, administrative and general expenses are approximately $38.0 million and $100.6 million, respectively. These amounts have been separately reflected in the above table. In summary, the 1996 non-recurring charges for exiting the Hathaway business and the Intimate Apparel Division consolidation and realignment and other items totaled approximately $88.8 million, after income tax benefits of $49.7 million, or $1.66 per share for first nine months of fiscal 1996. RESULTS OF OPERATIONS Net revenues in the third quarter of fiscal 1997 were $333.4 million, 14.2% higher than the $292.0 million recorded in the third quarter of fiscal 1996. Net revenues for the nine months ended October 4, 1997 were $875.1 million, an increase of 21.3% over the $721.3 million recorded in the first nine months of fiscal 1996. Intimate apparel division net revenues increased 9.2% to $235.7 million from $215.8 million in the third quarter of fiscal 1996. The increase in net revenues in the third quarter of fiscal 1997 compared to fiscal 1996 was generated by a nearly 30.0% increase in Calvin Klein worldwide revenues, and a strong 18.0% increase in our Warner's/Olga U.S. business, partially offset by $6.0 million unfavorable foreign exchange impact on revenues resulting from a stronger dollar to European currencies. For the first nine months, net revenues increased 19.8% to $644.5 million from $538.0 million in the first nine months of fiscal 1996. The increase in net revenues in the first nine months of fiscal 1997 compared to fiscal 1996 was generated by a 24.0% increase in Calvin Klein worldwide revenues, and a 10.0% increase in our Warner's/Olga U.S. business. International shipments in the first nine months of fiscal 1997, including Calvin Klein and Lejaby increased 41.1% to $201.2 million or 31.2% of total intimate apparel sales from $142.6 million or 26.5% of total intimate apparel sales last year reflecting continuing expansion outside the United States. Menswear division net revenues increased 39.1% to $84.6 million in the third quarter of fiscal 1997. The increase is attributable to a 66.0% increase in Chaps by Ralph Lauren partially offset by the discontinuance of the Hathway shirts brand in 1996. Net revenues for the nine months ended October 4, 1997 increased 30.6% to $194.5 million from $148.9 million in the first nine months of fiscal 1996. The increase for the nine months primarily reflects an increase of 58.5% in Chaps by Ralph Lauren net revenues and 51.9% for Calvin Klein accessories net revenues partially offset by the discontinuance of the Hathway shirts brand in 1996. Gross profit increased 37.2% to $124.0 million in the third quarter of fiscal 1997 from $90.4 million in the third quarter of fiscal 1996. Gross profit for the first nine months of fiscal 1997 increased 50.0% to $316.0 million from $210.6 million in the first nine months of fiscal 1996. The increase in gross profit was attributable to a better mix of regular price sales and higher Calvin Klein sales in fiscal year 1997, and the non-recurring charge recorded in fiscal 1996 (see discussion above). 10 Selling, administrative and general expenses decreased to $61.7 million (18.5% of net revenues) in the third quarter of fiscal 1997 from the $71.9 million (24.6% of net revenues) recorded in the third quarter of fiscal 1996. Excluding the fiscal 1996 non-recurring charge, selling, administrative and general expenses increased slightly resulting from higher marketing costs to support the Calvin Klein line. Selling, administrative and general expenses, for the first nine months of fiscal 1997 decreased to $175.4 million (20.0% of net revenues) from $236.2 million (32.7% of net revenues) in fiscal 1996 mainly as a result of the 1996 non-recurring charges previously discussed. Interest expense increased $2.5 million in the third quarter of fiscal 1997 to $11.5 million. Interest expense for the nine months ended October 4, 1997 increased $8.1 million to $32.0 million from $23.9 million in the first nine months of fiscal 1996. The increase in 1997 interest expense for both the quarter and nine months is due mainly to interest costs attributable to the three acquisitions completed in 1996. The provision for income taxes for the third quarter of fiscal 1996 and for the first nine months of fiscal 1996 reflects income tax benefits of $12.2 million and $49.7 million, respectively, related to the exit from the Hathaway business and consolidation and realignment of the intimate apparel division. The Company's effective tax rate for 1996, before the tax benefits discussed above, was 39% compared to 38% in 1997. Net income for the third quarter of fiscal 1997 was $32.1 million, an increase of $26.3 million from the third quarter of fiscal 1996. Net income for the first nine months of fiscal 1997 was $67.4 million as opposed to a net loss of $34.5 million in the first nine months of fiscal 1996. The increase for both the quarter and nine months reflects the higher net revenues and operating income in 1997, and the non-recurring charge recorded in fiscal 1996, as previously discussed. CAPITAL RESOURCES AND LIQUIDITY On May 11, 1995, consistent with the Company's goal of providing increased shareholder value, the Company declared a quarterly cash dividend of $0.07 per share. The Company has since declared eleven successive quarterly cash dividends. In fiscal 1997, the Company increased its quarterly cash dividend from $0.07 per share to $0.08 per share. The Company's liquidity requirements arise primarily from its debt service requirements and funding of the Company's working capital needs, primarily inventory and accounts receivable. The Company's borrowing requirements are seasonal, with needs peaking at the end of the second quarter and during the third quarter each year. The Company generates nearly all of its operating cash flow in the fourth quarter of the fiscal year due to increased shipments in the third and fourth quarters and the sale of inventory built during the first half of the fiscal year. Cash used in operations before the $4.0 million payment of accruals related to exiting the Hathaway business, the consolidation and realignment of the intimate apparel division and other items was $78.8 million in the first nine months of fiscal 1997 compared to $66.7 million in the first nine months of fiscal 1996. The negative cash flow in operating activities reflects higher working capital requirements primarily due to higher sales and seasonal increases in working capital, primarily inventory. Cash used in investing activities was $61.9 million for the first nine months of fiscal 1997 compared to $121.7 million in the first nine months of fiscal 1996. Capital expenditures were $32.1 million in the first nine months of fiscal 1997, compared to $20.6 million in the first nine months of fiscal 1996. Payment for the purchase of acquired assets includes $15.0 million related to the payment of acquisition accruals, primarily Lejaby, GJM and Bodyslimmers in fiscal 1997 and $87.0 million related to the purchase of Lejaby, GJM and Bodyslimmers in fiscal 1996. Cash provided from financing activities was $144.6 for the first nine months of fiscal 1997 compared to $199.1 million for the first nine months of fiscal 1996. Borrowings under the Company's revolving credit agreements, which increase during the first nine months of the fiscal year, were $351.2 million in the first nine months of fiscal 1997 compared to $144.1 million in the first nine months of fiscal 1996. The Company repurchased 271,363 shares of its common stock in the first nine months of fiscal 1997 for approximately $8.9 million. The Company has purchased 521,363 shares of its common stock for 11 approximately $15.9 million under the current share repurchase program, for an average cost of approximately $30.50 per share. On August 12, 1997, the Company refinanced existing credit facilities of $750 million, consisting of the remaining outstanding balance of a $200 million term loan, a $250 million revolving credit facility, both maturing in 2000, a $100 million, 364-day revolving credit facility and a $200 million trade credit facility (the 'Predecessor Facilities') with amended credit facilities totaling $900 million and consisting of a $600 million revolving credit facility maturing in 2002 and a $300 million trade credit facility (the 'Facilities'). The Facilities provide the Company with additional financing to support the continued strong growth of its business and flexibility for acquisitions and further share repurchases. The Amended Facilities have improved terms and conditions compared to the Predecessor Facilities reflecting the Company's continuing strong operating performance and credit profile, including lower pricing, fewer restrictive covenants, no debt amortization and increased flexibility. The Company believes that funds available under the Amended Facilities and cash flow to be generated from future operations will be sufficient to meet working capital and capital expenditure needs of the Company, including dividends and interest and principal payments on outstanding debt obligations for the next twelve months and for the next several years. YEAR 2000 COMPLIANCE Following a comprehensive study of current systems and future requirements to support international growth, the Company will initiate a program to replace existing capabilities with enhanced hardware and software applications. The objectives of the new program are to achieve competitive benefits for the Company, as well as assuring that all information systems will meet 'year 2000' and Economic and Monetary Union compliance. Full implementation of this program is expected to require expenditures, primarily capital, of approximately $50 million over the next three years. Funding requirements have been incorporated in the Company's capital expenditure planning and are not expected to have a material adverse impact on financial condition, results of operations or liquidity. 12 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Shortly after the announcement of a proposed transaction between Designer Holdings and the Company, three stockholders of Designer Holdings, Jacob J. Spinner, Yaskov Glatter and Sherry Berman, as custodian for Jordan Berman, filed lawsuits in the Delaware Court of Chancery challenging the transaction. The named plantiff in each of the actions purports to maintain each individual action as a class action on behalf of Designer Holdings stockholders. On October 30, 1997 the Court of Chancery signed an order which consolidated the three actions. Now captioned as In re Designer Holdings Ltd. Shareholders Litigation, Consolidated Civil Action 15942, the consolidated complaint alleges that the directors of Designer Holdings breached their fiduciary duties to Designer Holdings' stockholders in approving the transaction. The complaint further alleges that the directors have a conflict of interest based on the price at which Designer Holdings shares were sold to the public in May 1996 relative to the transaction price. The plaintiffs also claim that the Company aided and abetted the directors of Designer Holdings in breaching their fiduciary duties. The plaintiffs seek injunctive relief to prohibit Designer Holdings from completing the merger, or in the alternative, monetary damages of an unspecified amount. On November 13, 1997, the parties to this litigation reached an agreement in principle to settle this litigation on the following terms, subject to court approval: 1. the defendants permitted the plaintiffs' attorneys to review drafts of the Joint Proxy Statement/Prospectus relating to the transaction prior to mailing and have revised the disclosure therein in response to their comments; 2. the defendants agreed that they would reduce the termination fee payable to the Company in certain circumstances from $12.5 million to $6.25 million; and 3. Charterhouse Equity Partners II, L.P., which beneficially owns approximately 2.6 million shares of the Company as a result of the exchange of shares with New Rio, L.L.C., has agreed that during the 14-day period following the date on which Designer Holdings stockholders can sell the shares of the Company issued in the merger, but in no event extending past December 31, 1997, it will not sell, transfer or otherwise dispose of any shares of the Company, notwithstanding the existence of an effective registration statement for the resale of any such shares, unless the closing price for shares of the Company on the NYSE Composite Transactions Tape on any day within such 14-day period was more than 15% above or below such closing price on the trading day immediately preceding the effective time of the merger. Upon final approval of the settlement by the court, plaintiffs' counsel will petition the court for an award of attorney's fees and expenses, which will be paid by Designer Holdings. Plaintiffs' counsel has agreed to submit a request for, and the defendants have agreed not to oppose, a request for court approval of not more than $350,000 in attorney's fees and expenses. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 4.1 -- Amended and Restated Declaration of Trust of Designer Finance Trust, dated as of November 6, 1996, among Designer Holdings, as Sponsor, IBJ Schroder Bank & Trust Company, as Property Trustee, Delaware Trust Capital Management, Inc., as Delaware Trustee and Merril M. Halpern and Arnold H. Simon, as Trustees. 4.2 -- Indenture dated as of November 6, 1996, between Designer Holdings and IBJ Schroder Bank & Trust Company, as Trustee. 4.3 -- Preferred Securities Guarantee Agreement dated as of November 6, 1996, between Designer Holdings, as Guarantor and IBJ Schroder Bank & Trust Company, as Preferred Guarantee Trustee, with respect to the Preferred Securities of Designer Finance Trust. 10.1 -- Credit Agreement, dated as of August 12, 1997 (the 'U.S. $600,000,000 Credit Agreement'), among Warnaco Inc., as Borrower, and Warnaco and The Bank of Nova Scotia and Citibank, N.A. as Managing Agents, Citibank, N.A. as Documentation Agent, The Bank of Nova Scotia as Administrative Agent, Competitive Bid Agent, Swing Line Bank and an Issuing Bank and certain other lenders named therein. 10.2 -- Second Amended and Restated Credit Agreement, dated as of August 12, 1997 (the 'U.S. $300,000,000 Credit Agreement'), among Warnaco Inc., as the U.S. Borrower, Warnaco (HK) Ltd., as the Foreign Borrower, Warnaco, as a Guarantor, Citibank, N.A., as the Documentation Agent, The Bank of Nova Scotia, as the Administrative Agent, and certain other lenders named therein. 10.3 -- First Amendment to the U.S. $300,000,000 Credit Agreement, dated as of October 14, 1997 among Warnaco Inc., as the U.S. Borrower, Warnaco (HK) Ltd. as the Foreign Borrower, Warnaco, Citibank, N.A., as the Documentation Agent, The Bank of Nova Scotia, as Administrative Agent, and certain other lenders party thereto. 10.4 -- Amended and Restated License Agreement dated as of January 1, 1996, between Polo Ralph Lauren, L.P. and Warnaco Inc. 10.5 -- Amended and Restated Design Services Agreement dated as of January 1, 1996, between Polo Ralph Lauren Enterprises, L.P. and Warnaco Inc. 11.1 -- Earnings per share. 27.1 -- Financial Data Schedule
(b) Reports on Form 8-K. The Company filed one report on Form 8-K on October 3, 1997 during the third quarter of 1997. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 12, 1997 By: /S/ WILLIAM S. FINKELSTEIN ................................... WILLIAM S. FINKELSTEIN DIRECTOR, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER Date: November 12, 1997 By: /S/ STANLEY P. SILVERSTEIN ................................... STANLEY P. SILVERSTEIN VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY 14 STATEMENT OF DIFFERENCES The registered trademark symbol shall be expressed as........................'r' EX-4 2 EXHIBIT 4.1 ================================================================================ AMENDED AND RESTATED DECLARATION OF TRUST OF DESIGNER FINANCE TRUST Dated as of November 6, 1996 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions ............................................ 2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application ....................... 9 SECTION 2.2 Lists of Holders of Securities ......................... 10 SECTION 2.3 Reports by the Property Trustee ........................ 11 SECTION 2.4 Periodic Reports to Property Trustee .............................................. 11 SECTION 2.5 Evidence of Compliance with Conditions Precedent ................................. 12 SECTION 2.6 Events of Default; Waiver .............................. 12 SECTION 2.7 Event of Default; Notice ............................... 14 ARTICLE III ORGANIZATION SECTION 3.1 Name ................................................... 15 SECTION 3.2 Office ................................................. 15 SECTION 3.3 Purpose ................................................ 15 SECTION 3.4 Prohibition of Actions by the Trust and the Trustees ..................................... 16 SECTION 3.5 General Authority of the Trustees ...................... 17 SECTION 3.6 Title to Property of the Trust ......................... 17 SECTION 3.7 Not Responsible for Recitals or Issuance of Securities ............................... 17 SECTION 3.8 Duration of Trust ...................................... 17 SECTION 3.9 Mergers ................................................ 17 SECTION 3.10 Termination of Trust ................................... 20 ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities ........................................... 21 SECTION 4.2 Responsibilities of the Sponsor ........................ 21
Page ---- ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees ..................................... 22 SECTION 5.2 Delaware Trustee; Eligibility .......................... 23 SECTIOn 5.3 Property Trustee; Eligibility .......................... 23 SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally ........................ 24 SECTION 5.5 Initial Trustees ....................................... 25 SECTION 5.6 Appointment, Removal and Resignation of Trustees ............................... 25 SECTION 5.7 Vacancies among Trustees ............................... 27 SECTION 5.8 Merger, Conversion, Consolidation or Succession to Business of a Trustee ............................................... 28 SECTION 5.9 Authority, Powers and Duties of the Regular Trustees ...................................... 28 SECTION 5.10 Delegation of Powers and Duties of the Regular Trustees .................................. 33 SECTION 5.11 Powers and Duties of the Property Trustee ............................................... 33 SECTION 5.12 Certain Duties and Responsibilities of the Property Trustee ............................... 35 SECTION 5.13 Certain Rights of Property Trustee ..................... 37 SECTION 5.14 Delaware Trustee ....................................... 40 SECTION 5.15 Meetings ............................................... 40 ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions .......................................... 41 ARTICLE VII THE SECURITIES SECTION 7.1 Title and Terms ........................................ 41 SECTION 7.2 General Provisions Regarding the Securities ............ 42 SECTION 7.3 General Form of Certificates ........................... 42 SECTION 7.4 Form of Preferred Securities Certificates; Global Certificates ..................... 43 SECTION 7.5 Execution and Dating of Certificates .......................................... 44 SECTION 7.6 Authentication of Preferred Security Certificates ................................. 45 SECTION 7.7 Definitive Preferred Security Certificates ............. 45 SECTION 7.8 Temporary Certificates ................................. 46 SECTION 7.9 Registrar, Paying Agent and
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Page ---- Conversion Agent ..................................... 46 SECTION 7.10 Paying Agent to Hold Money in Trust .................... 47 SECTION 7.11 Outstanding Preferred Securities ....................... 47 SECTION 7.12 Preferred Securities in Treasury ....................... 48 SECTION 7.13 Notices to Clearing Agency ............................. 48 SECTION 7.14 Appointment of Successor Clearing Agency ............... 48 SECTION 7.15 Deemed Security Holders ................................ 48 ARTICLE VIII TRANSFERS, EXCHANGES AND CANCELLATIONS OF SECURITIES SECTION 8.1 General ................................................ 49 SECTION 8.2 Transfer Procedures and Restrictions for Global Certificates .......................................... 50 SECTION 8.3 Mutilated, Destroyed, Lost or Stolen Certificates; Replacement Securities ............................................ 51 SECTION 8.4 Cancellation of Preferred Security Certificates .......................................... 52 ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS SECTION 9.1 Liability .............................................. 52 SECTION 9.2 Exculpation ............................................ 53 SECTION 9.3 Fiduciary Duty ......................................... 54 SECTION 9.4 Indemnification ........................................ 55 SECTION 9.5 Outside Businesses ..................................... 59 ARTICLE X ACCOUNTING SECTION 10.1 Fiscal Year ............................................ 60 SECTION 10.2 Certain Accounting Matters ............................. 60 SECTION 10.3 Banking ................................................ 61 SECTION 10.4 Withholding ............................................ 61 ARTICLE XI AMENDMENTS AND MEETINGS SECTION 11.1 Amendments ............................................. 62 SECTION 11.2 Meetings of the Holders of Securities; Action by Written Consent ............................................... 64
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Page ---- ARTICLE XII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 12.1 Representations and Warranties of Property Trustee ..... 66 SECTION 12.2 Representations and Warranties of Delaware Trustee ..... 67 ARTICLE XIII MISCELLANEOUS SECTION 13.1 Notices ................................................ 68 SECTION 13.2 Governing Law .......................................... 69 SECTION 13.3 Intention of the Parties ............................... 70 SECTION 13.4 Headings ............................................... 70 SECTION 13.5 Successors and Assigns ................................. 70 SECTION 13.6 Partial Enforceability ................................. 70 SECTION 13.7 Counterparts ........................................... 70 ANNEX AND EXHIBITS ANNEX I Terms of 6% Convertible Trust Originated Preferred Securities and 6% Convertible Common Securities Exhibit A-1 Form of Preferred Security Exhibit A-2 Form of Common Security Exhibit B Form of Debenture
iv CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- --------------- 310(a)........................................................ 5.3(a) 310(c)........................................................ Inapplicable 311(c)........................................................ Inapplicable 312(a)........................................................ 2.2(a) 312(b)........................................................ 2.2(b) 313........................................................... 2.3 314(a)........................................................ 2.4 314(b)........................................................ Inapplicable 314(c)........................................................ 2.5 314(d)........................................................ Inapplicable 314(f)........................................................ Inapplicable 315(a)........................................................ 5.12(b)-(e) 315(c)........................................................ 5.12(a) 315(d)........................................................ 5.12(a) 316(a)........................................................ Annex I 316(c)........................................................ 5.9(d)(v) - --------------- * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. v AMENDED AND RESTATED DECLARATION OF TRUST OF DESIGNER FINANCE TRUST NOVEMBER 6, 1996 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of November 6, 1996, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Designer Holdings Ltd., a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the Trust issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established Designer Finance Trust (the "Trust"), a trust under the Business Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of September 26, 1996 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on September 27, 1996, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as defined herein) of the Debenture Issuer (as defined herein); WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) a reference to the masculine includes the feminine and vice versa. "Additional Interest" means if the Trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other taxing authority, such amounts as shall be required so that the net amounts received and retained by the Trust after paying such taxes, duties, assessments and governmental charges will not be less than the amounts the Trust would have received had no such taxes, duties, assessments or governmental charges been imposed. 2 "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Agent" means any Registrar, Paying Agent, Conversion Agent or co-registrar. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 8.2. "Business Day" means any day other than a day on which banking institutions in the City of New York or in Wilmington, Delaware are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code 'SS'3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a certificate in global or definitive form representing a Common Security or a Preferred Security. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Closing Date" means November 6, 1996. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Securities" has the meaning specified in Section 7.1. 3 "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "Common Securities Guarantee" means the guarantee agreement dated as of November 6, 1996, of the Sponsor in respect of the Common Securities. "Company Indemnified Person" means (i) any Regular Trustee; (ii) any Affiliate of any Regular Trustee; (iii) any officer, director, shareholder, member, partner, employee, representative or agent of any Regular Trustee; or (iv) any officer, employee or agent of the Trust or its Affiliates. "Compounded Interest" means interest compounded quarterly at the rate specified for the Debentures to the extent permitted by applicable law upon interest accrued and unpaid (including Additional Interest) at the end of each Extension Period. "Conversion Agent" has the meaning set forth in Section 7.9. "Covered Person" means (a) any officer, director, stockholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means the Sponsor in its capacity as issuer of the Debentures. "Debenture Trustee" means IBJ Schroder Bank & Trust Company, a New York banking corporation, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the Debentures to be issued by the Debenture Issuer under the Indenture and to be held by the Property Trustee, a specimen certificate for such Debentures being Exhibit B hereto. "Definitive Preferred Security Certificates" has the meaning set forth in Section 7.7. "Delaware Trustee" has the meaning set forth in Section 5.2. 4 "Depositary" means The Depository Trust Company, the initial Clearing Agency, until a successor shall be appointed pursuant to Section 7.14, and thereafter means such successor Depositary. "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. "Fiduciary Indemnified Person" has the meaning set forth in Section 9.4(b). "Global Certificate" has the meaning set forth in Section 7.4(a). "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture dated as of November 6, 1996, between the Debenture Issuer and the Debenture Trustee, as it may be amended from time to time. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. "Legal Action" has the meaning set forth in Section 5.9(d)(vii). 5 "Majority in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Annex I hereto. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (i) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (ii) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (iii) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer 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, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 7.9. 6 "Person" means any legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning specified in Section 7.1. "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Exhibit A-1. "Preferred Securities Guarantee" means the Guarantee Agreement dated as of November 6, 1996 of the Sponsor in respect of the Preferred Securities. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Depositary, or on the books of a Person maintaining an account with such Depositary (directly as a participant or as an indirect participant, in each case in accordance with the rules of such Depositary). "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section 5.11(c). "Purchase Agreement" means the Purchase Agreement dated as of November 1, 1996, between the Sponsor and the underwriters named therein, relating to the Preferred Securities. "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Registrar" has the meaning set forth in Section 7.9. "Registration Statement" means the Registration Statement on Form S-1 (Reg. No. 333-13097), including any amendments thereto relating to, among other securities, the Preferred Securities. 7 "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any vice-president, any assistant vice-president, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. "Securities Guarantee" means the Common Securities Guarantee and the Preferred Securities Guarantee. "Special Event" has the meaning set forth in Annex I hereto. "Sponsor" means Designer Holdings Ltd., a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Event" has the meaning set forth in Annex I hereto. 8 "10% in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities, voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration, which are incorporated by reference in and made part of this Declaration and shall, to the extent applicable, be governed by such provisions. 9 (b) The Property Trustee shall be the only Trustee that is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by 'SS''SS'310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in any List of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under 'SS''SS'311(a), 311(b) and 312(b) of the Trust Indenture Act. 10 SECTION 2.3 Reports by the Property Trustee. (a) Within 60 days after May 15 of each year, commencing May 15, 1997, the Property Trustee shall transmit by mail to Holders such reports concerning the Property Trustee and its actions under this Declaration as may be required pursuant to the Trust Indenture Act in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Trust will notify the Property Trustee when the Securities are listed on any stock exchange. SECTION 2.3 Periodic Reports to Property Trustee. Each of the Sponsor and the Trust shall file with the Property Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided, that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Property Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Property Trustee is for informational purposes only and the Property Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Trust's compliance with any of its covenants hereunder (as to which the Property Trustee is entitled to rely exclusively on Officers' Certificates). Each of the Sponsor and the Trust shall also provide to the Property Trustee on a timely basis such information as the Property Trustee requires to enable the Property Trustee to prepare and file any form required to be submitted by the Company with the Internal Revenue Service and the Holders of the Securities relating to original issue discount, if any, including, without limitation, Form 1099-OID or any successor form. 11 SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in 'SS'314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to 'SS'314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of 'SS'316(a)(1)(B) of the Trust Indenture Act and such 'SS'316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of 12 the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided further, that each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of 'SS''SS' 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such 'SS''SS' 316(a)(1)(A) and 316(a)(1)(B) of 13 the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of 'SS' 316(a)(1)(B) of the Trust Indenture Act and such 'SS' 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Event of Default; Notice. (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities actually known to a Responsible Officer of the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. 14 (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 501(1) and 501(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or of which a Responsible Officer of the Property Trustee charged with the administration of the Declaration shall have actual knowledge. ARTICLE III. ORGANIZATION OF TRUST SECTION 3.1 Name. The Trust is named "Designer Finance Trust," as such name may be modified from time to time by the Regular Trustees following 10 Business Days written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Designer Holdings Ltd., 1385 Broadway, 3rd Floor, New York, New York 10018, Attention: John J. Jones, Vice President, Secretary and General Counsel. On 10 Business Days written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. 15 SECTION 3.4 Prohibition of Actions by the Trust and the Trustees. The Trust shall not, and the Trustees (including the Property Trustee) shall not, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not cause the Trust to: (a) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (b) acquire any assets other than as expressly provided herein; (c) possess Trust property for other than a Trust purpose; (d) make any loans or incur any indebtedness other than loans represented by the Debentures; (e) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (g) other than as provided in this Declaration or Annex I hereto, (a) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (b) waive any past default that is waivable under the Indenture, (c) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (d) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such amendment or modification will not cause more than an insubstantial risk that (i) the Trust will be deemed an Investment Company required to be registered under the Investment Company Act, or (ii) for 16 United States federal income tax purposes the Trust will not be classified as a grantor trust. SECTION 3.5 General Authority of the Trustees. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.6 Title to Property of the Trust. Except as provided in Section 5.11 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.7 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.8 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Section 3.10 hereof, shall exist until September 27, 2021. SECTION 3.9 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety, to any Person, except as described in Sections 3.9(b) and 3.9(c). 17 (b) The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees, and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state of the United States; provided that: (i) if the Trust is not the survivor, such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities with respect to Distributions, assets and payments upon liquidation, redemption and otherwise; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect (other than with 18 respect to any dilution of the Holders' interest in the new entity); (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee; and (viii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust reasonably acceptable to the Property Trustee and experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement will not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will be treated as a grantor trust for United States federal income tax purposes. (c) Notwithstanding Section 3.9(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Common Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. 19 SECTION 3.10 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor, the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of at least a majority in liquidation amount of the Securities, voting together as a single class, to file such certificate of cancellation, or the revocation of the Certificate of Incorporation of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof, including any Additional Interest and Compounded Interest, shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Tax Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures shall have been distributed to the Holders of Securities in exchange for all of the Securities; (vi) upon the distribution of the Sponsor's common stock to all Securities Holders upon conversion of all outstanding Preferred Securities; (vii) the expiration of the term of the Trust on September 27, 2021; or (viii) before the issuance of any Securities, with the consent of all the Regular Trustees and the Sponsor. 20 (b) As soon as is practicable after the occurrence of an event referred to in Section 3.10(a), the Regular Trustees shall pay (or make provision for the payment of) all claims against the Trust and shall execute and file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Article IX shall survive the termination of the Trust. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On the Closing Date and on any other date Preferred Securities and Common Securities are sold pursuant to the over-allotment option granted in the Purchase Agreement, the Sponsor will purchase all of the Common Securities issued by the Trust, in an aggregate amount at least equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare for filing with the Commission the Registration Statement, including any amendments thereto; (b) to determine the states and foreign jurisdictions in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions that must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such states and foreign jurisdictions; 21 (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing or quotation of the Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Purchase Agreement and other agreements, documents and instruments providing for the sale of the Preferred Securities. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The initial number of Trustees shall be four, and (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; provided, however, that the number of Trustees shall in no event be less than two; provided further that (i) there shall be at least one Regular Trustee who is an employee or officer of, or is affiliated with the Sponsor and (ii) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. 22 SECTION 5.2 Delaware Trustee; Eligibility. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be (a) a natural person who is resident of the State of Delaware; or (b) if not a natural person, an entity that has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee may also be the Delaware Trustee and Section 5.14 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee and shall (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and 23 (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-5 and to the extent the Investment Company Act or Trust Indenture Act requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(d). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of 'SS' 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in 'SS' 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of 'SS' 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. 24 SECTION 5.5 Initial Trustees. (a) The initial Regular Trustees are: Arnold H. Simon c/o Designer Holdings Ltd. 1385 Broadway, 3rd Floor New York, New York 10018 Merril M. Halpern c/o Charterhouse Group International, Inc. 535 Madison Avenue New York, New York 10022 The initial Delaware Trustee is: Delaware Trust Capital Management, Inc. 900 Market Street H02M12 Wilmington, DE 19801 Attention: Corporate Trust Department The initial Property Trustee is: IBJ Schroder Bank & Trust Company 1 State Street 11th Floor New York, NY 10004 Attention: Corporate Trust & Agency Department SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Sections 5.6(b) and 5.6(c), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities, by vote of the Holders of a majority in liquidation amount of the Common Securities voting as a class. (b) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor possessing the qualifications to act as a Property Trustee under Section 5.3 (a "Successor Property 25 Trustee") has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the removed Property Trustee. (c) The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.6(a) until a successor possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the removed Delaware Trustee. (d) A Trustee appointed to office shall hold office until his, hers or its successor shall have been appointed or until his, her or its death, removal, resignation, dissolution or liquidation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. 26 (e) The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with Section 5.6(d). (f) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery pursuant to this Section 5.6 of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (g) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees, shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with this Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. 27 SECTION 5.8 Merger, Conversion, Consolidation or Succession to Business of a Trustee. Any corporation into which the Property Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article V, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 5.9 Authority, Powers and Duties of the Regular Trustees. (a) Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. (b) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (c) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 5.9, provided, that the Registration Statement, including any amendments thereto, shall be signed by a majority of the Regular Trustees. 28 (d) The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (i) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided, further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date and any other date Preferred Securities and Common Securities are sold pursuant to the over-allotment option granted in the Purchase Agreement; (ii) in connection with the issue and sale of the Preferred Securities, at the direction of the Sponsor, to: (A) execute the Registration Statement prepared by the Sponsor, including any amendments thereto relating to, among other securities, the Preferred Securities; (B) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Preferred Securities in any state or foreign jurisdiction in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (C) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing or quotation of the Preferred Securities, from time to time; (D) execute and deliver letters, documents, or instruments to the Depositary relating to the Preferred Securities; 29 (E) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act; and (F) execute and perform the Purchase Agreement and other agreements, documents and instruments providing for the sale of the Preferred Securities; (iii) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Holders of Common Securities; (iv) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (v) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of 'SS' 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (vi) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (vii) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 30 5.11(f), the Property Trustee has the exclusive power to bring such Legal Action; (viii) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, advisors, and consultants and pay reasonable compensation for such services; (ix) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (x) to give the certificate required by 'SS' 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (xi) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (xii) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (xiii) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (xiv) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (xv) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; 31 (xvi) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 5.9, including, but not limited to: (A) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (B) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (C) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes; provided that such action does not adversely affect the interests of Holders; and (xvii) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. (e) The Regular Trustees must exercise the powers set forth in this Section 5.9 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. (f) Subject to this Section 5.9, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 5.11. (g) Any expenses incurred by the Regular Trustees pursuant to this Section 5.9 shall be reimbursed by the Debenture Issuer. 32 SECTION 5.10 Delegation of Powers and Duties of the Regular Trustees. The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. The Regular Trustees may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 their power for the purpose of executing any documents contemplated in Section 5.9, including the Registration Statement or any amendment thereto or other document filed with the Commission, or making any other governmental filing. SECTION 5.11 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the 33 Holders of the Preferred Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with the Property Trustee or a banking institution the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization," as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as so directed and as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as so directed as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain Special Events arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities. (e) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer of the Property Trustee occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, but subject to the rights of the Holders pursuant to the terms of such Securities, enforce its rights as holder of the Debentures, including the right to take any Legal Action which arises out of or in connection with such an Event of Default. 34 (f) Subject to this Section 5.11, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 5.9. (g) The Property Trustee must exercise the powers set forth in this Section 5.11 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 5.12 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiving of all Events of Default that may have occurred, shall undertake to perform only such duties and obligations as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Property Trustee has actual knowledge, the Property Trustee shall exercise such rights and powers vested in it by this Declaration, and use the same degree of care and skill in its exercise, as a prudent individual would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred, in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration. 35 (c) The Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts. (d) The Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration. (e) The Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. (f) No provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Property Trustee against such risk or liability is not reasonably assured to it. (g) The Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act. (h) The Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Sec- 36 tion 5.11(c)(i) and except to the extent otherwise required by law. (i) The Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith. SECTION 5.13 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 5.12: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel of its choice or other experts and the advice or opinion of such counsel and experts with respect to 37 legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion, such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee; provided that, nothing contained in this Section 5.13(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, security, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; 38 (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (A) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions; (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or 39 obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 5.14 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of 'SS' 3807 of the Business Trust Act. SECTION 5.15 Meetings. If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. 40 ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest), Additional Interest, premium and/or principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders of Preferred Securities and Common Securities in accordance with the preferences set forth in the respective terms of such Securities, as described in Annex I hereto. ARTICLE VII THE SECURITIES SECTION 7.1 Title and Terms. The Regular Trustees shall on behalf of the Trust issue one class of convertible preferred securities, representing undivided beneficial interests in the assets of the Trust (the "Preferred Securities"), and one class of convertible common securities, representing undivided beneficial interests in the assets of the Trust (the "Common Securities"), each having such terms (the "Terms") as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. The aggregate number of Preferred Securities outstanding at any time shall not exceed the number set forth in the Terms in Annex I hereto. The Terms of the Securities set forth in Annex I and the forms of Certificates set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Property Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such Terms and to be bound thereby. 41 SECTION 7.2 General Provisions Regarding the Securities. (a) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (b) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be validly issued, fully paid and nonassessable. (c) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 7.3 General Form of Certificates. The Preferred Security Certificates and the Property Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Security Certificates shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. The Certificates may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Property Trustee in writing. The definitive Certificates shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the Regular Trustees, as evidenced by their execution thereof. The Trust shall issue no Securities in bearer form. 42 SECTION 7.4 Form of Preferred Securities Certificates; Global Certificates. (a) Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. No Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 7.7. (b) Unless required by the Depositary, any securities exchange on which the Preferred Securities may be listed or any rule, regulation or law, Preferred Securities issued in the form of Global Certificates need not be printed, lithographed or engraved on steel engraved borders, but shall be in such form as is acceptable to the Depositary. (c) Every Global Certificate authenticated and delivered hereunder shall bear a legend in substantially the following form, in capital letters and bold-face type: THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A PREFERRED SECURITY REGISTERED, AND NO TRANSFER OF THIS PREFERRED SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION. 43 (d) If the Depositary is the Depository Trust Company, the Global Certificate authenticated and delivered hereunder shall also bear a legend in substantially the following form, in capital letters and bold-face type: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. SECTION 7.5 Execution and Dating of Certificates. The Certificates shall be signed on behalf of the Trust by a Regular Trustee. In case any Regular Trustee who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificates may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Each Preferred Security shall be dated the date of its authentication. One Regular Trustee shall sign the Preferred Security Certificates for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Security Certificates, be a manual signature. 44 SECTION 7.6 Authentication of Preferred Security Certificates. Each Global Certificate shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of The Depositary Trust Company, and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Certificate shall constitute a single Preferred Security for all purposes of this Declaration. A Preferred Security Certificate shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Preferred Security Certificate has been authenticated under this Declaration. Upon a written order of the Trust signed by one Regular Trustee, the Property Trustee shall authenticate the Preferred Security Certificates for original issue. The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Preferred Security Certificates. An authenticating agent may authenticate Preferred Security Certificates whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Sponsor or an Affiliate. SECTION 7.7 Definitive Preferred Security Certificates. (a) Upon the occurrence of an event specified in Section 8.2(a), definitive, fully registered Preferred Security Certificates ("Definitive Preferred Security Certificates") shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities. (b) Upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Preferred Security Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and 45 each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. SECTION 7.8 Temporary Certificates. Until definitive Certificates are ready for delivery, the Trust may prepare and, in the case of the Preferred Securities, the Property Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have variations that the Trust considers appropriate for temporary Certificates. Without unreasonable delay, the Trust shall prepare and, in the case of the Preferred Securities, the Property Trustee shall authenticate definitive Certificates in exchange for temporary Certificates. SECTION 7.9 Registrar, Paying Agent and Conversion Agent. In the event that the Preferred Securities are not in book entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where Preferred Securities may be presented for registration of transfer or from exchange ("Registrar"), (ii) an office or agency where Preferred Securities may be presented for payment ("Paying Agent"). The Trust shall maintain an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Preferred Securities and of their transfer and exchange. The Trust may appoint the Registrar, the Paying Agent and the Conversion Agent and may appoint one or more co-registrars, one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Trust may change any Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice to any Holder. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Regular Trustees. The Trust shall notify the Property Trustee of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or Conversion 46 Agent. The Trust shall act as Paying Agent, Registrar, co-registrar, and Conversion Agent for the Common Securities. The Trust initially appoints the Property Trustee as Registrar, Paying Agent and Conversion Agent for the Preferred Securities. The Property Trustee shall be entitled to the protections of Sections 5.12 and 5.13 and Article IX in its capacity as Registrar, Paying Agent and Conversion Agent. SECTION 7.10 Paying Agent to Hold Money in Trust. The Trust shall require each Paying Agent other than the Property Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Property Trustee all money held by the Paying Agent for the payment of principal or distribution on the Securities, and will notify the Property Trustee if there are insufficient funds. While any such insufficiency continues, the Property Trustee may require a Paying Agent to pay all money held by it to the Property Trustee. The Trust at any time may require a Paying Agent to pay all money held by it to the Property Trustee and to account for any money disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have no further liability for the money. If the Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. SECTION 7.11 Outstanding Preferred Securities. The Preferred Securities outstanding at any time are all the Preferred Securities authenticated by the Property Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section 7.11 as not outstanding. If a Preferred Security is replaced or paid pursuant to Section 8.3, it ceases to be outstanding unless the Property Trustee receives proof satisfactory to it that the replaced, paid or purchased Preferred Security is held by a bona fide purchaser. 47 If Preferred Securities are considered paid in accordance with the terms of this Declaration, they cease to be outstanding and interest on them ceases to accrue. A Preferred Security does not cease to be outstanding because one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Preferred Security. SECTION 7.12 Preferred Securities in Treasury. In determining whether the Holders of the required amount of Securities have concurred in any direction, waiver or consent, Preferred Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Property Trustee shall be fully protected in relying on any such direction, waiver or consent, only Preferred Securities which the Property Trustee knows are so owned shall be so disregarded. SECTION 7.13 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, the Regular Trustees shall, in the case of any Global Preferred Security, give all such notices and communications specified herein to be given to the Preferred Security Holders to the Depositary, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 7.14 Appointment of Successor Clearing Agency. If the Depositary elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 7.15 Deemed Security Holders. The Trustees and any Agent may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to 48 recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. ARTICLE VIII TRANSFERS, EXCHANGES AND CANCELLATIONS OF SECURITIES SECTION 8.1 General. (a) Where Preferred Security Certificates are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Preferred Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Trust shall issue and the Property Trustee shall authenticate Preferred Security Certificates at the Registrar's request. (b) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the Terms set forth in Annex I. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (c) Subject to this Article VIII, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would not be classified for United States federal income tax purposes as a grantor trust; and (ii) the Trust would be an Investment Company or the transferee would become an Investment Company. 49 (d) The Regular Trustees shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificates, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. (e) The Trust shall not be required (i) to issue, register the transfer of or exchange Preferred Security Certificates during a period beginning at the opening of business 15 days before the day of any selection of Preferred Securities for redemption and ending at 5:00 p.m. (New York City time) on the day of selection, or (ii) to register the transfer or exchange of any Preferred Security so selected for redemption in whole or in part, except the unredeemed portion of any Preferred Security being redeemed in part. SECTION 8.2 Transfer Procedures and Restrictions for Global Certificates. (a) Notwithstanding any other provision in this Declaration, no Global Certificate may be exchanged in whole or in part for Preferred Securities registered, and no transfer of a Global Certificate in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Certificate or a nominee thereof or a successor Depositary or a nominee of such successor Depositary, unless (i) such Depositary (x) has notified the Sponsor that it is unwilling or unable to continue as Depositary for such Global Certificate and is not replaced by a successor Depositary approved by the Sponsor within 90 days or (y) at any time has ceased to be a clearing agency 50 registered under the Exchange Act, or (ii) an Event of Default has occurred and is continuing. (b) The transfer and exchange of Global Certificates or beneficial interests therein shall be effected through the Clearing Agency, in accordance with this Declaration and the procedures of the Clearing Agency therefor. (c) Unless and until Definitive Preferred Security Certificates have been issued to the Preferred Security Beneficial Owners pursuant to Section 7.7: (i) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; and (ii) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. The Depositary will make book entry transfers among the Clearing Agency Participants. SECTION 8.3 Mutilated, Destroyed, Lost or Stolen Certificates; Replacement Securities. If the holder of a Security claims that the Certificate representing such Security has been lost, destroyed or wrongfully taken or if such Certificate is mutilated and is surrendered to the Trust or in the case of the Preferred Securities to the Property Trustee, the Trust shall issue and the Property Trustee shall authenticate a replacement Certificate if the Property Trustee's and the Trust's requirements, as the case may be, are met. If required by the Property Trustee or the Trust, an indemnity bond must be sufficient in the judgment of both to protect the Trustees, the Property Trustee, the Sponsor or any 51 authenticating agent from any loss which any of them may suffer if a Certificate is replaced. The Company may charge for its expenses in replacing a Certificate. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Sponsor in its discretion may, instead of issuing a new Certificate, pay such Security. Every replacement Certificate is an additional obligation of the Trust. SECTION 8.4 Cancellation of Preferred Security Certificates. The Trust at any time may deliver Preferred Security Certificates to the Property Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Property Trustee any Preferred Securities surrendered to them for registration of transfer, redemption, conversion, exchange or payment. The Property Trustee shall promptly cancel all Preferred Securities surrendered for registration of transfer, redemption, conversion, exchange, payment, replacement or cancellation and shall dispose of cancelled Preferred Securities as the Trust directs. The Trust may not issue new Preferred Securities to replace Preferred Securities that it has paid or that have been delivered to the Property Trustee for cancellation or that any holder has converted. ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS SECTION 9.1 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or 52 (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to 'SS' 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability as is extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 9.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. 53 SECTION 9.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be 54 entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 9.4 Indemnification. (a) (i) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact 55 that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 9.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 9.4(a) (unless ordered by a court) shall be made by the Debenture Issuer only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Holders of the Common Securities of the Trust. 56 (v) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 9.4(a) shall be paid by the Debenture Issuer in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Debenture Issuer as authorized in this Section 9.4(a). Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) the Holders of the Common Securities of the Trust, that, based upon the facts known to the Regular Trustees, counsel or the Holders of the Common Securities at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or the Holders of the Common Securities reasonably determine that such person deliberately breached his duty to the Trust or the Holders of the Common or Preferred Securities. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Debenture Issuer or Holders of the Preferred Securities of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4(a) shall be deemed to be provided by a con- 57 tract between the Debenture Issuer and each Company Indemnified Person who serves in such capacity at any time while this Section 9.4(a) is in effect. Any repeal or modification of this Section 9.4(a) shall not affect any rights or obligations then existing. (vii) The Debenture Issuer or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Debenture Issuer would have the power to indemnify him against such liability under the provisions of this Section 9.4(a). (viii) For purposes of this Section 9.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any and all 58 loss, liability or expense including taxes (other than taxes based on the income of such Fiduciary Indemnified Person) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration or the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 9.4(b) shall survive the satisfaction and discharge of this Declaration. SECTION 9.5 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. 59 ARTICLE X ACCOUNTING SECTION 10.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 10.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. 60 (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by the Code, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 10.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account. SECTION 10.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustee shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. 61 ARTICLE XI AMENDMENTS AND MEETINGS SECTION 11.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee. (b) No amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the 62 terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the Trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company that is required to be registered under the Investment Company Act. (c) So long as any Securities remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities. (d) Section 8.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities. (e) Article IV and the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a majority in liquidation amount of the Common Securities. (f) Notwithstanding Section 11.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and 63 (iv) conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority, which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders. SECTION 11.2 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities represented by the Certificates so specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least seven days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange or over-the-counter market on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. 64 Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holders for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading provide otherwise, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or pur- 65 pose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 12.1 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of New York, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee; and the Declaration has been duly executed and delivered by the Property Trustee, and constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the certificate of incorporation or By-laws of the Property Trustee. 66 (d) At the Closing Date, the Property Trustee has not knowingly created any liens or encumbrances on such Debentures. (e) No consent, approval or authorization of, or registration with or notice to, any New York State or federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. SECTION 12.2 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration and at the time of Closing, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Delaware Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee; and the Declaration has been duly executed and delivered by the Delaware Trustee, and constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Delaware Trustee does not conflict with or constitute a breach of the certificate of incorporation or by-laws of the Delaware Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking 67 authority is required for the execution, delivery or performance by the Delaware Trustee, of this Declaration. (e) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware. (f) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. ARTICLE XIII MISCELLANEOUS SECTION 13.2 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, sent by facsimile or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): c/o Designer Holdings Ltd. 1385 Broadway Third Floor New York, NY 10018 Tel: (212) 556-9600 Telecopy: (212) 556-9722 Attention: John J. Jones, General Counsel (b) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): IBJ Schroder Bank & Trust Company 1 State Street 11th Floor New York, NY 10004 Tel: (212) 858-2529 Telecopy: (212) 858-2952 Attention: Corporate Trust & Agency Department 68 (c) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities): Delaware Trust Capital Management, Inc. 900 Market Street H02M12 Wilmington, DE 19801 Attention: Corporate Trust Department (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): c/o Designer Holdings Ltd. 1385 Broadway Third Floor New York, NY 10018 Tel: (212) 556-9600 Telecopy: (212) 556-9722 Attention: John J. Jones, General Counsel (e) if given to any other Holder, at the address set forth on the books and records of the Trust or the Registrar, as applicable. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 13.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. 69 SECTION 13.3 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 13.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 13.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 13.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 13.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 70 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the date first above written. By: /s/ ARNOLD H. SIMON _________________________________ Name: Arnold H. Simon Title: Trustee By: /s/ MERRIL M. HALPERN ___________________________________ Name: Merril M. Halpern Title: Trustee DELAWARE TRUST CAPITAL MANAGEMENT, INC., Delaware Trustee By:_____________________________ Name: Title: IBJ SCHRODER BANK & TRUST COMPANY, Property Trustee By:_____________________________ Name: Title: DESIGNER HOLDINGS LTD., Sponsor By: /s/ ARNOLD H. SIMON _____________________________ Name: Arnold H. Simon Title: President, Chief, Executive Officer and Director 71 EX-4 3 EXHIBIT 4.2 DESIGNER HOLDINGS LTD., as Issuer and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee ---------------- Indenture Dated as of November 6, 1996 $123,711,350* 6% Convertible Subordinated Debentures Due 2016 ---------------- - ------------------- * Subject to increase to up to $142,268,050 in the event an over-allotment option is exercised. Designer Holdings Ltd. Certain Sections of this Indenture relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Indenture Act Section Section - --------------- --------- 'SS'310(a)(1) ........................................... 609 (a)(2) ........................................... 609 (a)(3) ........................................... Not Applicable (a)(4) ........................................... Not Applicable (b) ........................................... 608, 610 'SS'311(a) ........................................... 613 (b) ........................................... 613 'SS'312(a) ........................................... 701 702(a) (b) ........................................... 702(b) (c) ........................................... 702(c) 'SS'313(a) ........................................... 703(a) (a)(4) ........................................... 101, 1004 (b) ........................................... 703(a) (c) ........................................... 703(a) (d) ........................................... 703(b) 'SS'314(a) ........................................... 704 (b) ........................................... Not Applicable (c)(1) ........................................... 102 (c)(2) ........................................... 102 (c)(3) ........................................... Not Applicable (d) ........................................... Not Applicable (e) ........................................... 102 'SS'315(a) ........................................... 601 (b) ........................................... 602 (c) ........................................... 601 (d) ........................................... 601 (e) ........................................... 514 'SS'316(a) ........................................... 101 (a)(1)(A) ........................................... 502 512 (a)(1)(B) ........................................... 513 (a)(2) ........................................... Not Applicable (b) ........................................... 508 (c) ........................................... 104(c) 'SS'317(a)(1) ........................................... 503 (a)(2) ........................................... 504 (b) ........................................... 1003 'SS'318(a) ........................................... 107 - -------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. -ii- TABLE OF CONTENTS Page ---- Recitals of the Company ..................................................... 1 ARTICLE ONE Definitions and Other Provisions of General Application SECTION 101. Definitions .................................................. 3 SECTION 102. Compliance Certificates and Opinions ......................... 12 SECTION 103. Form of Documents Delivered to Trustee ....................... 13 SECTION 104. Acts of Holders; Record Dates ................................ 14 SECTION 105. Notices, Etc., to Trustee and the Company ................................................... 15 SECTION 106. Notice to Holders; Waiver .................................... 16 SECTION 107. Conflict with Trust Indenture Act ............................ 16 SECTION 108. Effect of Headings and Table of Contents .................................................. 17 SECTION 109. Successors and Assigns ....................................... 17 SECTION 110. Separability Clause .......................................... 17 SECTION 111. Benefits of Indenture ........................................ 17 SECTION 112. Governing Law ................................................ 17 SECTION 113. Legal Holidays ............................................... 18 ARTICLE TWO Security Forms SECTION 201. Forms Generally .............................................. 18 SECTION 202. Initial Issuance to Property Trustee ......................... 19 ARTICLE THREE The Securities SECTION 301. Title and Terms .............................................. 19 SECTION 302. Denominations ................................................ 21 SECTION 303. Execution, Authentication, Delivery and Dating ............... 21 SECTION 304. Temporary Securities ......................................... 22 SECTION 305. Registration, Registration of Transfer and Exchange .......... 22 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities ............. 24 SECTION 307. Payment of Interest; Interest Rights Preserved ............... 25 -iii- Page ---- SECTION 308. Persons Deemed Owners ........................................ 27 SECTION 309. Cancellation ................................................. 27 SECTION 310. Right of Set Off ............................................. 28 SECTION 311. CUSIP Numbers ................................................ 28 SECTION 312. Option to Extend Interest Payment Period ..................... 28 SECTION 313. Paying Agent, Security Registrar and Conversion Agent ........ 30 SECTION 314. Global Security .............................................. 30 ARTICLE FOUR Satisfaction and Discharge SECTION 401. Satisfaction and Discharge of Indenture ...................... 33 SECTION 402. Application of Trust Money ................................... 34 ARTICLE FIVE Remedies SECTION 501. Events of Default ............................................ 35 SECTION 502. Acceleration of Maturity; Rescission and Annulment ........... 36 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee ................................................... 37 SECTION 504. Trustee May File Proofs of Claim ............................. 38 SECTION 505. Trustee May Enforce Claims Without Possession of Securities .. 39 SECTION 506. Application of Money Collected ............................... 39 SECTION 507. Limitation on Suits .......................................... 40 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest and Convert .................................. 41 SECTION 509. Restoration of Rights and Remedies ........................... 41 SECTION 510. Rights and Remedies Cumulative ............................... 41 SECTION 511. Delay or Omission Not Waiver ................................. 42 SECTION 512. Control by Holders ........................................... 42 SECTION 513. Waiver of Past Defaults ...................................... 42 SECTION 514. Undertaking for Costs ........................................ 43 SECTION 515. Waiver of Stay or Extension Laws ............................. 43 SECTION 516. Enforcement by Holders of Preferred Securities ............... 44 -iv- Page ---- ARTICLE SIX The Trustee SECTION 601. Certain Duties and Responsibilities .......................... 44 SECTION 602. Notice of Defaults ........................................... 45 SECTION 603. Certain Rights of Trustee .................................... 45 SECTION 604. Not Responsible for Recitals or Issuance of Securities ....... 46 SECTION 605. May Hold Securities .......................................... 47 SECTION 606. Money Held in Trust .......................................... 47 SECTION 607. Compensation and Reimbursement ............................... 47 SECTION 608. Disqualification; Conflicting Interests ...................... 48 SECTION 609. Corporate Trustee Required; Eligibility ...................... 48 SECTION 610. Resignation and Removal; Appointment of Successor ............ 48 SECTION 611. Acceptance of Appointment by Successor ....................... 50 SECTION 612. Merger, Conversion, Consolidation or Succession to Business .................................................. 51 SECTION 613. Preferential Collection of Claims Against Company ............ 51 ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company SECTION 701. Company to Furnish Trustee Names and Addresses of Holders ................................................. 51 SECTION 702. Preservation of Information; Communications to Holders ....... 52 SECTION 703. Reports by Trustee ........................................... 52 SECTION 704. Reports by Company ........................................... 53 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease SECTION 801. Company May Consolidate, Etc., Only on Certain Terms ......... 54 SECTION 802. Successor Substituted ........................................ 55 -v- Page ---- ARTICLE NINE Supplemental Indentures SECTION 901. Supplemental Indentures Without Consent of Holders ........... 55 SECTION 902. Supplemental Indentures with Consent of Holders .............. 56 SECTION 903. Execution of Supplemental Indentures ......................... 58 SECTION 904. Effect of Supplemental Indentures ............................ 58 SECTION 905. Conformity with Trust Indenture Act .......................... 58 SECTION 906. Reference in Securities to Supplemental Indentures ........... 58 ARTICLE TEN Covenants; Representations and Warranties SECTION 1001. Payment of Principal and Interest ............................ 59 SECTION 1002. Maintenance of Office or Agency .............................. 59 SECTION 1003. Money for Security Payments to Be Held in Trust .............. 60 SECTION 1004. Statement by Officers as to Default .......................... 61 SECTION 1005. Limitation on Dividends; Transactions with Affiliates; Covenants as to the Trust ................................. 61 SECTION 1006. Payment of Expenses of the Trust ............................. 62 ARTICLE ELEVEN Redemption of Securities SECTION 1101. Optional Redemption .......................................... 63 SECTION 1102. Tax Event Optional Redemption ................................ 64 SECTION 1103. Applicability of Article ..................................... 65 SECTION 1104. Election to Redeem; Notice to Trustee ........................ 65 SECTION 1105. Selection by Trustee of Securities to Be Redeemed ............ 65 SECTION 1106. Notice of Redemption ......................................... 66 SECTION 1107. Deposit and Payment of Redemption Price ...................... 67 SECTION 1108. Securities Payable on Redemption Date ........................ 67 SECTION 1109. Securities Redeemed in Part .................................. 68 SECTION 1110. No Sinking Fund .............................................. 68 -vi- Page ---- ARTICLE TWELVE Subordination of Securities SECTION 1201. Agreement to Subordinate ..................................... 69 SECTION 1202. Default on Senior Indebtedness ............................... 69 SECTION 1203. Liquidation; Dissolution; Bankruptcy ......................... 70 SECTION 1204. Subrogation .................................................. 72 SECTION 1205. Trustee to Effectuate Subordination .......................... 73 SECTION 1206. Notice by the Company ........................................ 73 SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness ........ 74 SECTION 1208. Subordination May Not Be Impaired ............................ 75 ARTICLE THIRTEEN Conversion of Securities SECTION 1301. Conversion Rights ............................................ 76 SECTION 1302. Conversion Procedures ........................................ 76 SECTION 1303. Conversion Price Adjustments ................................. 79 SECTION 1304. Reclassification, Consolidation, Merger or Sale of Assets .................................................. 85 SECTION 1305. Notice of Adjustments of Conversion Price .................... 86 SECTION 1306. Prior Notice of Certain Events ............................... 86 SECTION 1307. Certain Defined Terms ........................................ 87 SECTION 1308. Dividend or Interest Reinvestment Plans ...................... 88 SECTION 1309. Certain Additional Rights .................................... 89 SECTION 1310. Trustee Not Responsible for Determining Conversion Price or Adjustments ............................................... 90 ARTICLE FOURTEEN Immunity of Incorporators, Stockholders, Officers and Directors SECTION 1401. No Recourse .................................................. 90 -vii- Page ---- EXHIBIT AND ANNEX EXHIBIT A Form of Security ANNEX A Amended and Restated Declaration of Trust among the Company, as trust sponsor, IBJ Schroder Bank & Trust Company, as property trustee, Delaware Trust Capital Management, Inc., as Delaware trustee and Arnold H. Simon and Merril M. Halpern, as regular trustees, dated as of November 6, 1996. - -------------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. -viii- INDENTURE, dated as of November 6, 1996, between Designer Holdings Ltd., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 1385 Broadway, 3rd Floor, New York, New York 10018, and IBJ Schroder Bank & Trust Company, a New York banking corporation, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY WHEREAS, Designer Finance Trust, a Delaware business trust (the "Trust"), formed under the Amended and Restated Declaration of Trust among the Company, as trust sponsor, IBJ Schroder Bank & Trust Company, as property trustee (the "Property Trustee"), Delaware Trust Capital Management, Inc., as Delaware trustee (the "Delaware Trustee") and Arnold H. Simon and Merril M. Halpern, as regular trustees (the "Regular Trustees"), dated as of November 6, 1996 (the "Declaration"), pursuant to the Purchase Agreement (the "Purchase Agreement") dated November 1, 1996, among the Company and the underwriters named therein, will issue and sell up to 2,400,000 (or 2,760,000 if the over-allotment option is exercised) of its 6% Convertible Trust Originated Preferred Securities (the "Preferred Securities") with a liquidation amount of $50 per Preferred Security, having an aggregate liquidation amount with respect to the assets of the Trust of $120,000,000 (or $138,000,000 if the over-allotment option is exercised); WHEREAS, the trustees of the Trust, on behalf of the Trust, will execute and deliver to the Company 6% Convertible Common Securities (the "Common Securities") of the Trust, registered in the name of the Company, in an aggregate amount equal to three percent of the capitalization of the Trust, equivalent to 74,227 Common Securities (or 85,361 Common Securities if the over-allotment option is exercised), with a liquidation amount of $50 per Common Security, having an aggregate liquidation amount with respect to the assets of the Trust of $3,711,350 (or $4,268,050 if the over-allotment option is exercised) (the "Common Securities"); WHEREAS, the Trust will use the proceeds from the sale of the Preferred Securities and the Common Securities to purchase from the Company 6% Convertible Subordinated Debentures Due 2016 (the "Securities") of the Company in an aggregate principal amount of $123,711,350 (or $142,268,050 if the over-allotment option is exercised); WHEREAS, the Company is guaranteeing the payment of distributions on the Preferred Securities, and payment of the Redemption Price and payments on liquidation with respect to the Preferred Securities, to the extent provided in the Preferred Securities Guarantee Agreement (the "Guarantee") dated November 6, 1996 between the Company and IBJ Schroder Bank & Trust Company, as guarantee trustee, for the benefit of the holders of the Preferred Securities from time to time; WHEREAS, the Company has duly authorized the creation of the Securities of the tenor and amount herein set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; WHEREAS, so long as the Trust is a Holder of Securities, and any Preferred Securities are outstanding, the Declaration provides that the holders of Preferred Securities may cause the Conversion Agent to (a) exchange such Preferred Securities for Securities held by the Trust and (b) immediately convert such Securities into Common Stock of the Company; and WHEREAS, all things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: -2- ARTICLE ONE Definitions and Other Provisions of General Application SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Interest" has the meaning specified in Section 301. "Additional Payments" means Compounded Interest and Additional Interest, if any. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Agent" means any Registrar, Paying Agent, Conversion Agent or co-registrar. -3- "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day on which banking institutions in The City of New York or in Wilmington, Delaware are authorized or required by law to close. "Closing Price" has the meaning specified in Section 1307. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" has the meaning specified in the recitals to this Instrument. "Common Securities Guarantee" means any guarantee that the Company may enter into that operate directly or indirectly for the benefit of holders of Common Securities of the Trust. "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of Article Thirteen, shares issuable on conversion of Securities shall include only shares of the class designated as Common Stock of the Company at the date of this instrument or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to -4- redemption by the Company; provided, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Compounded Interest" has the meaning specified in Section 312. "Conversion Agent" means the Person appointed to act on behalf of the holders of Preferred Securities in effecting the conversion of Preferred Securities as and in the manner set forth in the Declaration and Section 1302 hereof. "Conversion Date" has the meaning specified in Section 1302. "Corporate Trust Office" means the principal office of the Trustee in New York, New York, at which at any particular time its corporate trust business shall be administered and which at the date of this Indenture is One State Street, 11th Floor, New York, New York 10004, Attention: Corporate Trust and Agency Department. "Declaration" has the meaning specified in the Recitals of this instrument. "Defaulted Interest" has the meaning specified in Section 307. -5- "Delaware Trustee" has the meaning given it in the Recitals of this instrument. "Depositary" means, with respect to any Securities issued in the form of one or more Global Security, a clearing agency registered under the Exchange Act that is dedicated to act as Depositary for the Securities. "Direct Action" means a proceeding directly instituted by a holder of Preferred Securities for enforcement of payment to such holder of the principal of or interest on the Securities having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holder on or after the respective due date specified in the Securities, if an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Securities on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date.) "Dissolution Event" means that, as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration and the Securities held by the Property Trustee are to be distributed to the holders of Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Dissolution Tax Opinion" has the meaning specified in the Declaration. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. "Extension Period" has the meaning specified in Section 312. "Global Security" has the meaning specified in Section 314. "Guarantee" has the meaning specified in the Recitals to this instrument. -6- "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date" has the meaning specified in Section 301. "Investment Company Event" has the meaning specified in Annex I to the Declaration. "Maturity", when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Ministerial Action" has the meaning specified in Section 1102. "90-Day Period" has the meaning specified in Section 1102. "No Recognition Opinion" has the meaning specified in Annex I to the Declaration. "Notice of Conversion" means the notice to be given by a holder of Preferred Securities to the Conversion Agent directing the Conversion Agent to exchange such Preferred Securities for Securities and to convert such Securities into Common Stock on behalf of such holder. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given -7- pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities that have been paid pursuant to Section 307, converted into Common Stock pursuant to Section 1301, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company, provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. -8- "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means any legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" has the meaning specified in the Recitals to this instrument. "Property Trustee" has the meaning specified in the Recitals of this instrument. "Purchase Agreement" has the meaning specified in the Recitals to this instrument. "Purchased Shares" has the meaning specified in Section 1303(e). "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Redemption Tax Opinion" has the meaning set forth in Annex I to the Declaration. "Reference Date" has the meaning specified in Section 1303(c). -9- "Regular Record Date" has the meaning specified in Section 301. "Regular Trustees" has the meaning specified in the Recitals of this instrument. "Responsible Officer", when used with respect to the Trustee, means any vice-president, any assistant vice-president, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Securities" has the meaning specified in the Recitals to this instrument. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means in respect of the Company (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such obligor for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor, (ii) all capital lease obligations of such obligor, (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (iv) all obligations of such obligor for the reimbursement of any letter of credit, banker's acceptance, security purchase facility or similar credit transaction, (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which such obligor 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 obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Securities and (2) any indebtedness between or among such obligor or its -10- affiliates, including all other debt securities and guarantees in respect of those debt securities issued to any other trust, or a trustee of such trust, partnership, or other entity affiliated with the Company that is, directly or indirectly, a financing vehicle of the Company (a "Financing Entity") in connection with the issuance by such Financing Entity of preferred securities or other securities which rank pari passu with, or junior to, the Preferred Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" has the meaning specified in Annex I to the Declaration. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal, together with any accrued and unpaid interest (including Compounded Interest), of such Security or such installment of interest is due and payable. "Subsidiary" of any Person means (i) a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Tax Event" has the meaning specified in Annex I to the Declaration. "Trading Day" has the meaning specified in Section 1307. "Trust" has the meaning specified in the Recitals to this instrument. -11- "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, and the rules and regulations promulgated thereunder, or any successor legislation. "Trust Securities" means Common Securities and Preferred Securities. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" of any Person means capital stock of such Person which ordinarily has voting power for the election of directors (or Persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act or reasonably requested by the Trustee in connection with such application or request. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the applicable requirements of the Trust Indenture Act and any other applicable requirement set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include -12- (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, 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 (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. -13- Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee or the Company, as the case may be, deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or -14- other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any such action with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. SECTION 105. Notices, Etc., to Trustee and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust & Agency Department, or -15- (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any -16- provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Preferred Securities (to the extent provided herein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. -17- SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, shall be the immediately preceding Business Day) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity or on such last day for conversion, provided, that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO Security Forms SECTION 201. Forms Generally. 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 letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A to the Trustee in writing. Each Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Exhibit A are part of the terms of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The definitive Securities shall be typewritten or printed, lithographed or engraved or produced by any combi- -18- nation of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution thereof. SECTION 202. Initial Issuance to Property Trustee. The Securities initially issued to the Property Trustee of the Trust shall be in the form of one or more individual certificates in definitive, fully registered form without coupons. ARTICLE THREE The Securities SECTION 301. Title and Terms. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is limited to $123,711,350 (or up to $142,268,050 if the over-allotment option is exercised by the Trust in accordance with the terms and provisions of the Purchase Agreement), except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906, 1109 or 1301. The Securities shall be known and designated as the "6% Convertible Subordinated Debentures Due 2016" of the Company. Their Stated Maturity shall be December 31, 2016, and they shall bear interest at the rate of 6% per annum, from November 6, 1996 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to deferral as set forth herein), in arrears, on March 31, June 30, September 30 and December 31 (each an "Interest Payment Date") of each year, commencing December 31, 1996, until the principal thereof is paid or made available for payment, and they shall be paid to the Person in whose name the Security is registered at 5:00 p.m. (New York City time) on the 9regular record date for such interest installment, which shall be the March 15, June 15, September 15 and December 15 next preceding such Interest Payment Date (the "Regular Record -19- Date"). Interest will compound quarterly and will accrue at the rate of 6% per annum on any interest installment in arrears for more than one quarter or during an extension of an interest payment period as set forth in Section 312 hereof. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest in computed, will be computed on the basis of the actual number of days elapsed per 90-day quarter. In the event that any date on which interest is payable on the Securities is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. If at any time while the Property Trustee is the Holder of any Securities, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will pay as additional interest ("Additional Interest") on the Securities held by the Property Trustee, such amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying any such taxes, duties, assessments or other governmental charges will be not less than the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other governmental charges been imposed. The principal of and interest on the Securities shall be payable at the office or agency of the Company in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. -20- The Securities shall be redeemable as provided in Article Eleven hereof. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Twelve hereof. The Securities shall be convertible as provided in Article Thirteen hereof. SECTION 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $50 and integral multiples thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as in this Indenture provided and not otherwise. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of -21- authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are typewritten, printed, lithographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of -22- registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1109 or 1301 not involving any transfer. -23- SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) 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 shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities 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. -24- SECTION 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at 5:00 p.m. (New York City time) on the Regular Record Date. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at 5:00 p.m. (New York City time) on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause (a) provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of -25- the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at 5:00 p.m. (New York City time) on such Special Record Date and shall no longer be payable pursuant to the following Clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause (B), such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section 307, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue (including in each such case Additional Payments, if any), which were carried by such other Security. In the case of any Security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at 5:00 p.m. (New York City time) on such Regular Record Date. Notwithstanding the foregoing, if, during an Extension Period, a notice of redemption is mailed pursuant to Section 1106 and a Security is converted after such mailing but prior to the relevant Redemption Date, all accrued but unpaid interest (including Additional Payments, if any) through the date of conversion shall be paid to the holder of such Security on the Redemption Date. Except as otherwise expressly provided in the immediately preceding two sentences, in the case of any Security that is converted prior to any Regular Record Date, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable, and the Company -26- shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest (including Additional Payments, if any) on the Securities being converted, which shall be deemed to be paid in full. Subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in this paragraph and the second paragraph of Clause (a) of Section 1302, the Company's delivery upon conversion of the fixed number of shares of Common Stock into which the Securities are convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Securities so converted and any unpaid interest (including Additional Payments, if any) accrued on such Securities at the time of such conversion. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in this paragraph) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 307) interest (including Additional Payments, if any) on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in -27- any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order; provided, however, that the Trustee shall not be required to destroy the certificates representing such cancelled Securities. SECTION 310. Right of Set Off. Notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set off any payment it is otherwise required to make hereunder to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. SECTION 311. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 312. Option to Extend Interest Payment Period. (a) The Company shall have the right at any time during the term of the Securities to defer interest payments (including Additional Payments) from time to time by extending the interest payment period for successive periods (each, an "Extension Period") not exceeding 20 consecutive quarters for each such period; provided, no Extension Period may extend beyond the maturity date of the Securities. At the end of each Extension Period, the Company shall pay all interest then accrued and unpaid (including Additional Interest) together with interest thereon compounded quarterly at the rate specified for the Securities to the extent permitted by applicable law ("Compounded Interest"); provided, that during any Extension Period, the Company shall (i) -28- not declare or pay dividends on, or make a distribution with respect to, or redeem or purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (A) purchases or acquisitions of shares of Common Stock in connection with the satisfaction by the Company of its obligations under any employee benefit plans or the satisfaction by the Company of its obligations pursuant to any contract or security requiring the Company to purchase shares of Common Stock, (B) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or (C) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged) or make any guarantee payments with respect to the foregoing, (ii) not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Company that rank pari passu with or junior to the Securities and (iii) not make any guarantee payments with respect to the foregoing (other than pursuant to the Guarantee). Prior to the termination of any such Extension Period, the Company may further extend such Extension Period; provided, that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the maturity date of the Securities. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. No interest during an Extension Period shall be due and payable. Notwithstanding any other provision in this Indenture to the contrary, the Company shall not have the right at any time to defer any Additional Interest, including by extending the interest payment period. (b) If the Property Trustee is the sole Holder of the Securities at the time the Company selects an Extension Period, the Company shall give written notice to the Regular Trustees, the Property Trustee and the Trustee of its selection of such Extension Period at least one Business Day prior to the earlier of (i) the date the distributions on the Preferred Securities are payable or (ii) if the Preferred Securities are listed on the New York Stock Exchange or other stock exchange or quotation system, the date the Trust is required to give notice to the New York Stock -29- Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such distributions are payable, but in any event not less than 10 Business Days prior to such record date. (c) If the Property Trustee is not the sole holder of the Securities at the time the Company selects an Extension Period, the Company shall give the Holders of the Securities and the Trustee written notice of its selection of such Extension Period at least 10 Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) if the Preferred Securities are listed on the New York Stock Exchange or other stock exchange or quotation system, the date the Company is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Securities on the record or payment date of such related interest payment, but in any event not less than two Business Days prior to such record date. (d) The quarter in which any notice is given pursuant to paragraphs (b) and (c) hereof shall be counted as one of the 20 quarters permitted in the maximum Extension Period permitted under paragraph (a) hereof. SECTION 313. Paying Agent, Security Registrar and Conversion Agent. The Trustee will initially act as Paying Agent, Security Registrar and Conversion Agent. The Company may change any Paying Agent, Security Registrar, co-registrar or Conversion Agent without prior notice. The Company or any of its Affiliates may act in any such capacity. The Trustee is entitled to the protections of Article VI in its capacity as Paying agent, Registrar and Conversion Agent. SECTION 314. Global Security. (a) In connection with a Dissolution Event, (1) the Securities in certificated form may be presented to the Trustee by the Property Trustee in exchange for a global Security in an aggregate principal amount equal to the aggregate principal amount of all outstanding Securities (a "Global Security"), to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the ac- -30- counts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Global Security in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with this Indenture. Payments on the Securities issued as a Global Security will be made to the Depositary; and (2) if any Preferred Securities are held in non book-entry certificated form, the Securities in certificated form may be presented to the Trustee by the Property Trustee and any Preferred Security Certificate which represents Preferred Securities other than Preferred Securities held by the Depositary or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Securities presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Preferred Security Certificates will be cancelled and a Security, registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate cancelled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with this Indenture. On issue of such Securities, Securities with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been cancelled. (b) A Global Security may be transferred, in whole but not in part, only to another nominee of the Depositary, or to a nominee of such successor Depositary. (c) If (i) the Depositary notifies the Company that it is unwilling or unable to continue as a depositary for such Global Security and no successor depositary shall have been appointed, (ii) the Depositary, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the Depositary is required to be so registered to act as such depositary and no successor depositary shall have been appointed, (iii) the Company, in its sole discretion, determines that such Global Security shall be so -31- exchangeable or (iv) there shall have occurred an Event of Default with respect to such Securities, as the case may be, the Company will execute, and, subject to Article Three of this Indenture, the Trustee, upon written notice from the Company and receipt of a Company Order, will authenticate and deliver the Securities in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. In addition, upon an Event of Default or if the Company may at any time determine that the Securities shall no longer be represented by a Global Security, in such event the Company will execute, and subject to Section 305 of this Indenture, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and make available for delivery the Securities in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. Upon the exchange of the Global Security for such Securities in definitive registered form without coupons, in authorized denominations, the Global Security shall be cancelled by the Trustee. Such Securities in definitive registered form issued in exchange for the Global Security shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Depositary for delivery to the Persons in whose names such Securities are so registered. (c) Every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form, in capital letters and bold-face type: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. -32- (d) If the Depositary is the Depository Trust Company, the Global Security authenticated and delivered hereunder shall also bear a legend in substantially the following form, in capital letters and bold-face type: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ARTICLE FOUR Satisfaction and Discharge SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or -33- (ii) all such Securities not theretofore delivered to the Trustee for cancellation have become due and payable, and the Company has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Additional Payments, if any) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be, along with an accountant's certificate stating such funds are sufficient to pay principal and interest on the Securities when and as due; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of Clause (a) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. -34- ARTICLE FIVE Remedies SECTION 501. Events of Default. "Event of Default," wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Twelve or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) failure for 30 days to pay interest on the Securities, including any Additional Payments in respect thereof, when due; provided that a valid extension of an interest payment period will not constitute a default in the payment of interest (including Additional Payments, if any) for this purpose; (b) failure to pay principal of or premium, if any, on the Securities when due, whether at maturity, upon redemption, by declaration or otherwise; (c) failure by the Company to deliver shares of its Common Stock upon an election by a holder of Preferred Securities to convert such Preferred Securities; (d) failure to observe or perform any other covenant contained in the Indenture for 90 days after notice to the Company by the Trustee or by the holders of not less than 25% in aggregate outstanding principal amount of the Securities; (e) entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or ap- -35- pointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of substantially all of the property of the Company, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; (f) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company or to the entry of a decree or order for relief in respect of itself in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of substantially all of the property of the Company, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (g) the voluntary or involuntary dissolution, winding up or termination of the Trust, except in connection with (i) the distribution of Securities to holders of Preferred Securities in liquidation of the Trust upon the redemption of all of the outstanding Preferred Securities of the Trust or (ii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding -36- Securities may declare the principal of all the Securities and any other amounts payable hereunder to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal and all accrued interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as provided in this Article, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue interest (including Additional Payments, if any) on all Securities, (ii) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (iii) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (b) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: -37- (a) default is made in the payment of any interest (including Additional Payments, if any) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest (including Additional Payments, if any) and, to the extent that payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest (including Additional Payments, if any), at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay -38- to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Subject to Article Twelve, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest (including Additional Payments, if any), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and interest (including Additional Payments, if any) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, -39- without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest (including Additional Payments, if any), respectively. SECTION 507. Limitation on Suits. Subject to Section 516, no Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. -40- SECTION 508. Unconditional Right of Holders to Receive Principal and Interest and Convert. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 307) interest (including Additional Payments, if any) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to convert such Security in accordance with Article Thirteen and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. -41- SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, that (a) such direction shall not be in conflict with any rule of law or with this Indenture; and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. Subject to Section 902 hereof, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (a) in the payment of the principal of, premium, if any, or interest (including Additional Payments, if any) on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee); or (b) in respect of a covenant or provision hereof that under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected; provided, however, that if the Securities are held by the Trust or a trustee of the Trust, such waiver shall -42- not be effective until the holders of a majority in liquidation amount of Trust Securities shall have consented to such waiver; provided, further, that if the consent of the Holder of each outstanding Security is required, such waiver shall not be effective until each holder of the Trust Securities shall have consented to such waiver. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. 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, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest (including Additional Payments, if any) on any Security or to convert any Security in accordance with Article Thirteen. SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -43- SECTION 516. Enforcement by Holders of Preferred Securities. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Securities on the date such interest or principal is otherwise payable, the Company acknowledges that, in such event, a holder of Preferred Securities may institute a Direct Action for payment on or after the respective due date specified in the Securities. The Company may not amend this Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of all the holders of Preferred Securities. Notwithstanding any payment made to such holder of Preferred Securities by the Company in connection with a Direct Action, the Company shall remain obligated to pay the principal of and interest on the Securities (including Additional Payments, if any) held by the Trust or the Property Trustee and the Company shall be subrogated to the rights of the holder of such Preferred Securities with respect to payments on the Preferred Securities to the extent of any payments made by the Company to such holder in any Direct Action. The holders of Preferred Securities will not be able to exercise directly any other remedy available to the Holders of the Securities. ARTICLE SIX The Trustee SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or indemnity reasonably satisfactory to the Trustee against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the -44- Trustee shall be subject to the provisions of this Section 601. SECTION 602. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(d), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section 602, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; -45- (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to reasonable examination of the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence or willful misconduct, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of the Securities or the proceeds thereof. -46- SECTION 605. May Hold Securities. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (a) to 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; (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, fees, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. -47- When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(f) or Section 501(g), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. SECTION 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in New York, New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. -48- (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (d) If at any time: (i) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by Board Resolution may remove the Trustee, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. -49- (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided, that on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments required to more fully and certainly vest in and confirm to such successor Trustee all such rights, powers and trusts. -50- No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semiannually, not later than February 15 and August 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the -51- Holders as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. Reports by Trustee. (a) Within 60 days after May 15 of each year, commencing May 15, 1997, the Trustee shall transmit by mail to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act in the manner provided pursuant thereto. -52- (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided, that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). The Company shall also provide to the Trustee on a timely basis such information as the Trustee requires to enable the Trustee to prepare and file any form required to be submitted by the Company with the Internal Revenue Service and the Holders of the Securities relating to original issue discount, if any, including, without limitation, Form 1099-OID or any successor form. -53- ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge with or into any other Person or, directly or indirectly, convey, transfer or lease all or substantially all of its properties and assets on a consolidated basis to any Person, unless: (a) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease, all or substantially all of the properties and assets of the Company on a consolidated basis shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including Additional Payments, if any) on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Article Thirteen; (b) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. -54- This Section shall only apply to a merger or consolidation in which the Company is not the surviving corporation and to conveyances, leases and transfers by the Company as transferor or lessor. SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company on a consolidated basis in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE Supplemental Indentures SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (c) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Article Thirteen; or -55- (d) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture; provided, that such action pursuant to this Clause (d) shall not adversely affect the interests of the Holders of the Securities or, so long as any of the Preferred Securities shall remain outstanding, the holders of the Preferred Securities; (e) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or (f) to make provision for transfer procedures, certification, book-entry provisions, the form of restricted securities legends, if any, to be placed on Securities, and all other matters required pursuant to Section 305(b) or otherwise necessary, desirable or appropriate in connection with the issuance of Securities to holders of Preferred Securities in the event of a distribution of Securities by the Trust if a Special Event occurs and is continuing. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) extend the Stated Maturity of the principal of, or any installment of interest (including Additional Payments, if any) on, any Security, or reduce the principal amount thereof, or reduce the rate or extend the time for payment of interest thereon, or extend the Extension Period, or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the coin or curren- -56- cy in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right to convert any Security as provided in Article Thirteen (except as permitted by Section 901(c)), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section or Section 513, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided that if the Securities are held by the Trust or a trustee of the Trust, such supplemental indenture shall not be effective until the holders of a majority in liquidation amount of Trust Securities shall have consented to such supplemental indenture; provided, further, that if the consent of the Holder of each Outstanding Security is required, such supplemental indenture shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such supplemental indenture. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have become -57- effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. No such supplemental indenture shall directly or indirectly modify the provisions of Article Twelve in any manner which might terminate or impair the rights of the Senior Indebtedness pursuant to such subordination provisions. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company -58- shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE TEN Covenants; Representations and Warranties SECTION 1001. Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on the Securities and Additional Payments, if any in accordance with the terms of the Securities and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in the United States an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. -59- SECTION 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on (including Additional Payments, if any) any Security and remaining unclaimed for -60- two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of any such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. SECTION 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the material terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 1005. Limitation on Dividends; Covenants as to the Trust. (a) The Company covenants that so long as the Securities are outstanding, if (i) there shall have occurred and be continuing any event that with the giving of notice or the lapse of time or both, would constitute an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Guarantee, or (iii) the Company has exercised its option to defer interest payments on the Securities by extending the interest payment period and such period, or any extension thereof, shall be continuing, then the Company shall (A) not declare or pay dividends on, or make a distribution with respect to, or redeem or purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (x) purchases or acquisitions of shares of Common Stock in connection with the satisfaction by the Company of its obligations under any employee benefit plans or the satisfaction by the Company of its obligations pursuant to any contract or security requiring the Company to purchase shares of Common Stock, (y) as a result of a reclassification of the Company's capital stock or the exchange or -61- conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or (z) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged) or make any guarantee payments with respect to the foregoing, (B) not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Company that rank pari passu with or junior to the Securities and (C) not make any guarantee payments with respect to the foregoing (other than pursuant to the Guarantee). (b) The Company also covenants and agrees (i) that it shall directly or indirectly maintain 100% ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities and (ii) that it shall use its reasonable efforts, consistent with the terms and provisions of the Declaration, to cause the Trust (x) to remain a statutory business trust, except in connection with the distribution of the Securities to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (y) to otherwise continue to be classified as a grantor trust for United States Federal income tax purposes. SECTION 1006. Payment of Expenses of the Trust. In connection with the offering, sale and issuance of the Securities to the Property Trustee in connection with the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs, fees and expenses relating to the offering, sale and issuance of the Securities, including commissions, discounts and expenses payable pursuant to the Purchase Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 607 of the Indenture; (b) be responsible for and pay for all debts and obligations (other than with respect to the Trust Securities) of the Trust, pay for all costs and expenses of the -62- Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions, discounts and expenses in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE ELEVEN Redemption of Securities SECTION 1101. Optional Redemption. (a) The Company shall have the right to redeem the Securities, in whole or in part, at any time or from time to time after December 31, 1999 upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 104.02% of the principal amount of the Securities to be redeemed plus any accrued and unpaid interest (including Additional Payments, if any) to the Redemption Date, if redeemed before December 31, 2000, and at the following optional redemption prices (expressed as a percentage of the principal amount of Securities), if redeemed during the 12-month period beginning December 31: -63-
Percentage of Principal Year Amount ---- -------------- 2000 .................................... 103.60% 2001 .................................... 103.00% 2002 .................................... 102.40% 2003 .................................... 101.80% 2004 .................................... 101.20% 2005 .................................... 100.60% 2006 and thereafter........................ 100.00%
plus, in each case, accrued and unpaid interest (including Additional Payments, if any) to the Redemption Date. Any redemption pursuant to this Section 1101 shall be made pursuant to the provisions of Sections 1103 through 1108 hereof. (b) If a partial redemption of the Securities would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Securities in whole. SECTION 1102. Tax Event Optional Redemption. If a Tax Event has occurred and is continuing and: (a) the Company has received a Redemption Tax Opinion; or (b) after receiving a Dissolution Tax Opinion, the Regular Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No Recognition Opinion cannot be delivered to the Trust, then, notwithstanding Section 1101(a) but subject to Section 1101(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the Holders of the Securities to redeem the Securities in whole (but not in part) for cash at a redemption price equal to 100% of the principal amount of the Securities plus accrued and unpaid interest (including Additional Payments), if any, within 90 days following the occurrence of such Tax Event (the "90-Day Period"); provided, however, that if, at the time there is -64- available to the Company or the Trust the opportunity to eliminate within the 90-Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which, in the sole judgment of the Company, has or will cause no adverse effect on the Company, the Trust or the Holders of the Trust Securities and will involve no material cost, the Company or the Trust shall pursue such Ministerial Action or other measure in lieu of redemption, and provided, further, that the Company shall have no right to redeem the Securities while the Trust is pursuing any Ministerial Action or other similar measure pursuant to its obligations under the Declaration. SECTION 1103. Applicability of Article. Redemption of Securities at the election of the Company, as permitted by Sections 1101 and 1102, shall be made in accordance with such provision and this Article. SECTION 1104. Election to Redeem; Notice to Trustee. The election of the Company to redeem Securities pursuant to Section 1101 or 1102 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 45 days and no more than 90 days prior to the Redemption Date fixed by the Company, notify the Trustee in writing of such Redemption Date and of the principal amount of Securities to be redeemed and provide a copy of the notice of redemption given to Holders of Securities to be redeemed pursuant to Section 1105. SECTION 1105. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $50 or any integral multiple thereof) of the principal amount of the Securities. -65- The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1106. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall identify the Securities to be redeemed (including, if relevant, CUSIP number or ISIN) and shall state: (a) the Redemption Date, (b) the Redemption Price, (c) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and (d) the place or places where such Securities are to be surrendered for payment of the Redemption Price. -66- Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1107. Deposit and Payment of Redemption Price. Prior to 10:00 a.m. (New York City time) on the Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, plus (except if the Redemption Date shall be an Interest Payment Date) accrued and unpaid interest (including Additional Payments, if any) on all the Securities which are to be redeemed on that date. Such redemption payment shall be made to the Holders prior to 12:00 noon (New York City time) on the Redemption Date or such earlier time as the Company determines. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 1108. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest, including Additional Payments, if any) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued and unpaid interest (including Additional Payments, if any) to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at 5:00 p.m. (New York City time) on the relevant -67- Record Dates according to the terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1109. Securities Redeemed in Part. In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at 9:00 a.m. (New York City time) 15 Business Days before any selection for redemption of Securities and ending at 5:00 p.m. (New York City time) on the earliest date in which the relevant notice of redemption is deemed to have been given to all holders of Securities to be so redeemed and (ii) register the transfer of or exchange any Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Securities being redeemed in part. Any Security which is to be redeemed only in part shall be surrendered at a place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. SECTION 1110. No Sinking Fund. The Securities are not entitled to the benefit of any sinking fund. -68- ARTICLE TWELVE Subordination of Securities SECTION 1201. Agreement to Subordinate. The Company covenants and agrees, and each Holder of Securities by such Holder's acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article Twelve; and each Holder of a Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest (including Additional Payments, if any) on all Securities issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all existing and future Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred; provided however, that no provision of this Article Twelve shall prevent the occurrence of any default or Event of Default hereunder. SECTION 1202. Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness continuing beyond the period of grace, if any, specified in the instrument evidencing such Senior Indebtedness, unless and until such default shall have been cured or waived or shall have ceased to exist, and in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then no payment shall be made by the Company with respect to the principal of (including redemption payments, if any), premium, if any, or interest on the Securities. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 1202, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but -69- only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 1203. Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due on, all Senior Indebtedness must be paid in full before any payment is made on account of the principal (and premium, if any) or interest (including Additional Payments, if any) on the Securities; and upon any such dissolution or winding up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provisions of this Article Twelve, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of Securities or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, -70- prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. For purposes of this Article Twelve, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article Twelve with respect to the Securities to the payment of all Senior Indebtedness which may at the time be outstanding; provided, that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company with or into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of all or substantially all its properties and assets on a consolidated basis to another Person upon the terms and conditions provided for in Article Eight hereof shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 1203 if such other Person shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions stated in Article Eight hereof. Nothing in Section 1202 or in this Section 1203 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607 hereof. -71- SECTION 1204. Subrogation. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any,) and interest (including Additional Payments, if any) on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article Twelve, and no payment over pursuant to the provisions of this Article Twelve, to or for the benefit of the holders of such Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article Twelve are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of such Senior Indebtedness on the other hand. Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including Additional Payments, if any) on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Twelve of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. -72- Upon any payment or distribution of assets of the Company referred to in this Article Twelve, the Trustee, subject to the provisions of Section 603, and the Holders of the Securities, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve. SECTION 1205. Trustee to Effectuate Subordination. Each Holder of Securities by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Twelve and appoints the Trustee as such Holder's attorney-in-fact for any and all such purposes. SECTION 1206. Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Twelve. Notwithstanding the provisions of this Article Twelve or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provision of this Article Twelve, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 603 hereof, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice -73- provided for in this Section 1206 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including Additional Payments, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 603, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the right of such Person under this Article Twelve, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Twelve in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are set forth in this Article Twelve, and no implied covenants -74- or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 603, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Holders of Securities, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article Twelve or otherwise. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article Twelve and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee. SECTION 1208. Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the holders of the Securities and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior -75- Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE THIRTEEN Conversion of Securities SECTION 1301. Conversion Rights. Subject to and upon compliance with the provisions of this Article, the Securities are convertible, at the option of the Holder, at any time on or before 5:00 p.m. (New York City time) on the Business Day immediately preceding the date of repayment of such Securities, whether at maturity or upon redemption (either at the option of the Company or pursuant to a Tax Event), into fully paid and nonassessable shares of Common Stock of the Company at an initial conversion rate of 2.126 shares of Common Stock for each $50 in aggregate principal amount of Securities (equal to a conversion price of $23.52 per share of Common Stock), subject to adjustment as described in this Article Thirteen. A Holder of Securities may convert any portion of the principal amount of the Securities into that number of fully paid and nonassessable shares of Common Stock (calculated as to each conversion to the nearest 1/100th of a share) obtained by dividing the principal amount of the Securities to be converted by such conversion price. In case a Security or portion thereof is called for redemption, such conversion right in respect of the Security or portion so called shall expire at 5:00 p.m. (New York City time) on the Business Day immediately preceding the corresponding Redemption Date, unless the Company defaults in making the payment due upon redemption. SECTION 1302. Conversion Procedures. (a) In order to convert all or a portion of the Securities, the Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of Conversion setting forth the principal amount of Securities to be converted, together with the name or names, if other than the Holder, in which the shares of Common Stock should be issued upon conversion and, if such Securities are definitive Securities, surrender to the Conversion Agent the Securities to be converted, duly endorsed or assigned to the Company or in blank. In addition, a holder of Preferred Securities may exercise its -76- right under the Declaration to convert such Preferred Securities into Common Stock by delivering to the Conversion Agent an irrevocable Notice of Conversion setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Preferred Security for a portion of the Securities held by the Trust (at an exchange rate of $50 liquidation amount of Securities for each Preferred Security) and (ii) to immediately convert such Securities, on behalf of such holder, into Common Stock of the Company pursuant to this Article Thirteen and, if such Preferred Securities are in definitive form, surrendering such Preferred Securities, duly endorsed or assigned to the Company or in blank. So long as any Preferred Securities are outstanding, the Trust shall not convert any Securities except pursuant to a Notice of Conversion delivered to the Conversion Agent by a holder of Preferred Securities. If a Notice of Conversion is delivered on or after the Regular Record Date and prior to the subsequent Interest Payment Date, the Holder will be entitled to receive the interest payable on the subsequent Interest Payment Date on the portion of Securities to be converted notwithstanding the conversion thereof prior to such Interest Payment Date. Notwithstanding the foregoing, if, during an Extension Period, a notice of redemption is mailed pursuant to Section 1106 and a Security is converted after such mailing but prior to the relevant Redemption Date, all accrued but unpaid interest (including Additional Payments, if any) through the date of conversion shall be paid to the holder of such Security on the Redemption Date. Except as otherwise provided in the immediately preceding sentence, in the case of any Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest (including Additional Payments, if any) on the Securities being converted, which shall be deemed to be paid in full. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307 and this paragraph) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. -77- Each conversion shall be deemed to have been effected immediately prior to 5:00 p.m. (New York City time) on the day on which the Notice of Conversion was received (the "Conversion Date") by the Conversion Agent from the Holder or from a holder of the Preferred Securities effecting a conversion thereof pursuant to its conversion rights under the Declaration, as the case may be. The Person or Persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the Conversion Date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder in the Notice of Conversion, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. (b) Subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307 and the second paragraph of Clause (a) of Section 1302, the Company's delivery upon conversion of the fixed number of shares of Common Stock into which the Securities are convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Securities so converted and any unpaid interest (including Additional Payments, if any) accrued on such Securities at the time of such conversion. (c) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a cash adjustment in an amount equal to the same fraction of the last reported sale price of such fractional interest on the date on which the Securities or Preferred Securities, as the case may be, were duly surrendered to the Conversion Agent for conversion, or, if such day is not a Trading Day, on the next Trading Day, and the Conversion Agent in turn will make such payment, if any, to the Holder of the Securities or the holder of the Preferred Securities so converted. -78- (d) In the event of the conversion of any Security in part only, a new Security or Securities for the unconverted portion thereof will be issued in the name of the Holder thereof upon the cancellation thereof in accordance with Section 305. (e) In effecting the conversion transactions described in this Section, the Conversion Agent is acting as agent of the holders of Preferred Securities (in the exchange of Preferred Securities for Securities) and as agent of the Holders of Securities (in the conversion of Securities into Common Stock), as the case may be, directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities held by the Trust from time to time for Preferred Securities in connection with the conversion of such Preferred Securities in accordance with this Article Thirteen and (ii) to convert all or a portion of the Securities into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Article Thirteen and to deliver to the Trust a new Security or Securities for any resulting unconverted principal amount. SECTION 1303. Conversion Price Adjustments. The conversion price shall be subject to adjustment (without duplication) from time to time as follows: (a) In case the Company shall, while any of the Securities are outstanding, (i) pay a dividend or make a distribution with respect to its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the conversion price in effect immediately prior to such action shall be adjusted so that the Holder of any Securities thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which he would have owned immediately following such action had such Securities been converted immediately prior thereto. An adjustment made pursuant to this Section 1303(a) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record -79- date if a record date shall have been established for such event). If, as a result of an adjustment made pursuant to this Section 1303(a), the Holder of any Security thereafter surrendered for conversion shall become entitled to receive shares of two or more classes or series of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a Board Resolution filed with the Trustee) shall determine the allocation of the adjusted conversion price between or among shares of such classes or series of capital stock. (b) In case the Company shall, while any of the Securities are outstanding, issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned in this Section 1303(b)) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share of Common Stock (as determined pursuant to 1303(f) below) on such record date, the conversion price for the Securities shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such current market price, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. For the purposes of this subsection, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. In case any rights or warrants referred to in this subsection in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the conversion price shall be readjusted at the time of such expiration to the conversion price that would have been in effect if no adjustment had -80- been made on account of the distribution or issuance of such expired rights or warrants. (c) Subject to the last sentence of this Section 1303(c), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class or series of capital stock, cash or assets (including securities, but excluding any rights or warrants referred to in Section 1303(b), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in Section 1303(a)), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by Section 1303(c) by a fraction of which the numerator shall be the current market price per share (determined as provided in Section 1303(f)) of the Common Stock on the date fixed for the payment of such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that such dividend or distribution is not so paid or made, the conversion price shall again be adjusted to be the conversion price which would then be in effect if such dividend or distribution had not occurred. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 1303(c) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share of Common Stock (determined as provided in Section 1303(f)). For purposes of this Section 1303(c), any dividend or distribution that includes shares of Common Stock or rights or warrants to subscribe for or purchase shares of Common Stock shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Common Stock or such rights or warrants (making any conversion price reduction required by -81- this Section 1303(c)) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (making any further conversion price reduction required by Section 1303(a) or 1303(b)), except (A) the Reference Date of such dividend or distribution as defined in this 1303(c) shall be substituted as (a) "the record date in the case of a dividend or other distribution," and (b) "the record date for the determination of stockholders entitled to receive such rights or warrants" and (c) "the date fixed for such determination" within the meaning of Sections 1303(a) and 1303(b) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the conversion price in Section 1303(a). (d) In case the Company shall pay or make a dividend or other distribution on its Common Stock exclusively in cash (excluding all regular cash dividends, if the annualized amount thereof per share of Common Stock does not exceed 15% of the current market price per share determined as provided in Section 1303(f) of the Common Stock on the Trading Day immediately preceding the date of declaration of such dividend), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this Section 1303(d) by a fraction of which the numerator shall be the current market price per share (determined as provided in Section 1303(f)) of the Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed and not excluded as provided applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the current market price per share (as defined in Section 1303(f)) of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of shares of Securities shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted each share of the Securities immediately prior to the record date for the distribution of the cash. In the event that such dividend -82- or distribution is not so paid or made, the conversion price shall again be adjusted to be the conversion price which would then be in effect if such record date had not been fixed. (e) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of the Company's Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds 110% of the current market price per share (determined as provided in Section 1303(f)) of the Common Stock on the Trading Day next succeeding the Expiration Time, the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this Section 1303(e) by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the current market price per share (determined as provided in Section 1303(f)) of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the current market price per share (determined as provided in Section 1303(f)) of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (f) For the purpose of any computation under Section 1303(b), 1303(c), 1303(d) or 1303(e), the current -83- market price per share of Common Stock on any date in question shall be deemed to be the average of the daily Closing Prices for the five consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question or, if applicable, the day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if another event occurs that would require an adjustment pursuant to Section 1303(a) through (e), inclusive, the Board of Directors may make such adjustments to the Closing Prices during such five Trading Day period as it deems appropriate to effectuate the intent of the adjustments in this Section 1303, in which case any such determination by the Board of Directors shall be set forth in a Board Resolution and shall be conclusive. For purposes of this paragraph, the term "ex" date, (i) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the New York Stock Exchange or on such successor securities exchange as the Common Stock may be listed or in the relevant market from which the Closing Prices were obtained without the right to receive such issuance or distribution, and (ii) when used with respect to any tender or exchange offer, means the first date on which the Common Stock trades regular way on such securities exchange or in such market after the Expiration Time of such offer. (g) The Company may make such reductions in the conversion price, in addition to those required by Sections 1303 (a) through (e), as it considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. The Company from time to time may reduce the conversion price by any amount for any period of time if the period is at least 20 days, the reduction is irrevocable during the period, and the Board of Directors of the Company shall have made a determination that such reduction would be in the best interest of the Company, which determination shall be conclusive. Whenever the conversion price is reduced pursuant to the preceding sentence, the Company shall mail to holders of record of the Securities a notice of the reduction at least 15 days prior to the date the reduced conversion price takes effect, and such notice shall state the reduced conversion price and the period it will be in effect. -84- (h) No adjustment in the conversion price shall be required unless such adjustment would require an increase or decrease of at least 1% in the conversion price; provided, however, that any adjustments which by reason of this Section 1303(h) are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. (i) If any action would require adjustment of the conversion price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the Holder of the Securities. SECTION 1304. Reclassification, Consolidation, Merger or Sale of Assets. In the event that the Company shall be a party to any transaction (including without limitation (a) any recapitalization or reclassification of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), (b) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), (c) any sale, transfer or lease of all or substantially all of the assets of the Company or (d) any compulsory share exchange) pursuant to which the Common Stock is converted into the right to receive other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder of each Security then outstanding shall have the right thereafter to convert such Security only into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock of the Company into which such Security could have been converted immediately prior to such transaction. The Company or the Person formed by such consolidation or resulting from such merger or which acquired such assets or which acquires the Company's shares, as the case may be, shall make provision in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation -85- or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article Thirteen. The above provisions shall similarly apply to successive transactions of the foregoing type. SECTION 1305. Notice of Adjustments of Conversion Price. Whenever the conversion price is adjusted as herein provided: (a) the Company shall compute the adjusted conversion price and shall prepare a certificate signed by the Chief Financial Officer or the Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee, the Conversion Agent and the transfer agent for the Preferred Securities and the Securities; and (b) a notice stating the conversion price has been adjusted and setting forth the adjusted conversion price shall as soon as practicable be mailed by the Company to all record holders of Preferred Securities and the Securities at their last addresses as they appear upon the stock transfer books of the Company and the Trust. SECTION 1306. Prior Notice of Certain Events. In case: (a) the Company shall (i) declare any dividend (or any other distribution) on its Common Stock, other than (A) a dividend payable in shares of Common Stock or (B) a dividend payable in cash that would not require an adjustment pursuant to Section 1303(c) or 1303(d), or (ii) authorize a tender or exchange offer that would require an adjustment pursuant to Section 1303(e); (b) the Company shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; -86- (c) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company shall be required, or of the sale or transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall (1) if any Preferred Securities are outstanding, cause to be filed with the transfer agent for the Preferred Securities, and shall cause to be mailed to the holders of record of the Preferred Securities, at their last addresses as they shall appear upon the stock transfer books the Trust or (2) shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 15 days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). SECTION 1307. Certain Defined Terms. The following definitions shall apply to terms used in this Article Thirteen: -87- (a) "Closing Price" of any Common Stock on any day shall mean the last reported sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way of such Common Stock, in each case on the New York Stock Exchange Composite Tape or, if the Common Stock is not listed or admitted to trading on such exchange, on the principal national securities exchange on which such common stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Company for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Directors. (b) "Trading Day" shall mean a day on which securities are traded on the national securities exchange or quotation system used to determine the Closing Price. SECTION 1308. Dividend or Interest Reinvestment Plans. Notwithstanding the foregoing provisions, the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any such plan, and the issuance of any shares of Common Stock or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Company or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Securities were first issued, shall not be deemed to constitute an issuance of Common Stock or exercisable, exchangeable or convertible securities by the Company to which any of the adjustment provisions described above applies. There shall also be no adjustment of the conversion price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Company except as specifically described in this Article Thirteen. -88- SECTION 1309. Certain Additional Rights. In case the Company shall, by dividend or otherwise, declare or make a distribution on its Common Stock referred to in Section 1303(c) or 1303(d) (including, without limitation, dividends or distributions referred to in the last sentence of Section 1303(c)), the Holder of the Securities, upon the conversion thereof subsequent to 5:00 p.m. (New York City time) on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution, shall also be entitled to receive for each share of Common Stock into which the Securities are converted, the portion of the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock; provided, however, that, at the election of the Company (whose election shall be evidenced by a resolution of the Board of Directors) with respect to all Holders so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors). If any conversion of Securities described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Stock which the Holder of Securities so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a resolution of the Board of Directors) to distribute to such Holder a due bill for the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, provided, that such due bill (i) meets any applicable requirements of the principal national securities exchange or other market on which the Common Stock is then traded and (ii) requires payment or delivery of such shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of shares of Common Stock receiving such distribution. -89- SECTION 1310. Trustee Not Responsible for Determining Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of any Security to determine whether any facts exist which may require any adjustment of the conversion price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind of account) of any shares of Common Stock or of any securities or property, which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion, or, except as expressly herein provided, to comply with any of the covenants of the Company contained in Article Ten or this Article Thirteen. ARTICLE FOURTEEN Immunity of Incorporators, Stockholders, Officers and Directors SECTION 1401. No Recourse. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall -90- be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Securities. -91- This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -92- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. DESIGNER HOLDINGS LTD. By: /s/ ARNOLD H. SIMON -------------------------------- Name: Arnold H. Simon Title: President, Chief Executive Officer and Director IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By: ---------------------------------- Name: Title: EX-4 4 EXHIBIT 4.3 ==================================== PREFERRED SECURITIES GUARANTEE AGREEMENT Designer Holdings Ltd. Dated as of November 6, 1996 ==================================== TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions and Interpretation............................ 2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act; Application.......................... 6 SECTION 2.2. Lists of Holders of Securities............................ 7 SECTION 2.3. Reports by the Preferred Guarantee Trustee................................................. 7 SECTION 2.4. Periodic Reports to the Preferred Guarantee Trustee....................................... 8 SECTION 2.5. Evidence of Compliance with Conditions Precedent.................................... 8 SECTION 2.6. Event of Default; Waiver.................................. 8 SECTION 2.7. Event of Default; Notice.................................. 8 SECTION 2.8. Conflicting Interests..................................... 9 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee....................................... 9 SECTION 3.2. Certain Rights of the Preferred Guarantee Trustee....................................... 11 SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee................................... 14 ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1. Preferred Guarantee Trustee; Eligibility............................................. 15 SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee Trustees.......................... 15
i ARTICLE V GUARANTEE SECTION 5.1. Guarantee................................................. 17 SECTION 5.2. Subordination............................................. 17 SECTION 5.3. Waiver of Notice and Demand............................... 17 SECTION 5.4. Obligations Not Affected.................................. 17 SECTION 5.5. Rights of Holders......................................... 19 SECTION 5.6. Guarantee of Payment...................................... 19 SECTION 5.7. Subrogation............................................... 19 SECTION 5.8. Independent Obligations................................... 20 SECTION 5.9. Conversion................................................ 20 ARTICLE VI LIMITATION OF TRANSACTIONS; RANKING SECTION 6.1. Limitation of Transactions................................ 20 SECTION 6.2. Ranking................................................... 21 ARTICLE VII TERMINATION SECTION 7.1. Termination............................................... 21 ARTICLE VIII INDEMNIFICATION SECTION 8.1. Exculpation............................................... 22 SECTION 8.2. Indemnification........................................... 22 ARTICLE IX MISCELLANEOUS SECTION 9.1. Successors and Assigns.................................... 23 SECTION 9.2. Amendments................................................ 23 SECTION 9.3. Notices................................................... 23 SECTION 9.4. Benefit................................................... 24 SECTION 9.5. Governing Law............................................. 24
ii PREFERRED SECURITIES GUARANTEE AGREEMENT This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as of November 6, 1996, is executed and delivered by Designer Holdings Ltd., a Delaware corporation (the "Guarantor"), and IBJ Schroder Bank & Trust Company, a New York banking corporation as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Designer Finance Trust, a Delaware statutory business trust (the "Trust"); WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of November 6, 1996, among the trustees of the Trust named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, the Trust is issuing on the date hereof 2,400,000 preferred securities, having an aggregate liquidation amount of $120,000,000 (plus up to an additional 360,000 preferred securities, having an aggregate liquidation amount of $18,000,000 to cover over-allotments), designated the 6% Convertible Trust Originated Preferred Securities'sm' (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to guarantee the obligations of the Trust to the Holders of the Preferred Securities on the terms and conditions set forth herein; WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee") in substantially identical terms to this Preferred Securities Guarantee for the benefit of the holders of the Common Securities (as defined herein), except that if an event of default (as defined in the Indenture (as defined herein)), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments (as defined in the Common Securities Guarantee) under the Common Securities Guarantee shall be subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments (as defined herein) under this Preferred Securities Guarantee; and NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions and Interpretation. In this Preferred Securities Guarantee, unless the context otherwise requires: (a) Capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as at the date hereof have the same meaning when used in this Preferred Securities Guarantee unless otherwise defined in this Preferred Securities Guarantee; (c) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout; (d) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified; 2 (f) a term defined in the Trust Indenture Act has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; (g) a reference to the singular includes the plural and vice versa; (h) a reference to any Person shall include its successors and assigns; (i) a reference to any agreement or instrument shall mean such agreement or instrument, as supplemented, modified, amended, or amended and restated, and in effect from time to time; and (j) a reference to any statute, law, rule or regulation, shall include any amendments thereto applicable to the relevant Person, and any successor statute, law, rule or regulation. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Business Day" means any day other than a day on which banking institutions in New York, New York or in Wilmington, Delaware are authorized or required by any applicable law or executive order to close. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Trust. "Corporate Trust Office" means the office of the Preferred Guarantee Trustee at which the corporate trust business of the Preferred Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at One State Street, 11th Floor, New York, New 3 York 10004, Attention: Corporate Trust & Agency Department. "Covered Person" means any Holder or beneficial owner of Preferred Securities. "Debentures" means the 6% Convertible Subordinated Debentures due December 31, 2016 of the Guarantor held by the Property Trustee (as defined in the Declaration). "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Preferred Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Trust: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on the Preferred Securities to the extent the Trust has funds available therefor, (ii) the redemption price, with respect to any Preferred Securities called for redemption by the Trust (the "Redemption Price"), to the extent the Trust has funds available therefor, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Convertible Subordinated Debentures to the Holders of Preferred Securities or the redemption of all the Preferred Securities (as provided in the Declaration)), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment to the extent the Trust has funds available therefor and (b) the amount of assets of the Trust remaining available for distribution to Holders of Preferred Securities upon the liquidation of the Trust (in either case, the "Liquidation Distribution"). "Holder" shall mean any holder, as registered on the books and records of the Trust of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. 4 "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Guarantee Trustee. "Indenture" means the Indenture dated as of November 6, 1996, among the Guarantor (the "Convertible Debenture Issuer") and IBJ Schroder Bank & Trust Company, a New York banking corporation, as trustee, pursuant to which the Debentures are to be issued to the Property Trustee of the Trust. "Indenture Trustee" means the Person acting as trustee under the Indenture, initially IBJ Schroder Bank & Trust Company. "Majority in liquidation amount of the Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount of all Preferred Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Preferred Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 5 (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee Trustee" means IBJ Schroder Bank & Trust Company, until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Guarantee Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act; Application. (a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions. 6 (b) If and to the extent that any provision of this Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2. List of Holders of Securities. (a) The Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Preferred Securities ("List of Holders") as of such date, (i) within one Business Day after January 1 and June 30 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee, provided that the Guarantor shall not be obligated to provide such List of Holders at any time (x) the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor or (y) the Preferred Securities are represented by one or more Global Securities (as defined in the Indenture). The Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Preferred Guarantee Trustee. Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. 7 SECTION 2.4. Periodic Reports to the Preferred Guarantee Trustee. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314, if any, and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. Event of Default; Waiver. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7. Event of Default; Notice. (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Events of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided that the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Preferred Guarantee Trustee in good faith 8 determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Guarantee Trustee shall have received written notice, or of which a Responsible Officer of the Preferred Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge. SECTION 2.8. Conflicting Interests. The Declaration shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee. (a) This Preferred Securities Guarantee shall be held by the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.5(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders of the Preferred Securities. 9 (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof 10 are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee; and (iv) no provision of this Preferred Securities Guarantee shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2. Certain Rights of the Preferred Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Preferred Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, 11 opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Preferred Guarantee Trustee may consult with counsel of its selection, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Preferred Guarantee Trustee shall be under no obligation to exercise any of the 12 rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee. (vii) The Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities, and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms 13 and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Preferred Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Preferred Securities Guarantee. (b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred 14 Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1. Preferred Guarantee Trustee; Eligibility. (a) There shall at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2. Appointment, Removal and Resignation of 15 Preferred Guarantee Trustees. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of removal or resignation, the resigning or removed Preferred Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee. (e) No Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Guarantee Trustee. (f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to the date of such termination, removal or 16 resignation. ARTICLE V GUARANTEE SECTION 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert, the Guarantee Payments, without duplication. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. SECTION 5.2. Subordination. If an Event of Default (as defined in the Indenture), has occurred and is continuing, the rights of Holders of Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinate to the rights of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee. SECTION 5.3. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.4. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of 17 any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.4 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders or any other Persons to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. 18 SECTION 5.5. Rights of Holders. (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Preferred Securities Guarantee or to direct the exercise of any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee. (b) Any Holder may directly institute a legal proceeding against the Guarantor to enforce the obligations of the Guarantor under this Preferred Securities Guarantee without first instituting a legal proceeding against the Trust, the Preferred Guarantee Trustee or any other Person. (c) If an Event of Default with respect to the Debentures (an "Indenture Event of Default"), constituting the failure to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable has occurred and is continuing, then a Holder of Preferred Securities may directly, at any time, institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder on or after the respective due date specified in the Debentures. The Holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures unless the Property Trustee (as defined in the Indenture) fails to do so. SECTION 5.6. Guarantee of Payment. This Preferred Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.7. Subrogation. The Guarantor shall be subrogated to all, if any, rights of the Holders against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or 19 exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.8. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g) inclusive, of Section 5.4 hereof. SECTION 5.9. Conversion. The Guarantor acknowledges its obligation to issue and deliver common stock of the Guarantor upon the conversion of the Preferred Securities. ARTICLE VI LIMITATION OF TRANSACTIONS; RANKING SECTION 6.1. Limitation of Transactions. So long as any Preferred Securities remain outstanding, if there shall have occurred any event of default under this Preferred Securities Guarantee or any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture, then the Guarantor has agreed not to declare or pay dividends on, or make a distribution with respect to, or redeem, purchase acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of common stock in connection with the satisfaction by the Guarantor of its obligations under any employee benefit plans or the satisfaction by the Guarantor of its obligations pursuant to any contract or security requiring the Guarantor to purchase shares of common stock, (ii) as a result of a reclassification of the 20 Guarantor's capital stock or the exchange or conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock or (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged (or make any guarantee payments with respect to the foregoing). SECTION 6.2. Ranking. (a) This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior to all other liabilities of the Guarantor except any liabilities that may be pari passu expressly by their terms, (ii) pari passu with the most senior preferred stock issued from time to time by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock or preferred securities of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. (b) The holders of any obligations of the Guarantor that are senior in priority to the obligations under this Preferred Securities Guarantee will be entitled to all of the rights inuring to the holders of "Senior Indebtedness" under Article 12 of the Indenture, and the Holders of the Preferred Securities will be subject to all of the terms and conditions of such Article 12 with respect to any claims or rights hereunder with the same effect as though fully set forth herein. ARTICLE VII TERMINATION SECTION 7 Termination. This Preferred Securities Guarantee will terminate as to each Holder upon (i) full payment of the Redemption Price of all Preferred Securities; or (ii) distribution of the Debentures held by the Trust to the Holders; or (iii) liquidation of the Trust, or (iv) upon the distribution of Guarantor's common stock to such Holder in respect of conversion of such Holder's Preferred Securities into common stock of the Guarantor. The Guarantee also will terminate completely upon full payment of the amounts payable in 21 accordance with the Declaration of the Trust. This Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under such Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.2. Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts 22 hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee. ARTICLE IX MISCELLANEOUS SECTION 9.1. Successors and Assigns. All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with any permitted merger or consolidation of the Guarantor with or into another entity or any permitted sale, transfer or lease of the Guarantor's assets to another entity as described in the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Preferred Securities Guarantee without the prior approval of the Holders of at least a Majority of the aggregate stated liquidation amount of the Preferred Securities then outstanding. SECTION 9.2. Amendments. Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no vote will be required), this Preferred Securities Guarantee may be amended only with the prior approval of the Holders of at least a Majority in liquidation amount of all the outstanding Preferred Securities. The provisions of Section 11.2 of the Declaration with respect to meetings of Holders of the Preferred Securities apply to the giving of such approval. SECTION 9.3. Notices. All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, sent by facsimile or mailed by registered or certified mail, as follows: 23 (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): IBJ Schroder Bank & Trust Company One State Street, 11th Floor New York, New York 10004 Attention: Corporate Trust & Agency Department (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): Designer Holdings Ltd. 1385 Broadway, 3rd Floor New York, New York 10018 Attention: General Counsel (c) If given to any Holder at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4. Benefit. This Preferred Securities Guarantee is solely for the benefit of the Holders of the Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 9.5. Governing Law. THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. 24 THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first above written. DESIGNER HOLDINGS LTD., as Guarantor By: /s/ ARNOLD H. SIMON --------------------------------------- Name: Arnold H. Simon Title: President, Chief Executive Officer and Director IBJ SCHRODER BANK & TRUST COMPANY, as Preferred Guarantee Trustee By: /s/ BARBARA McCLUSKEY --------------------------------------- Name: Barbara McCluskey Title: Vice President 25 EX-10 5 EXHIBIT 10.1 EXECUTION COPY U.S. $600,000,000 CREDIT AGREEMENT Dated as of August 12, 1997 Among WARNACO INC. as Borrower and THE WARNACO GROUP, INC. and THE INITIAL LENDERS NAMED HEREIN as Initial Lenders and THE BANK OF NOVA SCOTIA and CITIBANK, N.A. as Managing Agents and CITIBANK, N.A. as Documentation Agent and THE BANK OF NOVA SCOTIA as Administrative Agent, Competitive Bid Agent, Swing Line Bank and an Issuing Bank TABLE OF CONTENTS ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms......................................... 1 SECTION 1.02. Computation of Time Periods...................................25 SECTION 1.03. Accounting Terms..............................................25 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances..................................................25 SECTION 2.02. Making the Advances...........................................27 SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit......................................................31 SECTION 2.04. The Competitive Bid Advances..................................33 SECTION 2.05. Repayment of Advances.........................................38 SECTION 2.06. Termination or Reduction of the Commitments...................39 SECTION 2.07. Prepayments...................................................39 SECTION 2.08. Interest......................................................40 SECTION 2.09. Fees..........................................................41 SECTION 2.10. Conversion of Advances........................................42 SECTION 2.11. Increased Costs, Etc..........................................43 SECTION 2.12. Illegality....................................................45 SECTION 2.13. Payments and Computations.....................................45 SECTION 2.14. Taxes.........................................................46 SECTION 2.15. Sharing of Payments, Etc......................................49 SECTION 2.16. Use of Proceeds...............................................50 SECTION 2.17. Defaulting Lenders............................................50 SECTION 2.18. Evidence of Debt..............................................53 ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01 and 2.03....................................................54 SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance...........55 SECTION 3.03. Determinations Under Section 3.01.............................56 ARTICLE IV REPRESENTATIONS AND WARRANTIES..................57 SECTION 4.01. Representations and Warranties of the Borrower................57 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants.........................................60 SECTION 5.02. Negative Covenants............................................63 SECTION 5.03. Financial Covenants...........................................68 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default.............................................69 SECTION 6.02. Actions in Respect of the Letters of Credit upon Default......72 ARTICLE VII THE AGENTS SECTION 7.01. Authorization and Action......................................73 SECTION 7.02. Agents' Reliance, Etc.........................................73 SECTION 7.03. Scotiabank, Citibank and Affiliates...........................74 SECTION 7.04. Lender Credit Decision........................................74 SECTION 7.05. Indemnification...............................................74 SECTION 7.06. Successor Agents..............................................75 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc...............................................75 SECTION 8.02. Notices, Etc..................................................76 SECTION 8.03. No Waiver; Remedies ..........................................77 SECTION 8.04. Costs and Expenses............................................77 SECTION 8.05. Right of Set-off..............................................79 SECTION 8.06. Binding Effect................................................79 SECTION 8.07. Assignments, Designations and Participations..................79 SECTION 8.08. Confidentiality...............................................85 SECTION 8.09. No Liability of the Issuing Banks.............................85 SECTION 8.10. Execution in Counterparts.....................................86 SECTION 8.11. Governing Law.................................................86 SECTION 8.12. Jurisdiction, Etc.............................................86 SECTION 8.13. Waiver of Jury Trial..........................................88 Page Schedules Schedule I - List of Applicable Lending Offices Schedule 2.03(e) - Existing Letters of Credit Schedule 4.01(b) - Subsidiaries Schedule 5.02(d) - Assets Held For Sale Exhibits Exhibit A-1 - Form of Competitive Bid Note Exhibit A-2 - Form of Revolving Credit Note Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Competitive Bid Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Designation Agreement Exhibit E - Form of Opinion of Counsel for the Loan Parties Exhibit F - Form of Group Guaranty Exhibit G - Form of Subsidiary Guaranty CREDIT AGREEMENT Dated as of August 12, 1997 WARNACO INC., a Delaware corporation (together with any successors-in-interest permitted hereunder, the "Borrower"), THE WARNACO GROUP, INC., a Delaware corporation (together with any successors-in-interest permitted hereunder, "Group"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, and THE BANK OF NOVA SCOTIA ("Scotiabank") and CITIBANK, N.A. ("Citibank") as managing agents (the "Managing Agents") for the Lenders (as hereinafter defined), Citibank as documentation agent (the "Documentation Agent") for the Lenders, and Scotiabank as administrative agent (the "Administrative Agent") and competitive bid agent (the "Competitive Bid Agent") for the Lenders and as a Swing Line Bank and an Issuing Bank hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent" has the meaning specified in the recital of parties to this Agreement. "Administrative Agent's Account" means the account of the Administrative Agent maintained by the Administrative Agent with Scotiabank at its office at One Liberty Plaza, New York, New York 10006, Special Management Account No. 0608335, Reference: Warnaco. "Advance" means a Revolving Credit Advance, a Competitive Bid Advance, a Swing Line Advance, or a Letter of Credit Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more 2 of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agents" means each of the Managing Agents, the Documentation Agent, the Administrative Agent and the Competitive Bid Agent, together, in each case, with any successor or successors of any thereof appointed pursuant to Article VII hereof. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. "Applicable Margin" means, as of any date, a percentage per annum determined by reference to the Rating Level in effect on such date as set forth below: ================== ================ ============= ============== Rating Debt Base Rate Eurodollar Level Rating Advances Rate Advances - ------------------ ---------------- ------------- -------------- Level 1 A-/A3 or higher 0.000% 0.250% - ------------------ ---------------- ------------- -------------- Level 2 BBB+/Baa1 0.000% 0.275% - ------------------ ---------------- ------------- -------------- Level 3 BBB/Baa2 0.000% 0.300% - ------------------ ---------------- ------------- -------------- Level 4 BBB-/Baa3 0.000% 0.425% - ------------------ ---------------- ------------- -------------- Level 5 BB+/Ba1 or 0.250% 0.625% lower ================== ================ ============= ============== provided, that at any time that the Rating Level is Level 1, 2 or 3 and the aggregate Available Amount of Letters of Credit plus the principal amount of Advances exceeds 25% of the aggregate Commitments, the Applicable Margin shall be increased by 0.075% per annum. "Applicable Percentage" means, as of any date, a percentage per annum determined by reference to the Rating Level in effect on such date as set forth below: 3 ============= ================ =============== Rating Debt Applicable Level Rating Percentage ------------- ---------------- --------------- Level 1 A-/A3 or higher 0.080% ------------- ---------------- --------------- Level 2 BBB+/Baa1 0.090% ----------------------------- --------------- Level 3 BBB/ Baa2 0.125% ------------- ---------------- --------------- Level 4 BBB-/Baa3 0.150% ------------- ---------------- --------------- Level 5 BB+/Ba1 or 0.200% lower ============= ================ =============== "Appropriate Lender" means, at any time, with respect to (a) the Revolving Credit Facility, a Lender that has a Revolving Credit Commitment at such time, (b) the Letter of Credit Facility, (i) the Issuing Banks and (ii) if the other Revolving Credit Lenders shall have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such other Revolving Credit Lender and (c) the Swing Line Facility, (i) the Swing Line Bank and (ii) if the other Revolving Credit Lenders have made Swing Line Advances pursuant to Section 2.02(b) that are outstanding at such time, such other Revolving Credit Lenders. "Approved Accounting Firm" means Arthur Andersen LLP, Coopers & Lybrand L.L.P., Deloitte & Touche LLP, Ernst & Young LLP, Price Waterhouse LLP or KPMG Peat Marwick LLP, or any successor thereof. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Documentation Agent, in accordance with Section 8.07 and in substantially the form of Exhibit C hereto. "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest established by the Administrative Agent, from time to time, at its Domestic Lending Office as its base rate for loans in United States dollars; and 4 (b) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.08(a)(i). "Borrower" has the meaning specified in the recital of parties to this Agreement. "Borrower's Account" means the account of the Borrower maintained by the Borrower with Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 3846-9269. "Borrowing" means a Revolving Credit Borrowing, a Competitive Bid Borrowing or a Swing Line Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Capital Stock Issuance" means the sale or issuance by any Loan Party or any of its Subsidiaries of any capital stock, any securities convertible into or exchangeable for capital stock or any warrants, rights or options to acquire capital stock of Group or any of its Subsidiaries other than any such sale or issuance by a wholly owned Subsidiary of the Borrower to the Borrower or to another wholly owned Subsidiary of the Borrower and other than the issuance or sale of common stock (or options to purchase common stock) by Group pursuant to customary management, employee or director stock option and stock purchase programs or other stock option or stock purchase programs with respect to common stock of Group approved by the Board of Directors of Group. "Capitalized Lease Obligations" of any Person shall at any time mean all Obligations under Capitalized Leases of such Person, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP at such time. "Capitalized Leases" has the meaning specified in clause (e) of the definition of "Debt". "Cash Equivalents" means cash equivalents and marketable securities (other than equity securities). 5 "Cash Interest Expense" means, for any period, interest expense net of interest income on all Debt of Group and its Subsidiaries, in each case determined for such period on a Consolidated basis for Group and its Subsidiaries in accordance with GAAP and including, without limitation, to the extent not otherwise included in accordance with GAAP, (a) interest expense in respect of Debt resulting from Advances, (b) the interest component of obligations as lessee under Capitalized Leases, (c) commissions, discounts and other fees and charges payable in connection with letters of credit, (d) the net payment, if any, payable in connection with interest rate hedge agreements and other interest rate protection contracts and (e) fees paid pursuant to Section 2.09(a), but excluding, in each case, (x) amortization of original issue discount, (y) the interest portion of any deferred payment obligation and (z) other interest not payable in cash. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980. "Citibank" has the meaning specified in the recital of parties to this Agreement. "Commitment" means a Revolving Credit Commitment or a Letter of Credit Commitment. "Competitive Bid Advance" means an advance by a Lender to the Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.04 and refers to a Fixed Rate Advance or a LIBO Rate Advance. "Competitive Bid Agent" has the meaning specified in the recital of parties to this Agreement. "Competitive Bid Borrowing" means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.04. "Competitive Bid Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender. "Confidential Information" means any information, whether written or oral that the Borrower or Group furnishes to any Agent or Lender which is designated as confidential or which could reasonably be expected by such Agent or Lender to be 6 confidential, provided, that for purposes of this definition, unless otherwise specified by the Borrower or Group, the term "Confidential Information" will include, without limitation, any information furnished by the Borrower or Group regarding proposed acquisitions and new product launches by Group or its Subsidiaries, and provided, further, that the term "Confidential Information" does not include any information that is or becomes generally available to the public or that is or becomes available to such Agent or Lender from a source other than the Borrower or Group. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.10 or 2.11. "Current Liabilities" of any Person means (a) all Debt of such Person except Funded Debt and Debt in respect of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances, (b) all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of determination and (c) all other items (including taxes accrued as estimated) that in accordance with GAAP would be classified as current liabilities of such Person. "Debt" of any Person means, without duplication, the following: (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 90 days incurred in the ordinary course of such Person's business), including, without limitation, the Trade Credit Facility, (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), 7 (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of Redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Debt of others of the kinds referred to in clauses (a) through (h) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss, and (j) all Debt referred to in clauses (a) through (h) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Debt Rating" means, as of any date, the Public Debt Rating in effect on such date or, if no Public Debt Rating is then in effect, the Implied Debt Rating in effect on such date, provided that if neither S&P nor Moody's shall have in effect a Public Debt Rating or an Implied Debt Rating, the Applicable Margin and the Applicable Percentage will be set in accordance with Rating Level 5 under the definition of "Applicable Margin" or "Applicable Percentage", as the case may be. 8 "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Defaulted Advance" means, with respect to any Lender Party at any time, the amount of any Advance required to be made by such Lender Party to the Borrower or for the account of the Borrower pursuant to Section 2.01 at or prior to such time which has not been so made as of such time; provided, however, any Advance made by the Administrative Agent for the account of such Lender Party pursuant to Section 2.02(e) shall not be considered a Defaulted Advance even if, at such time, such Lender Party shall not have reimbursed the Administrative Agent therefor as provided in Section 2.02(e). In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.17(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Advance so deemed made in part. "Defaulted Amount" means, with respect to any Lender Party at any time, any amount required to be paid by such Lender to any Agent or any other Lender Party hereunder or under any other Loan Document at or prior to such time which has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion of a Swing Line Advance made by the Swing Line Bank, (b) any Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a Letter of Credit Advance made by such Issuing Bank, (c) the Administrative Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for the amount of any Advance made by the Administrative Agent for the account of such Lender Party, (d) any other Lender Party pursuant to Section 2.15 to purchase any participation in Advances owing to such other Lender Party and (e) any Agent pursuant to Section 7.05 to reimburse such Agent for such Lender Party's ratable share of any amount required to be paid by the Lender Parties to such Agent as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.17(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be made hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part. "Defaulting Lender" means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take or be the subject of any action or proceeding of a type described in Section 6.01(e). "Designated Lender" means each special purpose corporation that (i) shall have been designated by a Designating Lender and shall have become a party to this Agreement, all pursuant to Section 8.07(d), and (ii) is not otherwise a Lender. 9 "Designating Lender" shall mean each Lender that is a party hereto (other than by virtue of a Designation Agreement) that shall designate a Designated Lender pursuant to a Designation Agreement in accordance with Section 8.07(d). "Designation Agreement" means a designation agreement entered into by a Designating Lender and a Designated Lender, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "Documentary Letter of Credit" means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of Inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory. "Documentation Agent" has the meaning specified in the recital of parties to this Agreement. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Domestic Subsidiary" means any Subsidiary of Group that is not a Foreign Subsidiary. "EBITDA" means, for any period, net income (or net loss) from operations (determined without giving effect to extraordinary or non-recurring gains or losses) plus, to the extent deducted in calculating such net income (loss), the sum of (a) Interest Expense, (b) income tax expense, (c) depreciation expense and (d) amortization expense, in each case determined in accordance with GAAP. "Effective Date" means the first date on which the conditions specified in Sections 3.01 and 3.02 have been satisfied. "Eligible Assignee" means any Person approved by the Managing Agents and the Borrower, such approval not to be unreasonably withheld; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of 10 liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment or decree relating to the environment, health, safety or Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the failure by the Borrower or any of its ERISA Affiliates to make a payment to a Plan if the conditions 11 for the imposition of a lien under Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could constitute grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum at which deposits in U.S. dollars are offered by the principal office of the Administrative Agent in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Administrative Agent's Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.08(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that 12 includes deposits by reference to which the interest rate on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Excluded Person" means (i) Linda J. Wachner or (ii) any trust of which Linda J. Wachner is the sole trustee or is a trustee with effective control over the voting stock held by such trust or over the management or policies of Group (or, in case of her death or disability, another trustee of comparable experience and ability selected by the Borrower within 180 days thereafter after consultation with the Managing Agents). "Excluded Taxes" means, in the case of each Lender Party, franchise taxes and taxes upon or determined by reference to such Lender Party's net income (including, without limitation, branch profit taxes), in each case imposed by the United States or any political subdivision or taxing authority thereof or therein or by any jurisdiction in which such Lender Party has its Applicable Lending Office, is resident or in which such Lender Party is organized or has its principal or registered office and, in the case of each Agent, franchise taxes and net income taxes upon or determined by reference to such Agent's net income (including, without limitation, branch profits taxes) imposed by the United States or by the state or foreign jurisdiction under the laws of which such Agent is organized (or by any political subdivision of such state or foreign jurisdiction), is resident or has its principal or registered office. "Existing Credit Agreement means the Credit Agreement, dated as of October 12, 1995, as amended, among the Borrower, Group, the financial institutions named therein, Scotiabank and Citicorp, as Managing Agents, Citicorp, as Documentation Agent and Collateral Agent, and Scotiabank, as Paying Agent and as Swing Line Bank and an Issuing Bank thereunder. "Existing Letters of Credit" has the meaning specified in Section 2.03(e). "Facility" means the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the 13 Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Quarter" means a fiscal quarter of Group and its Consolidated Subsidiaries ending on or about March 31, June 30, September 30 or December 31 of each year. "Fiscal Year" means a fiscal year of Group and its Consolidated Subsidiaries ending on or about December 31 of each year. "Fixed Rate Advances" has the meaning specified in Section 2.04(a)(i). "Foreign Subsidiary" means a Subsidiary of Group organized under the laws of a country other than the United States or any state thereof. "Funded Debt" of any Person means Debt (other than Debt incurred pursuant to Section 5.02(c)(iii) hereof) of such Person that by its terms matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of its creation. "GAAP" has the meaning specified in Section 1.03. "Group" has the meaning specified in the recital of parties to this Agreement. "Group Guaranty" has the meaning specified in Section 3.01(f)(i). "Guaranties" means the Group Guaranty and the Subsidiary Guaranty. "Guarantors" means Group and each of its Domestic Subsidiaries (other than the Borrower) which is required to guarantee the Borrower's Obligations under the Loan Documents pursuant to Section 5.01(k). "Hazardous Materials" means petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, radon gas and any other chemicals, materials or substances designated, classified or regulated as being "hazardous" or "toxic", or words of similar import, under any Environmental Law. 14 "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "Implied Senior Rating" means the rating assigned by S&P to Group's unsecured "implied senior debt" from time to time, as reported by S&P on July 11, 1997 or any subsequent report or notification in writing issued by S&P (which rating on the date hereof is BBB), or, if such rating is unavailable, the equivalent rating assigned by Moody's to Group's unsecured "implied senior debt", as notified in writing to Group by Moody's. "Indebtedness for Borrowed Money" of any Person means all Debt of such Person for borrowed money or evidenced by notes, bonds, debentures or other similar instruments, all Obligations of such Person for the deferred purchase price of any property, service or business (other than trade accounts payable (including the Trade Credit Facility) incurred in the ordinary course of business and constituting Current Liabilities), and all Obligations of such Person under Capitalized Leases and finance leases. "Indemnified Party" has the meaning specified in Section 8.04(b). "Initial Lenders" has the meaning specified in the recital of parties to this Agreement. "Insufficiency"means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "Interest Expense" means, with respect to any Person for any period, the excess, if any, of (i) interest expense (whether cash or accretion) of such Person during such period determined in accordance with GAAP, and shall include in any event, without limitation, interest expense with respect to Indebtedness for Borrowed Money, the Trade Credit Facility and payments under Hedge Agreements over (ii) interest income of such Person for such period, including payments received under Hedge Agreements. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing and each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of 15 the period selected by the Borrower pursuant to the provisions below and, thereafter, with respect to Eurodollar Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three, four, five or six months, or, if available to all Lenders, nine or 12 months, as the Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (a) the Borrower may not select any Interest Period that ends after the Termination Date; (b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Revolving Credit Borrowing or for LIBO Rate Advances comprising part of the same Competitive Bid Borrowing shall be of the same duration; (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day, unless the Borrower and the Administrative Agent otherwise agree; and (d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month unless the Borrower and the Administrative Agent otherwise agree. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock or other ownership or profit interest, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without 16 limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clauses (i) or (j) of the definition of "Debt" in respect of such Person. "Issuing Bank" means Scotiabank and any other Revolving Credit Lender approved by the Borrower and the Managing Agents that is a commercial bank, acting through a domestic branch, and has a Letter of Credit Commitment, as issuer of a Letter of Credit, and, with respect to the Existing Letters of Credit issued by it pursuant to the Existing Credit Agreement, Societe Generale. "L/C Cash Collateral Account" means the interest-bearing cash collateral account to be established and maintained by the Administrative Agent, over which the Administrative Agent shall have sole dominion and control, upon terms as may be satisfactory to the Administrative Agent. "L/C Related Documents" has the meaning specified in Section 2.05(c)(ii)(A). "Lender Party" means any Lender, any Issuing Bank and any Swing Line Bank. "Lenders" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.07, including the Designated Lenders, if any; provided, however, that the term "Lender" shall exclude each Designated Lender when used (i) in reference to a Revolving Credit Advance or the Commitments or terms relating thereto, except to the extent a Designated Lender is the obligee of a Revolving Credit Advance actually funded by such Designated Lender pursuant to Section 2.01(a) hereof and (ii) in any determination or calculation of Required Lenders, it being understood that for purposes hereof, any Advance made by a Designated Lender shall be deemed to have been made by the applicable Designating Lender. "Letter of Credit Advance" means an advance made by any Issuing Bank or any Revolving Credit Lender pursuant to Section 2.03(c). "Letter of Credit Agreement" has the meaning specified in Section 2.03(a). "Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such Issuing Bank has entered into one or more Assignments and Acceptances, set forth for such Issuing Bank in the Register maintained by the Documentation Agent pursuant to Section 8.07(c) as such Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. 17 "Letter of Credit Facility" means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Letter of Credit Commitments of the Issuing Banks at such time and (b) $100,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Letters of Credit" has the meaning specified in Section 2.01(c). "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances comprising part of the same Competitive Bid Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum at which deposits in U.S. dollars are offered by the principal office of the Administrative Agent, in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the amount that would be the Administrative Agent's ratable share of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing to be outstanding during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "LIBO Rate Advances" has the meaning specified in Section 2.04(a)(i). "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means (a) for purposes of this Agreement, the Notes, if any, and any amendments or modifications hereof or thereof and for all other purposes other than for purposes of the Guarantees, (i) this Agreement, (ii) the Notes, if any, (iii) the Guarantees, (iv) each Letter of Credit Agreement and (v) each L/C Related Document, and (b) for purposes of the Guarantees, (i) this Agreement, (ii) the Notes, if any, (iii) the Guarantees, (iv) each Letter of Credit Agreement, (v) each L/C Related Document and (v) the interest rate Hedge Agreements entered into by Group or the Borrower with Lender Parties, in the case of each of the foregoing agreements referred to in clause (a) or (b), and any amendments, supplements or modifications hereof or thereof. "Loan Parties" means the Borrower and the Guarantors. "Managing Agents" has the meaning specified in the recital of parties to this Agreement. 18 "Margin Stock" has the meaning specified in Regulation U. "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or of Group and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or of Group and its Subsidiaries taken as a whole, (b) the rights and remedies of any Agent or Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party. "Material Guarantor" means, at any time, a Guarantor having (i) at least 10% of Consolidated total assets of Group and its Subsidiaries (determined as of the last day of the most recent Fiscal Quarter) or (ii) at least 10% of Consolidated EBITDA of Group and its Subsidiaries for the 12-month period ending on the last day of the most recent Fiscal Quarter. "Material Subsidiary" of any Person means, at any time, a Subsidiary of such Person having (i) at least $5,000,000 in total assets (determined as of the last day of the most recent fiscal quarter of such Person) or (ii) EBITDA of at least $5,000,000 for the 12-month period ending on the last day of the most recent fiscal quarter of such Person. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any of its ERISA Affiliates is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any of its ERISA Affiliates and at least one Person other than the Borrower and its ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any of its ERISA Affiliates could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. 19 "Net Worth" at any time means the excess of total assets of Group and its Subsidiaries at such time over total liabilities of Group and its Subsidiaries at such time, in each case as determined on a Consolidated basis in accordance with GAAP. "Note" means a Revolving Credit Note or a Competitive Bid Note. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Competitive Bid Borrowing" has the meaning specified in Section 2.04(a)(i). "Notice of Issuance" has the meaning specified in Section 2.03(a). "Notice of Swing Line Borrowing" has the meaning specified in Section 2.02(b). "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(e). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Other Taxes" has the meaning specified in Section 2.14(b). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Liens" means the following: (a) Liens, other than in favor of the PBGC, arising out of judgments or awards in respect of which Group or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided it shall have set aside on its books adequate 20 reserves, in accordance with GAAP, with respect to such judgment or award and provided further that the aggregate amount secured by such Liens does not exceed $5,000,000 in any one case or $10,000,000 in the aggregate; (b) Liens for taxes, assessments or governmental charges or levies, provided payment thereof shall not at the time be required in accordance with the provisions of Section 5.01(b) and such amount, when taken together with any amount payable under Section 5.01(b) as to which any Lien has been attached as described in the last phrase thereof, shall not exceed $10,000,000; (c) deposits, Liens or pledges to secure payments of workmen's compensation and other payments, unemployment and other insurance, old-age pensions or other social security obligations, or the performance of bids, tenders, leases, contracts (other than contracts for the payment of money), public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business; (d) mechanics', workmen's, repairmen's, warehousemen's, vendors' or carriers' Liens or other similar Liens arising in the ordinary course of business and securing sums which are not past due, or deposits or pledges to obtain the release of any such Liens; (e) statutory landlord's Liens under leases to which Group or any of its Subsidiaries is a party; (f) any Lien constituting a renewal, extension or replacement of a Lien constituting a Permitted Lien, but only if at the time such Lien is granted and immediately after giving effect thereto, no Default would exist; (g) leases or subleases granted to other Persons not materially interfering with the conduct of the business of Group and its Subsidiaries, taken as a whole; (h) zoning restrictions, easements, rights of way, licenses and restrictions on the use of real property or minor irregularities in title thereto, which do not materially impair the use of such property in the normal operation of the business of Group or any of its Subsidiaries or the value of such property for the purpose of such business; and 21 (i) statutory or common law Liens (such as rights of set-off) on deposit accounts of Group and its Subsidiaries and other Liens under the L/C Related Documents. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pro Rata Share" of any amount means, with respect to any Revolving Credit Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time and the denominator of which is the Revolving Credit Facility at such time. "Public Debt Rating" means, as of any date, the higher rating that has been most recently announced by either S&P or Moody's, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by Group. For purposes of the foregoing, (a) if only one of S&P and Moody's shall have in effect a Public Debt Rating, the Applicable Margin and the Applicable Percentage shall be determined by reference to the available rating; (b) if the ratings established by S&P and Moody's shall fall within different levels separated by two or more levels, the Applicable Margin and the Applicable Percentage shall be based upon the level that is one level below the higher rating; (c) if any rating established by S&P or Moody's shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (d) if S&P or Moody's shall change the basis on which ratings are established, each reference to the Public Debt Rating announced by S&P or Moody's, as the case may be, shall refer to the then equivalent rating by S&P or Moody's, as the case may be. "Redeemable" means, with respect to any capital stock, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "Register" has the meaning specified in Section 8.07(g). "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 22 "Required Lenders" means, at any time, Lenders owed or holding more than 51% of the sum of (a) the aggregate principal amount of the Advances (other than Competitive Bid Advances) outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) the aggregate Unused Revolving Credit Commitments at such time; provided, however, if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (i) the aggregate principal amount of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (ii) such Lender's Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time and (iii) the Unused Revolving Credit Commitment of such Lender at such time and provided further, that for purposes of this definition, any Advance made by a Designated Lender shall be deemed to have been made by its applicable Designating Lender. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. "Revolving Credit Advance" has the meaning specified in Section 2.01(a). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Revolving Credit Lenders pursuant to Section 2.01. "Revolving Credit Commitment" means, with respect to any Revolving Credit Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Documentation Agent pursuant to Section 8.07(c) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Revolving Credit Facility" means, at any time, the aggregate amount of the Revolving Credit Lenders' Revolving Credit Commitments at such time. "Revolving Credit Lender" means any Lender that has a Revolving Credit Commitment. "Revolving Credit Note" has the meaning specified in Section 2.18. 23 "S&P" means Standard & Poor's Ratings Group, currently a division of The McGraw-Hill Companies, Inc., or any successor thereto. "Scotiabank" has the meaning specified in the recital of parties to this Agreement. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any of its ERISA Affiliates and no Person other than the Borrower and its ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any of its ERISA Affiliates could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Standby Letter of Credit" means any Letter of Credit issued under the Letter of Credit Facility, other than a Documentary Letter of Credit. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. The term "wholly owned 24 Subsidiary" shall exclude any directors' or officers' qualifying shares which may be outstanding. "Subsidiary Guaranty" has the meaning specified in Section 3.01(f)(ii). "Swing Line Advance" means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(b), or (b) any Revolving Credit Lender pursuant to Section 2.02(b). "Swing Line Bank" means Scotiabank (and its successors and assigns), provided that Scotiabank (and any such successors and assigns as Swing Line Bank hereunder) may resign, and thereupon be released from its obligations, as Swing Line Bank under this Agreement upon receipt by the Borrower and the Managing Agents, in writing and in a form reasonably satisfactory to the Borrower and the Managing Agents, of the assumption by another Revolving Credit Lender of the rights and obligations of the Swing Line Bank hereunder. "Swing Line Borrowing" means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank. "Swing Line Facility" has the meaning specified in Section 2.01(b). "Tangible Assets" means total assets minus goodwill and intangibles, in each case determined in accordance with GAAP. "Taxes" has the meaning specified in Section 2.14(a). "Termination Date" means the earlier of August 12, 2002 and the date of termination in whole of the Commitments pursuant to Section 2.06 or 6.01. "Total Debt" means, as of the end of any period of four consecutive Fiscal Quarters, all Indebtedness for Borrowed Money (including, without limitation, the aggregate outstanding principal amount of all Advances and loans under other revolving credit facilities and lines of credit and the like but excluding undrawn letters of credit and the Trade Credit Facility) of Group and its Subsidiaries, on a Consolidated basis at such time. "Trade Credit Facility" means the revolving loan facility under the Amended and Restated Credit Agreement dated as of the date hereof among the Borrower, certain lenders party thereto and Scotiabank, as agent for said lenders, as each such agreement has been amended to date and the same may be amended, extended, renewed, 25 refinanced, replaced or otherwise modified from time to time (provided, however, that the aggregate principal amount of Debt thereunder shall not exceed $300,000,000 at any time outstanding). "Type" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "Unused Revolving Credit Commitment" means, with respect to any Revolving Credit Lender at any time, (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender and outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) for all purposes other than for purposes of calculating commitment fees pursuant to Section 2.09(a), the aggregate amount of Competitive Bid Advances outstanding at such time, (C) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time other than any such Letter of Credit Advance which, at or prior to such time, has been assigned in part to such Revolving Credit Lender pursuant to Section 2.03(c) and other than, in the case of each Lender that is an Issuing Bank, any such Letter of Credit Advance in respect of a Letter of Credit issued by it and (D) for all purposes other than for purposes of calculating commitment fees pursuant to Section 2.09(a), the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(b) and outstanding at such time other than any such Swing Line Advance which, at or prior to such time, has been assigned in part to such Revolving Credit Lender pursuant to Section 2.02(b). "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. 26 "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(f) ("GAAP"). 27 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances. (a) The Revolving Credit Advances. Each Revolving Credit Lender severally agrees, on the terms and conditions hereinafter set forth, to make Advances (each a "Revolving Credit Advance") to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount for each such Advance not to exceed such Lender's Unused Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate amount equal to the amount by which the aggregate amount of a proposed Competitive Bid Borrowing requested by the Borrower exceeds the aggregate amount of Competitive Bid Advances offered to be made by the Revolving Credit Lenders and accepted by the Borrower in respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is made on the same date as such Revolving Credit Borrowing) and shall consist of Revolving Credit Advances of the same Type made on the same day by the Revolving Credit Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Revolving Credit Lender's Unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(a). For any Lender which is a Designating Lender, any Revolving Credit Advance to be made by such Lender may from time to time and upon notice to the Administrative Agent, be made by its Designated Lender pursuant to the terms hereof in such Designating Lender's sole discretion, and nothing herein shall constitute a Commitment to make Revolving Credit Advances by such Designated Lender; provided, that (i) if any Designated Lender elects not to, or fails for any reason whatsoever to, make such Revolving Credit Advance, its Designating Lender hereby agrees that it shall make such Revolving Credit Advance pursuant to the terms hereof and (ii) notwithstanding anything to the contrary, neither the designation of a Designated Lender, the election or other determination that a Designated Lender will make any Revolving Credit Advance nor any other condition or circumstance relating to the Designated Lender shall in any way release, diminish or otherwise affect the relevant Designating Lender's Commitment or any of its other obligations hereunder or under any other Loan Document or any rights of the Borrower, any Agent or any Lender Party with respect to such Designating Lender. Any Revolving Credit Advance actually funded by a Designated Lender shall constitute a utilization of the Commitment of the Designating Lender for all purposes hereunder. (b) The Swing Line Advances. The Borrower may request the Swing Line Bank to make, and the Swing Line Bank shall make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to 28 exceed at any time outstanding $30,000,000 (the "Swing Line Facility") and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $100,000 or an integral multiple of $1,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.01(b), repay pursuant to Section 2.05(b) or prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(b). (c) Letters of Credit. Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue letters of credit (together with the Existing Letters of Credit referred to in Section 2.03(e), the "Letters of Credit") for the account of the Borrower from time to time on any Business Day during the period from the date hereof until 10 days before the Termination Date (i) in an aggregate Available Amount for all Letters of Credit issued by such Issuing Bank not to exceed at any time such Issuing Bank's Letter of Credit Commitment at such time and (ii) in an Available Amount for each such Letter of Credit not to exceed the lesser of (x) the Letter of Credit Facility at such time and (y) an amount equal to the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 10 days before the Termination Date and, in the case of a Documentary Letter of Credit, 180 days after the date of issuance thereof. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(c), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Sections 2.03(c) and 2.05(c) and request the issuance of additional Letters of Credit under this Section 2.01(c). Each Letter of Credit issued pursuant to this Section 2.01(c) shall, effective upon its issuance and without further action, be issued on behalf of all Lenders (including the applicable Issuing Bank) according to their respective Pro Rata Shares. Each Lender shall, to the extent of its Pro Rata Share, be deemed irrevocably to have participated in the issuance of such Letter of Credit and shall be responsible to reimburse the Issuing Bank promptly for Letter of Credit Advances in accordance with Section 2.03. SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Appropriate Lender prompt notice thereof by telecopier or telex. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or telex in 29 substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing, and (v) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Appropriate Lender shall, before 12:00 Noon (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments under the applicable Facility of such Lender and the other Appropriate Lenders. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower's Account; provided, however, that, in the case of any Revolving Credit Borrowing, the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or any Issuing Bank, as the case may be, and by any other Revolving Credit Lender and outstanding on the date of such Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank or such Issuing Bank, as the case may be, and such other Revolving Credit Lenders for repayment of such Swing Line Advances and Letter of Credit Advances. (b) (i) Each Swing Line Borrowing shall be made on notice, given not later than 11:30 A.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be by telephone, confirmed immediately in writing or telex or telecopier, specifying therein the requested (A) date of such Borrowing and (B) amount of such Borrowing and shall constitute a representation and warranty by the Borrower (upon which the Swing Line Bank may conclusively rely, in the absence of prior receipt by the Swing Line Bank of written notice from an Agent or Revolving Credit Lenders holding at least 51% of the Revolving Credit Commitments that the conditions precedent to the making of Swing Line Advances have not been satisfied or duly waived). Upon fulfillment of the applicable conditions set forth in Article III, the Swing Line Bank will make the amount thereof available to the Borrower by crediting the Borrower's Account. (ii) (A) (1) Subject to clause (ii)(B) below, in the event that on any Business Day the Swing Line Bank desires that all or any portion of one or more Swing Line Advances be paid, the Swing Line Bank shall promptly notify the Administrative Agent to that effect and indicate the portion of the Swing Line Advances to be paid. (2) The Administrative Agent agrees to promptly transmit to the Lenders the information contained in each notice received by the Administrative Agent under clause (ii)(A)(1) above, and shall concurrently notify the other Agents and the Revolving Credit 30 Lenders of each Revolving Credit Lender's Pro Rata Share of the Swing Line Advances (or portion thereof) to be paid. (3) Each Revolving Credit Lender hereby unconditionally and irrevocably agrees to fund to the Administrative Agent for the benefit of the Swing Line Bank, in lawful money of the United States and in same day funds, not later than 12:00 noon (New York City time) on the Business Day immediately following the Business Day of such Lender's receipt of such notice from the Administrative Agent (provided that if any Lender shall receive such notice at or prior to 1:00 P.M. (New York City time) on a Business Day, such funding shall be made by such Lender on such Business Day), a Revolving Credit Advance in the amount of such Lender's Pro Rata Share of the payment of the Swing Line Advances to be made on such date, regardless, however, of whether (x) the conditions precedent thereto set forth in Article III are then satisfied, (y) the Borrower has provided a Notice of Borrowing under Section 2.02(a) hereof and (z) the Revolving Credit Facility has been terminated, any Default or Event of Default exists or all or any of the Advances have been accelerated, but subject to clause (B) below and subject to the limitations in respect of the amount of Revolving Credit Advances contained in Section 2.01(a). The proceeds of each such Revolving Credit Advance shall be immediately paid over to the Administrative Agent for the benefit of the Swing Line Bank for application to the Swing Line Facility. Each such Revolving Credit Advance shall initially be a Base Rate Advance and shall be deemed to be requested by the Borrower pursuant to Section 2.02(a). (B) In the event that Commitments of the Lenders shall have terminated pursuant to Section 6.01 following an Event of Default of the type described in Section 6.01(f) with respect to Group or the Borrower, no further Revolving Credit Advances of the type described in clause (ii)(A) above shall be made, and each of the Revolving Credit Lenders (other than the Swing Line Bank) shall be deemed to have irrevocably, unconditionally and immediately purchased from the Swing Line Bank such Revolving Credit Lender's Pro Rata Share of the principal amount of the Swing Line Advances outstanding as of the date of the occurrence of such Event of Default. Each Revolving Credit Lender shall effect such purchase by making available an amount equal to its participation on the date of such purchase in U.S. dollars in immediately available funds at the office of the Swing Line Bank located at 600 Peachtree Street Northeast, Suite 2700, Atlanta, Georgia 30308 or such other office as the Swing Line Bank may from time to time direct for the account of such office of the Swing Line Bank. (C) Each purchase made pursuant to clause (ii)(B) above by a Revolving Credit Lender shall be made without recourse to the Swing Line Bank, and, except as to the absence of liens created by the Swing Line Bank on the Swing Line Advance and the Swing Line Bank's right to effect such sale, without representation or warranty of any kind, and shall 31 be effected and evidenced pursuant to documents reasonably acceptable to the Swing Line Bank. (D) The obligations of the Revolving Credit Lenders under this Section 2.02(b)(ii) shall be absolute, irrevocable and unconditional, shall be made under all circumstances and shall not be affected, reduced or impaired for any reason whatsoever, including (without limitation): (1) any Default, Event of Default, misrepresentation, negligence, misconduct or other action or inaction of any kind by any of the Loan Parties or any other Person, whether in, under or in connection with this Agreement, the Guaranty or any of the other Loan Documents; (2) any extension, renewal, release or waiver of the time of performance of or compliance with any of the obligations or other provisions hereof or of any other Loan Document; (3) any settlement, compromise or subordination of any or all of the obligations to the claims of others, or any failure by any Agent, the Swing Line Bank or any other Lender to mitigate damages; (4) any amendment, modification or other waiver of any one or more of the Loan Documents; (5) the insolvency, bankruptcy, reorganization or cessation of existence of any of the Loan Parties; (6) any impossibility or illegality of performance or the lack of genuineness, validity, legality or enforceability of any of this Agreement or the other Loan Documents, or any term thereof or any other agreement or instrument relating thereto for any reason, or the lack of power or authority of any party to enter into any of the Loan Documents; (7) any dispute, setoff, recoupment, counterclaim or other defense or right any Lender may have at any time, whether against any Agent, the Swing Line Bank, any other Lender or any of the Loan Parties; (8) any merger or consolidation of any of the Loan Parties or any Lender, or any sale, lease or transfer of any or all of the assets of any such Person; or (9) any other circumstances whether similar or dissimilar to any of the foregoing. (c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $10,000,000 or if the obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.10, 2.11 or 2.12 and (ii) the Advances under the Revolving Credit Facility may not be outstanding as part of more than 20 separate Borrowings. (d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund 32 the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, the Administrative Agent agrees to give prompt notice thereof to the Borrower (provided that failure to give such notice shall not affect the obligations of the Borrower under this Section 2.02(e)), and such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.08 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 11:00 A.M. (New York City time) on the first Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to any Issuing Bank, which shall give to the Administrative Agent and each Revolving Credit Lender prompt notice thereof by telex or telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Borrower for use in connection with such requested 33 Letter of Credit (a "Letter of Credit Agreement"). If (x) the requested form of such Letter of Credit is acceptable to such Issuing Bank in its sole discretion and (y) it has not received written notice from an Agent or Lenders holding at least 51% of the Revolving Credit Commitments that the conditions to issuing such Letter of Credit have not been satisfied or duly waived, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 8.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Administrative Agent, the Documentation Agent and each Revolving Credit Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (B) to the Administrative Agent, the Documentation Agent and each Revolving Credit Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. (c) Drawing and Reimbursement. The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. Upon written demand by any Issuing Bank with an outstanding Letter of Credit Advance, with a copy of such demand to the Administrative Agent, each Revolving Credit Lender shall purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to each such Revolving Credit Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Revolving Credit Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank, provided notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by any Issuing Bank to any other Revolving Credit Lender of a portion of a Letter of Credit Advance, such Issuing Bank represents and warrants to such other Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no 34 responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Revolving Credit Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day. (d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. (e) Existing Letters of Credit. Effective as of the Effective Date, (i) the "Letters of Credit" issued for the account of the Borrower pursuant to the Existing Credit Agreement (such Letters of Credit as are outstanding thereunder on the date hereof and set forth on Schedule 2.03(e) hereto being the "Existing Letters of Credit") will be deemed to be Letters of Credit hereunder and (ii) the Existing Letters of Credit will no longer be Obligations outstanding under the Existing Credit Agreement. SECTION 2.04. The Competitive Bid Advances. (a) Each Lender severally agrees that the Borrower may make Competitive Bid Borrowings under this Section 2.04 from time to time on any Business Day during the period from the date hereof until the date occurring 10 days prior to the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, (x) the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Revolving Credit Commitments of the Lenders and (y) the aggregate amount of the Competitive Bid Advances then outstanding shall not exceed $350,000,000. (i) The Borrower may request a Competitive Bid Borrowing under this Section 2.04 by delivering to the Competitive Bid Agent, by telecopier or telex, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (v) date of such proposed Competitive Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing, (x) in the case of a Competitive Bid Borrowing consisting 35 of LIBO Rate Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, maturity date for repayment of each Fixed Rate Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring 7 days after the date of such Competitive Bid Borrowing or later than the earlier of (I) 180 days after the date of such Competitive Bid Borrowing and (II) the Termination Date), (y) interest payment date or dates relating thereto, and (z) other terms (if any) to be applicable to such Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall specify in the Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing being referred to herein as "Fixed Rate Advances") and (B) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall instead specify in the Notice of Competitive Bid Borrowing that the rates of interest be offered by the Lenders are to be based on the LIBO Rate (the Advances comprising such Competitive Bid Borrowing being referred to herein as "LIBO Rate Advances"). Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on the Borrower. The Competitive Bid Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Advances to the Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Competitive Bid Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and on the third Business Day before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, of the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.04(a), exceed such Lender's Revolving Credit Commitment, if any), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Administrative Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Competitive Bid Agent, 36 before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, and before 1:00 P.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either: (x) cancel such Competitive Bid Borrowing by giving the Competitive Bid Agent notice to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Administrative Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Competitive Bid Agent on behalf of such Lender for such Competitive Bid Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Competitive Bid Agent notice to that effect. The Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated by the Administrative Agent among such Lenders in proportion to the maximum amount that each such Lender offered at such interest rate. (iv) If the Borrower notifies the Competitive Bid Agent that such Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Competitive Bid Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Competitive Bid Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) 37 above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Competitive Bid Agent has received forms of documents, if any, requested pursuant to Section 3.02(b). Each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before 12:00 noon (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Competitive Bid Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Competitive Bid Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Competitive Bid Agent at the Competitive Bid Agent's Account, in same day funds, such Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Competitive Bid Agent of such funds, the Competitive Bid Agent will, as promptly as possible, transfer such funds to the Borrower's Account. Promptly after each Competitive Bid Borrowing, the Competitive Bid Agent will notify each Lender of the amount of the Competitive Bid Borrowing, the consequent deemed use of the aggregate amount of the Commitments as a result thereof and the dates upon which such Competitive Bid Borrowing commenced and will terminate. For any Lender which is a Designating Lender, any Competitive Bid Advance to be made by such Lender may from time to time be made by its Designated Lender pursuant to the terms hereof in such Designating Lender's sole discretion, and nothing herein shall constitute a commitment to make Competitive Bid Advances by such Designated Lender, provided, that (i) if any Designated Lender elects not to, or fails for any reason whatsoever to, make any such Competitive Bid Advance that has been accepted by the Borrower in accordance with the foregoing, its Designating Lender hereby agrees that it shall make such Competitive Bid Advance pursuant to the terms hereof and (ii) notwithstanding anything to the contrary, neither the designation of a Designated Lender, the election or other determination that a Designated Lender will make any Competitive Bid Advance nor any other condition or circumstance relating to the Designated Lender shall in any way release, diminish or otherwise affect the relevant Designating Lender's Commitment or any of its other obligations hereunder or under any other Loan Document or any rights of the Borrower, any Agent or any Lender Party with respect to such Designating Lender. (vi) If the Borrower notifies the Competitive Bid Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, 38 such notice of acceptance shall be irrevocable and binding on the Borrower. The Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date. (b) Each Competitive Bid Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the Borrower shall be in compliance with the limitation set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.04, the Borrower may from time to time borrow under this Section 2.04, repay or prepay pursuant to subsection (d) below, and reborrow under this Section 2.04, provided that a Competitive Bid Borrowing shall not be made within three Business Days of the date of any other Competitive Bid Borrowing. (d) The Borrower shall repay to the Competitive Bid Agent for the account of each Lender that has made a Competitive Bid Advance, on the maturity date of each Competitive Bid Advance (such maturity date being that specified by the Borrower for repayment of such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and provided in the Competitive Bid Note evidencing such Competitive Bid Advance), the then unpaid principal amount of such Competitive Bid Advance. The Borrower shall have no right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms, specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, or unless separately agreed between the Borrower and any Lender that has made a Competitive Bid Advance, and set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. (e) The Borrower shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Borrower for such Competitive Bid Advance in 39 the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the amount of unpaid principal of and interest on each Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note. (f) The indebtedness of the Borrower resulting from each Competitive Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower payable to the order of the Lender making such Competitive Bid Advance. (g) Upon delivery of each Notice of Competitive Bid Borrowing, the Borrower shall pay a non-refundable fee of $2,000 to the Competitive Bid Agent for its own account. SECTION 2.05. Repayment of Advances. (a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding. (b) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the account of the Swing Line Bank and each other Revolving Credit Lender that has purchased a Swing Line Advance pursuant to Section 2.02(b) the outstanding principal amount of each Swing Line Advance at the times and in the manner and amounts specified in Section 2.02(b) and on the Termination Date. (c) Letter of Credit Advances. (i) The Borrower shall repay to the Administrative Agent for the account of each Issuing Bank and each other Revolving Credit Lender that has made a Letter of Credit Advance on the earlier of demand and the Termination Date the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: 40 (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guaranty, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. SECTION 2.06. Termination or Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction (i) shall be in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their Commitments with respect to such Facility, and provided further that after giving effect to any such reduction, the 41 Letter of Credit Commitments shall be less than or equal to the Revolving Credit Commitments, and provided still further that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Competitive Bid Advances then outstanding. SECTION 2.07. Prepayments. (a) Optional Prepayments. (i) The Borrower may, upon at least one Business Day's notice in the case of the Swing Line Facility and Base Rate Advances and three Business Days' notice in the case of any Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (x) each partial prepayment of the Revolving Credit Facility shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) any such prepayment of a Eurodollar Rate Advance made other than on the last day of an Interest Period therefor shall be made together with payment of all amounts, if any, required pursuant to Section 8.04(c). (ii) Competitive Bid Advances may be prepaid only in accordance with the provisions of Section 2.04(d). (b) Mandatory Prepayments. (i) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Revolving Credit Advances, (y) the Letter of Credit Advances and (z) the Swing Line Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the Revolving Credit Facility on such Business Day. (ii) The Borrower shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day. SECTION 2.08. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: 42 (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time, payable in arrears quarterly on the first day of each January, April, July and October during such periods. (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Advance plus (y) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of a Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender (except as otherwise provided in Section 2.04(e)), payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above. SECTION 2.09. Fees. (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of the Lenders a commitment fee, from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable quarterly on the first Business Day of each January, April, July and October, commencing October 1, 1997, and on the Termination Date, at the rate per annum equal to the Applicable Percentage in effect from time to time on the average daily Unused Revolving Credit Commitment of such Lender; provided, however, (i) that any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower 43 prior to such time and (ii) that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. (b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commission, payable in arrears quarterly on the first Business Day of each January, April, July and October, commencing October 1, 1997, and on the earliest to occur of the full drawing, expiration, termination or cancellation of any such Letter of Credit and on the Termination Date, on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter at a rate per annum determined by reference to the Rating Level in effect from time to time as set forth below: ============= ================= ================ ================ Rating Debt Standby Trade Letter Level Rating Letters of of Credit Credit ------------- ----------------- ---------------- ---------------- Level 1 A-/A3 or higher 0.250% 0.175% ------------- ----------------- ---------------- ---------------- Level 2 BBB+ /Baa1 0.275% 0.200% ------------- ----------------- ---------------- ---------------- Level 3 BBB /Baa2 0.300% 0.225% ------------- ----------------- ---------------- ---------------- Level 4 BBB-/Baa3 0.425% 0.350% ------------- ----------------- ---------------- ---------------- Level 5 BB+/Ba1 or lower 0.625% 0.550% ============= ================= ================ ================ provided, that at any time that the Rating Level is Level 1, 2 or 3 and the aggregate Available Amount of Letters of Credit plus the principal amount of Advances exceeds 25% of the aggregate Commitments, the Letter of Credit fees shall be increased by 0.075% per annum. (ii) The Borrower shall pay to each Issuing Bank, for its own account, such commissions, issuance fees, fronting fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree. (c) Agent's Fees. The Borrower shall pay to each of the Agents for its own account such fees as may from time to time be agreed between the Borrower and such Agent. SECTION 2.10. Conversion of Advances. (a) Optional. The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion 44 and subject to the provisions of Sections 2.10, 2.11 and 2.12, Convert all Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c) and no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower. (b) Mandatory. (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Advances shall automatically Convert into Base Rate Advances. (ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Appropriate Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Default, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. SECTION 2.11. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost (other than in taxes, including interest, additions to tax and penalties relating thereto, except to the extent that the same are required to be paid pursuant to Section 2.14 hereof) to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances or of agreeing to issue or of issuing or maintaining Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances (excluding for purposes of this Section 2.11 any such increased costs resulting from (x) Taxes, Other Taxes, Excluded Taxes or taxes excluded from the definitions of Taxes or Other Taxes in Section 2.14(e) or from indemnification pursuant to Section 2.14(f) (as to which Section 2.14 shall govern) and 45 (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that, before making any such demand, each Lender Party agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party and provided, further, that the Borrower's obligations to any Designated Lender hereunder shall be limited as set forth in Section 8.04(e). A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party's commitment to lend or to issue Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to lend or to issue Letters of Credit hereunder or to the issuance or maintenance of any Letters of Credit, provided, however, that the Borrower's obligations to any Designated Lender hereunder shall be limited as set forth in Section 8.04(e). A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances under any Facility, Lenders (other than Designated Lenders) owed at least a majority of the then aggregate unpaid principal amount thereof notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes, Other Taxes, Excluded Taxes or taxes excluded from the definitions of Taxes or Other Taxes in Section 2.14(e) or from indemnification pursuant to Section 2.14(f) (as to which Section 2.14 shall govern) and 46 (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof) to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under any Facility will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. SECTION 2.12. Illegality. Notwithstanding any other provision of this Agreement, if any Lender (other than a Designated Lender) shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or LIBO Rate Advances or to fund or maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder, (i) each Eurodollar Rate Advance or LIBO Rate Advance, as the case may be, will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist; provided, that if it becomes unlawful for any Designated Lender or its Eurodollar Lending Office to perform its obligations hereunder to make or fund or maintain Eurodollar Rate Advances or LIBO Rate Advances, such Designated Lender shall immediately assign its rights and obligations with respect to such Advance to its applicable Designating Lender. SECTION 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes, if any, irrespective of counterclaim or set-off (except as otherwise provided in Section 2.15), not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent's Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or commitment fees ratably (other than amounts payable pursuant to Section 2.04, 2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the 47 effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Administrative Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each Lender Party ratably in accordance with such Lender Party's proportionate share of the principal amount of all outstanding Advances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender Party, and for application to such principal installments, as the Administrative Agent shall direct. (c) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under the Note, if any, held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. (d) All computations of interest, fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or commitment fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (e) Whenever any payment hereunder or under the Notes, if any, shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each 48 Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder or under any Notes shall be made, in accordance with Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, Excluded Taxes (all such non-Excluded Taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or any Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or such Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under any Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify each Lender Party and each Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender Party or such Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or such Agent (as the case may be) makes written demand therefor, including in such demand an identification of the Taxes or Other Taxes (together with the amounts thereof) with respect to which such indemnification is being sought. (d) Within 30 days after the date of any payment of Taxes, the Borrower will furnish to the Administrative Agent and the Documentation Agent, at their respective addresses referred to in Section 8.02, the original or a certified copy of a receipt evidencing payment thereof. In the case of any payment hereunder or under any Notes by or on behalf of 49 the Borrower through an account or branch outside the United States or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent and the Documentation Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each initial Lender or initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance or Designation Agreement pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower with two original Internal Revenue Service forms 1001, 4224 or W-8 as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes, if any. If any Lender Party which is not a "United States person" determines that it is unable to submit to the Borrower or the Documentation Agent any form or certificate that such Lender is otherwise required to submit pursuant to this Section 2.14, or that it is required to withdraw or cancel any such form or certificate, or that any such form or certificate previously submitted has otherwise become ineffective or inaccurate, such Lender shall promptly notify the Borrower and the Documentation Agent of such fact. In addition, if a Lender provides a form W-8 (or any successor or related form) to the Documentation Agent and the Borrower pursuant to this Section 2.14, such Lender shall also provide a certificate stating that such Lender is not a "bank" within the meaning of section 881(c)(3)(A) of the Internal Revenue Code of 1986 and shall promptly notify the Documentation Agent and the Borrower if such Lender determines that it is no longer able to provide such certification. If the form provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. Upon the 50 reasonable request of the Borrower or the Documentation Agent, each Lender Party that has not provided the forms or other documents, as provided above, on the basis of being a United States person shall submit to the Borrower and the Documentation Agent a certificate to the effect that it is such a "United States person" (as defined in Section 7701(a)(30) of the Internal Revenue Code). (f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in Section 2.14(e) (other than if such failure is due to a change in law occurring subsequent to the date on which such Lender became a Lender Party hereunder, or if such form otherwise is not required under the first sentence of subsection (e) above because the Borrower has not requested in writing such form subsequent to the date on which such Lender Party became a Lender Party hereunder), such Lender Party shall not be entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes imposed by the United States; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as the Lender Party shall reasonably request to assist the Lender Party to recover such Taxes. (g) Any Lender Party or Agent claiming any additional amounts payable pursuant to this Section 2.14 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. (h) Within 60 days after the written request of the Borrower, each Lender Party or Agent shall execute and deliver to the Borrower such certificates or forms as are reasonably requested by the Borrower in such request, which can be furnished consistent with the facts and which are reasonably necessary to assist the Borrower in applying for refunds of Taxes paid by the Borrower hereunder or making payment of Taxes hereunder; provided, however, that no Lender Party or Agent shall be required to furnish to the Borrower and financial or other information which it considers confidential. The cost of preparing any materials referred to in the previous sentence shall be borne by the Borrower. If a Lender Party or Agent determines in good faith that it has received a refund of any Taxes or Other Taxes with respect to which Borrower has made a payment of additional amounts, such Lender Party or Agent shall pay to the Borrower an amount that such Lender Party or Agent determines in good faith to be equal to the net benefit, after tax, that was obtained by such Lender Party or Agent (as the case may be) as a consequence of such refund. (i) All obligations of the Borrower owed to any Designated Lender pursuant to this Section 2.14 shall be limited to the amount that the Borrower would be 51 obligated to pay to such Designated Lender's applicable Designating Lender but for such designation, as set forth in Section 8.04(e). SECTION 2.15. Sharing of Payments, Etc. If any Lender Party shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of Obligations owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its ratable share of payments on account of the Obligations obtained by all the Lender Parties, such Lender Party shall forthwith purchase from the other Lender Parties such participations in Obligations owing to them as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each Lender Party shall be rescinded and such Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such participation. SECTION 2.16. Use of Proceeds. The proceeds of the Advances shall be available to refinance amounts outstanding under the Existing Credit Agreement, to provide working capital for the Borrower and for general corporate purposes, including commercial paper backstop, of the Borrower and its Subsidiaries. SECTION 2.17. Defaulting Lenders. (a) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower shall be required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower may, so long as no Default shall occur or be continuing at such time and to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of the Borrower to make such payment to or for the account of such Defaulting Lender against the Obligation of such Defaulting Lender to make such Defaulted Advance. In the event that, on any date, the Borrower shall so set off and otherwise apply its Obligation to make any such payment against the Obligation of such Defaulting Lender to make any such Defaulted Advance on or prior to such date, the amount so set off and otherwise applied by the Borrower shall constitute for all purposes of this Agreement and the other Loan Documents an Advance by such Defaulting Lender made on the date under the Facility pursuant to which such Defaulted Advance was originally required to have been made pursuant to Section 2.01. 52 Such Advance shall be a Base Rate Advance and shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in connection with which such Defaulted Advance was originally required to have been made pursuant to Section 2.01, even if the other Advances comprising such Borrowing shall be Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant to this subsection (a). The Borrower shall notify the Administrative Agent at any time the Borrower exercises its right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Advance required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Advance pursuant to this subsection (a). Any portion of such payment otherwise required to be made by the Borrower to or for the account of such Defaulting Lender which is paid by the Borrower, after giving effect to the amount set off and otherwise applied by the Borrower pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.17. (b) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to any Agent or any of the other Lender Parties and (iii) the Borrower shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Lender Parties and to the fullest extent permitted by applicable law, apply at such time the amount so paid by the Borrower to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Lender Parties, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent and such other Lender Parties and, if the amount of such payment made by the Borrower shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent and the other Lender Parties, in the following order of priority: (i) first, to the Agents for any Defaulted Amount then owing to the Agents; and (ii) second, to any other Lender Parties for any Defaulted Amounts then owing to such other Lender Parties, ratably in accordance with such respective Defaulted Amounts then owing to such other Lender Parties. 53 Any portion of such amount paid by the Borrower for the account of such Defaulting Lender remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b), shall be applied by the Administrative Agent as specified in subsection (c) of this Section 2.17. (c) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other Lender Party shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower or such other Lender Party shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow or the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this subsection (c) shall be deposited by the Administrative Agent in an account with the Administrative Agent, in the name and under the control of the Administrative Agent, but subject to the provisions of this subsection (c). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be the Administrative Agent's standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this subsection (c). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Lender and to pay any amount payable by such Defaulting Lender hereunder and under the other Loan Documents to any Agent or any other Lender Party, as and when such Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority: (i) first, to the Agents for any amount then due and payable by such Defaulting Lender to the Agents hereunder; (ii) second, to any other Lender Parties for any amount then due and payable by such Defaulting Lender to such other Lender Parties hereunder, ratably in accordance with such respective amounts then due and payable to such other Lender Parties; and (iii) third, to the Borrower for any Advance then required to be made by such Defaulting Lender pursuant to a Commitment of such Defaulting Lender. 54 In the event that any Lender Party that is a Defaulting Lender shall, at any time, cease to be a Defaulting Lender, any funds held by the Administrative Agent in escrow at such time with respect to such Lender Party shall be distributed by the Administrative Agent to such Lender Party and applied by such Lender Party to the Obligations owing to such Lender Party at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time. (d) The rights and remedies against a Defaulting Lender under this Section 2.17 are in addition to other rights and remedies that the Borrower may have against such Defaulting Lender with respect to any Defaulted Advance and that any Agent or any Lender Party may have against such Defaulting Lender with respect to any Defaulted Amount. SECTION 2.18. Evidence of Debt . (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Revolving Credit Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a promissory note in the form of Exhibit A-2 hereto (each a "Revolving Credit Note"), payable to the order of such Lender in a principal amount equal to the Revolving Credit Commitment of such Lender. (b) The Register maintained by the Administrative Agent pursuant to Section 8.07(g) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender's share thereof. (c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such 55 Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) The Lender Parties shall be satisfied that all obligations of the Borrower under the Existing Credit Agreement, whether for principal, interest, fees, expenses or otherwise, have been or, concurrently with the making of the initial Borrowing, will be paid in full in cash and all "Commitments" (as defined therein) terminated. (b) There shall have occurred no Material Adverse Change since January 4, 1997 and all information provided by or on behalf of the Borrower to the Lenders prior to the delivery of their commitments shall be true and correct in all material aspects. (c) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect, all applicable waiting periods shall have expired without any action being taken by any competent authority and no law or regulation shall be applicable in the reasonable judgment of the Lender Parties that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (d) The Borrower shall have paid all accrued and invoiced fees and expenses of the Managing Agents and the Lender Parties (including the accrued and invoiced fees and expenses of counsel to the Agents). (e) On the Effective Date, the following statements shall be true and the Documentation Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that: (i) The representations and warranties contained in each Loan Document are correct on and as of the Effective Date, and 56 (ii) No event has occurred and is continuing that constitutes a Default. (f) The Documentation Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Documentation Agent and in sufficient copies for each Lender Party: (i) A guaranty in substantially the form of Exhibit F (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Group Guaranty"), duly executed by Group. (ii) A guaranty in substantially the form of Exhibit G (together with each other guaranty delivered pursuant to Section 5.01(k), in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Subsidiary Guaranty"), duly executed by the Guarantors (other than Group). (iii) Certified copies of the resolutions of the Board of Directors of the Borrower and each other Loan Party approving this Agreement and each other Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and each other Loan Document. (iv) A certificate of the Secretary or an Assistant Secretary of the Borrower and each other Loan Party certifying the names and true signatures of the officers of the Borrower and such other Loan Party authorized to sign this Agreement, each other Loan Document to which they are or are to be parties and the other documents to be delivered hereunder and thereunder. (v) A favorable opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Loan Parties, in substantially the form of Exhibit E-1 hereto and as to such other matters as any Lender Party through the Managing Agents may reasonably request. (vi) A favorable opinion of Stanley P. Silverstein, General Counsel for the Borrower, in substantially the form of Exhibit E-2 hereto and as to such other matters as any Lender Party through the Managing Agents may reasonably request. 57 (vi) A favorable opinion of Shearman & Sterling, counsel for the Managing Agents, in form and substance satisfactory to the Managing Agents. SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance. The obligation of each Appropriate Lender to make an Advance (other than a Letter of Credit Advance and other than a Swing Line Advance made by a Revolving Credit Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), and the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) and the right of the Borrower to request a Swing Line Borrowing, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance: (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing or Notice of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or of such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct in all material respects on and as of the date of such Borrowing or issuance, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing or issuance, in which case such representations and warranties shall be correct as of such specific date, and (ii) no event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and (b) the Documentation Agent shall have received such other approvals or documents, if any, as any Appropriate Lender through the Documentation Agent may reasonably request. SECTION 3.03. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Documentation Agent responsible for the transactions contemplated by Loan Documents shall have received notice from such Lender Party prior to the date that the Borrower, by notice to the Lenders, designates as the proposed 58 Effective Date, specifying its objection thereto. The Administrative Agent shall promptly notify the Lender Parties of the occurrence of the Effective Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. Each of Group and the Borrower represents and warrants as follows: (a) Each Loan Party (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) whether or not such Subsidiary is a wholly-owned Subsidiary. Each such Subsidiary (i) is a corporation duly organized or a limited liability corporation duly formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) The execution, delivery and performance by each Loan Party of this Agreement and each other Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated hereby, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or by-laws, (ii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or 59 (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which is or would be reasonably likely to have a Material Adverse Effect. (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance by any Loan Party of this Agreement or any other Loan Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby. (e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law). (f) (i) The Consolidated balance sheets of Group and its Subsidiaries as at January 4, 1997, and the related Consolidated statements of operations, stockholders' equity and cash flow of Group and its Subsidiaries for the fiscal years then ended, accompanied by an opinion of Price Waterhouse, independent public accountants, and the Consolidated balance sheet of Group and its Subsidiaries as at April 5, 1997, and the related Consolidated statements of operations, stockholders' equity and cash flow of Group and its Subsidiaries for the six months then ended, duly certified by the chief financial officer of Group, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at April 5, 1997, and said statements of operations, stockholders' equity and cash flow for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of Group and its Subsidiaries as at such dates and the Consolidated results of the operations of Group and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and (ii) since January 4, 1997, there has been no Material Adverse Change. (g) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, 60 pending or threatened before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby or (ii) is or would be reasonably likely to have a Material Adverse Effect. (h) No proceeds of any Advance will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (other than (i) shares of capital stock of Group and (ii) to the extent applicable, in connection with an acquisition of a company, so long as (x) the board of directors of such company shall have approved such acquisition at the time such acquisition is first publicly announced, (y) if such company shall have been soliciting bids for its acquisition, the board of directors of such company shall not have determined either to accept no offer or to accept an offer other than the offer of Group or one of its Subsidiaries or (z) if such company shall not have been soliciting bids for its acquisition or if the board of directors of such company shall have solicited bids for its acquisition but shall have initially determined either to accept no offer or to accept an offer other than the offer of Group or one of its Subsidiaries, the existence, amount and availability for the acquisition of such company of the Commitments hereunder shall not have been disclosed, orally or in writing, to such company or its advisors; provided, that the public filing of this Agreement shall not be deemed to be disclosure of the Commitments hereunder to such company or its advisors, until after such time as the board of directors of such company shall have approved such acquisition by Group or one of its Subsidiaries and so long as, in any case, such acquisition is otherwise permitted hereunder). (i) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock except for shares of capital stock of Group and as otherwise permitted in Sections 4.01(h). (j) Neither any Loan Party nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. 61 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Group and the Borrower will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, except where the failure so to comply would not have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, would reasonably be likely to by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors so long as any such amount, when taken together with any amount required to be paid as described in clause (b) of the definition of "Permitted Liens", shall not exceed $10 million. (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises; provided, however, that Group and its Subsidiaries may consummate any merger, consolidation or voluntary dissolution or liquidation permitted under Section 5.02(b). (e) Visitation Rights. At any reasonable time and from time to time, permit any Agent or any of the Lender Parties or any agents or representatives thereof, upon 62 reasonable notice to the Borrower to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, (i) other than with respect to transactions between the Borrower and its wholly owned Subsidiaries, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate and (ii) with respect to transactions between the Borrower and its wholly owned Subsidiaries, all transactions otherwise permitted under the Loan Documents on terms that are no less favorable to the Borrower than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate, provided, however, that the foregoing restrictions shall not apply to transactions pursuant to any agreement referred to in Section 5.02(a)(ii) and provided, further, that the Borrower shall not engage in any transaction with any such Subsidiary that would render such Subsidiary insolvent or cause a default under, or a breach of, any material contract to which such Subsidiary is a party. (i) Implied Senior Rating. So long as no Public Debt Rating is in effect, no less frequently than once during every Fiscal Year, obtain from S&P (or, if unavailable, from Moody's) an update of the Implied Senior Rating and deliver a letter to the Managing Agents from S&P (or Moody's, as the case may be) advising the Managing Agents of the current Implied Senior Rating. (j) Reporting Requirements. Furnish to the Lenders (and for purposes hereof, any Designated Lender shall be deemed to have received the following information from its Designating Lender): 63 (i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated and consolidating balance sheets of Group and its Subsidiaries as of the end of such quarter and Consolidated and consolidating statements of income and Consolidated statements of cash flows of Group and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with generally accepted accounting principles and a certificate of the chief financial officer of Group as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (ii) as soon as available and in any event within 90 days after the end of each Fiscal Year of Group, a copy of the annual audit report for such year for Group and its Subsidiaries, containing Consolidated balance sheet of Group and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Lenders by any Approved Accounting Firm or by other independent public accountants acceptable to the Required Lenders, and a certificate of the chief financial officer or Group as to compliance with the terms of this Agreement setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03 provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.03, a statement of reconciliation conforming such financial statements to GAAP; (iii) as soon as possible and in any event within two Business Days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all 64 reports that the Borrower sends to any of its securityholders generally, and copies of all reports and registration statements that Group or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (v) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(g); (vi) so long as no Public Debt Rating is then in effect, within five Business Days after receipt thereof by any Loan Party, copies of each notice from S&P (or Moody's, if S&P has ceased to provide Implied Senior Ratings) indicating any change in the Implied Senior Rating; and (vii) such other information respecting the Borrower or any of its Subsidiaries as any Lender Party through the Managing Agents may from time to time reasonably request. (k) Covenant To Guarantee Obligations. At such time as any new direct or indirect Domestic Subsidiary is formed or acquired, cause such new Subsidiary that is a wholly owned Subsidiary to (i) within 30 days thereafter or such later time as the Borrower and the Documentation Agent shall agree (but in any event no later than 30 additional days thereafter), duly execute and deliver to the Documentation Agent guarantees, in substantially the form of Exhibit G and otherwise in form and substance reasonably satisfactory to the Documentation Agent, guaranteeing the Borrower's Obligations under the Loan Documents, provided, however, that the foregoing shall not apply to (A) joint ventures or (B) any Subsidiary organized solely for the purpose of entering into any agreements and transactions referred to in Section 5.02(a)(ii) to the extent that such agreements require that such Subsidiary not be a Guarantor hereunder, and (ii) within 30 days thereafter or such later time as the Borrower and the Documentation Agent shall agree (but in any event no later than 30 additional days thereafter), deliver to the Documentation Agent a signed copy of a favorable opinion, addressed to the Documentation Agent, of counsel for the Loan Parties acceptable to the Documentation Agent as to the documents contained in clause (i) above, as to such guarantees being legal, valid and binding obligations of such Domestic Subsidiaries enforceable in accordance with their terms and as to such other matters as the Documentation Agent may reasonably request. SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, neither Group nor the Borrower will at any time: 65 (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, other than: (i) Permitted Liens, (ii) Liens on receivables of any kind (and in property securing or otherwise supporting such receivables) in connection with agreements for limited recourse sales or financings by the Borrower or any of its Subsidiaries for cash of such receivables or interests therein, provided that (A) any such agreement is of a type and on terms customary for comparable transactions in the good faith judgment of the Board of Directors of the Borrower, (B) such agreement does not create any interest in any asset other than receivables (and property securing or otherwise supporting such receivables) and proceeds of the foregoing, and (C) in the case of sales or financings of receivables to Persons other than Group, the Borrower or any of their Domestic Subsidiaries, on any date of determination, the aggregate face value of such receivables shall not exceed at any time outstanding $150,000,000, (iii) other Liens securing Debt, including Liens incurred pursuant to subsection (v) below, in an aggregate principal amount outstanding at any time not to exceed 20% of Consolidated Tangible Assets of Group and its Subsidiaries at such time, (iv) Liens arising from covenants by the Borrower or its Subsidiaries to grant security interests in the assets of Warnaco of Canada Limited or its Subsidiaries (the "Canadian Subsidiaries") to secure Debt of the Canadian Subsidiaries in the event that the Lenders hereunder are granted Liens by Group or its Subsidiaries in their respective assets to secure the Obligations under the Loan Documents, and (v) Liens on Margin Stock. (b) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so or to voluntarily liquidate, except that (i) any Domestic Subsidiary of Group may merge into or consolidate with any other Domestic Subsidiary of Group, provided that the person formed thereby shall be a direct or indirect wholly owned Domestic Subsidiary of Group, (ii) any Foreign Subsidiary of Group may merge into or consolidate with any other Foreign Subsidiary of Group, provided that the Person formed thereby shall be a 66 direct or indirect wholly owned Foreign Subsidiary of Group, (iii) any Domestic Subsidiary of Group may merge into or consolidate with Group, (iv) the Borrower may merge into or consolidate with any other Person so long as the Borrower is the surviving corporation and (v) any Subsidiary of Group may voluntarily liquidate and distribute its assets to Group or any direct or indirect wholly owned Domestic Subsidiary of Group, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (c) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other than: (i) Debt under the Loan Documents; (ii) Debt secured by Liens permitted by Section 5.02(a)(iii) hereof; (iii) Debt incurred on terms customary for comparable transactions in the good faith judgment of the Board of Directors of the Borrower in connection with any obligation under or resulting from any agreement referred to in Section 5.02(a)(ii); (iv) Debt of Foreign Subsidiaries (and, without duplication, guarantees thereof) for general corporate purposes (other than acquisitions) not to exceed an aggregate of $125,000,000 outstanding at any time; (v) unsecured Debt (other than letters of credit) of the Borrower, Group or any Domestic Subsidiary that is a Guarantor; (vi) Debt under the Trade Credit Facility in an aggregate principal amount not to exceed $300,000,000 at any time outstanding; (vii) Debt secured by Liens permitted by Section 5.02(a)(i) hereof; (viii) in the case of any of its Subsidiaries, Debt owing to Group or to any of its Subsidiaries; and (ix) Debt of Group or any of its Subsidiaries in an aggregate amount not to exceed $250,000,000 for purposes of Section 5.02(e)(i). No incurrence of Debt shall be permitted unless the Borrower shall be in compliance with each of the covenants set forth in Section 5.03 both before and after giving effect thereto. 67 (d) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except: (i) sales of inventory in the ordinary course of its business; (ii) sales, leases, transfers or other disposals of assets, or grants of any option or other right to purchase, lease or otherwise acquire assets, following the Effective Date for fair value (valued at the time of any such sale, lease, transfer or other disposal), in an aggregate amount from the Effective Date not to exceed 15% of the Consolidated total assets of the Borrower and its Subsidiaries as valued at January 4, 1997, and the fair value of such assets shall have been determined in good faith by the Board of Directors of the Borrower; (iii) sales of assets on terms customary for comparable transactions in the good faith judgment of the Board of Directors of the Borrower pursuant to agreements referred to in Section 5.02(a)(ii); (iv) transfers of assets between Group and its Subsidiaries, and, in the case of the Borrower, subject to Section 5.02(f)(ii); (v) sales of assets listed on Schedule 5.02(d) hereto; (vi) sales of assets and properties of Group and its Subsidiaries in connection with sale-leaseback transactions otherwise permitted hereunder (including, without limitation, under Section 5.02(c)); (vii) the sale or discount of accounts (A) owing by Persons incorporated, residing or having their principal place of business in the United States in an aggregate amount not exceeding $10,000,000 in face amount per calendar year or (B) that are past due by more than 90 days, provided that the sale or discount of such accounts is in the ordinary course of the Borrower's business and consistent with prudent business practices; (viii) the licensing of trademarks and trade names by the Borrower or any of its Subsidiaries in the ordinary course of its business, provided that such licensing takes place on an arm's-length basis; 68 (ix) the rental by the Borrower and its Subsidiaries, as lessors, in the ordinary course of their respective businesses, on an arm's-length basis, of real property and personal property, in each case under leases (other than Capitalized Leases); and (x) sales of Margin Stock for fair value as determined in good faith by the Board of Directors of the Borrower. (e) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than: (i) Investments by Group or its wholly owned Subsidiaries in Persons or assets located outside the United States in a net aggregate amount (after giving effect to any dividends or other returns of capital received from any such Investments) invested from the date hereof not to exceed $250,000,000; (ii) Investments by Group or its wholly owned Subsidiaries in Persons or assets located in the United States; (iii) the Guaranties; (iv) Investments in Cash Equivalents; (v) other Investments in a net aggregate amount (after giving effect to any dividends or other returns of capital) invested from the date hereof not to exceed $55,000,000; (vi) endorsement of negotiable instruments for deposit or collection in the ordinary course of business; (vii) Investments representing stock or obligations issued to Group or any of its Subsidiaries in settlement of claims against any other Person by reason of a composition or readjustment of debt or a reorganization of any debtor of Group or such Subsidiary; (viii) Investments representing the Debt of any Person owing as a result of the sale by Group or any of its Subsidiaries in the ordinary course of business of products or services (on customary trade terms); 69 (ix) loans or advances, not to exceed $15,000,000 in the aggregate at any one time outstanding, to (A) employees of the Borrower and its Subsidiaries as travel advances, short-term loans or relocation expenses, and (B) to employees and independent sales representatives as commission advances; (x) Investments outstanding on the date hereof, but not any additional investments therein; (xi) Investments represented by the L/C Cash Collateral Account and the other bank accounts permitted hereunder; (xii) Investments made with the capital stock of Group or any of its Subsidiaries or with the proceeds of any Capital Stock Issuance by Group; and (xiii) Investments otherwise permitted under Section 5.02(c). (f) Nature of Business. (i) Make, or permit any of its Subsidiaries to make, (A) except as otherwise permitted pursuant to subsection (B) below, any change in the nature of its business as carried on at the date hereof in a manner materially adverse to the Agents and the Lender Parties or (B) any investments including, without limitation, Investments (except as permitted pursuant to Section 5.02(e)(v)) other than in apparel manufacturing or wholesaling businesses or apparel accessories manufacturing or wholesaling businesses or in related retail businesses, provided that on an annual basis, at least 51% of the revenue of Group and its Subsidiaries on a Consolidated basis is derived from apparel manufacturing or wholesaling businesses or apparel accessories manufacturing or wholesaling businesses, or (ii) transfer, in aggregate from the Effective Date, from the Borrower to Group or to any of the Subsidiaries of Group other than the Borrower operating assets (valued at the time of any such transfer) in excess of 20% of the Consolidated total assets of Group and its Subsidiaries as valued at January 4, 1997, provided, however, that the limitation of this clause (ii) shall not apply to mergers, consolidations or liquidations permitted under Section 5.02(b). (g) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies (except as required or permitted by the Financial Accounting Standards Board or generally accepted accounting principles), reporting practices or Fiscal Year. SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, Group and the Borrower will: 70 (a) Leverage Ratio. Maintain, as of the end of each Fiscal Quarter, a ratio of Total Debt to the sum of Total Debt plus Net Worth of not greater than 0.55:1.00 provided, that for the purposes of calculating Net Worth, the amount of the one time, nonrecurring charge during the Fiscal Year ended January 1997 in an amount of $88,804,000 shall be added thereto. (b) Coverage Ratio. Maintain, as of the end of each period of four consecutive Fiscal Quarters, a ratio of Consolidated EBITDA of Group and its Subsidiaries for any four consecutive Fiscal Quarter period to Consolidated Interest Expense of Group and its Subsidiaries for such period of not less than 3.00:1.00. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable; or the Borrower or any other Loan Party shall fail to pay any interest on any Advance or make any other payment of fees or other amounts payable under any Loan Document within three Business Days after the same becomes due and payable; or (b) Any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) (i) Group or the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d) or (k), 5.02 or 5.03, or (ii) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days (A) after written notice thereof shall have been given to the Borrower by any Agent or any Lender or (B) after any officer of the Borrower obtains knowledge thereof; or (d) Any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt under the Trade Credit Facility or other Debt that is outstanding in a principal or notional amount of at least $20,000,000 in the aggregate (but excluding Debt outstanding hereunder) of such Loan Party or such 71 Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption or other than as a result of any event which provides cash to such Loan Party in an amount sufficient to satisfy such redemption or prepayment), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) Group, the Borrower or any of their Material Subsidiaries (or any group of Subsidiaries which, in the aggregate, would constitute a Material Subsidiary) shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Group, the Borrower or any of their Subsidiaries (or any group of Subsidiaries which, in the aggregate, would constitute a Material Subsidiary) seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or such Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $20,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal 72 or otherwise, shall not be in effect unless the payment of such judgment or order is covered by insurance and such insurance coverage is not in dispute. (g) Any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could be reasonably expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) any provision of any Loan Document, after delivery thereof pursuant to Section 3.01 or 5.01(k), shall for any reason cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or (i) (A) Group shall at any time cease to have legal and beneficial ownership of 100% of the capital stock of the Borrower (except if such parties shall merge); or (B) any Person, or two or more Persons acting in concert, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Group (or other securities convertible into such Voting Stock) representing 25% or more of the combined voting power of all Voting Stock of Group (other than Excluded Persons); or (C) any Person, or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, the power to exercise, directly or indirectly, a controlling influence over the management or policies of Group, or control over Voting Stock of Group (or other securities convertible into such securities) representing 25% or more of combined voting power of all Voting Stock of Group (other than Excluded Persons); or (D) Linda J. Wachner (or, in the case of her death or disability, another officer or officers of comparable experience and ability selected by the Borrower within 180 days thereafter after consultation with the Managing Agents) shall cease to be Chairman and Chief Executive Officer of Group and the Borrower); or (j) Any Loan Party or any of its ERISA Affiliates shall incur, or shall be reasonably likely to incur, liability in excess of $20,000,000 in the aggregate as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of such Loan Party or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; then, and in any such event, the Managing Agents (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each 73 Appropriate Lender to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and (B) by notice to each party required under the terms of any agreement in support of which a Standby Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party or any of its Material Subsidiaries (or any group of Subsidiaries which, in the aggregate, would constitute a Material Subsidiary) under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances (other than Letter of Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. SECTION 6.02. Actions in Respect of the Letters of Credit upon Default . If any Event of Default shall have occurred and be continuing, the Managing Agents may, or shall at the request of the Required Lenders, irrespective of whether they are taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Managing Agents determine that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Agents and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Managing Agents, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Managing Agents determine to be free and clear of any such right and claim. 74 ARTICLE VII THE AGENTS SECTION 7.01. Authorization and Action. Each Lender Party hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Notes, if any), each Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Agents' Reliance, Etc. None of the Agents nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement and the other Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (i) may treat the payee of any Note as the holder thereof until the Documentation Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement and the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement and the other Loan Documents on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party (v) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of or the other Loan Documents or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or 75 other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Scotiabank, Citibank and Affiliates. With respect to its Commitment, the Advances made by it and any Notes issued to it, each of Scotiabank and Citibank shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not an Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include Scotiabank and Citibank in their individual capacities. Each of Scotiabank and Citibank and their Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if Scotiabank and Citibank were not Agents and without any duty to account therefor to the Lender Parties. SECTION 7.04. Lender Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. Each Lender Party (other than the Designated Lenders which have only Competitive Bid Advances outstanding) agrees to indemnify each Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances then owed to each of them (or if no Advances are at the time outstanding or if any Advances are owed to Persons that are not Lenders, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by such Agent under this Agreement or the other Loan Documents, provided that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct; and provided, further, that no Designated Lender shall be liable for any payment under this Section 7.05 so long as, and to the extent that, its Designating Lender makes such payments on its behalf. The Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with the Designating Lender in connection with the Designated Lender's rights 76 and obligations under this Agreement. Without limitation of the foregoing, each Lender Party (other than the Designated Lenders which have only Competitive Bid Advances outstanding) agrees to reimburse each Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Agent 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 rights or responsibilities under, this Agreement and the other Loan Documents, to the extent that such Agent is not reimbursed for such expenses by the Borrower. SECTION 7.06. Successor Agents. Any Agent may resign at any time by giving written notice thereof to the Lender Parties and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent with the approval of the Borrower. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 77 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Lenders and other than any Lender Party which is, at such time, a Defaulting Lender), do any of the following at any time: (i) waive any of the conditions specified in Section 3.01 or, in the case of the initial Borrowing, Section 3.02, (ii) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (iii) release any Material Guarantor, or (vi) amend this Section 8.01, (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender affected by such amendment, waiver or consent (other than the Designated Lenders and other than any Lender which is, at such time, a Defaulting Lender), (i) reduce the principal of, or interest on, the Advances owed to such Lender or any fees or other amounts payable hereunder to such Lender or (ii) postpone any date fixed for any payment of principal of, or interest on, the Advances owed to such Lender or any fees or other amounts payable hereunder to such Lender and (c) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and, for each Facility directly affected by such amendment, waiver or consent, each Lender that has a Commitment under such Facility (other than the Designated Lenders and other than any Lender which is, at such time, a Defaulting Lender), increase the Commitments of such Lender or subject such Lender to any additional obligations; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or any Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of such Issuing Bank, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Agent under this Agreement. Each Designating Lender shall act as its Designated Lender's agent and attorney in fact and exercise on behalf of its Designated Lender all rights, if any, to vote and to grant and make approvals, waivers, consents or waivers in accordance with this Section 8.01. The Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with the Designating Lender in connection with the Designated Lender's rights and obligations under this Agreement. Any request by any Loan Party for an amendment or waiver of any provision of any Loan Document shall be made by such Loan Party by giving a written request therefor to the Documentation Agent. 78 SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy, telex or cable communication) and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to the Borrower, at its address at 90 Park Avenue, New York, New York 10016, Attention: Chief Financial Officer, with a copy to General Counsel; if to any Initial Lender or initial Issuing Bank or Agent, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to an Agent pursuant to Article II, III or VII shall not be effective until received by such Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender Party or Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) Group and the Borrower agree to pay on demand (i) all reasonable costs and expenses (other than taxes, including interest, additions to tax and penalties relating thereto, except to the extent that the same are required to be paid pursuant to Section 2.14 hereof) of the Agents in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and all other out-of-pocket expenses and (B) the reasonable fees and expenses of counsel for the Agents with respect thereto, with respect to advising the Agents as to their respective rights and responsibilities, or the protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally, and any proceeding ancillary thereto) and (ii) all reasonable costs and expenses (other than 79 taxes, including interest, additions to tax and penalties relating thereto, except to the extent that the same are required to be paid pursuant to Section 2.14 hereof) of the Agents and the Lender Parties in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Agents and each Lender Party with respect thereto). (b) Group and the Borrower agree to indemnify and hold harmless each of the Agents and each Lender (other than any Designated Lender to the extent such indemnification obligation exceeds that which the Borrower would owe to its Designating Lender) and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel, but other than taxes, including interest, additions to tax and penalties relating thereto, except to the extent that the same are required to be paid pursuant to Section 2.14 hereof) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) this Agreement, the Facilities, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, in each case whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. The Borrower also agrees not to assert any claim against any Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances, except in the event of gross negligence or willful misconduct on the part of such Agent, Lender or Affiliate. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.11, 2.12 or 2.14, acceleration of the maturity of the Advances pursuant to Section 6.01 or for any other reason, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the 80 Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits and taxes, including interest, additions to tax and penalties relating thereto, except to the extent that the same are required to be paid pursuant to Section 2.14 hereof), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance; provided, however, that notwithstanding any of the foregoing, the Borrower shall not be required to compensate any Designated Lender for any losses, costs or expenses to the extent such amounts exceed that which the Borrower would owe to its Designating Lender, but for such designation. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 8.04 and the agreements and obligations of any Lender Party or Agent contained in Section 2.14 shall survive the payment in full of principal, interest and all other amounts payable hereunder. (e) Notwithstanding anything to the contrary, neither the designation of any Designated Lender, any Advance made by any Designated Lender, nor any other condition or circumstance relating to any Designated Lender shall increase (i) any obligations or liabilities of the Borrower hereunder, including, without limitation, pursuant to Section 2.11, 2.12, 2.14 or this Section 8.04, or (ii) any obligations or liabilities of the Borrower under any Loan Documents, in each case, as compared with any obligations or liabilities which would arise if the Designating Lender were the Lender for all purposes and had not otherwise appointed a Designated Lender. SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Managing Agents to declare the Advances due and payable pursuant to the provisions of Section 6.01, each Lender Party and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender Party or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, whether or not such Lender Party shall have made any demand under this Agreement or such Note, if any, and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender Party and its Affiliates under this Section are in addition to other 81 rights and remedies (including, without limitation, other rights of set-off) that such Lender Party and its Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower, Group and the Agents and when the Managing Agents shall have been notified by each Initial Lender and initial Issuing Bank that such Initial Lender and initial Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agents and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. SECTION 8.07. Assignments, Designations and Participations (a) Each Lender Party (other than any Designated Lender except for an assignments to its Designating Lender) may assign, and, if (i) demanded by the Borrower following either (x) a payment by the Borrower of Taxes with respect to such Lender in accordance with Section 2.14 or (y) the occurrence of an event that would, upon payment to such Lender of amounts hereunder, require a payment by the Borrower of Taxes with respect to such Lender in accordance with Section 2.14 and (ii) upon at least 30 Business Days' notice to such Lender and the Administrative Agent, will assign, to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it (including accrued interest) and any Revolving Credit Note held by it but not including any right to make Competitive Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes); provided, however, that (A) each such assignment shall be of a fixed percentage of all rights and obligations under and in respect of all of the Facilities under which it has a Commitment; (B) except in the case of (x) an assignment to a Person that, immediately prior to such assignment, was a Lender, (y) an assignment to an Affiliate of the assigning Lender (including an assignment by a Designated Lender to its Designating Lender) or (z) an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000, and the amount of the Commitment of the assigning Lender being retained by such Lender immediately after giving effect to such assignment (determined as of the effective date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000, (C) each such assignment shall be to an Eligible Assignee, (D) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Managing Agents and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently 82 with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (E) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, (F) no such assignments will be permitted without the consent of the Managing Agents until the Managing Agents shall have notified the Lender Parties that syndication of the Commitments thereunder has been completed, and (G) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Revolving Credit Note subject to such assignment and a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender Party's hereunder and (y) the Lender Party's assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender Party's rights and obligations under this Agreement, such Lender Party shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender Party assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other or any other Loan Document or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the any Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate 83 at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v)such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the each Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender Party. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee representing that it is an Eligible Assignee, together with any Revolving Credit Note subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (d) Any Lender (other than a Designated Lender) may at any time designate not more than one Designated Lender to fund Revolving Credit Advances and/or Competitive Bid Advances on behalf of such Designating Lender subject to the terms of this Section 8.07(d). Such designation may occur by execution by such parties of a Designation Agreement. The parties to each such designation shall execute and deliver to the Administrative Agent and the Borrower for their acceptance a Designation Agreement. Upon receipt of an appropriately completed Designation Agreement executed by a Designating Lender and a designee representing that it is a Designated Lender and consented by the Borrower, the Administrative Agent will accept such Designation Agreement and will give prompt notice thereof to the Borrower and the other Lenders, whereupon, (i) upon the written request of the Designating Lender, the Borrower shall execute and deliver to the Designating Lender a Revolving Credit Note and/or from time to time a Competitive Bid Note, as applicable, in each case payable to the order of the Designated Lender, (ii) from and after the effective date specified in the Designation Agreement, the Designated Lender shall become a party to this Agreement with a right to make Revolving Credit Advances and/or Competitive Bid Advances on behalf of its Designating Lender pursuant to Sections 2.01(a) and 2.04, respectively, and (iii) the Designated Lender shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Lender which is not otherwise required to repay obligations of such Designated Lender which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Lender, the Designating Lender (i) shall be and remain obligated to the Borrower, the Agents and the Lender Parties for each and every of the obligations of the Designating Lender and its related Designated Lender with respect to this Agreement, including, without limitation, any indemnification obligations under Section 7.05 hereof and any sums otherwise payable to the Borrower by the Designated Lender and (ii) neither the designation of a 84 Designated Lender, the election or other determination that a Designated Lender will make any Advance nor any other condition or circumstance relating to the Designated Lender shall in any way release, diminish or otherwise affect the relevant Designating Lender's Commitment or any other of its obligations hereunder or under any other Loan Document or any rights of the Borrower, any Agent or any Lender with respect to such Designating Lender. The Borrower, the Agents and the Lender Parties may, at their option, pursue remedies against any Designating Lender which arise out of any failure of its Designated Lender to perform such Designated Lender's obligations under this Agreement or any other Loan Document. Each Designating Lender shall serve as the administrative agent and attorney in fact for its Designated Lender and shall on behalf of its Designated Lender: (i) receive any and all payments made for the benefit of such Designated Lender and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, consents and amendments under or relating to this Agreement and the other Loan Documents to the extent, if any, such Designated Lender shall have any rights hereunder or thereunder. To the extent a Designated Lender shall have the right to receive or give any such notice, communication, vote, approval, waiver, consent or amendment, it shall be signed by its Designating Lender as administrative agent and attorney in fact for such Designated Lender and need not be signed by such Designated Lender on his own behalf. The Borrower, the Agents and the Lender Parties may rely thereon without any requirement that the Designated Lender sign or acknowledge the same. Notwithstanding anything to the contrary contained herein, no Designated Lender may assign or transfer all or any portion of its interest hereunder or under any other Loan Document, other than via an assignment to its Designating Lender in accordance with the provisions of this Section 8.07. (e) By executing and delivering a Designation Agreement, the Lender Party making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Designation Agreement; (iv) such designee will, independently and without reliance upon any Agent, such designating Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own 85 credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Lender; (vi) such designee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to such Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender Party. (f) Upon its receipt of a Designation Agreement executed by a designating Lender Party and a designee representing that it is a Designated Lender, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit D hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (g) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance and each Designation Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and, with respect to Lenders other than Designated Lenders, the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (h) Each Lender Party may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it); provided, however, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any Note issued to it for all purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would (i) reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, (ii) postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts 86 payable hereunder, in each case to the extent subject to such participation or (iii) release any Material Guarantor. (i) Any Lender Party may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender Party. (j) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500. (k) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (l) Each of the Borrower, the Lenders and the Agents agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender. Notwithstanding the foregoing, the Designating Lender unconditionally agrees to indemnify the Borrower, the Agents and each Lender Party against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be incurred by or asserted against the Borrower, such Agent or such Lender Party, as the case may be, in any way relating to or arising as a 87 consequence of any such forbearance or delay in the initiation of any such proceeding against its Designated Lender. SECTION 8.08. Confidentiality. None of the Agents nor any Lender Party shall disclose any Confidential Information to any other Person without the consent of Group and the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 8.07(i), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to Group or the Borrower received by it from such Lender Party and (d) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. SECTION 8.09. No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i)such Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 88 SECTION 8.11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.12. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the Agents and the Lender Parties hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of any Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WARNACO INC. By /s/ WILLIAM S. FINKELSTEIN _______________________________ Title: Senior Vice President and Chief Financial Officer THE WARNACO GROUP, INC. By /s/ WILLIAM S. FINKELSTEIN _______________________________ Title: Senior Vice President and Chief Financial Officer THE BANK OF NOVA SCOTIA as Managing Agent, Administrative Agent, Competitive Bid Agent, Swing Line Bank and an Issuing Bank By /s/ JOHN HOPMANS _______________________________ Title: CITIBANK, N.A. as Managing Agent and Documentation Agent By /s/ ROBERT D. WETRUN _______________________________ Title: Attorney-in-Fact Initial Lenders UNION BANK OF CALIFORNIA, N.A. By /s/ CARY MOORE _______________________________ Title: Vice President THE BANK OF NEW YORK By /s/ ELIZA S. ADAMS _______________________________ Title: Vice President THE BANK OF NOVA SCOTIA By /s/ JOHN HOPMANS _______________________________ Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ G. STEWART _______________________________ Title: BANKBOSTON, N.A. By /s/ NANCY FULLER _______________________________ Title: Director CITIBANK, N.A. By /s/ ROBERT D. WETRUN _______________________________ Title: Attorney-in-Fact COMMERZBANK A.G., NEW YORK BRANCH By /s/ ROBERT DONOHUE _______________________________ Title: Vice President By /s/ PETER DOYLE ------------------------------- Title: Assistant Treasurer CORESTATES BANK, N.A. By /s/ IRENE ROSEN MARTES _______________________________ Title: Vice President CREDITO ITALIANO BANK By /s/ SAIYED A. ABBAS ------------------------------- Title: Assistant Vice President By /s/ PIERLUIGI MAINARDI ------------------------------- Title: Assistant Vice President DAI-ICHI KANGYO BANK, LIMITED By /s/ THOMAS K. FENNESSEY _______________________________ Title: Assistant Vice President FIRST UNION NATIONAL BANK By /s/ WILLIAM JOHNSON _______________________________ Title: Vice President FLEET BANK, N.A. By /s/ ELIZABETH ALLEN _______________________________ Title: Vice President THE FUJI BANK, LIMITED, NEW YORK BRANCH By /s/ RAYMOND VENTURA _______________________________ Title: Vice President & Manager THE INDUSTRIAL BANK OF JAPAN, LTD., NEW YORK BRANCH By /s/ JEFFREY COLE _______________________________ Title: Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION By /s/ PEGGY ERLENKOTTER ________________________________ Title: Duly Authorized Signatory KREDIETBANK N.V. By /s/ ARMEN KAROZICHIAN _______________________________ Title: Vice President MARINE MIDLAND BANK By /s/ PAUL J. DECHAGAS _______________________________ Title: Vice President MERITA BANK LTD - NEW YORK BRANCH By _______________________________ Title: Vice President By _______________________________ Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ JAMES E. CONDON _______________________________ Title: Vice President NATIONSBANK, N.A. By /s/ JOSEPH R. NETZEL _______________________________ Title: Vice President THE SANWA BANK, LIMITED, NEW YORK BRANCH By /s/ PAUL E. JUDICKE _______________________________ Title: Vice President SOCIETE GENERALE By /s/ SEDARE CORADIN _______________________________ Title: Vice President WACHOVIA BANK, N.A. By /s/ J. BARWIS _______________________________ Title: Vice President EX-10 6 EXHIBIT 10.2 U.S. $300,000,000 SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 12, 1997, among WARNACO INC., as the U.S. Borrower, WARNACO (HK) Ltd., as the Foreign Borrower, THE WARNACO GROUP, INC., as a Guarantor, CERTAIN FINANCIAL INSTITUTIONS, as the Lenders, CITIBANK, N.A., as the Documentation Agent, for the Lenders, and THE BANK OF NOVA SCOTIA, as the Administrative Agent for the Lenders. Arrangers: --------- THE BANK OF NOVA SCOTIA and CITICORP SECURITIES, INC. TABLE OF CONTENTS
Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms 1.2. Use of Defined Terms............................................15 1.3. Cross-References................................................15 1.4. Accounting and Financial Determinations.........................16 ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES 2.1. Commitments.....................................................16 2.1.1. Loan Commitment.................................................16 2.1.2. Commitment to Issue Letters of Credit...........................18 2.1.3. Lenders Not Permitted or Required to Make Loans and Fronting Bank Not Permitted or Required to Issue Letters of Credit Under Certain Circumstances................................................18 2.2. Reduction of the Commitment Amount..............................19 2.3. Borrowing Procedure.............................................19 2.4. Continuation and Conversion Elections...........................21 2.5. Funding.........................................................22 2.6. Notes...........................................................22 2.7. Extension of Commitment Termination Date........................23 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments......................................23 3.2. Interest Provisions.............................................24 3.2.1. Rates...........................................................24 3.2.2. Post-Maturity Rates.............................................25 3.2.3. Payment Dates...................................................26 3.2.4. Allocation of Interest Payments.................................26 3.3. Fees............................................................27 3.3.1. Letter of Credit Face Amount Fee................................27 3.3.2. Letter of Credit Fees...........................................28 3.3.3. Fee Letter......................................................28 3.3.4. Commitment Fee..................................................28 3.4. Guaranty........................................................29 3.4.1. Guaranty........................................................29 3.4.2. Acceleration of Guaranty........................................30 3.4.3. Guarantee Absolute, etc.........................................30
TABLE OF CONTENTS (continued)
Section Page - ------- ---- 3.4.4. Reinstatement, etc...............................................32 3.4.5. Waiver, etc......................................................32 3.4.6. Postponement of Subrogation, etc.................................32 ARTICLE IV LETTERS OF CREDIT 4.1. Issuance Requests................................................33 4.2. Issuances and Extensions.........................................35 4.3. Destruction of Goods, etc........................................35 4.4. Other Lenders' Participation.....................................35 4.5. Disbursements....................................................37 4.6. Reimbursement; Outstanding Letters, etc..........................37 4.7. Deemed Disbursements.............................................40 4.8. Nature of Reimbursement Obligations..............................41 4.9. Existing Letters of Credit.......................................41 ARTICLE V CERTAIN LIBO RATE AND OTHER PROVISIONS 5.1. LIBO Rate Lending Unlawful.......................................42 5.2. Deposits Unavailable.............................................42 5.3. Increased LIBO Rate Loan Costs, etc..............................42 5.4. Funding Losses...................................................43 5.5. Increased Capital Costs, etc.....................................43 5.6. Taxes............................................................44 5.7. Payments, Computations, etc......................................46 5.8. Sharing of Payments..............................................47 5.9. Setoff...........................................................48 5.10. Use of Proceeds..................................................48 ARTICLE VI CONDITIONS PRECEDENT 6.1. Initial Credit Extension.........................................48 6.1.1. Resolutions, etc.................................................48 6.1.2. Delivery of Notes................................................49 6.1.3. Guarantees.......................................................49 6.1.4. Delivery of Form 1001 or 4224....................................49 6.1.5. Certificates as to No Default, etc...............................49 6.1.6. No Material Adverse Change........................................49
-ii- TABLE OF CONTENTS (continued)
Section Page - ------- ---- 6.1.7. Tradexpress Agreement.............................................50 6.1.8. U.S. Credit Agreement.............................................50 6.1.9. Opinions of Counsel...............................................50 6.2. All Credit Extensions.............................................50 6.2.1. Compliance with Warranties, No Default, etc.......................50 6.2.2. Credit Request....................................................51 6.2.3. Satisfactory Legal Form...........................................51 ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1. Organization, etc.................................................52 7.2. Due Authorization, Non-Contravention, etc.........................52 7.3. Government Approval, Regulation, etc..............................52 7.4. Validity, etc.....................................................53 7.5. No Material Adverse Change........................................53 7.6. Litigation, etc...................................................53 7.7. Regulations G, U and X............................................53 7.8. Accuracy of Information...........................................53 7.9. U.S. Credit Agreement Representations and Warranties.....................................................54 ARTICLE VIII COVENANTS 8.1. Covenants.........................................................54 8.1.1. Financial Information, Reports, Notices, etc......................54 8.1.2. Future Subsidiaries of Group......................................55 8.1.3. U.S. Credit Agreement Covenants...................................55 8.1.4. Default Notice....................................................55 ARTICLE IX EVENTS OF DEFAULT 9.1. Listing of Events of Default......................................55 9.1.1. Non-Payment of Obligations........................................55 9.1.2. Breach of Warranty................................................56 9.1.3. Non-Performance of Certain Covenants and Obligations....................................................56 9.1.4. Non-Performance of Other Covenants and Obligations...................................................56
-iii- TABLE OF CONTENTS (continued)
Section Page - ------- ---- 9.1.5. Default Under U.S. Credit Agreement..............................56 9.1.6. Bankruptcy, Insolvency, etc......................................56 9.1.7. Termination, etc. of Loan Documents..............................56 9.2. Action Upon Bankruptcy...........................................56 9.3. Action Upon Other Event of Default...............................57 ARTICLE X THE AGENTS 10.1. Actions..........................................................57 10.2. Copies, etc......................................................58 10.3. Exculpation......................................................58 10.4. Successor........................................................58 10.5. Loans Made or Letters of Credit Issued by Scotiabank and Loans made by Citibank.........................59 10.6. Credit Decisions.................................................59 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Waivers, Amendments, etc.........................................60 11.2. Notices..........................................................61 11.3. Payment of Costs and Expenses....................................61 11.4. Indemnification..................................................62 11.5. Survival.........................................................63 11.6. Severability.....................................................63 11.7. Headings.........................................................63 11.8. Execution in Counterparts, Effectiveness, etc....................63 11.9. Governing Law; Entire Agreement..................................63 11.10. Successors and Assigns...........................................63 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes.............................64 11.11.1. Assignments......................................................64 11.11.2. Participations...................................................66 11.11.3. Fronting Bank Assignments........................................66 11.12. Other Transactions...............................................67 11.13. Forum Selection and Consent to Jurisdiction......................67 11.14. Waiver of Jury Trial.............................................68 11.15. UCP; etc.........................................................68 11.16. Usury Restraint..................................................69 11.17. Judgment Currency................................................69
-iv- SCHEDULE I - List of Existing Letters of Credit and Existing Loans EXHIBIT A - Form of Note EXHIBIT B - Form of Issuance Request EXHIBIT C - Form of Borrowing Request EXHIBIT D - Form of Continuation/Conversion Notice EXHIBIT E - Form of Lender Assignment Agreement EXHIBIT F-1 - Form of Group Guaranty EXHIBIT F-2 - Form of Subsidiary Guaranty EXHIBIT G - Form of Opinion of New York Counsel to the Obligors EXHIBIT H - Form of Opinion of General Counsel for the U.S. Borrower EXHIBIT I - Form of Opinion of Barbados Counsel to the Obligors -v- AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 12, 1997 (amending and restating the Existing Credit Agreement (as defined below)), is among WARNACO INC., a Delaware corporation (the "U.S. Borrower"), WARNACO (HK) LTD., a company organized under the laws of Barbados (the "Foreign Borrower"), THE WARNACO GROUP, INC., a Delaware corporation ("Group"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), CITIBANK, N.A. ("Citibank"), as documentation agent (in such capacity, the "Documentation Agent") and THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent (in such capacity, the "Administrative Agent") for the Lenders. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the U.S. Borrower, certain financial institutions and Scotiabank are parties to an Amended and Restated Credit Agreement, dated as of June 30, 1997 (as amended or otherwise modified to the date hereof, the "Existing Credit Agreement"), pursuant to which, inter alia, such financial institutions have made (or participated in) loans to the U.S. Borrower, as listed on Schedule I hereto (the "Existing Loans"), and Scotiabank provides a documentary letter of credit facility in favor of the U.S. Borrower and has issued those documentary letters of credit (the "Existing Letters of Credit") listed on Schedule I hereto; WHEREAS, the Borrowers have requested that the Lenders and the Fronting Bank amend and restate the Existing Credit Agreement with this Agreement; WHEREAS, pursuant to this Agreement the Borrowers desire to obtain Commitments from the Lenders pursuant to which (a) Letters of Credit will be issued by the Fronting Bank for the account of the U.S. Borrower to support obligations of the U.S. Borrower and its wholly-owned Subsidiaries (and their respective divisions) and for the account of the Foreign Borrower to support obligations of the Foreign Borrower and, under the several obligations hereunder, each of the Lenders will, to the extent of such Lender's Percentage, participate in Letters of Credit (including the Existing Letters of Credit) issued from time to time hereunder prior to the Commitment Termination Date; and (b) Loans will be made by the Fronting Bank to the Borrowers and, under the several obligations hereunder, each of the Lenders will, to the extent of such Lender's Percentage, participate in or make the Loans from time to time prior to the Commitment Termination Date; WHEREAS, the Fronting Bank and the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article VI), to amend and restate the Existing Credit Agreement pursuant to the terms and conditions of this Agreement, extend such Commitments hereunder, make and participate in such Loans and issue and participate in such Letters of Credit; and WHEREAS, the proceeds of Loans will be used for the sole purpose of providing the Borrowers with up to a four-month (or 120-day, in the case of Base Rate Loans) trade credit in respect of disbursements made to the beneficiaries of Letters of Credit and Letters of Credit will be issued solely to support the worldwide sourcing of merchandise by the U.S. Borrower and its wholly-owned Subsidiaries (or divisions), including the Foreign Borrower; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Administrative Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 10.4. "Agent" means, as the context may require, the Administrative Agent, the Documentation Agent and/or the Managing Agents. "Agreement" means, on any date, this Amended and Restated Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. -2- "Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently announced by Scotiabank at its Domestic Office as its base rate for Dollar loans; and (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by Scotiabank in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the U.S. Borrower of changes in the Alternate Base Rate. "Applicable Margin" means, on any date, a percentage per annum determined by reference to the Rating Level in effect on such date as set forth below:
Applicable Applicable Margin for Margin for Rating Base Rate LIBO Rate Level Debt Rating Loans Loans ----- ----------- ---------- ---------- Level 1 A-/A3 or higher 0.000% 0.250% Level 2 BBB+/Baa1 0.000% 0.275% Level 3 BBB/Baa2 0.000% 0.300% Level 4 BBB-/Baa3 0.000% 0.425% Level 5 BB+/Ba1 or lower 0.250% 0.625%;
provided, however, that at any time when the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings exceeds $75,000,000 and the then existing Rating Level is equal to Level 1, Level 2 or Level 3, the Applicable Margin shall be increased by 0.075% per annum. The Applicable Margin shall be determined by reference to the Rating Level in effect from time to time; provided, however, that no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives evidence reasonably satisfactory to it from Group or the U.S. Borrower that a new Rating Level is in effect. In the event that at any time no Debt Rating shall be in effect, the Applicable Margin shall be 0.250% for each Base Rate Loan and 0.625% for each LIBO Rate Loan. -3- "Applicable Time" shall mean New York time, or in the case of actions or notices by or relating to the Foreign Borrower, Hong Kong time. "Assignee Lender" is defined in Section 11.11.1. "Authorized Officer" means, relative to either Borrower or any other Obligor, those of its officers whose signatures and incumbency shall have been certified to the Managing Agents and the Lenders pursuant to Section 6.1.1. "Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Borrowers" means, collectively, the U.S. Borrower and the Foreign Borrower. "Borrowing" means the making of Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period by the Fronting Bank following a disbursement under a Letter of Credit and the funding of a Lender's Percentage of such Loans, in each case in accordance with the terms of this Agreement. "Borrowing Request" means a loan request and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of Exhibit C hereto. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York or Hong Kong in the case of actions relating to the Foreign Borrower; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "Citibank" is defined in the preamble. "Commitment" means, as the context may require, a Lender's Loan Commitment or the Fronting Bank's or a Lender's Letter of Credit Commitment. "Commitment Amount" means $300,000,000, as such amount may be reduced by Section 2.2. -4- "Commitment Termination Date" means the earliest of (a) August 11, 1998, as such date may be extended pursuant to the terms of this Agreement; (b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (b) or (c), the Commitments shall terminate automatically and without any further action. "Commitment Termination Event" means (a) the occurrence of any event or condition described in clause (e) of Section 6.01 of the U.S. Credit Agreement; (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans to be due and payable pursuant to Section 9.3, or (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrowers that the Commitments have been terminated; or (c) the termination of, or any refinancing, refunding, replacement, renewal or restatement of, the U.S. Credit Agreement. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of Exhibit D hereto. "Credit Extension" means and includes (a) the advancing of any Loans by the Lenders in connection with a Borrowing (including the making of a Loan by the Fronting Bank to a Borrower on a Disbursement Date and the refunding and refinancing of such Loans by the Lenders); and -5- (b) any issuance or extension by the Fronting Bank of a Letter of Credit. "Debt Rating" means, on any date, the Public Debt Rating in effect on such date or, if no Public Debt Rating is then in effect, the Implied Debt Rating in effect on such date. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Disbursement" means any payment made under a Letter of Credit by the Fronting Bank to the beneficiary of such Letter of Credit. "Disbursement Date" is defined in Section 4.5. "Documentary Letter of Credit" is defined in clause (a) of Section 4.1, and shall also mean and include each Existing Letter of Credit. "Documentation Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Documentation Agent pursuant to Section 10.4. "Dollar" and the sign "$" mean lawful money of the United States. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "Domestic Subsidiary" means any Subsidiary of Group (other than the U.S. Borrower) organized under the laws of the United States or any state thereof. "Draft" means and includes any draft, bill, cable or written demand for payment or receipt drawn or issued under a Documentary Letter of Credit. "Effective Date" means the date this Agreement becomes effective pursuant to Section 11.8. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential -6- liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment or decree relating to the environment, health, safety or Hazardous Materials. "Environment Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Event of Default" is defined in Section 9.1. "Excess" is defined in Section 11.16. "Existing Credit Agreement" is defined in the first recital. "Existing Letters of Credit" is defined in the first recital. "Existing Loans" is defined in the first recital. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day in New York) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day in New York, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive, absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative -7- Agent to obtain sufficient bids or publications in accordance with the terms hereof, the rate announced by the Administrative Agent at its New York Agency as its "Base Rate New York" shall be the Alternate Base Rate until the circumstances giving rise to such inability no longer exists. "Fee Letter" means the confidential Fee Letter, dated July 14, 1997, between the U.S. Borrower and the Administrative Agent. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means the fiscal year of the U.S. Borrower ending on or about December 31 of each year. "Foreign Borrower" is defined in the preamble. "Foreign Borrower Tradexpress Agreement" means the Tradexpress Transmission Agreement duly executed and delivered by the Foreign Borrower and the Fronting Bank pursuant to Section 6.1.7 in a form agreed to by the Fronting Bank and the U.S. Borrower. "Fronting Bank" means Scotiabank, in its capacity as the issuer of Letters of Credit (regardless of which office, branch or agency of Scotiabank issues a Letter of Credit) and in its capacity as the Lender of Loans made prior to a Funding Date pursuant to the terms of this Agreement. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Funding Date" is defined in clause (c) of Section 2.3. "GAAP" has the meaning set forth in the U.S. Credit Agreement. "Goods" means, collectively, all goods (including all inventory), wares, merchandise and other commodities purchased by or shipped to or to the order of a Borrower under or by virtue of or in connection with the issuance of a Documentary Letter of Credit. "Group" is defined in the preamble. "Group Guaranty" means the Amended and Restated Guaranty executed and delivered by an Authorized Officer of Group pursuant to Section 6.1.3, substantially in the form of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified from time to time. -8- "Hazardous Materials" means petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, radon gas and any other chemicals, materials or substances designated, classified or regulated as being "hazardous" or "toxic", or words of similar import, under any Environmental Law. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Implied Senior Rating" means the rating assigned by S&P to Group's unsecured "implied senior debt" from time to time, as reported by S&P on July 11, 1997 or any subsequent report or notification in writing issued by S&P (which rating on the date hereof is BBB), or, if such rating is unavailable, the equivalent rating assigned by Moody's to Group's unsecured "implied senior debt", as notified in writing to Group by Moody's. "including" means including without limiting the generality of any description preceding such term. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as capitalized lease liabilities; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade debt incurred in the ordinary course of business), and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (e) all contingent liabilities of such Person in respect of any of the foregoing. -9- "Indemnified Liabilities" is defined in Section 11.4. "Indemnified Parties" is defined in Section 11.4. "Interest Period" means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and ending on (but excluding) the day which numerically corresponds to such date one, two, three or four months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in each case as such Loan may be made or as a Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period may end later than the Stated Maturity Date for such Loan or, if earlier, the date set forth in clause (a) of the definition of "Commitment Termination Date", as such date may be extended from time to time pursuant to the terms of this Agreement. "Issuance Request" means either (a) a request delivered by a Borrower to the Fronting Bank in accordance with the provisions of the Tradexpress Agreement or (b) a request and certificate duly executed by an Authorized Officer of a Borrower, in substantially the form of Exhibit B attached hereto (with such changes thereto as may be agreed upon from time to time by the Administrative Agent and the U.S. Borrower). "Lender Assignment Agreement" means a Lender Assignment Agreement substantially in the form of Exhibit E hereto. "Lenders" is defined in the preamble. "Letter of Credit" means, as the context may require, a Documentary Letter of Credit and/or a Standby Letter of Credit. -10- "Letter of Credit Availability" means, at any time, the then existing Commitment Amount minus the sum of the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings. "Letter of Credit Commitment" means, relative to the Fronting Bank, the Fronting Bank's obligation to issue Letters of Credit pursuant to Section 2.1.2 and, with respect to each of the other Lenders, the obligations of each such Lender to participate in such Letters of Credit pursuant to the terms of this Agreement. "Letter of Credit Outstandings" means, at any time, an amount equal to the sum of (a) the aggregate Stated Amount at such time of all Letters of Credit then outstanding and undrawn (as such aggregate Stated Amount shall be adjusted, from time to time, as a result of drawings, the issuance of Letters of Credit, or otherwise), plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" is defined in Section 3.2.1. "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of any Lender as designated from time to time by notice from such Lender to the U.S. Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans hereunder. "LIBOR Reserve Percentage" is defined in Section 3.2.1. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. -11- "Loans" is defined in Section 2.1.1, and shall also mean and include the Existing Loans. "Loan Commitment" means, relative to (i) the Fronting Bank (in such capacity), its obligation to make Loans to the Borrowers on a Disbursement Date and (ii) each Lender (other than the Fronting Bank in such capacity), such Lender's obligation to participate in the Loans made by the Fronting Bank to the Borrowers and, as set forth in this Agreement, to refund and reimburse the Fronting Bank for such Loans, in each case pursuant to the terms of this Agreement. "Loan Document" means this Agreement, each Note, the Tradexpress Agreement, the Group Guaranty, the Subsidiary Guaranty, the Fee Letter and each other agreement, document or instrument delivered in connection with this Agreement, whether or not specifically mentioned herein. "Managing Agents" means, collectively, Scotiabank and Citibank. "Maximum Rate" is defined in Section 11.16. "Moody's" means Moody's Investors Service, Inc. "Note" means any promissory note of either Borrower payable to the order of any Lender (including the Fronting Bank), in the form of Exhibit A (as any such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of such Borrower to such Lender resulting from outstanding Loans made by such Lender, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" means all obligations (monetary or otherwise) of the Borrowers and each other Obligor arising under or in connection with this Agreement, the Notes and each other Loan Document. "Obligor" means the Borrowers and each other Person (other than the Agents, the Fronting Bank and the Lenders) obligated under any Loan Document. "Order" is defined in clause (b) of Section 4.6. "Organic Document" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of formation or limited liability company agreement, and all shareholder agreements, voting trusts and similar arrangements applicable to any of the authorized shares of capital stock or other ownership interest of such Obligor. -12- "Participant" is defined in Section 11.11.2. "Percentage" means, relative to any Lender, the percentage set forth opposite its signature hereto or set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to the terms hereof or a Lender Assignment Agreement executed by such Lender and its Assignee Lender and delivered pursuant to Section 11.11; provided, that the Percentage of each Lender's Loan Commitment and Letter of Credit Commitment shall be identical. "Person" means any natural person, corporation, limited liability company, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Public Debt Rating" means, as of any date, the higher rating that has been most recently announced by either S&P or Moody's, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by Group. For purposes of the foregoing, (a) if only one of S&P and Moody's shall have in effect a Public Debt Rating, the Applicable Margin and the letter of credit face amount fees shall be determined by reference to the available rating; (b) if the ratings established by S&P and Moody's shall fall within different levels separated by two or more levels, the Applicable Margin and the Applicable Percentage shall be based upon the level that is one level below the higher rating; (c) if any rating established by S&P or Moody's shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (d) if S&P or Moody's shall change the basis on which ratings are established, each reference to the Public Debt Rating announced by S&P or Moody's, as the case may be, shall refer to the then equivalent rating by S&P or Moody's, as the case may be. "Quarterly Payment Date" means the last day of each March, June, September, and December or, if any such day is not a Business Day in New York, the next succeeding Business Day in New York. "Received Amount" is defined in clause (c) of Section 4.6. "Reimbursement Obligation" is defined in Section 4.6. "Required Lenders" means, at any time, Lenders holding at least 51% of the then aggregate outstanding principal amount of the Notes then held by the Lenders or, if no such principal amount is then outstanding, Lenders having Percentages that equal at least 51% of the Commitments; provided, that so long as the Fronting Bank (in such capacity) has any Loans outstanding and -13- owing to it from either Borrower, each Lender will be deemed to have outstanding and owing to it a principal amount equal to such Lender's Percentage multiplied by the aggregate outstanding principal amount of Loans owing to the Fronting Bank. "S&P" means Standard & Poor's Ratings Group, currently a division of McGraw-Hill, Inc., or any successor thereto. "Scotiabank" is defined in the preamble. "Standby Letter of Credit" is defined in clause (b) of Section 4.1. "Stated Amount" of each Letter of Credit means the maximum amount of such Letter of Credit that may then be drawn under such Letter of Credit whether or not the conditions for drawing thereunder have been met. "Stated Expiry Date" is defined in Section 4.1. "Stated Maturity Date" means, in the case of any Loan, the earlier of (a) the date which is four months following the date of the making of such Loan (in the case of a Loan initially made as a LIBO Rate Loan) or (in the case of a Loan initially made as a Base Rate Loan), the date that is 120 days after the making of such Loan and (b) the Commitment Termination Date (as such date may be extended pursuant to the terms of this Agreement). "Stated Rate" is defined in Section 11.16. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. The term "wholly owned Subsidiary" shall exclude any directors' or officers' qualifying shares which may be outstanding. "Subsidiary Guaranty" means the Amended and Restated Guaranty executed and delivered by each Domestic Subsidiary pursuant to Section 6.1.3 or Section 8.1.3, substantially in the -14- form of Exhibit F-2 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Taxes" is defined in Section 5.6. "Tradexpress Agreement" means, as the context may require, the U.S. Borrower Tradexpress Agreement and/or the Foreign Borrower Tradexpress Agreement. "type" means relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UCP" is defined in Section 11.15. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "U.S. Borrower" is defined in the preamble. "U.S. Borrower Tradexpress Agreement" means the Tradexpress Transmission Agreement duly executed and delivered by the U.S. Borrower and the Fronting Bank pursuant to Section 6.1.7 in a form agreed to by the Fronting Bank and the U.S. Borrower. "U.S. Credit Agreement" means the Credit Agreement, dated as of August 12, 1997, among the U.S. Borrower, Group, the initial lenders named therein, Scotiabank and Citibank, as managing agents, Citibank, as documentation agent, and Scotiabank, as administrative agent, competitive bid agent, swing line bank and an issuing bank, as further amended, restated or waived from time to time with the consent of the Required Lenders hereunder solely for purposes of this Agreement, and regardless of whether such U.S. Credit Agreement is terminated, unless in connection with such termination a replacement credit facility satisfactory to the Required Lenders hereunder is entered into, in which case the affirmative and negative covenants in such facility shall become the subject of this Agreement. "Usury Restraint" is defined in Section 11.16. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each Note, Borrowing Request, Continuation/ Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or -15- Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein shall be interpreted, all accounting determinations and computations hereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, GAAP. ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement (including Article VI), each Lender severally agrees as follows: SECTION 2.1.1. Loan Commitment. The Borrowers, Group, the Agents, the Fronting Bank and the Lenders hereby agree that the Existing Credit Agreement is hereby amended and restated in its entirety to become effective and binding on the Borrowers, Group and the other parties to this Agreement pursuant to the terms of this Agreement, and that the commitments which the Fronting Bank and the Lenders have agreed to extend to the Borrowers under the Existing Credit Agreement shall be extended or advanced to the Borrowers upon the amended and restated terms and conditions contained in this Agreement with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (which shall hereafter have no further effect upon the parties thereto, other than for accrued fees and expenses, and indemnification provisions, accrued and owing under the terms of the Existing Credit Agreement on or prior to the date hereof or arising (in the case of an indemnification) under the terms of the Existing Credit Agreement). In furtherance of the foregoing, from time to time on any Business Day each Lender severally agrees, subject to the terms of this Agreement (including Article VI) that (a) in the case of the Fronting Bank, it will make loans (the "Loans") to (i) the U.S. Borrower (in the case of each Letter of Credit issued for the account of other than the Foreign Borrower) and (ii) the Foreign Borrower (in the case of each Letter of Credit issued for the account of the Foreign Borrower), and (in each case), on the Disbursement Date of each Letter of Credit for a period not to exceed the Stated Maturity Date for such Loan in a principal amount -16- equal to the aggregate amount of Disbursements made under one or more Letters of Credit on such Disbursement Date; and (b) in the case of each Lender (other than the Fronting Bank in such capacity), such Lender will participate in the Loans made by the Fronting Bank pursuant to this Agreement and, if required pursuant to the terms of this Agreement, such Lender will refinance and reimburse the Fronting Bank for the outstanding principal amount of Loans previously made by the Fronting Bank in an amount equal to its Percentage of the aggregate amount of all (or, if elected by the Fronting Bank, less than all) Loans (determined, in the sole discretion of the Fronting Bank, as between Loans made to the U.S. Borrower and the Foreign Borrower) then outstanding and owing to the Fronting Bank (in its capacity as the Fronting Bank), and upon the receipt by the Fronting Bank of immediately available funds from a Lender in respect of the reimbursement or refinancing of a Loan previously made by and owing to the Fronting Bank, the amount so received by the Fronting Bank will thereafter be a Loan to the applicable Borrower owing to such Lender (and no longer owing to the Fronting Bank). No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. On the terms and subject to the conditions hereof, the Borrowers may from time to time borrow Loans and continue or convert such Loans as Base Rate Loans or LIBO Rate Loans pursuant to the terms hereof, but once a particular Loan is repaid or prepaid by a Borrower, it cannot be reborrowed. Notwithstanding anything contained herein to the contrary, so long as any Lender shall be in default in its obligation to fund its pro rata share of any Loans (as notified to such Lender by the Administrative Agent, the Administrative Agent agreeing to use good faith efforts to give such notification promptly following the occurrence of such default) or shall have rejected its obligations under its Commitments, then such Lender shall not be entitled to receive any payments of principal of or interest on its pro rata share of the Loans or its share of any commitment or other fees payable hereunder (including fees payable pursuant to Section 3.3) unless and until (x) the Loans of all the other Lenders and all interest thereon have been paid in full, (y) such failure to fulfill its obligation to fund is cured or (z) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, and for purposes of voting or consenting to matters with respect to the Loan Documents, such Lender shall be deemed not to be a "Lender" hereunder and such Lender's Percentage shall each be deemed to be zero (0) (with each other Lender's Percentage being increased proportionately for purposes of the definition of "Required Lenders" so that all such non-defaulting Lenders' Percentages -17- shall collectively equal 100%). No Commitment of any Lender shall be increased or otherwise affected by any such failure or rejections by any other Lender. Any payments of principal of or interest on Obligations which would, but for this Section, be paid to any Lender, shall be paid to the Lenders who shall not be in default under their respective Commitments and who shall not have rejected any Commitment, for application to the Obligations or cash collateral in respect of Letters of Credit in such manner and order (pro rata among such Lenders) as shall be determined by the Administrative Agent. The parties hereto acknowledge and agree that a Lender's failure to make a Loan based on either Borrower's failure to satisfy one or more of the conditions precedent to the making of Loans set forth in Article VI shall not be construed as such Lender being in default of its obligations to fund its pro rata share of Loans or a rejection of such Lender's Commitments. SECTION 2.1.2. Commitment to Issue Letters of Credit. From time to time on any Business Day prior to the Commitment Termination Date, the Fronting Bank will issue, and each Lender will participate in, the Letters of Credit, in accordance with Article IV. SECTION 2.1.3. Lenders Not Permitted or Required to Make Loans and Fronting Bank Not Permitted or Required to Issue Letters of Credit Under Certain Circumstances. In addition to the other terms of this Agreement (including Article VI): (a) No Lender (other than, in the case of clause (a)(ii), the Fronting Bank acting in such capacity) shall be permitted or required to make any Loan if, after giving effect thereto (and the payment of any Reimbursement Obligations with the proceeds of such Loans or the refunding and refinancing of Loans made by the Fronting Bank with the proceeds of the Loans made by the Lenders hereunder), the aggregate outstanding principal amount of all Loans (i) together with the aggregate amount of all Letter of Credit Outstandings, would exceed the Commitment Amount, or (ii) of such Lender, together with such Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings would exceed the amount of such Lender's Percentage multiplied by the Commitment Amount. (b) The Fronting Bank shall not be permitted or required to issue any Letter of Credit or extend for an additional period of time the Stated Expiry Date of a -18- previously issued Letter of Credit if, after giving effect thereto the aggregate amount of all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Loans would exceed the Commitment Amount. (c) The Fronting Bank shall not be permitted or required to make any Loan on any Disbursement Date if, after giving effect thereto (and the payment of any Reimbursement Obligations with the proceeds of such Loans), the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings, would exceed the Commitment Amount. SECTION 2.2. Reduction of the Commitment Amount. The U.S. Borrower may, from time to time on any Business Day, voluntarily reduce the amount of the Commitment Amount; provided, however, that all such reductions shall be binding on both Borrowers, shall require at least three Business Days' prior notice to the Administrative Agent and be permanent. SECTION 2.3. Borrowing Procedure. (a) Upon any Disbursements being made in respect of one or more Letters of Credit (whether such Letters of Credit were issued to support the obligations of the Foreign Borrower, the U.S. Borrower or any Subsidiary of the U.S. Borrower (or any of their respective divisions)), the U.S. Borrower (in the case of a Letter of Credit issued for the account of other than the Foreign Borrower) and the Foreign Borrower (in the case of a Letter of Credit issued for its account) shall (unless it shall have given notice to the Administrative Agent to the contrary prior to 3:00 p.m., Applicable Time, at least three Business Days prior to the date of such Disbursement) be deemed to have delivered to the Administrative Agent a Borrowing Request pursuant to which such Borrower shall have been deemed to irrevocably request that the Fronting Bank make a LIBO Rate Loan to such Borrower with a four month Interest Period in a principal amount equal to the aggregate amount of the Disbursements made on such date. Each Borrower hereby acknowledges and agrees that each Borrowing Request deemed to be delivered hereunder, the making of a Loan by the Fronting Bank to reimburse the Fronting Bank for Disbursements made under the Letters of Credit and the acceptance by either Borrower of the proceeds of the Borrowing shall constitute a representation and warranty by the Borrowers that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 6.2.1 are in each case true and correct. Proceeds of such Loans shall be used to fund the Reimbursement Obligations in respect of Letters of Credit under which one or more Disbursements were made on the date of the Loan. Each of the parties hereto acknowledge and -19- agree that upon the satisfaction of the conditions precedent set forth in Section 6.1, the Existing Loans shall be deemed to be Loans made by the Fronting Bank on the Effective Date under the terms of this Agreement and shall thereafter accrue interest and fees pursuant to the terms hereof, and each Lender shall continue to participate in such Loans in an amount equal to such Lender's Percentage of the outstanding principal amount of the Existing Loans. (b) In addition to the provisions of the making of Loans set forth in clause (a), above, by delivering a Borrowing Request to the Administrative Agent on or before 11:00 a.m., Applicable Time, on a Business Day, a Borrower may from time to time irrevocably request, on not less than three nor more than five Business Days' notice (in the case of LIBO Rate Loans) and on the date of such Borrowing (in the case of Base Rate Loans), that a Borrowing be made as other than a LIBO Rate Loan having a four month Interest Period or in an amount other than the full amount of Disbursements with respect to which such Loan is to be made. If either Borrower elects that a Borrowing be made as a LIBO Rate Loan having a one, two or three month Interest Period pursuant to this clause, then upon the expiration of such Interest Period such Borrower shall (unless it shall have given notice to the Administrative Agent to the contrary prior to 11:00 a.m., Applicable Time, at least three Business Days prior to the date of such Disbursement) be deemed to have delivered to the Administrative Agent a Continuation/Conversion Notice pursuant to which such Borrower shall have been deemed to irrevocably request that the Fronting Bank continue the outstanding LIBO Rate Loan as a LIBO Rate Loan with an Interest Period of (i) one month, in the case of the expiration of a three month Interest Period or Interest Periods which, in the aggregate, equal three months, (ii) two months, in the case of the expiration of a two month Interest Period or Interest Periods which, in the aggregate, equal two months, or (iii) three months, in the case of the expiration of a one month Interest Period, in each case in a principal amount equal to the amount of the LIBO Rate Loan with an Interest Period then expiring. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified (or deemed to be specified) in such Borrowing Request. (c) The Fronting Bank may, at any time (whether or not a Default or Event of Default has occurred and is then continuing), in its sole and absolute discretion but subject to clause (a)(ii) of Section 2.1.3, demand that each other Lender make a Loan in an amount equal to such Lender's Percentage of the aggregate principal amount of all or a portion of the Loans outstanding on the date such demand is made, and may (in its sole discretion) elect which Loans (as among the Borrowers) are to be chosen as -20- the Loans to be refunded by the Lenders. Each Lender (other than the Fronting Bank) irrevocably agrees that it shall (whether or not the conditions to the making of a Credit Extension contained in Article VI have been (or can be) satisfied) make such Loan by depositing the amount so demanded in same day funds in an account specified by the Fronting Bank on or before 11:00 a.m. New York City time on the first Business Day following receipt of such a demand. The Fronting Bank agrees to apply all such funds received by it under this clause to refund and refinance the Loans previously made by it to either Borrower, as identified in the demand that it delivers to the Lenders pursuant to this clause. On the date (a "Funding Date") that the Lenders (other than the Fronting Bank) advance funds to the Fronting Bank pursuant to this clause, the principal amount so refunded and refinanced shall become a Loan to the Borrower identified by the Fronting Bank outstanding under such Lender's Note to that particular Borrower and shall no longer be a Loan owed to the Fronting Bank under the Fronting Bank's Note to that particular Borrower. All interest payable with respect to any Loans made pursuant to this clause shall be appropriately adjusted to reflect the period of time during which such Loans were owing to the Fronting Bank and, on and subsequent to a Funding Date, such Loans were owing to the Lenders. The obligation of each Lender to make Loans by way of advancing immediately available funds to the Fronting Bank on a Funding Date to be applied to refund and refinance the Loans previously made by the Fronting Bank to the Borrowers (or either one of them) under this clause shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which any Lender may have against Scotiabank, the Borrowers or any other Person for any reason whatsoever; (ii) the occurrence or continuance of any Default or the inability of the Borrowers to otherwise satisfy the conditions precedent set forth in Article VI; (iii) any adverse change in the condition (financial or otherwise) of either Borrower or any other Obligor; (iv) the acceleration or maturity of any Loans or other Obligations or the termination of any Commitment after the making of any Loan; (v) any breach of this Agreement or any other Loan Document by either Borrower, any other Obligor or any Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 10:00 a.m., Applicable Time, on a Business Day, either Borrower may from time to time irrevocably elect, on not less than three nor more than five Business Days' notice that -21- all, or any portion of any Loans made to it be, in the case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of a LIBO Rate Loan, converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a LIBO Rate Loan pursuant to the provisions of clause (b) of Section 2.3, unless such Loan is otherwise required to be paid pursuant to the terms of this Agreement (including the first sentence of Section 3.1)); provided, however, that (i) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing and (ii) the maximum length of any Interest Period or combination of Interest Periods for any particular Loan shall not exceed four months. Section 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to participate in, and to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or affiliates (or an international banking facility all of the capital stock or other ownership interests of which are wholly-owned by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Lender to refund and refinance such LIBO Rate Loan on the Funding Date and the obligation of the Borrowers to repay such LIBO Rate Loan shall nevertheless be of or to such Lender for the account of such foreign branch, affiliate or international banking facility; provided, further that the Borrowers shall not be required to pay any amount under this Section or Section 5.6 that is greater than the amount which it would have been required to pay had such Lender not caused such branch, affiliate or facility to make or maintain such LIBO Rate Loan. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 5.1, 5.2, 5.3 or 5.4, it shall be conclusively assumed that such Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. Notes. The Loans of the Fronting Bank under the Loan Commitment shall be evidenced by Notes payable to the order of the Fronting Bank from each Borrower in an aggregate maximum principal amount equal to the original Commitment Amount, and the Loans of each Lender (other than the Fronting Bank) under the Loan Commitment shall be evidenced by Notes payable from each Borrower to the order of such Lender in a maximum principal amount equal to such Lender's Percentage multiplied by the original Commitment Amount. Each Borrower hereby irrevocably -22- authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby and the principal amount of Loans that have been repaid (including, in the case of the Fronting Bank, Loans that have been refunded and refinanced by the Lenders on a Funding Date). Such notations shall be conclusive and binding on the Borrowers absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of either Borrower. SECTION 2.7. Extension of Commitment Termination Date. The Commitment Termination Date may be extended by the Lenders in their sole and absolute discretion upon written request of the U.S. Borrower received at least 60 days but not more than 90 days prior to the then effective Commitment Termination Date (as such date may have been extended). The Lenders shall give written notice to the U.S. Borrower of their decision and, if approved, of the new Commitment Termination Date; provided, that notwithstanding any other provision in this Agreement to the contrary, in no event shall the modified Commitment Termination Date exceed 364 days from the then expiring Commitment Termination Date. The Lenders shall give written notice to the U.S. Borrower of their decision within 30 days of request. In the absence of the approval of any one of the Lenders, the then effective Commitment Termination Date shall not be extended and shall terminate and expire as otherwise provided in this Agreement, and the failure of any Lender to deliver a written notice within the requisite period set forth above shall be deemed to be an election by that Lender not to extend the Commitment Termination Date. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrowers shall repay in full the entire unpaid principal amount of each Loan upon the Stated Maturity Date therefor; provided, that notwithstanding anything contained in this Agreement or any Loan Document to the contrary, the Foreign Borrower shall only be obligated to repay the principal amount of the Loans made to it and Reimbursement Obligations in respect of Letters of Credit issued for its account. Prior thereto (and subject to Section 2.1.1), each Borrower (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the -23- outstanding principal amount of any Loans; provided, however, that all such voluntary prepayments shall require at least one Business Day's prior written notice to the Administrative Agent; (b) shall, on each date when any reduction in the Commitment Amount shall become effective (which reduction shall be subject to Section 2.2), make a mandatory prepayment (which shall be applied (or held as cash collateral for application to the aggregate amount of all Letter of Credit Outstandings not consisting of unpaid and outstanding Reimbursement Obligations) by the Administrative Agent to the payment of the Loans and unpaid and outstanding Reimbursement Obligations of the then Letter of Credit Outstandings) equal to the excess, if any, of the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings over the Commitment Amount as so reduced; and (c) shall, immediately upon any acceleration of the Stated Maturity Date of any Obligations pursuant to Section 9.2 or Section 9.3, repay all Obligations, unless, pursuant to Section 9.3, only a portion of all Obligations is so accelerated. Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 5.4. No voluntary prepayment of principal of any Loans shall cause a reduction in the Commitment Amount. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Loans comprising a Borrowing shall accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin in effect from time to time; or (b) on that portion maintained as a LIBO Rate Loan (whether made pursuant to clause (a) or clause (b) of Section 2.3), during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin in effect from time to time. The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a -24- LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate (Reserve Adjusted) ------------------------------- 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent from Scotiabank, two Business Days before the first day of such Interest Period. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) reported, on the first day of such Interest Period as of 11:00 a.m. London time, on Telerate Access Service Page 3750 (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for Dollar deposits having a term comparable to such Interest Period and in an amount of $1,000,000 or more (or, if said page shall cease to be publicly available, as reported by any publicly available source of similar market data selected by the Administrative Agent that, in the Administrative Agent's reasonable judgment, accurately reflects such London Interbank Offered Rate). "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage, if any (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Post-Maturity Rates. After and during the continuance of a Default or an Event of Default (after giving effect to any grace periods in respect thereof in the case of an Event of Default described in Section 9.1.1), the Borrowers shall pay interest (after as well as before judgment) on (a) the unpaid principal amount of each outstanding Loan at a rate per annum -25- equal to 2% per annum above the then applicable interest rate in respect of such Loan and (b) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder at a rate per annum equal at all times to 2% per annum above the Alternate Base Rate then in effect. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any optional or required payment or prepayment, in whole or in part, of principal outstanding on such Loan (including, with respect to LIBO Rate Loans, on the last day of each applicable Interest Period for such LIBO Rate Loan); (c) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to the terms hereof, on the date of such conversion; and (d) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.2.4. Allocation of Interest Payments. Accrued and unpaid interest on the outstanding principal amount of the Loans shall be allocated and payable to the Lenders as set forth in this Section: (a) Interest shall be payable by a Borrower to the Fronting Bank (for its own account) on the outstanding principal amount of its Loans from the date such Loans are made to (but excluding) the Funding Date in an amount equal to the difference between (x) (i) in the case of LIBO Rate Loans, the LIBO Rate (Reserve Adjusted) or, in the case of Base Rate Loans, the Alternate Base Rate, plus the Applicable Margin then in effect for LIBO Rate Loans or Base Rate Loans (as applicable) multiplied by (ii) the outstanding principal amount of the LIBO Rate Loans or Base Rate Loans, as the case may be, minus (y) the Interest Amount (as defined below). Prior to the Funding Date each Lender (other than the Fronting Bank) shall be paid interest in an aggregate amount (referred to as the "Interest -26- Amount") equal to such Lender's Percentage of (i) the principal amount of the Loans outstanding prior to a Funding Date multiplied by (ii) the Applicable Margin then in effect for LIBO Rate Loans (in the case of the outstanding principal amount of LIBO Rate Loans) or Base Rate Loans (in the case of the outstanding principal amount of Base Rate Loans). (b) On and subsequent to a Funding Date, interest shall be payable by a Borrower for the account of each Lender (including the Fronting Bank, in its capacity as a Lender) in accordance with its Percentage on the principal amount of its Loans actually funded by such Lender in an amount equal to (in the case of the outstanding principal amount of LIBO Rate Loans) the LIBO Rate (Reserve Adjusted) plus the Applicable Margin for such LIBO Rate Loans or, if applicable (in the case of the outstanding principal amount of Base Rate Loans), the Alternate Base Rate plus the Applicable Margin for Base Rate Loans. SECTION 3.3. Fees. Each Borrower agrees to pay the fees payable by it set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1. Letter of Credit Face Amount Fee. The Borrowers agree to pay to the Administrative Agent, for the pro rata account of the Lenders determined in accordance with each Lender's Percentage, a fee for each Letter of Credit for the period from and including the date of the issuance of such Letter of Credit to (but not including) the earlier of (a) the date upon which such Letter of Credit expires and (b) the date upon which the Stated Amount of such Letter of Credit is irrevocably reduced to zero (by the making of a Disbursement by the Fronting Bank or otherwise), at the rates per annum determined by reference to the Rating Level in effect from time to time as set forth below for such type of Letter of Credit (provided, however, that no change in the rate for Letters of Credit shall be effective until three Business Days after the date on which the Administrative Agent receives evidence reasonably satisfactory to it from Group or the U.S. Borrower that a new Rating Level is in effect):
Rate for Rate for Documentary Standby Rating Letters of Letters of Level Debt Rating Credit Credit ----- ----------- ----------- ---------- Level 1 A-/A3 or higher 0.175% 0.250% Level 2 BBB+/Baa1 0.200% 0.275% Level 3 BBB/Baa2 0.225% 0.300%
-27- Level 4 BBB-/Baa3 0.350% 0.425% Level 5 BB+/Ba1 or lower 0.550% 0.625%;
provided, however, that at any time when the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings exceeds $75,000,000 and the then existing Rating Level is equal to Level 1, Level 2 or Level 3, such fee shall be increased by 0.075% per annum. The Foreign Borrower shall only be liable for the fee that has accrued on those Letters of Credit issued for its account. In the event that at any time no Debt Rating shall be in effect, the applicable rate per annum for purposes of determining the Letter of Credit fees provided for under this Section shall be 0.550% in the case of Documentary Letters of Credit and 0.625% in the case of Standby Letters of Credit. Such fee shall be payable by the applicable Borrower in arrears on each Quarterly Payment Date (commencing on the first such date after the issuance of such Letter of Credit), on the Commitment Termination Date and, in the case of Documentary Letters of Credit with expiry dates that extend beyond the Commitment Termination Date, on the expiration of or, if earlier, on the date of any disbursement made under, such Documentary Letter of Credit, in each case, for any period then ending for which such fee shall not theretofore have been paid. SECTION 3.3.2. Letter of Credit Fees. The Borrowers agree to pay to the Fronting Bank the fees relating to Letters of Credit in accordance with the Fee Letter and such customary fees currently paid by the Borrowers on the Effective Date for each Letter of Credit for the period from and including the date of issuance of such Letter of Credit to (but not including) the date upon which such Letter of Credit expires; provided, that the Foreign Borrower shall be obligated to pay such fees only on those Letters of Credit issued for its account. SECTION 3.3.3. Fee Letter. The U.S. Borrower agrees to pay to Scotiabank, for its own account, such fees in the amounts and on the dates set forth in the Fee Letter. SECTION 3.3.4. Commitment Fee. The U.S. Borrower agrees to pay to the Administrative Agent, for the pro rata account of each Lender determined in accordance with each Lender's Percentage, for the period commencing on the Effective Date and continuing through the Commitment Termination Date, a commitment fee on the sum of the average daily unused portion of the Commitment Amount at the rates per annum determined by reference to the Rating Level in effect from time to time as set forth below; (provided, however, that no change in the commitment fee rate shall be effective until three Business Days after the date on which the -28- Administrative Agent receives evidence reasonably satisfactory to it from Group or the U.S. Borrower that a new Rating Level is in effect):
Commitment Rating Level Fee Rate ------------ -------- Level 1 0.065% Level 2 0.075% Level 3 0.100% Level 4 0.125% Level 5 0.200%
In the event that at any time no Rating Level shall be in effect, the applicable rate per annum for purposes of determining the commitment fees provided for under this Section shall be 0.200%. The fee payable under this Section shall be payable by the U.S. Borrower in arrears on each Quarterly Payment Date, commencing on the first such date after the Effective Date, and on the Commitment Termination Date for any period then ending for which such fee shall not theretofore have been paid. The amount of any Loans made and Letters of Credit issued by the Fronting Bank and not funded by the other Lenders will constitute usage of the Commitment Amount for purposes of calculating the commitment fee payable to Lenders (other than the Fronting Bank) pursuant to this Section. SECTION 3.4. Guaranty. The U.S. Borrower shall guaranty the Obligations of the Foreign Borrower and each other L/C Party as set forth below. SECTION 3.4.1. Guaranty. The U.S. Borrower hereby absolutely, unconditionally and irrevocably (a) guarantees (referred to as its "Guaranty") the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of each of its Subsidiaries (and/or divisions thereof), including the Foreign Borrower for whom a Letter of Credit has been issued (collectively referred to as the "L/C Parties"), whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. 'SS'362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. 'SS'502(b) and 'SS'506(b)); and -29- (b) indemnifies and holds harmless each Lender, the Fronting Bank and each Agent, and their respective successors, transferees and assigns (collectively referred to as the "Lender Parties") for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by such Lender Party in enforcing any rights under this Section 3.4.1. This Guaranty constitutes a guaranty of payment when due and not of collection, and the U.S. Borrower specifically agrees that it shall not be necessary or required that any Lender Party exercise any right, assert any claim or demand or enforce any remedy whatsoever against any L/C Party or any other Obligor (or any other Person) before or as a condition to the obligations of the U.S. Borrower hereunder. SECTION 3.4.2. Acceleration of Guaranty. The U.S. Borrower agrees that, in the event of the dissolution or insolvency of the Foreign Borrower or the dissolution (other than to the extent permitted by the U.S. Credit Agreement) or insolvency of any other L/C Party, Obligor, or the U.S. Borrower, or the inability or failure of any Obligor, any L/C Party or the U.S. Borrower to pay debts as they become due, or an assignment by any Obligor, any L/C Party or the U.S. Borrower for the benefit of creditors, or the commencement of any case or proceeding in respect of any of the foregoing Persons under any bankruptcy, insolvency or similar laws, and with respect to any involuntary case or proceeding, such case or proceeding remains undismissed for a period of 30 days; and if any such event shall occur at a time when any of the Obligations of any L/C Party and each other Obligor may not then be due and payable, the U.S. Borrower will pay to the Administrative Agent (for the account of the Lender Parties) forthwith the full amount which would be payable hereunder by the U.S. Borrower if all such Obligations were then due and payable. SECTION 3.4.3. Guarantee Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations of the Foreign Borrower, each other L/C Party and each other Obligor have been paid in full, all obligations of the U.S. Borrower hereunder shall have been paid in full and all Commitments shall have terminated. The U.S. Borrower guarantees that the Obligations of the Foreign Borrower, each other L/C Party and each other Obligor and their respective Subsidiaries will be paid strictly in accordance with the terms of this Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender Party with respect thereto. -30- The liability of the U.S. Borrower under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Lender Party (i) to assert any claim or demand or to enforce any right or remedy against the Foreign Borrower, any other L/C Party, any other Obligor or any other Person (including any other guarantor) under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of any Obligations of the Foreign Borrower, any other L/C Party or any other Obligor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor, or any other extension, compromise or renewal of any Obligation of the Foreign Borrower, any other L/C Party or any other Obligor; (d) any reduction, limitation, impairment or termination of the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the U.S. Borrower hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting the Obligations of the Foreign Borrower, any other L/C Party, any other Obligor or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note or any other Loan Document; (f) any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Lender Party securing any of the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor; or -31- (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Foreign Borrower, any other L/C Party, any other Obligor, any surety or any guarantor. SECTION 3.4.4. Reinstatement, etc. The U.S. Borrower agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Lender Party, upon the insolvency, bankruptcy or reorganization of the Foreign Borrower, any other L/C Party, any other Obligor or otherwise, all as though such payment had not been made. SECTION 3.4.5. Waiver, etc. The U.S. Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor and this Guaranty and any requirement that any Agent or any other Lender Party protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Foreign Borrower, any other L/C Party, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor, as the case may be. SECTION 3.4.6. Postponement of Subrogation, etc. The U.S. Borrower will not exercise any rights which it may acquire by way of rights of subrogation under this Guaranty, by any payment made hereunder or otherwise, until the prior payment, in full and in cash, of all Obligations of the Foreign Borrower, each other L/C Party and each other Obligor. Any amount paid to the U.S. Borrower on account of any such subrogation rights prior to the payment in full of all Obligations of the Foreign Borrower, each other L/C Party and each other Obligor shall be held in trust for the benefit of the Lender Parties and shall immediately be paid to the Administrative Agent and credited and applied against the Obligations of the Foreign Borrower, each other L/C Party and each other Obligor, whether matured or unmatured, in accordance with the terms of this Agreement; provided, however, that if (a) the U.S. Borrower has made payment to the Lender Parties of all or any part of the Obligations of the Foreign Borrower, any other L/C Party or any other Obligor; and (b) all Obligations of the Foreign Borrower, each other L/C Party and each other Obligor have been paid in full and all Commitments have been permanently terminated; -32- each Lender Party agrees that, at the U.S. Borrower's request, the Administrative Agent, on behalf of the Lender Parties, will execute and deliver to the U.S. Borrower appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to the U.S. Borrower of an interest in the Obligations of the Foreign Borrower, each other L/C Party and each other Obligor resulting from such payment by the U.S. Borrower. In furtherance of the foregoing, for so long as any Obligations or Commitments remain outstanding, the U.S. Borrower shall refrain from taking any action or commencing any proceeding against the Foreign Borrower, any other L/C Party or any other Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under this Guaranty to any Lender Party. ARTICLE IV LETTERS OF CREDIT SECTION 4.1. Issuance Requests. Either Borrower or any wholly-owned Subsidiary of the U.S. Borrower (or any of their respective divisions) may request, from time to time on or prior to the Commitment Termination Date, by delivering to the Administrative Agent and the Fronting Bank an Issuance Request (such request being, in either Borrower's sole discretion, either delivered (by telex, teletransmission or otherwise) in the form attached hereto as Exhibit B or, in the case of any Documentary Letter of Credit, in accordance with the terms of the Tradexpress Agreement) on or before 3:00 p.m., Applicable Time on the Business Day on which a Documentary Letter of Credit is to be issued or on not less than three nor more than ten Business Day's in advance of the Business Day on which a Standby Letter of Credit is to be issued, that the Fronting Bank issue either (a) an irrevocable sight documentary letter of credit in such form as may be requested by such Borrower or such Subsidiary and approved by the Fronting Bank (each a "Documentary Letter of Credit"), or (b) an irrevocable standby irrevocable letter of credit in such form as may be requested by such Borrower or such Subsidiary and approved by the Fronting Bank (each a "Standby Letter of Credit"), in each case to facilitate such Borrower's and (in the case of the U.S. Borrower, its Subsidiaries') worldwide sourcing of merchandise. Each Letter of Credit shall by its terms: -33- (i) be issued in a Stated Amount which does not exceed (or would not exceed) the then Letter of Credit Availability; (ii) be stated to expire on a date (its "Stated Expiry Date") no later than 180 days from its date of issuance (it being acknowledged and agreed by the Borrowers, the Fronting Bank and the Lenders that the Stated Expiry Date for a Documentary Letter of Credit may be a date that is up to 179 days subsequent to the Commitment Termination Date; provided, however, that no Standby Letter of Credit may have a Stated Expiry date subsequent to the Commitment Termination Date); and (iii) on or prior to its Stated Expiry Date: (A) terminate immediately upon notice to the Fronting Bank thereof from the beneficiary thereunder that all obligations covered thereby have been terminated, paid, or otherwise satisfied in full, and (B) reduce in part immediately and to the extent the beneficiary thereunder has notified the Fronting Bank thereof that the obligations covered thereby have been paid or otherwise satisfied in part. So long as no Default has occurred and is continuing, by delivery to the Fronting Bank and the Administrative Agent of an Issuance Request (such request being, in either Borrower's sole discretion, either delivered (by telex, teletransmission or otherwise) in accordance with the terms of the Tradexpress Agreement or in the form attached hereto as Exhibit B) on or before 3:00 p.m., Applicable Time, (1) in the case of any Documentary Letter of Credit, on the Stated Expiry Date thereof and (2) in the case of any Standby Letter of Credit, on the third day prior to the Stated Expiry Date thereof, each Borrower may on or prior to the then existing Commitment Termination Date request the Fronting Bank to extend the Stated Expiry Date of such Letter of Credit for an additional period not to exceed (x) in the case of a Documentary Letter of Credit, the earlier of 180 days from its date of extension and 179 days after the Commitment Termination Date and (y) in the case of a Standby Letter of Credit, the earlier of 180 days from its date of extension and the Commitment Termination Date. Notwithstanding any other provision in this Agreement to the contrary, the Fronting Bank may in its discretion refuse to issue any Letter of Credit if such issuance would, in the Fronting Bank's reasonable determination, contravene any sanctions, laws or regulations of any State of the United States or any Federal body or authority of the United States (including but not limited to the regulations of the Federal Reserve Bank) or the laws, regulations -34- or sanctions of any other applicable jurisdiction or authority or if, in the Fronting Bank's reasonable determination, any of the above-mentioned laws, regulations or sanctions would affect the Fronting Bank's ability to perform its obligations with respect to any such Letter of Credit if issued. SECTION 4.2. Issuances and Extensions. On the terms and subject to the conditions of this Agreement (including Section 4.1 and Article VI), the Fronting Bank shall issue Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of Credit, in accordance with the Issuance Requests made therefor. The Fronting Bank will make available the original of each Letter of Credit which it issues in accordance with the Issuance Request therefor to the beneficiary thereof (and, at the request of a Lender, will provide such Lender on a monthly basis with a schedule of the outstanding Letters of Credit as of the last day of the prior month) and will notify the beneficiary under any Letter of Credit of any extension of the Stated Expiry Date thereof. SECTION 4.3. Destruction of Goods, etc. Neither the Fronting Bank nor its agents or correspondents shall be responsible for the negligence or fraudulence of any beneficiary of a Letter of Credit, for the existence, nature, condition, description, value, quality or quantity of the Goods, for the packing, shipment, export, import, handling, storage or delivery thereof, or for the safety or preservation thereof at any time, and neither the Fronting Bank nor its agents or correspondents shall be liable for any loss resulting from the total or partial destruction of or damage to or deterioration or fall in value of the Goods, or from the delay in arrival or failure to arrive of either the Goods or of any of the documents relating thereto, or from the inadequacy or invalidity of any document or insurance, or from the default or insolvency of any insurer, carrier or other Person issuing any document with respect to the Goods, or from failure to give or delay in giving notice of arrival of the Goods or any other notice, or from any error in or misinterpretation of or default or delay in the sending, transmission, arrival or delivery of any message, whether in writing or not, by post, telegraph, cable, wireless or otherwise, and the obligations hereunder of each Borrower to the Fronting Bank shall not be in any way lessened or affected if any Draft or document accepted, paid or acted upon by the Fronting Bank or its agents or correspondents does not bear a reference or sufficient reference to a Documentary Letter of Credit or if no note thereof is made on a Documentary Letter of Credit. SECTION 4.4. Other Lenders' Participation. Each Letter of Credit issued pursuant to Section 4.2 shall, effective upon its issuance and without further action, be issued on behalf of all Lenders (including the Fronting Bank thereof) according to their -35- respective Percentages. Each Lender shall, to the extent of its Percentage, be deemed irrevocably to have participated in the issuance of such Letter of Credit and shall be responsible to reimburse promptly the Fronting Bank thereof for Reimbursement Obligations which have not been converted into a Loan on the Disbursement Date pursuant to the terms of this Agreement or reimbursed by the Borrowers in accordance with Section 4.5, or which have been converted into a Loan on the Disbursement Date pursuant to the terms of this Agreement or reimbursed by the Borrowers but must be returned, restored or disgorged by the Fronting Bank for any reason, and each Lender shall, to the extent of its Percentage, be entitled to receive from the Administrative Agent a ratable portion of the letter of credit fees received by the Administrative Agent pursuant to Section 3.3.1, with respect to each Letter of Credit. In the event that either Borrower shall fail to reimburse the Fronting Bank, or if for any reason Loans shall not be made to fund any Reimbursement Obligation, in each case as provided in this Agreement and in an amount equal to the Disbursement amount, or in the event the Fronting Bank must for any reason return or disgorge such reimbursement, the Fronting Bank shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective participation therein. Each Lender shall make available to the Fronting Bank, whether or not any Default shall have occurred and be continuing, an amount equal to its respective participation in same day or immediately available funds at the office of the Fronting Bank specified in such notice not later than 11:00 a.m., New York City time, on the Business Day after the date notified by the Fronting Bank. In the event that any Lender fails to make available to the Fronting Bank the amount of such Lender's participation in such Letter of Credit as provided herein, the Fronting Bank shall be entitled to recover such amount on demand from such Lender together with interest at the Federal Funds Rate from the date such amount is due through (but excluding) the date such payment is made (together with such other compensatory amounts as may be required to be paid by such Lender to the Administrative Agent pursuant to the Rules for Interbank Compensation of the council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time). Nothing in this Section shall be deemed to prejudice the right of any Lender to recover from the Fronting Bank any amounts made available by such Lender to the Fronting Bank pursuant to this Section in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Fronting Bank in respect of which payment was made by such Lender constituted gross negligence or wilful misconduct on the part of the Fronting Bank. The Fronting Bank shall distribute to each other Lender which has paid all amounts payable by it under this Section with respect to any Letter of Credit issued by the Fronting Bank such other Lender's Percentage of all payments received by the -36- Fronting Bank from the Borrowers in reimbursement of drawings honored by the Fronting Bank under such Letter of Credit when such payments are received. SECTION 4.5. Disbursements. The Fronting Bank will notify the applicable Borrower and the Administrative Agent promptly of the presentment for payment of any Letter of Credit, together with notice of the date (a "Disbursement Date") such payment shall be made. Subject to the terms and provisions of such Letter of Credit, and the delivery to the Fronting Bank of all drafts, certificates, documents and/or instruments required as a condition to making a Disbursement under such Letter of Credit, the Fronting Bank shall make such payment to the beneficiary (or its designee) of such Letter of Credit. If and to the extent that Loans are not made to fund a Reimbursement Obligation pursuant to Section 2.3, then the Borrowers will reimburse the Fronting Bank within one Business Day following the Disbursement Date for all amounts which the Fronting Bank has disbursed under the Letter of Credit; provided, that the Foreign Borrower shall only be obligated to reimburse the Fronting Bank for disbursements under Letters of Credit issued for its account. SECTION 4.6. Reimbursement; Outstanding Letters, etc. (a) Each Borrower's obligation (a "Reimbursement Obligation") under Section 4.5 to reimburse the Fronting Bank with respect to each Disbursement (including fees and interest thereon payable pursuant to Section 3.2.2 and Section 3.3.1), and each Lender's obligation to make participation payments pursuant to Section 4.4 in each Disbursement, shall be absolute, unconditional and irrevocable and shall not be reduced by any event or occurrence including, without limitation, (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; -37- (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; (v) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit; (vi) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from any Letter of Credit; (vii) the existence of any claim, set-off, defense or other right that either Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Fronting Bank or any other Person, whether in connection with the transactions contemplated by the applicable Letter of Credit or any unrelated transaction; (viii) payment by the Fronting Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (ix) any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations in respect of the applicable Letter of Credit; or (x) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, either Borrower or a guarantor. The obligations of each Borrower and the Lenders hereunder shall remain in full force and effect and shall apply to any alteration to or extension of the expiration date of any Letter of Credit or any Letter of Credit issued to replace, extend or alter any Letter of Credit during the term of this Agreement. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Fronting Bank or any Lender hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Fronting Bank in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon each Borrower, each Obligor and each such Lender, -38- and shall not put the Fronting Bank under any resulting liability to either Borrower, any Obligor or any such Lender, as the case may be. (b) The applicable Borrower shall pay to the Fronting Bank an amount equal to the then Stated Amount and all unpaid fees in respect of (i) any Letter of Credit outstanding under this Agreement upon any termination of this Agreement and (ii) any Letter of Credit which is affected by, or becomes the subject matter of, any order, judgment, injunction or other such determination (an "Order") or any petition or other application for any Order by either Borrower or any other party, restricting payment by the Fronting Bank under and in accordance with such Letter of Credit or extending the Fronting Bank's or any Lender's liability under such Letter of Credit beyond the expiration date stated therein, or if not stated therein, which would otherwise apply to such Letter of Credit. Payment in respect of each such Letter of Credit described in (i) and (ii) in this clause shall be due forthwith upon demand and in Dollars. (c) The Fronting Bank hereby agrees that it will, with respect to each Letter of Credit subjected to any such demand for payment under the preceding clause (b), upon the later of: (i) the date on which any final and non-appealable order, judgment or other such determination has been rendered or issued either terminating any applicable Order or permanently enjoining the Fronting Bank from paying under such Letter; and (ii) the earlier of (x) the date on which either the original counterpart of such Letter of Credit is returned to the Fronting Bank for cancellation or the Fronting Bank is released by the beneficiary thereof from any further obligations in respect of such Letter of Credit, and (y) the expiry of such Letter of Credit; pay to the applicable Borrower an amount in Dollars equal to any excess of the amount received by the Fronting Bank pursuant to clause (b) above in respect of such Letter of Credit (the "Received Amount") over the equivalent in Dollars of the total of amounts applied to reimburse the Fronting Bank for amounts paid by it under such Letter of Credit, if any (the Fronting Bank having the right to so appropriate such funds), together with an additional amount in Dollars computed by applying to the amount of such excess from time to time a per annum rate equal to 3% less than the Alternate Base Rate. Such additional amount shall be calculated daily on the basis of a 360 day year for the actual number of days elapsed from and including the date of payment to the Fronting Bank of the Received Amount to (but not including) the date of return to the applicable Borrower of the excess. -39- SECTION 4.7. Deemed Disbursements. Upon (i) the occurrence of any Commitment Termination Event of the type described in clause (c) of the definition of "Commitment Termination Event", (ii) the occurrence and during the continuation of any event or condition specified in clause (e) of Section 6.01 of the U.S. Credit Agreement, or (iii) the occurrence and during the continuance of any other Event of Default, (a) an amount equal to that portion of Letter of Credit Outstandings attributable to outstanding and undrawn Letters of Credit shall, without demand upon or notice to either Borrower, be deemed to have been paid or disbursed by the Fronting Bank under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b) upon notification by the Fronting Bank to the Administrative Agent and the U.S. Borrower of its obligations under this Section, the Borrowers shall be immediately obligated to reimburse the Fronting Bank the amount deemed to have been so paid or disbursed by the Fronting Bank; provided, that the Foreign Borrower shall only be obligated to reimburse the Fronting Bank for amounts deemed to have been disbursed under Letters of Credit issued for its account. Any amounts so received by the Fronting Bank from the Borrowers pursuant to this Section shall be held as collateral security for the repayment of such Borrower's Obligations in connection with the Letters of Credit issued by the Fronting Bank. At any time when such Letters of Credit shall terminate and all Obligations of the Fronting Bank are either terminated or paid or reimbursed to the Fronting Bank in full, the Obligations of the Borrowers under this Section shall be reduced accordingly (subject, however, to reinstatement in the event any payment in respect of such Letters of Credit is recovered in any manner from the Fronting Bank), and the Fronting Bank will return to the applicable Borrower the excess, if any, of (c) the aggregate amount deposited by the Borrowers with the Fronting Bank and not theretofore applied by the Fronting Bank to any Reimbursement Obligation over (d) the aggregate amount of all Reimbursement Obligations to the Fronting Bank pursuant to this Section, as so adjusted. At such time when all Events of Default shall have been cured or waived, the Fronting Bank shall return to the applicable Borrower -40- all amounts then on deposit with the Fronting Bank pursuant to this Section together with an additional amount in dollars computed by applying to the amount so returned to the applicable Borrower from time to time a per annum rate equal to 3% less than the Alternate Base Rate. Such additional amount shall be calculated daily on the basis of a 360 day year for the actual number of days elapsed from and including the date of payment to the Fronting Bank by the applicable Borrower to (but not including) the date of return to the applicable Borrower of such amounts. SECTION 4.8. Nature of Reimbursement Obligations. The Borrowers shall assume all risks of the acts, omissions, or misuse of any Letter of Credit by the beneficiary thereof. Any action, inaction or omission taken or suffered by the Fronting Bank or any of the Fronting Bank's correspondents under or in connection with a Letter of Credit or any Draft made under any Documentary Letter of Credit or any document relating thereto, if in good faith and in conformity with foreign or domestic laws, regulations or customs applicable thereto shall be binding upon the Borrowers and shall not place the Fronting Bank or any of its correspondents under any resulting liability to the Borrowers. Without limiting the generality of the foregoing, the Fronting Bank and its correspondents may receive, accept or pay as complying with the terms of a Letter of Credit, any Draft under any Documentary Letter of Credit, otherwise in order which may be signed by, or issued to, the administrator or any executor of, or the trustee in bankruptcy of, or the receiver for any property of, or other Person or entity acting as the representative or in the place of, such beneficiary or its successors and assigns. The Borrowers covenant that they will not take any steps, issue any instructions to the Fronting Bank or any of its correspondents or institute any proceedings intended to derogate from the right or ability of the Fronting Bank or its correspondents to honor and pay any Draft or Drafts. Without in any way limiting the provisions of Section 4.6, and notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, each Borrower irrevocably acknowledges and agrees that it is unconditionally liable for all Reimbursement Obligations with respect to each Disbursement (including fees and interest thereon) under each Letter of Credit issued for its account, regardless (in the case of the U.S. Borrower) of whether such Letter of Credit was issued in respect of the sourcing or other corporate requirements or needs of the U.S. Borrower or any Subsidiary of the U.S. Borrower, or otherwise. SECTION 4.9. Existing Letters of Credit. The Existing Letters of Credit, and the amount and payment date of fees on Letters of Credit (including such Existing Letters of Credit deemed to be Documentary Letters of Credit hereunder), shall be -41- governed by this Agreement. Simultaneously with the effectiveness of this Agreement pursuant to Section 11.8, the Existing Credit Agreement shall be superseded in its entirety by this Agreement, except to the extent of any provisions of the Existing Credit Agreement which by their express terms survive termination of the Existing Credit Agreement. ARTICLE V CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 5.1. LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to the U.S. Borrower, be conclusive and binding on the Borrowers) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of the Lenders to make, continue, maintain or convert into any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the U.S. Borrower that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 5.2. Deposits Unavailable. If any Lender shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to it in its relevant market; or (b) by reason of circumstances affecting such Lender's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from such Lender to the U.S. Borrower and the Administrative Agent, the obligations of the Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until such Lender shall notify the U.S. Borrower and the Administrative Agent that the circumstances causing such suspension no longer exist. SECTION 5.3. Increased LIBO Rate Loan Costs, etc. The Borrowers agree to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum -42- receivable by such Lender in respect of, making or continuing (or of its obligation to make or continue) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans. Each Lender shall promptly notify the U.S. Borrower and the Administrative Agent in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such lender for such increased cost or reduced amount. Such additional amounts shall be payable by the U.S. Borrower directly to such Lender within five Business Days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the U.S. Borrower. SECTION 5.4. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan, but excluding the loss of any anticipated or expected profits in respect of such LIBO Rate Loan) as a result of (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion Notice therefor, then, upon the written notice of such Lender to the U.S. Borrower and the Administrative Agent, the U.S. Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the U.S. Borrower. SECTION 5.5. Increased Capital Costs, etc. If the implementation of or, after the date hereof, the introduction or any change in the interpretation of, or any change in its application to the Borrowers, the Fronting Bank and/or the Lenders of, any law or any regulation or guideline issued by any central bank or other governmental authority (whether or not having the force of law), including any eurocurrency or other reserve or special deposit requirement or any tax (other than tax -43- which is on a Lender's general net or gross income or in respect of a Lender's franchise taxes) or any capital requirement, has, due to a Lender's or the Fronting Bank's compliance, the effect, directly or indirectly, of (i) increasing the cost to such Lender or Fronting Bank of performing its obligations hereunder or under any Letter of Credit or Loan; (ii) reducing any amount received or receivable by such Lender or Fronting Bank or its effective return hereunder or in respect of any Letter of Credit or Loan or on its capital; or (iii) causing such Lender or Fronting Bank to make any payment or to forgo any return based on any amount received or receivable by such Lender or Fronting Bank hereunder or in respect of any Letter of Credit or Loan, then upon demand from time to time the U.S. Borrower shall pay such amount as shall compensate such Lender or Fronting Bank for any such cost, reduction, payment or foregone return upon receipt of the certificate referred to in the last sentence of this paragraph. The Borrowers shall further indemnify the Fronting Bank for all costs, losses and expenses incurred by the Fronting Bank in connection with any Letter of Credit and agrees that the Fronting Bank shall have no liability to the Borrowers for any reason in respect of any Letter of Credit other than on account of the Fronting Bank's gross negligence or wilful misconduct. Any certificate of the Fronting Bank or any Lender in respect of the foregoing will be conclusive and binding upon the Borrowers, except for manifest error, and shall set forth a determination of the amounts owing to the Fronting Bank or such Lender in good faith using any reasonable averaging and attribution methods. Anything in this Agreement or any Loan Document to the contrary notwithstanding, no Lender or Fronting Bank shall be indemnified for, exculpated from, or relieved from liability, under this Agreement or any Loan Document, for any act or omission constituting gross negligence or wilful misconduct. SECTION 5.6. Taxes. (a) Each payment made by each Borrower under this Agreement shall be made free and clear of, and without deduction for, any present or future withholding or other taxes imposed on such payments by or on behalf of any government or any political subdivision or agency thereof or therein, except for any income, franchise and other taxes imposed on the Lender (which for purposes of this Section 5.6 shall include any branch, affiliate or international banking facility created by a Lender to make or maintain a LIBO Rate Loan pursuant to Section 2.5) by the jurisdiction under the laws of which such Lender is organized or any political subdivision or agency thereof or by the jurisdiction of such Lender's branch or lending office or principal place of business (all such non-excluded taxes being hereinafter referred to as "Taxes"). Whenever any Taxes are payable by either Borrower with respect to any payments hereunder, such Borrower shall promptly furnish to the Administrative Agent for the account of the applicable Lender official receipts (to the extent that the relevant governmental -44- authority delivers such receipts) evidencing payment of any such Taxes so withheld or deducted. (b) Each Lender that is not a "United States person" (as such term is defined in Section 7701(a)(3) of the Internal Revenue Code of 1986) shall submit to the U.S. Borrower on or before the Effective Date (or, in the case of a Person that becomes a Lender after the Effective Date by assignment or pursuant to Section 2.5 promptly upon such assignment or funding) two duly completed and signed copies of either (1) Form 1001 of the United States Internal Revenue Service entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Agreement or (2) Form 4224 of the United States Internal Revenue Service relating to all amounts to be received by such Lender pursuant to this Agreement. Each such Lender shall, from time to time after submitting either such form, submit to the U.S. Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other such forms (or such successor forms or other documents as shall be adopted from time to time by the relevant United States taxing authorities) as may be (1) reasonably requested in writing by the U.S. Borrower or the Administrative Agent and (2) appropriate under then current United States law or regulations to avoid United States withholding taxes on payments in respect of any amounts to be received by such Lender pursuant to this Agreement. Upon the reasonable request of the U.S. Borrower or the Administrative Agent, each Lender that has not provided the forms or other documents, as provided above, on the basis of being a "United States person" shall submit to the U.S. Borrower and the Administrative Agent a certificate to the effect that it is such a "United States person". (c) If any Lender which is not a "United States person" determines that it is unable to submit to the U.S. Borrower and the Administrative Agent any form or certificate that such Lender is requested to submit pursuant to the preceding paragraph, or that it is required to withdraw or cancel any such form or certificate, or that any such form or certificate previously submitted has otherwise become ineffective or inaccurate, such Lender shall promptly notify the U.S. Borrower and the Administrative Agent of such fact. (d) The Borrowers shall not be required to pay any additional amount in respect of Taxes to any Lender if and only to the extent that (A) such Lender is subject to such Taxes on the Effective Date (or in the case of a Person that became a Lender after the Effective Date by assignment or pursuant to Section 2.5 on the date of such assignment or funding) or would be subject to such Taxes on such date if a payment under this Agreement has been received by it on such date; (B) such Lender -45- becomes subject to such Taxes subsequent to the date referred to in clause (A) above (or in the case of a Lender which is not a "United States person", the first date on which it delivers the appropriate form or certificate to the U.S. Borrower as referred to in clause (b) of this Section) as a result of a change in the circumstances of such Lender (other than a change in applicable law), including a change in the residence, place of incorporation or principal place of business of the Lender, a change in the branch or lending office of the Lender participating in the transactions set forth herein or as a result of the sale by the Lender of participating interests in such Lender's creditor position(s) hereunder; or (C) such Taxes would not have been incurred but for the failure of such Lender to file with the appropriate tax authorities and/or provide to the U.S. Borrower any form or certificate that it was required so to do pursuant to clause (b) of this Section, unless the Lender is not entitled to provide such form or certificate as a result of a change in applicable law after the Effective Date (or in the case of a Person that became a Lender after the Effective Date by assignment or pursuant to Section 2.5 the date of such assignment or funding). (e) Within thirty (30) days after the written reasonable request of the U.S. Borrower, each Lender shall execute and deliver to the U.S. Borrower such certificates, forms or other documents which can be furnished consistent with the facts and which are reasonably necessary to assist the U.S. Borrower in applying for refunds of Taxes paid by the U.S. Borrower hereunder or making payment of Taxes hereunder; provided, however, that no Lender shall be required to furnish to the U.S. Borrower any financial information with respect to itself or other information which it considers confidential. (f) The U.S. Borrower shall have the right to require any Lender which is not a "United States person" to which the U.S. Borrower is required to make additional payments pursuant to Section 5.6 hereof on account of Taxes (or would, upon payment to such Lender of an amount hereunder, be so required) to assign such Lender's total Loans and Commitments to one or more banks or financial institutions identified by the U.S. Borrower and acceptable to the Administrative Agent at a purchase price equal to the then outstanding amount of all principal, interest, fees and other amounts then owed to such Lender. SECTION 5.7. Payments, Computations, etc. Unless otherwise expressly provided herein (including as set forth in Section 2.3 and Section 4.5), all payments by the Borrowers pursuant to this Agreement, the Notes or any other Loan Document shall be made by the Borrowers to the Administrative Agent for the account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, -46- without setoff, deduction or counterclaim, not later than 11:00 a.m., Applicable Time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the U.S. Borrower. To the extent the Administrative Agent receives such funds prior to 12:00 noon, Applicable Time, the Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day in New York, such payment shall (except as otherwise required by clause (b) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 5.8. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Letter of Credit or Loan in excess of its Percentage of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Letters of Credit or Loans, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 5.9) with respect to such -47- participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 5.9. Setoff. Each Lender shall, upon the occurrence of any event or condition described in clause (e) of Section 6.01 of the U.S. Credit Agreement or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due) any and all balances, credits, deposits, accounts or moneys of the applicable Borrower then or thereafter maintained with or otherwise held by such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 5.8. Each Lender agrees promptly to notify the U.S. Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 5.10. Use of Proceeds. Each Borrower shall apply the proceeds of each Credit Extension in accordance with the fifth recital. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Initial Credit Extension. The amendment and restatement of the Existing Credit Agreement on the terms set forth in this Agreement and the obligations of the Lenders to make any Credit Extension and the Fronting Bank to issue any Letters of Credit shall be subject to the delivery to the Managing Agents of this Agreement duly executed and delivered by each Lender, each Agent, each Borrower and Group, and the prior or concurrent satisfaction of each of the conditions precedent set forth below in this Section 6.1. SECTION 6.1.1. Resolutions, etc. The Managing Agents shall have received from each Borrower originally executed copies of a -48- certificate, each dated the date of the Effective Date, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; and (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of such Obligor canceling or amending such prior certificate. SECTION 6.1.2. Delivery of Notes. Each Lender shall have received its Notes duly executed and delivered by each Borrower. SECTION 6.1.3. Guarantees. The Managing Agents shall have received originally executed counterparts for each Lender of (a) the Group Guaranty, dated as of the date hereof, duly executed by an Authorized Officer of Group and (b) the Subsidiary Guaranty, dated as of the date hereof, duly executed by an Authorized Officer of each Domestic Subsidiary that is a party thereto. SECTION 6.1.4. Delivery of Form 1001 or 4224. The Administrative Agent shall have received two executed copies of either Internal Revenue Service Form 1001 or Form 4224, as applicable, from each non-U.S. Lender. SECTION 6.1.5. Certificates as to No Default, etc. No default shall have occurred in the performance of any affirmative or negative covenants contained in the U.S. Credit Agreement, none of the events described in clauses (a), (b), (d), (e), (f), (g), (h), (i) or (j) of Section 6.01 of the U.S. Credit Agreement shall have occurred, and no Event of Default shall have occurred or would occur under the U.S. Credit Agreement or would result from the execution and delivery of, or the performance by the Borrowers of their obligations under, this Agreement or the issuance of any Letter of Credit or the making of any Loan, and the Managing Agents shall have received originally executed certificates for each Lender dated the Effective Date from an Authorized Officer of the U.S. Borrower certifying as to the above. SECTION 6.1.6. No Material Adverse Change. Since January 4, 1997, there shall have been no material adverse change in the business, condition (financial or otherwise), operations, -49- performance, properties or prospects of (i) the U.S. Borrower or (ii) Group and its Subsidiaries, taken as a whole. SECTION 6.1.7. Tradexpress Agreement. The Administrative Agent shall have received the completed Tradexpress Agreements, in each case duly executed and delivered by the Borrower party thereto and the Fronting Bank. SECTION 6.1.8. U.S. Credit Agreement. Prior to or concurrently with the Effective Date, the U.S. Borrower shall have executed and delivered the U.S. Credit Agreement. The U.S. Credit Agreement shall be in full force and effect. SECTION 6.1.9. Opinions of Counsel. The Managing Agents shall have received opinions, dated the Effective Date and addressed to the Agents and all Lenders, from (i) Skadden, Arps, Slate, Meagher & Flom LLP, New York counsel to the Obligors, substantially in the form of Exhibit G hereto, (ii) Stanley P. Silverstein, General Counsel for the U.S. Borrower, substantially in the form of Exhibit H hereto and (iii) Thompson & Patterson, Barbados counsel to the Foreign Borrower, substantially in the form of Exhibit I hereto. SECTION 6.2. All Credit Extensions. The obligation of each Lender or the Fronting Bank to make any Credit Extension on any date other than a Funding Date shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 6.2. SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension the following statements shall be true and correct: (a) no event or circumstances has occurred and is continuing, or would result from the making of such Credit Extension, which constitutes a Default, or which when considered by itself or together with other past or then existing events or circumstances, constitutes or would constitute a material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the U.S. Borrower or of Group and its Subsidiaries taken as a whole; (b) no event of default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an event of default shall have occurred (unless otherwise waived by the Required Lenders) in the performance of any affirmative and negative covenants contained in Sections 5.01, 5.02 or 5.03 of the U.S. Credit Agreement and regardless of whether such U.S. Credit Agreement is terminated, unless in connection with such termination a -50- replacement credit facility which the Required Lenders hereunder have approved is entered into in which case, the affirmative and negative covenants in such facility shall become the subject of this clause; (c) none of the events described in clauses (a), (b), (d), (e), (f), (g), (h), (i) or (j) of Section 6.01 of the U.S. Credit Agreement (without giving effect to any termination of the U.S. Credit Agreement, unless in connection with such termination a replacement credit facility to which the Required Lenders hereunder have approved, in which case the analogous provisions of such replacement credit facility shall become the subject of this clause), shall have occurred (unless, in the case of other than such clause (e), otherwise waived by the Required Lenders); and (d) the representations and warranties set forth in Article VII, Article III of the Subsidiary Guaranty and Article III of the Group Guaranty shall, in each case, be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date). SECTION 6.2.2. Credit Request. To the extent that Loans are made in accordance with clause (b) of Section 2.3 or a Borrower requests that the Fronting Bank issue a Documentary Letter of Credit other than by means of notification in accordance with the terms of the Tradexpress Agreement or a Standby Letter of Credit, the Administrative Agent shall have received a Borrowing Request or Issuance Request, as the case may be, for such Credit Extension, executed and delivered by the applicable Borrower. Each of the delivery (or deemed delivery pursuant to the terms of this Agreement) of a Borrowing Request or an Issuance Request and the acceptance by either Borrower of the proceeds of the Borrowing or the issuance of the Letter of Credit, or the making of a Loan upon a Disbursement, as applicable, shall constitute a representation and warranty by the Borrowers that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) or the issuance of the Letter of Credit, as applicable, the statements made in Section 6.2.1 are in each case true and correct. SECTION 6.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of Group or any of its Subsidiaries shall be satisfactory in form and substance to the Managing Agents; the Managing Agents shall have received all information, approvals, opinions, documents or instruments as the Managing Agents may reasonably request. -51- ARTICLE VII REPRESENTATIONS AND WARRANTIES In order to induce the Fronting Bank, the Lenders and the Agents to enter into this Agreement and to make Loans and issue Letters of Credit hereunder, each of the U.S. Borrower and Group represents and warrants unto each Agent, each Lender and the Fronting Bank, as set forth in this Article VII. SECTION 7.1. Organization, etc. Group and each of its Subsidiaries is a corporation or limited liability company, as the case may be, validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation or organization, is duly qualified to do business and is in good standing as a foreign corporation or foreign entity, as applicable, in each jurisdiction where the nature of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect (as defined in the U.S. Credit Agreement), and each Obligor has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. SECTION 7.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance (i) by the Borrowers and Group of this Agreement, the Notes and each other Loan Document executed or to be executed by it, and (ii) by each other Obligor of each Loan Document executed and delivered by it, are, in each case, within such Obligor's corporate (or other, as applicable) powers, have been duly authorized by all necessary corporate (or other, as applicable) action, and do not (a) contravene such Obligor's Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting such Obligor; or (c) result in, or require the creation or imposition of, any Lien on any of such Obligor's properties. SECTION 7.3. Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by either Borrower, Group or any other Obligor of -52- this Agreement, the Notes or any other Loan Document to which it is a party. Neither Group nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 7.4. Validity, etc. This Agreement constitutes, and the Notes and each other Loan Document executed by the Borrowers and each other Obligor will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of such Borrower or such Obligor enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors rights generally and by general equity principles. SECTION 7.5. No Material Adverse Change. Since January 4, 1997, there has been no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of (i) the U.S. Borrower or (ii) Group and its Subsidiaries, taken a whole. SECTION 7.6. Litigation, etc. There is no action, suit, investigation or proceeding affecting any Obligor or any of its Subsidiaries, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby or (ii) is or would be reasonably likely to materially adversely affect the business, condition (financial or otherwise), operations, performance, properties or prospects of the U.S. Borrower or Group and its Subsidiaries, taken as a whole. SECTION 7.7. Regulations G, U and X. Neither Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 7.8. Accuracy of Information. All factual information heretofore or contemporaneously furnished by or on behalf of either Borrower or Group in writing to any Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such -53- factual information hereafter furnished by or on behalf of either Borrower to any Agent or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by such Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. The parties acknowledge and agree that nothing contained in this Section shall constitute a representation or warranty by either Borrower or Group as to the future financial performance or the results of operations of either Borrower or Group; provided, however, that any projections delivered pursuant to this Agreement have been (and will be) prepared on the basis of the assumptions accompanying them, and such projections and assumptions, as of the date of preparation thereof and as of the date hereof, are reasonable and represent the U.S. Borrower's or Group's good faith estimate of its future financial performance. SECTION 7.9. U.S. Credit Agreement Representations and Warranties. As to all representations and warranties contained in Article IV of the U.S. Credit Agreement and each Loan Document (as such term is defined by the U.S. Credit Agreement) insofar as applicable to the Borrowers, Group or any other Obligor, the properties of the Borrowers, Group or any other Obligor or the obligations of the Borrowers, Group or any other Obligor under the documents executed and delivered in connection with the U.S. Credit Agreement, each such representation and warranty set forth in such Article (insofar as so applicable) and all other terms of the U.S. Credit Agreement and each Loan Document (as such term is defined by the U.S. Credit Agreement) to which reference is made therein, together with all related definitions and ancillary provisions, are hereby incorporated into this Agreement by reference with respect to each Borrower, Group or any other Obligor as though specifically set forth in this Section 7.9. ARTICLE VIII COVENANTS SECTION 8.1. Covenants. Each of the U.S. Borrower and Group agrees with each Agent, each Lender and the Fronting Bank that, until all Commitments have terminated and all Obligations have been paid and performed in full, the U.S. Borrower and Group will perform, and will cause each of their respective Subsidiaries to perform, the obligations set forth in this Section 8.1. SECTION 8.1.1. Financial Information, Reports, Notices, etc. Unless the information set forth below is otherwise -54- delivered to a Lender under the terms of the U.S. Credit Agreement, Group will furnish, or will cause to be furnished, to each Lender and each Agent copies of the financial statements, reports, notices and information required pursuant to clause (j) of Section 5.01 of the U.S. Credit Agreement. SECTION 8.1.2. Future Subsidiaries of Group. Group covenants and agrees that, upon any Person becoming a Subsidiary after the Effective Date, Group shall cause such Person to become party to the Subsidiary Guaranty if such Person is required to deliver a guaranty pursuant to clause (k) of Section 5.01 of the U.S. Credit Agreement (without giving effect to any waiver of such Section's requirements unless consented to by the Required Lenders). SECTION 8.1.3. U.S. Credit Agreement Covenants. Each of the U.S. Borrower and Group will comply with and be bound by, and will cause each of the Subsidiaries to comply with and be bound by, all of the agreements, covenants and obligations contained in Article V of the U.S. Credit Agreement. Each such agreement, covenant and obligation contained in such Sections and all other terms of the U.S. Credit Agreement and the documents executed in connection therewith to which reference is made therein, together with all related definitions and ancillary provisions is hereby incorporated into this Agreement by reference as though specifically set forth in this Section 8.1.3, and each such agreement, covenant and obligation shall, for purposes hereof, survive the termination of the U.S. Credit Agreement. SECTION 8.1.4. Default Notice. The U.S. Borrower will furnish, or will cause to be furnished, to each Lender as soon as possible and in any event within two Business Days after the occurrence of each Default a statement of its chief financial officer setting forth details of such Default and the action that the U.S. Borrower has taken and proposes to take with respect thereto. ARTICLE IX EVENTS OF DEFAULT SECTION 9.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 9.1 shall constitute an "Event of Default". SECTION 9.1.1. Non-Payment of Obligations. Either Borrower shall default in the payment or prepayment when due of (i) any principal of or interest on any Loan, (ii) any Reimbursement Obligation, or (iii) any fee or of any other Obligation, and in each case such default in payment or prepayment shall continue -55- unremedied for more than three Business Days from the date such payment or prepayment was due. SECTION 9.1.2. Breach of Warranty. Any representation or warranty of either Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it (including any certificates delivered pursuant to Article VI) is or shall be incorrect when made or deemed made in any material respect. SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations. The U.S. Borrower or Group shall default in the due performance and observance of any of its obligations under Sections 8.1.2 or 8.1.4, or any Obligor shall default in the due performance or observance of any of its obligations under any other covenant in a Loan Document which is impossible to remedy. SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. Either Borrower or any other Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days (a) after notice thereof shall have been given to the U.S. Borrower by any Agent or any Lender or (b) after any officer of either Borrower obtains knowledge thereof. SECTION 9.1.5. Default Under U.S. Credit Agreement. Any Event of Default under (and as defined in) the U.S. Credit Agreement or any replacement credit facility shall have occurred whether or not such Event of Default is waived by the lenders under the U.S. Credit Agreement, or an amendment of the U.S. Credit Agreement is entered into with the effect of waiving or curing such Event of Default. SECTION 9.1.6. Bankruptcy, Insolvency, etc. Any event or condition described in clause (e) of Section 6.01 of the U.S. Credit Agreement (or similar provision of any replacement credit facility) shall have occurred and be continuing. SECTION 9.1.7. Termination, etc. of Loan Documents. Any Loan Document shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Obligor that is a party thereto; or either Borrower (including the U.S. Borrower with respect to its Guaranty set forth in Section 3.4) or any other Obligor shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability (except as aforesaid). SECTION 9.2. Action Upon Bankruptcy. If any Event of Default described in Section 9.1.6 shall occur, the Commitments -56- (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 9.3. Action Upon Other Event of Default. If any Event of Default (other than any Event of Default described in Section 9.1.6) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the U.S. Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations in respect of the Loans or otherwise to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. ARTICLE X THE AGENTS SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its Administrative Agent and Citibank as its Documentation Agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes each Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by such Agent (with respect to which the such Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of such Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees, and as to which such Agent is not reimbursed by the Borrowers; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to -57- have resulted from such Agent's gross negligence or wilful misconduct. Each Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of any Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 10.2. Copies, etc. Each Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to such Agent by the Borrowers pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by a Borrower). Each Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by such Agent from the Borrowers for distribution to the Lenders by such Agent in accordance with the terms of this Agreement. SECTION 10.3. Exculpation. Neither any Agent nor any of its affiliates, directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens (if any) purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of collateral security (if any), nor to make any inquiry respecting the performance by either Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by any Agent shall not obligate it to make any further inquiry or to take any action. Each Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION 10.4. Successor. Each Agent may resign as such at any time upon at least 30 days' prior notice to the U.S. Borrower and all Lenders. If such Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Agent which shall thereupon become an Agent in the capacity of the resigning Agent hereunder. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on -58- behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as an Agent, the provisions of (a) this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement; and (b) Section 11.3 and Section 11.4 shall continue to inure to its benefit. SECTION 10.5. Loans Made or Letters of Credit Issued by Scotiabank and Loans made by Citibank. Each of Scotiabank and Citibank shall have the same rights and powers with respect to (x) the Loans made by it or any of its affiliates, (y) the Notes held by it or any of its affiliates, and (z) its participating interests in the Letters of Credit as any other Lender and may exercise the same as if it were not an Agent. Each of Scotiabank, Citibank and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the U.S. Borrower or any Subsidiary or affiliate of the U.S. Borrower as if Scotiabank or Citibank were not Agents hereunder. SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrowers, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitment. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. -59- ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrowers and the Required Lenders; provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) modify this Section 11.1, change the definition of "Required Lenders", increase the Commitment Amount or (except as otherwise contemplated by this Agreement) the Percentage of any Lender, reduce any fees described in Article III, release any guarantor under the Subsidiary Guaranty or the Group Guaranty, or extend any Commitment Termination Date shall be made without the consent of each Lender; (c) extend the due date for, or reduce the amount of, (i) any scheduled repayment or prepayment of principal of or interest on or fees payable in respect of any Loan (or reduce the principal amount of or rate of interest on or fees payable in respect of any Loan) shall be made without the consent of the holder of that Note evidencing such Loan, or (ii) any Reimbursement Obligation shall be made without the consent of the Lender to whom such Reimbursement Obligation is owed; (d) affect adversely the interests, rights or obligations of the Fronting Bank in its capacity as the Fronting Bank shall be made without the consent of the Fronting Bank; (e) affect adversely the interests, rights or obligations of the Documentation Agent in its capacity as the Documentation Agent shall be made without the consent of the Documentation Agent; or (f) affect adversely the interests, rights or obligations of the Administrative Agent in its capacity as the Administrative Agent shall be made without consent of the Administrative Agent. -60- No failure or delay on the part of any Agent, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on either Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 11.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address, or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted. SECTION 11.3. Payment of Costs and Expenses. The U.S. Borrower agrees to pay on demand all reasonable expenses of the Agents (including the reasonable fees and out-of-pocket expenses of counsel to the Agents and of local counsel, if any, who may be retained by counsel to the Agents) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated, and (b) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. Each Borrower covenants to pay on demand all reasonable costs and expenses of the Agents, the Fronting Bank and the Lenders incurred in the enforcement of any Agent's, the Fronting Bank's or any Lender's rights under this Agreement and any Loan Document (including the reasonable fees and expenses of counsel for such Agent, the Fronting Bank and such Lender with respect thereto) -61- and, further, covenants that it will indemnify the Agents, the Fronting Bank and the Lenders on demand against all loss or damage to such Persons arising out of the issuance of or other action taken by such Persons in connection with any Letter of Credit or Loan including the costs relating to any legal process instituted by any party restraining or seeking to restrain the Fronting Bank from accepting or paying any Letter of Credit or Draft. Each Borrower also agrees that neither any Agent, the Fronting Bank nor any Lender shall have any liability to it for any reason in respect of the issuance of any Letter of Credit or Loan other than on account of such Agent's, Fronting Bank's or Lender's gross negligence or wilful misconduct. All payments to be made to such Agent, the Fronting Bank and such Lender hereunder shall, subject to Section 5.6, be made for value on the date due and free of any withholding tax or levy, other than taxes imposed on the net income of such Agent, the Fronting Bank or such Lender, and each Borrower covenants that such taxes or levies, other than as excepted, shall be paid by such Borrower. The provisions of this paragraph will survive payment in full hereunder. SECTION 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, each Borrower hereby indemnifies, exonerates and holds each Agent, the Fronting Bank and each Lender and each of their respective affiliates, officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including the reasonable fees and expenses of counsel for such Agent, the Fronting Bank and such Lender with respect thereto (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or the use of any Letter of Credit; or (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article VI not to make any Credit Extension); except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the -62- relevant Indemnified Party's gross negligence or wilful misconduct. SECTION 11.5. Survival. The obligations of each Borrower under Sections 5.3, 5.4, 5.5, 5.6, 11.3 and 11.4, and the obligations of the Lenders under Section 10.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrowers in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 11.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by each Borrower and each Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of each Borrower and each Lender (or notice thereof satisfactory to the Agents) shall have been received by the Agents and notice thereof shall have been given by the Agents to the U.S. Borrower and each Lender. SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the -63- parties hereto and their respective successors and assigns; provided, however, that: (a) neither Borrower may assign or transfer its rights or obligations hereunder without the prior written consent of the Agents and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11. SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Each Lender may assign, or sell participations in, its Loans and Commitments to one or more other Persons in accordance with this Section 11.11. SECTION 11.11.1. Assignments. Any Lender, (a) with the written consent of the U.S. Borrower (which consent shall not be unreasonably delayed or withheld), the Fronting Bank and the Administrative Agent may at any time assign and delegate to one or more commercial banks or other financial institutions; and (b) with the consent of the Fronting Bank, and notice to the U.S. Borrower and the Administrative Agent, but without the consent of the U.S. Borrower or the Administrative Agent, may assign and delegate to any other Lender or any Lender (as defined in the U.S. Credit Agreement), (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or a fraction of such Lender's total Loans and Commitments in a minimum amount of $10,000,000 of Loans and Commitments (other than in the case of an assignment to any other Lender or any Affiliate of a Lender or an assignment of the remaining Loans and Commitments of such assignor Lender), that neither Borrower shall be required to pay an amount under Section 5.6 that is greater than the amount which it would have been required to pay had no assignment been made and provided, however, that, the Borrowers and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (c) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the U.S. Borrower and the Administrative Agent by such Lender and such Assignee Lender, -64- (d) such Assignee Lender shall have executed and delivered to the U.S. Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent, and (e) the processing fees described below shall have been paid. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement with respect to the assignment of Loans, the Borrowers shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if the assignor Lender has Loans and Commitments hereunder, replacement Notes in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Notes. The assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to the U.S. Borrower. Accrued interest on that part of the predecessor Notes evidenced by the new Notes, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500. Any attempted assignment and delegation not made in accordance with this Section 11.11.1 shall be null and void. Nothing in this Section shall prevent or prohibit any Lender from pledging its rights (but not its obligations to make Loans and to issue or participate in Letters of Credit) under this Agreement and/or its Loans and/or Notes hereunder to a Federal Reserve Bank in support of borrowing made by such Lender from such Federal Reserve Bank. -65- SECTION 11.11.2. Participations. Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests (or a sub-participating interest, in the case of a Lender's participating interest in a Letter of Credit) in any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that (a) no participation or sub-participation contemplated in this Section 11.11 shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document, (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations, (c) the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, (d) no Participant, unless such Participant is an affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (b) or (c) of Section 11.1, and (e) neither Borrower shall be required to pay any amount under Section 5.6 that is greater than the amount which it would have been required to pay had no participating interest been sold. SECTION 11.11.3. Fronting Bank Assignments. In the event that S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance companies (or Best's Insurance Reports, if such insurance company is not rated by InsuranceWatch Ratings Service)) shall, after the date that any Lender becomes a Lender, downgrade the long-term certificate of deposit ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and B (or BB, in the case of Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)), then each of the Fronting Bank and the U.S. Borrower shall have the individual right, but not the obligation, upon notice to such Lender, to replace (or, in the case of a request by the Fronting Bank, to request the U.S. Borrower to use its reasonable efforts to replace) such Lender with an Assignee Lender (in accordance -66- with and subject to the restrictions contained in Section 11.11.1), and such affected Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 11.11.1) all of its interests, rights and obligations in respect of its Commitment, Loans and other Obligations owing to it, together with the obligations of such affected Lender hereunder, to such Assignee Lender; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any governmental authority and (ii) such Assignee Lender shall pay to such affected Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. SECTION 11.12. Other Transactions. Nothing contained herein shall preclude any Agent, the Fronting Lender or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrowers or any of their affiliates in which such Borrower or such affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, GROUP OR THE BORROWERS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK. THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE FOREIGN BORROWER HEREBY IRREVOCABLY APPOINTS THE U.S. BORROWER (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 90 PARK AVENUE, NEW YORK, NEW YORK 10016, UNITED STATES, AS ITS AGENT TO RECEIVE, ON THE FOREIGN BORROWER'S BEHALF AND ON BEHALF OF THE FOREIGN BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE FOREIGN BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE FOREIGN BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH -67- BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT EITHER BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 11.14. Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, THE FRONTING BANK, GROUP OR THE BORROWERS. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND GROUP AND EACH BORROWER ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE FRONTING BANK AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. SECTION 11.15. UCP; etc. (a) The Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce (the "UCP") shall in all respects apply to each Letter of Credit issued hereunder and shall be deemed for such purpose to be a part hereof as if fully incorporated herein. In the event of any conflict between the UCP and the governing law of the Agreement, the UCP shall prevail to the extent necessary to remove the conflict. (b) In the event of any issuance of a Letter of Credit for which either Borrower may apply from time to time hereafter, or, of any extension of the maturity or time for presentation of any Draft, or, of any renewal, extension or increase in the amount of a Letter of Credit or any other modifications of its terms, in each case with the consent or at the request of the U.S. Borrower, the terms of the Agreement shall continue in force and apply to the Letter of Credit so issued, or, to a Letter of Credit so renewed, extended, increased or otherwise modified, or, to any, Draft, document or property covered thereby and to any action taken by the Fronting Bank or its agents or correspondents -68- in accordance with such issuance, renewal, extension, increase or other modification. SECTION 11.16. Usury Restraint. The provisions of this Agreement shall be subject to any applicable law, regulation, order, rule or direction (a "Usury Restraint") which prohibits or restricts the charging, receipt or retention of interest or other amounts at the rates and amounts set forth herein (the "Stated Rate") in excess (the "Excess") of the maximum rates or amount (the "Maximum Rate") stipulated in the Usury Restraint. The provisions of this Agreement shall not require the payment or permit the collection of interest in excess of the Maximum Rate from time to time. If the Lenders comply (whether or not required to do so at law) with such Usury Restraint then, to the extent permitted by law, a subsequent reduction in the Stated Rate below the Maximum Rate shall be deemed not to reduce the Stated Rate below the Maximum Rate until the total amount of interest and other amounts earned and retained, measured by a dollar amount, equals the amount of interest and other amounts which would have been earned and retained hereunder, inclusive of the Excess, measured by a dollar amount, if the Stated Rate had not been held at the Maximum Rate or any amount had not been refunded to the Borrower. SECTION 11.17. Judgment Currency. The Obligations of the Borrowers, Group and each other Obligor in respect of any sum due to any Lender, the Fronting Bank or the Administrative Agent hereunder, under the Notes or under or in respect of any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than Dollars, be discharged only to the extent that on the Business Day following receipt by such Lender, the Fronting Bank or the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, such Lender, the Fronting Bank or the Administrative Agent, in accordance with normal banking procedures, purchases Dollars with the Judgment Currency. If the amount of Dollars so purchased is less than the sum originally due to such Lender, the Fronting Bank or the Administrative Agent, each Borrower and Group agrees as a separate obligation and notwithstanding any such judgment, to indemnify each Lender, the Fronting Bank and the Administrative Agent, as the case may be, against such loss. -69- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. WARNACO INC. By /s/ WILLIAM S. FINKELSTEIN ---------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.: 212-687-0480 Attention: Chief Financial Officer General Counsel WARNACO (HK) LTD. By /s/ WILLIAM S. FINKELSTEIN ---------------------------------- Title: Address: 2A, Jing Hin Industrial Bldg. 5 Wang Kee Street Kowloon Bay, Kowloon Hong Kong Facsimile No.: 852-2755-2265 Attention: Director of Finance THE WARNACO GROUP, INC. By /s/ WILLIAM S. FINKELSTEIN ---------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.: 212-687-0480 Attention: Chief Financial Officer General Counsel S-1 THE BANK OF NOVA SCOTIA, as Administrative Agent By: /s/ JOHN HOPMANS --------------------------------- Title: Address: One Liberty Plaza New York, New York 10006 Facsimile No.: 212-225-5090 Attention: John Hopmans CITIBANK, N.A., as Documentation Agent By: /s/ ROBERT D. WETRUN --------------------------------- Title: Attorney-in-Fact Address: 399 Park Avenue New York, New York 10043 Facsimile No.: 212-793-7585 Attention: Mark Merlino S-2 PERCENTAGE LENDERS - ---------- ------- 8.8888888889% THE BANK OF NOVA SCOTIA By: /s/ JOHN HOPMANS --------------------------------- Title: Domestic Office: One Liberty Plaza New York, New York 10006 Facsimile No.: 212-225-5090 Attention: John Hopmans LIBOR Office: One Liberty Plaza New York, New York 10006 Facsimile No.: 212-225-5090 Attention: John Hopmans S-3 PERCENTAGE LENDERS - ---------- ------- 8.8888888889% CITIBANK, N.A. By: /s/ ROBERT D. WETRUS --------------------------------- Title: Attorney-in-Fact Domestic Office: 399 Park Avenue New York, New York 10043 Facsimile No.: 212-793-7585 Attention: Mark Merlino LIBOR Office: 399 Park Avenue New York, New York 10043 Facsimile No.: 212-793-7585 Attention: Mark Merlino S-4 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% THE BANK OF NEW YORK By: /s/ ELIZA ADAMS --------------------------------- Title: Vice President Domestic Office: One Wall Street New York, New York 10286 Facsimile No.: 212-635-1480 Attention: Eliza Adams LIBOR Office: One Wall Street New York, New York 10286 Facsimile No.: 212-635-1480 Attention: Eliza Adams S-5 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% COMMERZBANK AG, NEW YORK BRANCH By: /s/ CARL H. JACKSON --------------------------------- Name: Carl H. Jackson Title: Vice President By: /s/ PETER T. DOYLE --------------------------------- Name: Peter T. Doyle Title: Assistant Treasurer Domestic Office: 2 World Financial Center New York, New York 10281 Facsimile No.: 212-266-7235 Attention: Bob Donohue LIBOR Office: 2 World Financial Center New York, New York 10281 Facsimile No.: 212-266-7235 Attention: Bob Donohue S-6 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ TINA BRUCCULERI --------------------------------- Title: Vice President Domestic Office: One World Trade Center New York, New York 10048 Facsimile No.: 212-912-1879 Attention: Tina Brucculeri LIBOR Office: One World Trade Center New York, New York 10048 Facsimile No.: 212-912-1879 Attention: Tina Brucculeri S-7 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% FIRST UNION NATIONAL BANK By: --------------------------------- Title: Vice President Domestic Office: 190 River Road 2nd Floor Summit, New Jersey 07901 Facsimile No.: 908-598-03085 Attention: Robert Doherty LIBOR Office: 190 River Road 2nd Floor Summit, New Jersey 07091 Facsimile No.: 908-598-0385 Attention: Robert Doherty S-8 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% FLEET BANK, N.A. By: /s/ ELIZABETH ALLEN --------------------------------- Title: Vice President Domestic Office: 1185 Avenue of the Americas 2nd Floor New York, New York 10036 Facsimile No.: 212-819-4105 Attention: Elizabeth Allen LIBOR Office: 1185 Avenue of the Americas 2nd Floor New York, New York 10036 Facsimile No.: 212-819-4108 Attention: Nancy Mejias S-9 PERCENTAGE LENDERS - ---------- ------- 6.1111111111% SOCIETE GENERALE By: /s/ SEDARE CORADIN --------------------------------- Title: Vice President Domestic Office: 1221 Avenue of the Americas New York, New York 10020 Facsimile No.: 212-278-7430 Attention: Sedare Coradin LIBOR Office: 1221 Avenue of the Americas New York, New York 10020 Facsimile No.: 212-278-7430 Attention: Sedare Coradin S-10 PERCENTAGE LENDERS - ---------- ------- 4.4444444444% GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ PEGGY ERLENKOTTER --------------------------------- Title: Duly Authorized Secretary Domestic Office: 201 High Ridge Road Stamford, Connecticut 06927 Facsimile No.: 203-357-6443/6573 Attention: Pat Evans LIBOR Office: 201 High Ridge Road Stamford, Connecticut 06927 Facsimile No.: 203-357-6443/6573 Attention: Pat Evans S-11 PERCENTAGE LENDERS - ---------- ------- 4.4444444444% NATIONSBANK, N.A. By: /s/ J. TIMOTHY MARTIN ---------------------------------- Name: J. Timothy Martin Title: Senior Vice President Domestic Office: 101 North Tryon Street 15th Floor NC1-001-15-003 Charlotte, North Carolina 28255 Facsimile No.: 704-386-8694 Attention: Dawn Long LIBOR Office: 101 North Tryon Street 15th Floor NC1-001-15-003 Facsimile No.: 704-386-8694 Attention: Dawn Long S-12 PERCENTAGE LENDERS - ---------- ------- 3.0555555555% UNION BANK OF CALIFORNIA, N.A. By: /s/ DENTON FOWLES --------------------------------- Title: Vice President By: /s/ LEONARDO R. FERNANDEZ, JR. --------------------------------- Title: Credit Officer Domestic Office: 446 South Figueroa Street 16th Floor Los Angeles, California 90071 Facsimile No.: 213-236-7636 Attention: Leonardo R. Fernandez, Jr. LIBOR Office: 446 South Figueroa Street 16th Floor Los Angeles, California 90071 Facsimile No.: 213-236-7636 Attention: Leonardo R. Fernandez S-13 PERCENTAGE LENDERS - ---------- ------- 3.0555555555% BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: --------------------------------- Title: Domestic Office: 1251 Avenue of the Americas 12th Floor New York, New York 10020-1104 Facsimile No.: 212-782-4358 Attention: Jim Brown, VP LIBOR Office: 1251 Avenue of the Americas 12th Floor New York, New York 10020-1104 Facsimile No.: 212-782-6441 Attention: Joan Sanderman S-14 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% BANKBOSTON, N.A. By: --------------------------------- Title: Director Domestic Office: 100 Federal Street Boston, Massachusetts 02110 Facsimile No.: 617-434-0637 Attention: Susan Santos LIBOR Office: 100 Federal Street Boston, Massachusetts 02110 Facsimile No.: 617-434-0637 Attention: Susan Santos S-15 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% CORESTATES BANK, N.A. By: /s/ IRENE ROSEN MARKS --------------------------------- Title: Vice President Domestic Office: Commercial Loan Accounting FC 1-3-17-70 15th and Market, CTSQ Bldg. Philadelphia, PA 19101 Facsimile No.: 215-973-2045 Attention: Joy Ditre LIBOR Office: Commercial Loan Accounting FC 1-3-17-70 15th and Market, CTSQ Bldg. Philadelphia, PA 19101 Facsimile No.: 215-973-2045 Attention: Joy Ditre S-16 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% CREDIT ITALIANO By: /s/ HARMON P. BUTLER --------------------------------- Name: Harmon P. Butler Title: First Vice President & Deputy Manager By: /s/ PIERLUIGI MAINARDI --------------------------------- Name: Pierluigi Mainardi Title: Assistant Vice President Domestic Office: 375 Park Avenue New York, New York 10152 Facsimile No.: 212-546-9675 Attention: Harmon P. Butler LIBOR Office: 375 Park Avenue New York, New York 10152 Facsimile No.: 212-546-9675 Attention: Harmon P. Butler S-17 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% THE FUJI BANK, LIMITED, NEW YORK BRANCH By: /s/ RAYMOND VENTURA --------------------------------- Title: Vice President and Manager Domestic Office: 2 World Trade Center New York, New York 10048 Facsimile No.: 212-912-0516 Attention: Chigusa Tada LIBOR Office: 2 World Trade Center New York, New York 10048 Facsimile No.: 212-912-0516 Attention: Chigusa Tada S-18 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% THE INDUSTRIAL BANK OF JAPAN By: /s/ KENNETH BIEGEN --------------------------------- Title: Domestic Office: New York Branch 1251 Avenue of the Americas New York, New York 10020 Facsimile No.: 212-282-4480 Attention: Atsushi Kawai LIBOR Office: New York Branch 1251 Avenueof the Americas New York, New York 10020 Facsimile No.: 212-282-4480 Attention: Atsushi Kawai S-19 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% KREDIETBANK, N.V. By: /s/ ARMEN KAROZICHIAN --------------------------------- Name: Armen Karozichian Title: Vice President Domestic Office: 125 W. 55th Street New York, New York 10019 Facsimile No.: 212-541-0793 Attention: Armen Karozichian LIBOR Office: 125 W. 55th Street New York, New York 10019 Facsimile No.: 212-541-0793 Attention: Armen Karozichian S-20 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% MARINE MIDLAND BANK By: /s/ PAUL J. DECHAGAS --------------------------------- Title: Vice President Domestic Office: 1 Marine Midland Center Buffalo, New York 14240 Facsimile No.: 716-841-2067 Attention: Patti M. Michalek LIBOR Office: 1 Marine Midland Center Buffalo, New York 14240 Facsimile No.: 716-841-2067 Attention: Patti M. Michalek S-21 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% MERITA BANK LTD. - NEW YORK BRANCH By: --------------------------------- Title: Vice President By: --------------------------------- Title: Vice President Domestic Office: 437 Madison Avenue New York, New York 10022 Facsimile No.: 212-421-4420 Attention: Thelma Dongallo LIBOR Office: 437 Madison Avenue New York, New York 10022 Facsimile No.: 212-421-4420 Attention: Thelma Dongallo S-22 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ JAMES E. CONDON ------------------------------------ Name: James E. Condon Title: Vice President Domestic Office: Loan Department 60 Wall Street New York, New York 10260-0060 Facsimile No.: 302-634-1852 Attention: Bernadette A. Dorsey, Associate LIBOR Office: Loan Department 60 Wall Street New York, New York 10260-0060 Facsimile No.: 302-634-1852 Attention: Bernadette A. Dorsey, Associate S-23 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% THE SANWA BANK, LIMITED, NEW YORK BRANCH By: /s/ PAUL JUDICKE --------------------------------- Title: Vice President Domestic Office: 55 East 52nd Street New York, New York 10055 Facsimile No.: 212-754-1304 Attention: Paul Judicke LIBOR Office: 55 East 52nd Street New York, New York 10055 Facsimile No.: 212-754-2368 Attention: Renko Hara S-24 PERCENTAGE LENDERS - ---------- ------- 2.7777777778% WACHOVIA BANK, N.A. By: /s/ J. BARWIS --------------------------------- Title: Vice President Domestic Office: 191 Peachtree Street Atlanta, Georgia 30303 Facsimile No.: 404-332-6898 Attention: James Barwis LIBOR Office: 191 Peachtree Street Atlanta, Georgia 30303 Facsimile No.: 404-332-6898 Attention: James Barwis - ------ 100% S-25 EX-10 7 EXHIBIT 10.3 FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of October 14, 1997 (this "First Amendment"), among WARNACO INC. (the "U.S. Borrower"), WARNACO (HK) LTD. (the "Foreign Borrower"; together with the U.S. Borrower, the "Borrowers"), THE WARNACO GROUP, INC. ("Group"), the various financial institutions listed on the signature pages hereto (the "Lenders"), CITIBANK, N.A., as documentation agent (the "Documentation Agent") for the Lenders and THE BANK OF NOVA SCOTIA, as agent (the "Administrative Agent"; together with the Documentation Agent, the "Agents") for the Lenders. W I T N E S S E T H: WHEREAS, the Borrowers, Group, the Lenders and the Agents are parties to a Second Amended and Restated Credit Agreement, dated as of August 12, 1997 (as amended or otherwise modified to the date hereof, the "Existing Credit Agreement"); WHEREAS, the Borrowers and Group have requested that the Lenders amend and waive certain provisions of the Existing Credit Agreement in certain respects as set forth below; and WHEREAS, the Lenders have agreed, subject to the terms and conditions hereinafter set forth, to amend and waive such provisions of the Existing Credit Agreement in certain respects as provided below (the Existing Credit Agreement, as so amended and waived by this First Amendment, being referred to as the "Credit Agreement"); NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto agree as follows: PART I DEFINITIONS SUBPART 1.1. Certain Definitions. Terms for which meanings are provided in the Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this First Amendment with such meanings. PART II AMENDMENTS AND WAIVERS TO THE EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the First Amendment Effective Date, the Existing Credit Agreement is hereby amended and certain provisions of the Existing Credit Agreement are hereby waived in accordance with the terms of this Part II; except as so amended or waived, the Existing Credit Agreement shall continue in full force and effect. SUBPART 2.1. Section 1.1 of the Existing Credit Agreement is hereby amended by inserting the following definitions in such Section in the appropriate alphabetical sequence: "Amendment No. 1" means the First Amendment, dated as of October 14, 1997, to this Agreement among the Borrowers, Group, the Lenders parties thereto, the Documentation Agent and the Administrative Agent. "First Amendment Effective Date" is defined in Subpart 3.1 of Amendment No. 1. "USCA Letter Waiver" means the first Letter Waiver to the U.S. Credit Agreement, dated as October 14, 1997, a copy of which is annexed to Amendment No. 1 as Exhibit A. SUBPART 2.2. Section 1.1 of the Existing Credit Agreement is hereby further amended by amending the definition of "U.S. Credit Agreement" in its entirety to read as follows: ""U.S. Credit Agreement" means the Credit Agreement, dated as of August 12, 1997, among the U.S. Borrower, Group, the initial lenders named therein, Scotiabank and Citibank, as managing agents, Citibank, as documentation agent, and Scotiabank, as administrative agent, competitive bid agent, swing line bank and an issuing bank, as in effect on the Effective Date and as modified by USCA Letter Waiver, and as further amended, restated or waived from time to time with the consent of the Required Lenders hereunder solely for purposes of this Agreement, and regardless of whether such U.S. Credit Agreement is terminated, unless in connection with such termination a replacement credit facility satisfactory to the Required Lenders hereunder is entered into, in which case the affirmative and negative covenants in such facility shall become the subject of this Agreement." SUBPART 2.3. Waiver of Guaranty Delivery. The requirements contained in Section 8.1.2 of the Existing Credit Agreement are hereby waived, but only to the same extent and upon the same -2- terms that the requirements under Section 5.01(k) of the U.S. Credit Agreement have been waived under USCA Letter Waiver by the Required Lenders under (and as defined in) the U.S. Credit Agreement. PART III CONDITIONS TO EFFECTIVENESS SUBPART 3.1. First Amendment Effective Date. This First Amendment (and the amendments and waivers contained herein) shall become effective, and shall thereafter be referred to as "Amendment No. 1", on the date (the "First Amendment Effective Date") when all of the conditions set forth in this Subpart 3.1 have been satisfied. SUBPART 3.1.1. Execution of Counterparts. The Administrative Agent shall have received counterparts of this First Amendment, duly executed and delivered on behalf of the Borrowers, Group and the Required Lenders. Each Lender's execution and delivery of this First Amendment shall also constitute such Lender's approval to the form and substance of USCA Letter Waiver. SUBPART 3.1.2. U.S. Credit Agreement. The Administrative Agent shall have received evidence satisfactory to it that USCA Letter Waiver in the form attached as Exhibit A hereto has become effective pursuant to the terms thereof. SUBPART 3.1.3. Affirmation and Consent. The Administrative Agent shall have received an Affirmation and Consent, substantially in the form of Exhibit B hereto, duly executed and delivered by Group and each Domestic Subsidiary. SUBPART 3.1.4. Legal Details, etc. All documents executed or submitted pursuant hereto shall be satisfactory in form and substance to the Administrative Agent and its counsel. The Administrative Agent and its counsel shall have received all information and such counterpart originals or such certified or other copies or such materials, as the Administrative Agent or its counsel may reasonably request, and all legal matters incident to the transactions contemplated by this First Amendment shall be satisfactory to the Administrative Agent and its counsel. PART IV MISCELLANEOUS SUBPART 4.1. Cross-References. References in this First Amendment to any Part or Subpart are, unless otherwise specified -3- or otherwise required by the context, to such Part or Subpart of this First Amendment. SUBPART 4.2. Loan Document Pursuant to Existing Credit Agreement. This First Amendment is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement. SUBPART 4.3. Representations and Warranties. The Borrower hereby represents and warrants that both before and after giving effect to this First Amendment, the statements contained in Section 6.2.1 of the Existing Credit Agreement are true and correct in all material respects. SUBPART 4.4. Successors and Assigns. This First Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART 4.5. Counterparts. This First Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SUBPART 4.6. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. -4- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By /s/ STANLEY SILVERSTEIN ----------------------------- Title: WARNACO (HK) LTD. By /s/ STANLEY SILVERSTEIN ----------------------------- Title: THE WARNACO GROUP, INC. By /s/ STANLEY SILVERSTEIN ----------------------------- Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: _______________________________ [NAME OF INSTITUTION] By_____________________________ -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By /s/ _____________________________ Title: Senior Relationship Manager CITIBANK, N.A., as Documentation Agent and as Lender By /s/ _____________________________ Title: Attorney-in-Fact _______________________________ [NAME OF INSTITUTION] By_____________________________ -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By _____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By _____________________________ Title: UNION BANK OF CALIFORNIA, N.A. _______________________________ [NAME OF INSTITUTION] By /s/ LEONARDO R. FERNANDEZ _____________________________ Title: Credit Officer -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: THE BANK OF NEW YORK _______________________________ [NAME OF INSTITUTION] By /s/ ELIZA S. ADAMS _____________________________ Name: Eliza S. Adams Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: BANK OF TOKYO-MITSUBISHI TRUST CO _______________________________ [NAME OF INSTITUTION] By /s/ JIM BROWN _____________________________ Name: Jim Brown Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: ______________________________ BANKBOSTON, N.A. By /s/ _____________________________ Title: Director -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: COMMERZBANK AG, New York and/or Grand Cayman Branches By /s/ ROBERT J. DONOHUE _____________________________ Name: Robert J. Donohue Title: Vice President By /s/ PETER T. DOYLE _____________________________ Name: Peter T. Doyle Title: Assistant Treasurer -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: CORESTATES BANK, N.A. _______________________________ [NAME OF INSTITUTION] By /s/ IRENE ROSEN MARKS _____________________________ Name: Irene Rosen Marks Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: CREDITO ITALIANO By /s/ ______________________________ Title: First Vice President & Deputy Manager By /s/ ______________________________ Title: First Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: THE DAI-ICHI KANGYO BANK, LIMITED By /s/ _____________________________ Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By_____________________________ Title: FIRST UNION NATIONAL BANK _______________________________ [NAME OF INSTITUTION] By /s/ RICHARD _____________________________ Title: Senior Portfolio Manager -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: FLEET BANK, N.A. _______________________________ [NAME OF INSTITUTION] By /s/ JOSEPH J. _____________________________ Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: THE FUJI BANK, LIMITED NEW YORK BRANCH By /s/ RAYMOND VENTURA _____________________________ Title: Vice President & Manager -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: THE INDUSTRIAL BANK OF JAPAN, INC. NEW YORK BRANCH By /s/ J. KENNETH BIEGEN _____________________________ Name: J. Kenneth Biegen Title: Senior Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: MARINE MIDLAND BANK _______________________________ [NAME OF INSTITUTION] By /s/ A. D. COLLINS _____________________________ Name: A. D. Collins -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: MERITA BANK LTD. _______________________________ By /s/ _____________________________ Title: Vice President By /s/ _____________________________ Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK _______________________________ [NAME OF INSTITUTION] By /s/ JAMES E. CONDON _____________________________ Name: James E. Condon Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: NATIONSBANK, N.A. _______________________________ [NAME OF INSTITUTION] By /s/ DAVID H. DINKINS _____________________________ Name: David H. Dinkins Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: THE SANWA BANK LIMITED _______________________________ [NAME OF INSTITUTION] By /s/ _____________________________ -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: SOCIETE GENERALE _______________________________ [NAME OF INSTITUTION] By /s/ SEDARE CORADIN _____________________________ Title: Vice President -5- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their respective officers as of the day and year first above written. WARNACO INC. By_____________________________ Title: WARNACO (HK) LTD. By_____________________________ Title: THE WARNACO GROUP, INC. By_____________________________ Title: THE BANK OF NOVA SCOTIA, as Administrative Agent and as Lender By_____________________________ Title: CITIBANK, N.A., as Documentation Agent and as Lender By ____________________________ Title: WACHOVIA BANK, N.A. _______________________________ [NAME OF INSTITUTION] By /s/ J. BARWIS _____________________________ -5- EX-10 8 EXHIBIT 10.4 License - Chaps - Sportswear AMENDED AND RESTATED LICENSE AGREEMENT, dated as of January 1, 1996 by and between Polo Ralph Lauren, L.P. "Licensor"), with a place of business at 650 Madison Avenue, New York, New York 10022, and Warnaco Inc., with a place of business at 90 Park Avenue, New York, New York 10016. 1. Definitions. As used herein, the term: 1.1. "License" shall mean the exclusive right to use the Trademark in connection with the manufacture and sale of Licensed Products in the Territory. 1.2. "Licensed Products" shall mean "Chaps Licensed Products", which term shall mean (1) high quality men's sportswear with the exception of (a) skiing or swimming items, and (b) heavy outerwear items commonly found in outerwear departments, and (2) high quality men's dress furnishings consisting of and limited to dress shirts and ties, with the exception of (a) formalwear shirts, ties or accessories, all bearing the trademark "CHAPS by RALPH LAUREN" or the CHAPS logo, as set forth on Exhibit A hereto. As used in this paragraph 1.2(A), the term "high quality men's sportswear" shall include a broad range of such sportswear (other than as expressly excepted herein), including but not limited to knit and woven shirts, jean and other casual bottoms and shorts, sweaters, jackets and casual vests (but not tailored vests), hats and caps, all in a broad range of materials, fabrications and constructions. 1.3. "Licensor" shall mean Polo Ralph Lauren, L.P., a limited partnership organized under the laws of the State of Delaware. 1.4. "Licensee" shall mean Warnaco Inc., a corporation organized under the laws of the State of Delaware. 1.5. "Territory" shall mean the United States of America, its territories and possessions, including Puerto Rico. 1.6. "Trademark" shall mean the trademarks "Chaps by Ralph Lauren" and/or the Chaps logo, as set forth on Exhibit A attached hereto, and where the content so indicates, each of them. Licensor shall have the sole right to determine which Trademark shall be used in connection with each particular Licensed Product. 2. Grant of License. 2.1. Subject to the terms and provisions hereof, Licensor hereby grants to Licensee and Licensee hereby accepts the License. Except as provided in paragraph 17.4 hereof, Licensor shall neither use nor authorize third parties to use the Trademarks in connection with the manufacture and sale and/or importation of Licensed Products in the Territory during the term of this Agreement without Licensee's prior approval. To the extent it is legally permissible to do so, no license is granted hereunder for the manufacture, sale or distribution of Licensed Products to be used for publicity purposes, other than publicity of Licensed Products, in combination sales, as premiums or giveaways, or to be disposed of under or in connection with similar methods of merchandising such license being specifically reserved for Licensor. 2.2. It is understood and agreed that the License applies solely to the use of the Trademarks on and in connection with the Licensed Products, and that (i) no use of any other trademark of Licensor (including any other trademark that uses the name "Ralph Lauren") or of any of Licensor's related companies (as such term is defined in the Lanham Act), and (ii) no use of the Trademarks on any other products, is authorized or permitted. Licensor reserves the right to use, and to grant to any other licensee the right to use, the Trademarks, whether within or outside the Territory, in connection with any and all products and services, other than Licensed Products within the Territory. Licensee understands and agrees that Licensor may itself manufacture or authorize third parties to manufacture in the Territory, Licensed Products for ultimate sale outside of the Territory. 2.3. Licensee shall not itself use or permit or authorize another person or entity in its control to use the words "Chaps", "Polo" "Ralph" or "Ralph Lauren" as part of a corporate name or tradename without the express written consent of Licensor and Licensee shall not permit or authorize use of the Trademarks in such a way so as to give the impression that the names, "Polo", "Ralph Lauren," or the Trademarks, or any modifications thereof, are the property of Licensee. 2.4. Licensee shall not sublicense any of the rights granted hereunder without first obtaining Licensor's prior written consent in connection therewith, which consent may be withheld by Licensor in its sole discretion. 2.5. Licensee shall not, directly or indirectly manufacture, distribute, sell or advertise during the term of this Agreement, any items which are comparable and/or competitive with Licensed -2- Products which bear the name or are associated with the name of any fashion apparel designer other than those names which are presently owned or under license by Licensee without first notifying Licensor in writing. 2.6. Licensor represents and warrants that it has full right, power and authority to enter into this Agreement, to perform all of its obligations hereunder and to consummate all of the transactions contemplated herein. 2.7. Licensee represents and warrants that it has full right, power and authority to enter into this Agreement, to perform all of its obligations hereunder, and to consummate all of the transactions contemplated herein. 2.8. Licensee recognizes that there are many uncertainties in the business contemplated by this Agreement. Licensee agrees and acknowledges that other than those representations explicitly contained in this Agreement, if any, no representations, warranties or guaranties of any kind have been made to Licensee, either by Licensor or its affiliates, or by anyone acting on their behalf. Without limitation, no representations concerning the value of the Licensed Products or the prospects for the level of their sales or profits have been made and Licensee has made its own independent business evaluation in deciding to manufacture and distribute the Licensed Products on the terms set forth herein. 3. Design Standards and Prestige of Licensed Products. 3.1. Licensee acknowledges that it has entered into a design services agreement ("Design Agreement"), of even date herewith, with Polo Ralph Lauren Enterprises, L.P. (the "Design Partnership"), which provides for the furnishing to Licensee by the Design Partnership of design concepts and other professional services so as to enable Licensee to manufacture or cause to be manufactured the Licensed Products in conformity with the established prestige and goodwill of the Trademarks. Licensee shall manufacture, or cause to be manufactured, and sell only such Licensed Products as are made in accordance with the design and other information approved under, and in all other respects in strict conformity with the terms of, the Design Agreement. 3.2. Licensee acknowledges that the Trademarks have established prestige and goodwill and are well recognized in the minds of the public, and that it is of great importance to each party that in the manufacture and sale of various lines of Licensor's products, including the Licensed Products, the high standards and reputation that Licensor and Ralph Lauren have -3- established be maintained. Accordingly, all items of Licensed Products manufactured or caused to be manufactured by Licensee hereunder shall be of high quality workmanship with strict adherence to all details and characteristics embodied in the designs furnished pursuant to the Design Agreement. Licensee shall supply Licensor with samples of the Licensed Products (including, if Licensor so requests, samples of labeling and packaging used in connection therewith) prior to production and from time to time during production, and shall, at all times during the term hereof, upon Licensor's request, make its manufacturing facilities available to Licensor, and shall use its best efforts to make available each subcontractor's manufacturing facilities, for inspection by Licensor's representatives during usual working hours. No sales of miscuts or damaged merchandise shall contain any labels or other identification bearing the Trademarks without Licensor's prior written approval, but sales of all products of Licensor's or the Design Partnership's design shall nonetheless be subject to royalty payment pursuant to paragraph 6 hereof. 3.3. In the event that any Licensed Product is, in the judgment of Licensor, not being manufactured, distributed or sold with first quality workmanship or in strict adherence to all details and characteristics furnished pursuant to the Design Agreement, Licensor shall notify Licensee thereof in writing and Licensee shall promptly repair or change such Licensed Product to conform thereto. If a Licensed Product as repaired or changed does not strictly conform after Licensor's request and such strict conformity cannot be obtained after at least one (1) resubmission, the Trademarks shall be promptly removed from the item, at the option of Licensor, in which event the item may be sold by Licensee, provided such miscut or damaged item does not contain any labels or other identification bearing the Trademark without Licensor's prior approval. Notwithstanding anything in this paragraph 3.3 to the contrary, sales of all products of Licensor's or the Design Partnership's design, whether or not bearing the Trademark, shall nonetheless be subject to royalty payments pursuant to paragraph 6 hereof. 3.4. At the request of Licensor, Licensee shall cause to be placed on all Licensed Products appropriate notice designating Licensor or the Design Partnership as the copyright or design patent owner thereof, as the case may be. The manner of presentation of said notices shall be determined by Licensor. 4. Marketing. 4.1. Any use of the License by any division, subsidiary or affiliate of Licensee must be approved in writing by Licensor. -4- The Licensed Products shall be sold by Licensee only to those specialty shops, department stores and other retail outlets which deal in products similar in quality and prestige to products bearing the Trademarks, whose operations are consistent with the quality and prestige of the Trademarks and only to those customers expressly approved by Licensor. Licensee's approved account list is attached hereto as and made a part hereof. Prior to the opening of each selling season (and whenever Licensee wishes to sell Licensed Products to a customer not previously approved by Licensor), Licensee shall submit a written list of its proposed customers to Licensor for Licensor's written approval, which shall be given or withheld in Licensor's sole discretion based on considerations of the quality and prestige of the Trademarks. In addition, Licensee shall have the right to sell Licensed Products at outlet stores owned or controlled by Licensee; provided, however, that (i) Licensee shall only sell overruns and irregular Licensed Products at such outlet stores and shall not produce any Licensed Products for such sales and (ii) the "net sales price" pursuant to paragraph 6.2 with respect to all such sales shall be the actual price paid by consumers at such outlet stores, less sales tax. Licensee shall not market or promote or seek customers for the Licensed Products outside of the Territory and Licensee shall not establish a branch, wholly owned subsidiary, distribution or warehouse with inventories of Licensed Products outside of the Territory. Licensee shall not without Licensor's prior written approval sell any Licensed Products bearing the Trademark to any third party which, directly or indirectly, sells or proposes to sell such Licensed Products outside the Territory. Licensee shall use its best efforts to prevent any such resale outside the Territory and shall, immediately upon learning or receiving notice from Licensor that a customer is selling Licensed Products outside the Territory, cease all sales and deliveries to such customer. 4.2. Licensee shall maintain the high standards of the Trademarks and the Licensed Products, in all advertising, packaging and promotion of the Licensed Products. Licensee shall not employ or otherwise release any of such advertising or packaging or other business materials relating to any Licensed Products or bearing the Trademarks, unless and until Licensee shall have made a request, in writing, for approval by Licensor. Licensor may, with respect to any advertising, promotional, packaging or business materials submitted by Licensee make such suggestions as Licensor deems necessary or appropriate, or disapprove, in either event by notice to Licensee. Any approval granted hereunder shall be limited to use during the seasonal collection of Licensed Products to which such advertising relates and shall be further limited to the use (e.g. TV or print) for which approval by Licensor was granted. Licensee shall, at the -5- option of Licensor, include on its business materials an indication of the relationship of the parties hereto in a form approved by Licensor. 4.3. Licensee shall use its best efforts to assure that all cooperative advertising, whereby Licensee provides a customer with a contribution toward the cost of an advertisement for Licensed Products, whether Licensee's contribution be in the form of an actual monetary contribution, a credit or otherwise, shall be subject to prior approval of Licensor under the same terms and conditions as apply to advertising and promotional materials prepared by or to be used by Licensee pursuant to paragraph 4.2 hereof; provided, however, that in the event that Licensee is not as a matter of practice given an opportunity to review the cooperative advertising due to time constraints, then Licensee shall notify Licensor, in advance, of those customers with whom it does cooperative Licensed Product advertising and/or promotion, and Licensee at Licensor's request shall notify the named customer of the terms of this Agreement which pertain to the said advertising or promotional materials. 4.4. Licensee shall maintain the high standards of the Trademarks in all packaging, advertising and promotion of the Licensed Products and shall exercise its best efforts to safeguard the established prestige and goodwill of the name "Ralph Lauren" and the Ralph Lauren image, at the same level of prestige and goodwill as heretofore maintained. "Image" as used herein refers primarily to quality and style of packaging, advertising and promotion, creation and introduction of new products, type of outlets with reference to quality of service provided by retail outlets and quality of presentation of Licensed Products in retail outlets. Licensee shall take all necessary steps, and all steps reasonably requested by Licensor, to prevent or avoid any misuse of the Trademarks by any of its customers, contractors or other resources. 4.5. During each year of this Agreement, Licensee shall expend for the production and placement of national, institutional and media advertising of Licensed Products ("Institutional Advertising"), as designated by Licensor, an amount that is not less than percent ( %) of the aggregate net sales price (as defined in paragraph 6.2 hereof) of Licensed Products sold in that year. Licensee shall deliver to Licensor within sixty (60) days after the end of each year hereof an accounting statement in respect of amounts expended by Licensee on advertising for the prior year. Each such accounting statement shall be signed, and certified as correct, by a duly authorized officer of Licensee. Prior to each year hereof, Licensee shall submit Licensee's advertising budget for the -6- upcoming year, based on the aggregate net sales price of Licensed Products during the year then ending and on sales projected for the upcoming year. The advertising expenditures for such upcoming year will initially be made based upon such budget. If the actual aggregate advertising expenditures are less than percent ( %) of the actual aggregate net sales price for such year, such shortage shall be expended in the next following year in addition to the amount otherwise to be expended in such next following year. Licensee shall place such portions of Licensee's advertising budget as Licensor may request with such advertising agencies or advertising carriers as may be designated by Licensor for promotional campaigns of Licensed Products. 4.6. To the extent permitted by applicable law Licensor may from time to time, and in writing, promulgate rules and regulations to Licensee relating to the manner of use of the Trademarks. Licensee shall comply with such reasonable rules and regulations. 4.7. Upon Licensor's request, Licensee agrees to make available for purchase and to sell at its customary price, and on its customary credit and payment terms all lines and styles of Licensed Products to retail stores in the Territory bearing as a tradename a trademark of Licensor or its affiliates and to any stores or facilities operated or owned by Licensor and its affiliates, which are authorized to sell the Licensed Products within such retail stores. Notwithstanding anything to the contrary contained herein, in the event that any such Licensed Products are not so made available by Licensee to such stores, such Licensed Products may be made available to such stores by Licensor (or its affiliates or other licensees). 4.8. Intentionally Omitted. 4.9. In consideration of the License granted herein, in the event Licensor elects to offer Licensed Products for sale in mail-order catalogs or other direct-to-consumer sales devices, such as telemarketing ("Catalog Sales"), Licensee shall sell and timely ship Licensed Products to Licensor or its affiliate for such purposes, to the extent of its requirements, at a price equal to % less than the regular wholesale price therefor. All such sales shall be separately reported by Licensee in its accounting statements pursuant to paragraph 6.2 hereof, and such sales shall not be subject to the advertising obligations set forth herein, but shall be subject to the royalty obligations set forth herein and to the compensation obligations set forth in the Design Agreement, and such sales shall be included within the renewal volumes set forth in paragraph 8 hereof. -7- 4.10. In consideration of the License granted herein, in the event Licensor elects to offer Licensed Products for sale in outlet stores owned by Licensor or its affiliates or operated under license from Licensor or its affiliates ("Outlet Stores"), Licensee shall sell and timely ship Licensed Products to Outlet Stores for such purposes, to the extent of their requirements, at a price equal to % less than the regular wholesale price therefor. All such sales shall be separately reported by Licensee in its accounting statements pursuant to paragraph 6.2 hereof, and such sales shall not be subject to the advertising obligations set forth herein, but shall be subject to the royalty obligations set forth herein and to the compensation obligations set forth in the Design Agreement, and such sales shall be included within the renewal volumes set forth in paragraph 8 hereof. 5. Trademark Protection. 5.1. All uses of the Trademarks by Licensee, including, without limitation, use in any business documents, invoices, stationery, advertising, promotions, labels, packaging and otherwise shall require Licensor's prior written consent in accordance with paragraph 4.2 hereof. 5.2. All uses of the Trademarks by Licensee in advertising, promotions, labels and packaging shall bear the notation "Chaps by Ralph Lauren", as the case may be, and shall include at Licensor's option, a notice to the effect that the Trademarks are used by Licensee for the account and benefit of Licensor. The use of the Trademarks pursuant to this Agreement shall be for the benefit of Licensor and shall not vest in Licensee any title to or right or presumptive right to continue such use. For the purposes of trademark registration, sales by Licensee shall be deemed to have been made by Licensor. 5.3 Licensee shall cooperate fully and in good faith with Licensor for the purpose of securing and preserving Licensor's rights in and to the Trademarks. Nothing contained in this Agreement shall be construed as an assignment or grant to Licensee of any right, title or interest in or to the Trademark, or any of Licensor's other trademarks, it being understood that all rights relating thereto are reserved by Licensor, except for the License hereunder to Licensee of the right to use and utilize the Trademarks only as specifically and expressly provided herein. Licensee shall not file or prosecute a trademark or service mark application or applications to register the Trademarks, for Licensed Products or otherwise. -8- 5.4. Licensee shall not, during the term of this Agreement or thereafter, (a) attack Licensor's title or rights in and to the Trademarks in any jurisdiction or attack the validity of this License or the Trademarks or (b) contest the fact that Licensee's rights under this Agreement (i) are solely those of a licensee, manufacturer and distributor and (ii) subject to the provisions of paragraph 10 hereof, cease upon termination of this Agreement. The provisions of this paragraph 5.4 shall survive the termination of this Agreement. 5.5. All right, title and interest in and to all samples, sketches, designs, artwork, logos and other materials furnished by or to Licensor or the Design Partnership, whether created by Licensor, the Design Partnership or Licensee, are hereby assigned in perpetuity to, and shall be the sole property of, Licensor and/or the Design Partnership as the case may be. Licensee shall assist Licensor to the extent necessary in the protection of or the procurement of any protection of Licensor's rights to the Trademarks, and Licensor, if Licensor so desires, may, at Licensor's expense, commence or prosecute any claims or suits in Licensor's own name or in the name of Licensee or join Licensee as a party thereto. Licensee shall promptly notify Licensor in writing of any uses which may be infringements or imitations by others of the Trademarks on articles similar to those covered by this Agreement which may come to Licensee's attention. Licensor shall have the sole right to determine whether or not any action shall be taken on account of any such infringements or imitations. Licensee shall not institute any suit or take any action on account of such infringements or imitations without first obtaining Licensor's written consent so to do, but in the event such consent is given, Licensee shall bear the costs of such suit or action. Any recovery in any such action by Licensee shall be applied first to reimbursing Licensee for the actual out-of-pocket costs thereof (including reasonable attorneys' fees) and the balance, if any, shall be divided equally between Licensee and Licensor. 6. Royalties. 6.1. Licensee shall pay to Licensor minimum royalties for each year during the term of this Agreement, as compensation for the License granted hereunder for the use of the Trademarks in the manufacture and sale, and/or importation and sale, of Licensed Products in the Territory. The minimum royalty for each year shall be as follows: Year 1 (1996) $ Year 2 $ Year 3 $ -9- Year 4 $ Year 5 $ Year 6 $ Minimum royalties for each year shall be paid on a quarterly basis, on the last day of each month following the end of each calendar quarter during the term hereof (e.g., April 30 for the quarter ending March 31), commencing with the first quarterly payment to be made on April 30, 1996. The amount of earned royalties paid, pursuant to paragraph 6.2 hereof, with respect to sales of Licensed Products in each calendar quarter, shall be deducted from the minimum royalty payment due for such quarter, it being the parties' intent that Licensee shall pay Licensor an amount equal to the greater of (i) aggregate minimum royalties for each year of the initial term or (ii) aggregate earned royalties for each year of the initial term. However, no credit shall be permitted against minimum royalties payable in any year on account of actual or minimum royalties paid in any other year, and minimum royalties shall not be returnable. For each year during any renewal term of this Agreement, minimum royalties shall be an amount equal to % of the aggregate earned royalties accrued with respect to the sale of all Licensed Products during the immediately preceding year; provided, however, that (i) the minimum royalty in each year shall in no event be less than the minimum royalty due for the immediately preceding year and (ii) the minimum royalty in each year shall in no event be less than $ . For the purposes of this Agreement, the term "year" shall mean a period of twelve (12) months commencing on each January l during the term hereof. 6.2. Licensee shall pay to Licensor earned royalties based on the net sales price of all Licensed Products manufactured or imported and sold by Licensee hereunder. Earned royalties shall equal percent ( %) of the net sales price of all Licensed Products sold under this Agreement, including, without limitation, any sales made pursuant to the terms of paragraphs 3.2 and 10 hereof; provided, however, that (i) the earned royalty rate with respect to sales of Licensed Products on or before December 31, 1996 shall be percent ( %) and (ii) the earned royalty payable to Licensor on Licensed Product design "close-outs", which were sold at least percent ( %) below Licensee's regular selling price shall be percent ( %) of the net sales price of such Licensed Products. Licensee shall prepare or cause to be prepared statements of operations for each month during the term hereof, which shall be furnished to Licensor together with the earned royalties due for each such month on the last day of the following month (e.g., July 31 for month of June). In addition, Licensee shall provide Licensor, for informational purposes only, with a monthly -10- statement reflecting retail sales of Licensed Products by account for each month, within five (5) days after the end of such month. The term "net sales price" shall mean the gross sales price to retailers who are not affiliates of Licensee or, with respect to Licensed Products that are not sold directly or indirectly to retailers, other ultimate consumers (as in the case of accommodation sales by Licensee to its employees), of all sales of Licensed Products under this Agreement, less trade discounts and allowances and merchandise returns. No other deductions shall be taken. Any merchandise returns shall be credited in the three (3) month period in which the returns are actually made. Any excess of earned royalties, determined under this paragraph 6.2 over the minimum royalties provided in paragraph 6.1 hereof, shall be remitted to Licensor within forty-five (45) days after the end of each such three (3) month period. For purposes of this Agreement, affiliates of Licensee shall mean all persons and business entities, whether corporations, partnerships, joint ventures or otherwise, which now or hereafter control, or are owned or controlled, directly or indirectly by Licensee, or are under common control with Licensee. It is the intention of the parties that royalties will be based on the bona fide wholesale prices at which Licensee sells Licensed Products to independent retailers in arms' length transactions. In the event Licensee shall sell Licensed Products to its affiliates, royalties shall be calculated on the basis of such a bona fide wholesale price irrespective of Licensee's internal accounting treatment of such sale. Licensee shall identify separately in the statements of operations provided to Licensor pursuant to paragraph 7 hereof, all sales to affiliates. Compensation for design services is provided for separately in the Design Agreement. 6.3. If the payment of any installment of royalties is delayed for any reason, interest shall accrue on the unpaid principal amount of such installment from and after the date on which the same became due pursuant to paragraphs 6.1 or 6.2 hereof at the lower of the highest rate permitted by law in New York and the prime rate of interest in effect from time to time at Chemical Bank, New York, Hew York, or its successor. 6.4. Provided that (a) no event of default under this Agreement has occurred and no default under this Agreement then exists and (b) this Agreement and the License are then in full force and effect, and (c) Licensee cooperates with Licensor, The Polo/Lauren Company ("PLC") and their licensees in connection with the manufacture and sale of Chaps Licensed Products in Canada, Licensor shall pay to Licensee an amount equal to ( %) percent of net royalties paid to Licensor with respect to sales of Chaps Licensed Products made in Canada by any licensee of Licensor (or PLC), other than Licensee. Licensee's -11- cooperation under clause (c) of the foregoing sentence shall consist of, but shall not be limited to, the sharing of designs and information with respect to suppliers and contractors in connection with Chaps Licensed Products. Payments of royalties by Licensor to Licensee, if any, pursuant to this paragraph 6.4. shall be made within thirty (30) days after Licensor's receipt thereof from its foreign Licensee, if any, and shall be accompanied by a statement of the foreign license payments received by Licensor (or PLC) pursuant to which the payment to Licensee is being made. 6.5. The obligation of Licensee to pay royalties hereunder shall be absolute notwithstanding any claim which Licensee may assert against Licensor or the Design Partnership. Licensee shall not have the right to set-off, compensate or make any deduction from such royalty payments for any reason whatsoever. 7. Accounting. 7.1. Licensee shall at all times keep an accurate account of all operations within the scope of this Agreement and shall render a full statement of such operations in writing to Licensor in accordance with paragraph 6.2 hereof. Such statements shall account separately for each different product category and shall include all aggregate gross sales, trade discounts, merchandise returns, sales of miscuts and damaged merchandise and net sales price of all sales for the previous three (3) month period. Such statements shall be in sufficient detail to be audited from the books of Licensee. Once annually, which may be in connection with the regular annual audit of Licensee's books, Licensee shall furnish an annual statement of the aggregate gross sales, trade discounts, merchandise returns and net sales price of all Licensed Products made by Licensee certified by an officer of Licensee. Each financial statement furnished by Licensee shall be certified by the chief financial officer of Licensee or a certified public accountant, who may be in the employ of Licensee. The books of account of Licensee with respect to such sales shall be available for inspection and audit by Licensor or its agent at all reasonable times, but such audit shall not be made more than once in each year and shall be made by Licensor at its own expense; provided, however, that if there is an error in favor of Licensee in excess of percent ( %) of royalties in computing such royalties, all expenses in connection with such inspection and audit shall be borne by Licensee. 7.2. At least once annually and no later than 90 days after the close of Licensee's fiscal year, Licensee will furnish to Licensor, a profit and loss statement and balance sheet covering Licensee's fiscal year both of which shall be certified by the -12- independent auditor for Licensee. All financial statements required to be furnished herein shall be prepared in accordance with generally accepted accounting principles and any officer's certificate relative thereto shall state that such statements are true, complete and correct in all material respects and present fairly the financial position of Licensee as of the respective date of the balance sheets and the results of operations for the respective periods covered. 8. Term, Solicitation of Employees. 8.1. The term of this Agreement shall commence on the date hereof and shall terminate on December 31, 2001; provided, however, that if no Event of Default shall have occurred and not been cured or waived, and Licensee has achieved the Minimum Renewal Volume (as such term is hereinafter defined) for the period January 1, 2000 to December 31, 2000, Licensee shall have the option, upon providing notice to Licensor on or before April 1, 2001, to renew this Agreement for an additional three (3) year period (the "Renewal Term") so as to expire on December 31, 2004, on the terms and conditions herein except that there will be no further right to renewal. The minimum aggregate net sales price which Licensee must achieve in connection with sales of Licensed Products during the period from January 1, 2000 to December 31, 2000 (the "Minimum Renewal Volume") in order to be entitled to renew this Agreement for a second term as hereinabove provided shall be $ . In the event either Licensor or Licensee elects not to renew or extend the term hereof for any reason, it is expressly understood that only the licensee whose licensed term covers the period subsequent to the expiration of this Agreement shall be entitled to receive designs for Licensed Products intended to be sold after the expiration of the term hereof, and to make presentations of the Licensed Products during the market period for which the related shipping period would occur after the expiration or termination of this Agreement. Without limiting the generality of the foregoing, in the event the term hereof is not renewed or extended, the last season for which Licensee shall be entitled to receive designs and to manufacture and sell Licensed Products shall be the Cruise/Holiday 2001 season, and Licensor shall be entitled to undertake, directly or through a successor licensee, all activities associated with the design, manufacture and sale of the Spring 2002 season. 8.2. Each of Licensor and Licensee agrees that during the term of this Agreement and for a one (1) year period following the expiration or termination of this Agreement, it shall refrain from soliciting for employment in any capacity any person while such person is in the employ of the other. However, nothing -13- shall prevent either Licensor or Licensee from employing (i) any person whose employment with the other has terminated or (ii) any person who has, without being solicited, sought employment by the other. 9. Default; Change of Control. 9.1. Each of the following shall constitute an event of default ("Event of Default") hereunder: (i) Any installment of royalty payments is not paid when due and such default continues for more than ten (10) days after notice thereof; (ii) Licensee shall fail to timely present for sale to the trade a broadly representative and fair collection of each seasonal collection of Licensed Products designed by the Design Partnership under the Design Agreement or Licensee shall fail to timely ship to its customers a material portion of the orders of Licensed Products it has accepted; (iii) Licensee defaults in performing any of the other terms of this Agreement and continues in such default for a period of thirty (30) days after notice thereof (unless the default cannot be cured within such thirty (30) day period and Licensee shall have commenced to cure the default and proceeds diligently thereafter to cure); (iv) Licensee fails within ten (10) days after written notice that payment is overdue to pay the amount due for any Licensed Products or materials, trim, fabrics, packaging or services relating to Licensed Products purchased by Licensee from Licensor or any agent or licensee of Licensor or any other supplier of such items; (v) If Licensee shall use the Trademarks in an unauthorized or improper manner and/or if Licensee shall make an unauthorized disclosure of confidential information or materials given or loaned to Company by Licensor, and/or the Design Partnership; (vi) Licensee institutes proceedings seeking relief under a bankruptcy act or any similar law, or consents to entry of any order for relief against it in any bankruptcy or insolvency proceeding or similar proceeding, or files a petition for or consent or answer consenting to reorganization or other relief under any bankruptcy act or other similar law, or consents to the filing against it of -14- any petition for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of it or of any substantial part of its property, or a proceeding seeking such an appointment shall have been commenced without Licensee's consent and shall continue undismissed for sixty (60) days or an order providing for such an appointment shall have been entered, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due or fails to pay its debts as they become due, or takes any action in furtherance of the foregoing; (vii) Licensee transfers or agrees to transfer substantially all of its assets; (viii) The calling of a meeting of creditors, appointment of a committee of creditors or liquidating agents, or offering a composition or extension to creditors by, for or of Licensee; (ix) There shall be a change in control of Licensee; (x) An event of default occurs under the Design Agreement or any other license agreement entered into between Licensor and Licensee or design agreement between Licensee and the Design Partnership; or (xi) The Design Agreement is terminated for any reason whatsoever. 9.2. If any Event of Default other than the Event of Default described in paragraphs 9.1 (v), (vi), (vii) or (viii) shall occur, Licensor shall have the right, exercisable in its sole discretion, to terminate this Agreement and the License upon ten (10) days' written notice to Licensee of its intention to do so, and upon the expiration of such ten (10) day period, this Agreement and the License shall terminate and come to an end. If the Event of Default described in paragraphs 9.1 (v), (vi), (vii) or (viii) shall occur, this Agreement and the License shall thereupon forthwith terminate and come to an end without any need for notice to Licensee. Any termination of this Agreement shall be without prejudice to any remedy of Licensor for the recovery of any monies then due it under this Agreement or in respect to any antecedent breach of this Agreement, and without prejudice to any other right of Licensor including, without limitation, damages for breach to the extent that the same may be recoverable and Licensee agrees to reimburse Licensor for any costs and expenses (including attorneys' fees) incurred by Licensor in enforcing its rights hereunder. No assignee for the benefit of -15- creditors, receiver, liquidator, sequestrator, trustee in bankruptcy, sheriff or any other officer of the court or official charged with taking over custody of Licensee's assets or business shall have any right to continue the performance of this Agreement. For purposes of paragraph 9.1(ix) the term "change in control of Licensee" shall not include (i) the sale or disposition of all or substantially all of the voting stock or assets of The Warnaco Group, Inc. or Warnaco Inc. or any successor thereto to (x) one or more subsidiaries or affiliates of The Warnaco Group, Inc. or Warnaco Inc.; or (y) any other entity controlled by The Warnaco Group, Inc. or Warnaco Inc. or its affiliates or any successor thereto; nor (ii) a public offering, sale to underwriters or private placement of capital stock by The Warnaco Group, Inc. or Warnaco Inc. or any successor thereto or any acquisitions by any such company through merger, purchase of assets or otherwise effected in whole or in part by issuance or reissuance of such company's shares of capital stock. 9.3. During the term of this Agreement, Licensee shall not (i) merge or consolidate with or into any other corporation, or (ii) directly or indirectly sell or otherwise dispose of all or of a substantial portion of its business or assets or (iii) suffer a change of control in its management without prior written notice to Licensor. Licensor will discuss the occurrence of any of the events described in (i), (ii) or (iii) above with Licensee at Licensee's request, and in the event of any change in the persons having principal authority to act for Licensee with respect to this Agreement Licensee shall notify Licensor in advance of any such change and shall consult in good faith with Licensor regarding the hiring of a suitable replacement. 10. Disposal of Stock Upon Termination or Expiration. 10.1. Within ten (10) days following the termination of this Agreement for any reason whatsoever including the expiration of the term hereof, Licensee shall furnish to Licensor a certificate of Licensee listing its inventories of Licensed Products (which defined term for purposes of this paragraph 10.1 shall include, but shall not be limited to, all fabrics, trim and packaging which are used in connection with the manufacture and marketing of Licensed Products) on hand, in transit, on order, or in process of being manufactured wherever situated. Licensor shall have the right to conduct a physical inventory of Licensed Products in Licensee's possession or under Licensee's control. Licensor or Licensor's designee shall have the option (but not the obligation) to purchase from Licensee all or any part of Licensee's then existing inventory of Licensed Products upon the following terms and conditions: -16- (i) Licensor shall notify Licensee of its or its designee's intention to exercise the foregoing option within 30 days of delivery of the certificate referred to above and shall specify the items of Licensed Products to be purchased. (ii) The price for Licensed Products manufactured by or on behalf of Licensee which are on hand, in transit, or in process shall be Licensee's standard cost (the actual manufacturing cost) for each such Licensed Product. The price for all other Licensed Products which are not manufactured by Licensee shall be Licensee's landed costs therefor. Landed costs for the purposes hereof means the F.O.B. price of the Licensed Products together with customs, duties, and brokerage, freight and insurance. (iii) Licensee shall deliver the Licensed Products purchased within fifteen (15) days of receipt of the notice referred to in clause (i) above. Payment of the purchase price for the Licensed Products so purchased by Licensor or its designee shall be payable upon delivery thereof, provided that Licensor shall be entitled to deduct from such purchase price any amounts owed it by Licensee. It is not intended by the operation of this provision or paragraph 6.5 that Licensor be entitled to double payment of royalties or any other amounts owed by Licensee hereunder. 10.2. In the event Licensor chooses not to exercise the option referred to in paragraph 10.1 hereof with respect to all or any portion of Licensed Products, for a period of one hundred and twenty (120) days after termination of this Agreement for any reason whatsoever, except on account of breach of the provisions of paragraphs 3, 4 or 6 hereof, Licensee may dispose of such Licensed Products which are on hand or in the process of being manufactured at the time of termination of this Agreement, provided Licensee fully complies with the provisions of this Agreement, including specifically those contained in paragraphs 3 and 4 hereof in connection with such disposal. Notwithstanding anything to the contrary contained herein, in the event that upon the expiration or termination of the term hereof for any reason Licensee is in default because it has not rendered to Licensor all accounting statements then due, and paid (i) all royalties and other amounts then due to Licensor, (ii) all compensation then due to the Design Partnership under the Design Agreement and (iii) all amounts then due to any affiliate of or supplier to Licensor or its affiliates (collectively, "Payments"), Licensee shall have no right whatsoever to dispose of any inventory of Licensed Products in any manner. In addition, if during any disposal period Licensee fails timely to render any accounting -17- statements or to make all Payments when due, Licensee's disposal rights hereunder shall immediately terminate without notice. 11. Effect of Termination. It is understood and agreed that except for the License to use the Trademarks only as specifically provided for in this Agreement, Licensee shall have no right, title or interest in or to the Trademarks. Upon and after the termination of this License, all right, title and interest in and to any and all designs, design patents, artwork, and other materials depicting or relating to the Licensed Products, and all rights granted to Licensee hereunder, together with any interest in and to the Trademarks which Licensee may acquire, shall forthwith and without further act or instrument be assigned to and revert to Licensor. In addition, Licensee will execute any instruments requested by Licensor which are necessary to accomplish or confirm the foregoing. Any such assignment, transfer or conveyance shall be without consideration other than the mutual agreements contained herein. Upon notice of termination Licensor shall be free to license to others the right to use the Trademarks in connection with the manufacture and sale of the Licensed Products covered hereby, and Licensee will refrain from further use of the Trademarks or any further reference to them, direct or indirect, or any other trademark, trade name or logo that is confusingly similar to the Trademarks, or associated with the Trademarks in any way, in connection with the manufacture, sale or distribution of Licensee's products, except as specifically provided in paragraph 10 hereof. It is expressly understood that under no circumstances shall Licensee be entitled, directly or indirectly, to any form of compensation or indemnity from Licensor, the Design Partnership or their affiliates as a consequence of the termination of this Agreement, whether as a result of the passage of time, or as the result of any other cause of termination referred to in this Agreement. Without limiting the generality of the foregoing, by its execution of the present Agreement, Licensee hereby waives any claim which it has or which it may have in the future against Licensor, the Design Partnership or their affiliates, arising from any alleged goodwill created by Licensee for the benefit of any or all of the said parties or from the alleged creation or increase of a market for Licensed Products. 11.2 Remedies. Licensee acknowledges and admits that there would be no adequate remedy at law for its failure (except as otherwise provided in paragraph 10 hereof) to cease the manufacture or sale of the Licensed Products covered by this Agreement at the termination of the License, and Licensee agrees that in the event of such failure Licensor shall be entitled to -18- equitable relief by the way of temporary and permanent injunction and such other and further relief as any court with jurisdiction may deem just and proper. 12. Liaison. Licensee shall appoint a high level managerial person who shall devote a substantial portion of his time to the production, merchandising, distribution and promotion of the Licensed Product lines. Such person shall act as liaison between Licensee and Licensor. 13. Indemnity. 13.1. Subject to the exclusions set forth in paragraph 7.1 of the Design Agreement, Licensee shall indemnify and save and hold Licensor, the Design Partnership, Polo Ralph Lauren Corporation and Ralph Lauren, individually, and their assignees, directors, officers, servants, agents and employees harmless of and from any and all liability, claims, causes of action, suits, damages and expenses, (including reasonable attorneys' fees and expenses in actions involving third parties or between the parties hereto), which they, or any of them, are or become liable for, or may incur, or be compelled to pay by reason of any acts, whether of omission or commission, that may be committed or suffered by Licensee or any of its servants, agents or employees in connection with Licensee's performance of this Agreement, in connection with Licensed Products manufactured by or on behalf of Licensee or otherwise in connection with Licensee's business, including without limitation, (i) Licensee's use of Licensee's own designs which were submitted for approval pursuant to the Design Agreement, and (ii) the unauthorized sale by Licensee of Licensed Products outside the Territory. 13.2. Licensee shall carry product and general liability insurance with limits of liability of not less than $ per occurrence and $ per person and Licensor, the Design Partnership, Polo Ralph Lauren Corporation and Ralph Lauren, individually, and their directors, officers, servants, agents and employees shall be named therein as insureds as their interests may appear. Licensee shall, promptly after the signing of this Agreement, deliver to Licensor a certificate of such insurance from the insurance carrier which sets forth the scope of coverage and the limits of liability and further provides that the policy may not be cancelled or amended without at least thirty (30) days' prior written notice to Licensor. -19- 14. Disclosure. Licensor and Licensee, and their affiliates, employees, attorneys, bankers and accountants shall hold in confidence and not use or disclose, except as permitted by this Agreement, (i) confidential information of the other or (ii) the terms of this Agreement, except upon consent of the other or pursuant to, or as may be required by law, or in connection with regulatory or administrative proceedings and only then with reasonable advance notice of such disclosure to the other. Licensee shall take all reasonable precautions to protect the secrecy of the materials, samples, sketches, designs, artwork, logos, and other materials used pursuant to this Agreement prior to the commercial distribution or the showing of samples for sale, and shall not sell any merchandise employing or adapted from any of said designs, sketches, artwork, logos, and other materials or their use except under the Trademarks. All press releases and other public announcements shall be subject to the prior approval of Licensor. Every request for a statement, release or other inquiry shall be sent in writing whenever practicable to the advertising/publicity director of Licensor for handling. 15. Showroom. Licensee, at its sole cost and expense, shall continue to maintain, operate and staff a showroom at 90 Park Avenue, New York, New York or at such suitable location as Licensor shall consent to for the exclusive presentation and sale of the Licensed Products. The showroom shall be maintained, operated, staffed and decorated in a manner consistent with that of Licensee's existing showrooms established for the presentation and sale of Licensor's products. Licensor shall have a right of approval with respect to the design and layout of the showroom and all expenses incurred with respect to the design, construction, operation and maintenance of such showroom shall be borne by Licensee. 16. Key Personnel. 16.1. At all times during the term hereof, Licensee shall employ a divisional President, approved in advance by Licensor (such approval not to be unreasonably withheld), whose sole responsibility shall be to manage all of Licensee's operations pursuant to this Agreement. Such individual shall report to the President of Licensee. 16.2. Intentionally Omitted. -20- 17. Miscellaneous. 17.1. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been properly given or sent (i) on the date when such notice, request, consent or communication is personally delivered and acknowledged, or (ii) five (5) days after the same was sent, if sent by certified or registered mail or (iii) one (1) day after the same was sent, if sent by overnight courier delivery, as follows: (a) if to Licensee, addressed as follows: Warnaco Inc. 90 Park Avenue New York, New York 10016 Attention: President with a copy to: Warnaco Inc. 90 Park Avenue New York, New York 10016 Attention: General Counsel (b) if to Licensor, addressed as follows: Polo Ralph Lauren, L.P. 650 Madison Avenue New York, New York 10022 Attention: President with a copy to: Victor Cohen, Esq. Eighth Floor 650 Madison Avenue New York, New York 10022 Anyone entitled to notice hereunder may change the address to which notices or other communications are to be sent to it by notice given in the manner contemplated hereby. 17.2. Nothing herein contained shall be construed to place the parties in the relationship of partners or joint venturers, and no party hereto shall have any power to obligate or bind any other party hereto in any manner whatsoever, except as otherwise provided for herein. -21- 17.3. None of the terms hereof can be waived or modified except by an express agreement in writing signed by the party to be charged. The failure of any party hereto to enforce, or the delay by any party in enforcing, any of its rights hereunder shall not be deemed a continuing waiver or a modification thereof and any party may, within the time provided by applicable law, commence appropriate legal proceedings to enforce any and all of such rights. All rights and remedies provided for herein shall be cumulative and in addition to any other rights or remedies such parties may have at law or in equity. Any party hereto may employ any of the remedies available to it with respect to any of its rights hereunder without prejudice to the use by it in the future of any other remedy with respect to any of such rights. No person, firm or corporation, other than the parties hereto and the Design Partnership, shall be deemed to have acquired any rights by reason of anything contained in this Agreement. 17.4. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. Licensor may assign all of its rights, duties and obligations hereunder to any entity to which the Trademarks or the right to use the Trademarks has been transferred, subject to Licensee's rights hereunder. The rights granted to Licensee hereunder are unique and personal in nature, and neither this Agreement nor the License may be assigned by Licensee without Licensor's prior written consent. Any attempt by Licensee to transfer any of its rights or obligations under this Agreement, whether by assignment, sublicense or otherwise, without having received the prior written consent of Licensor shall constitute an Event of Default, but shall otherwise be null and void. Licensee may employ subcontractors for the manufacture of Licensed Products; provided, however, that: (i) the supervision of production of Licensed Products shall remain under the control of Licensee, (ii) Licensee shall maintain appropriate quality controls, (iii) such subcontractors shall comply with the quality standards set forth herein, (iv) such subcontractors shall comply with other requirements of Licensor consistent with the terms of this Agreement, including, but not limited to, the execution by subcontractor of the Trademark and Design Protection Agreement attached hereto and made a part hereof; (v) once each quarter and upon the expiration or termination of this Agreement, Licensee shall provide Licensor with a complete list setting forth the full name and address of each subcontractor it uses in connection with the manufacture of Licensed Products, together with a complete list of Licensed Products (and/or components thereof) manufactured by each such subcontractor; and (vi) Licensee, upon request from Licensor, shall cease placing orders for Licensed Products with any such subcontractor. -22- 17.5. Licensee shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the operations of Licensee contemplated hereby, including, without limitation, as they relate to the manufacture, distribution, sale or promotion of Licensed Products, notwithstanding the fact that Licensor may have approved such item or conduct. 17.6. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, applicable to contracts made and to be wholly performed therein without regard to its conflicts of law rules. 17.7. If any dispute between the parties leads to litigation, the parties agree that the courts of the State of New York in the City of New York, or the federal courts in that City, shall have the exclusive jurisdiction and venue over such litigation. All parties consent to personal jurisdiction in the State of New York, and agree to accept service of process outside of the State of New York as if service had been made in that state. Any claim by Licensee arising hereunder shall be asserted by Licensee exclusively against Licensor, and Licensee shall not have nor claim to have any recourse for any such claim against any general or limited partner of Licensor. 17.8. The provisions hereof are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such provision, or part thereof in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction, or any other provision in this Agreement in any jurisdiction. To the extent legally permissible, an arrangement which reflects the original intent of the parties shall be substituted for such invalid or unenforceable provision. As of the effective date hereof, this agreement supercedes the agreement dated as of January 1, 1995 between Licensee and Licensor, but neither Licensee nor Licensor waives any rights arising under such prior agreement. Licensee shall not be required to seek Licensor's approval with respect to any Licensed Products or other materials approved by Licensor pursuant to the prior agreement solely as a result of the execution of this Agreement. 17.9. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -23- 17.10. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused the same to be executed by a duly authorized officer as of the day and year first above written. POLO RALPH LAUREN, L.P. By: Polo Ralph Lauren Corporation, General Partner By: ________________________________ WARNACO INC. By: ________________________________ -24- EX-10 9 EXHIBIT 10.5 Design - Chaps/Ralph - Sportswear AMENDED AND RESTATED DESIGN SERVICES AGREEMENT effective as of January 1, 1996, by and between Polo Ralph Lauren Enterprises, L.P. (the "Design Partnership"), with a place of business at 650 Madison Avenue, New York, New York 10022 and Warnaco Inc. (the "Company") with a place of business at 90 Park Avenue, New York, New York 10016. Ralph Lauren ("Lauren") is an internationally famous designer who has been twice inducted into the Coty Hall of Fame for his design of men's and women's fashions, is the recipient of the CFDA Lifetime Achievement Award, and is a creator of original designs for cosmetics, jewelry, home furnishings and other products. Polo Ralph Lauren, L.P., a Delaware limited partnership ("Polo"), holds the right and interest in and to certain trademarks and trade names, as same may be used in connection with the manufacture and sale of Licensed Products, as hereinafter defined, and on even date herewith, the Company has obtained the right to use the trademarks ("Trademarks") in connection with the Licensed Products, pursuant to a license agreement ("License Agreement") of even date herewith by and between the Company and Polo. The value of the Trademarks are largely derived from the reputation, skill and design talents of Lauren, and Lauren, directly and through his designees, provides design services through the Design Partnership. The Company desires to obtain the services of the Design Partnership in connection with the creation and design of the Licensed Products. The Company desires, in order to exploit the rights granted to it under the License Agreement, to engage and retain the Design Partnership to create and provide to the Company the designs for its line of Licensed Products. The Design Partnership is willing to furnish such designs and render such services on the basis hereinafter set forth. As used herein, the term "Licensed Products" shall mean high quality men's sportswear with the exception of (i) skiing or swimming items, and (ii) heavy outerwear items commonly found in outerwear departments, bearing the Trademarks. In consideration of the foregoing premises and of the mutual promises and covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 2 1. Designs; Assistance. 1.1 At any time or from time to time the Company may provide the Design Partnership with a list or lists setting forth those Licensed Products for which the Company shall require designing. 1.2 At any time or from time to time, or within a reasonable period following receipt by the Design Partnership of the aforesaid list or lists, the Design Partnership shall provide the Company with a program of suggested, broad design themes and concepts with respect to the design of the Licensed Products ("Design Concepts") which shall be embodied in verbal and/or written descriptions of design themes and concepts and such other detailed designs and sketches therefor, as the Design Partnership deems appropriate. The Design Partnership shall have full discretion with respect to the manner in which the Design Concepts shall be formulated and presented by the Design Partnership to the Company. The Company and the Design Partnership shall confer on Design Concepts and shall make such modifications as are required to meet the Design Partnership's approval. 1.3 The Design Partnership may engage such employees, agents and consultants operating under the Design Partnership's creative supervision and control as it may deem necessary and appropriate. 1.4 From time to time while this Agreement is in effect, the Design Partnership may (a) develop or modify and implement designs from the Design Concepts or other designs furnished by the Design Partnership or (b) develop and implement new designs. 1.5 If the Company wishes to prepare a design for any or all of its lines of Licensed Products, it shall submit to the Design Partnership for its approval the Company's proposed design therefor. By written notice to the Company, the Design Partnership may approve any of the designs so furnished, with such modifications as it shall deem appropriate, or the Design Partnership may, in its sole discretion, disapprove any or all of the designs. 1.6 The Company understands that all or portions of the Design Concepts may be furnished to the Company through or in cooperation with other entities to which the Design Partnership has provided design services. The Company upon its prior authorization shall pay all costs, including shipping and handling charges, for fabric swatches or mill chips, sketches, specifications, paper sample patterns and product samples furnished to the Company by the Design Partnership or such other entities. 3 1.7 The Company shall submit to the Design Partnership for its review and approval, the Company's proposed media advertising (other than cooperative advertising) relating to each Licensed Product or Licensed Product line. All layouts proposed by the Company for cooperative advertising shall similarly be subject to the Design Partnership's review and approval, which shall not be unreasonably withheld. The Design Partnership may, with respect to such advertising make such suggestions as it may deem necessary or appropriate, or disapprove, in either event by notice to the Company. 1.8 All patents and copyrights on designs of the Licensed Products shall be applied for by the Design Partnership or its designee, at the Design Partnership's discretion and expense and shall designate the Design Partnership or its designee as the patent or copyright owner, as the case may be, therefor. 1.9 Company acknowledges that the Licensed Products contain elements which in concept, execution and/or presentation are unique. Company agrees that it will not, during the term of the Agreement, use any designs used in the Licensed Products or any designs submitted or modified by the Design Partnership or any designs which are comparable and/or competitive with Licensed Products and which may be identified as the Design Partnership designs. 2. Design Legends; Copyright Notice and License. 2.1 All designs, sketches, artwork, logos and other materials of Licensed Products and the use of such designs, artwork, sketches, logos and other materials created by the Design Partnership, or created by or for the Company and reviewed and approved by the Design Partnership, or developed by or for the Company from Design Concepts or subsequent design concepts furnished or approved by the Design Partnership (all of which shall hereinafter constitute Design Concepts), shall be the property of the Design Partnership and shall be subject to the provisions of this paragraph 2. 2.2 All right, title and interest in and to the samples, sketches, design, artwork, logos and other materials furnished by or to Company or submitted to the Design Partnership, whether created by the Design Partnership or Company, are hereby assigned to and shall be the sole property of the Design Partnership. The Company shall cause to be placed on all Licensed Products appropriate notice designating the Design Partnership as the copyright or design patent owner thereof, as the case may be. The manner of presentation of said notices shall be reviewed and approved by the Design Partnership prior to use thereof by the Company. 2.3 The Design Partnership hereby grants to the Company the exclusive right, license and privilege ("License") to 4 use the designs furnished hereunder and all copyrights, if any, and patents, if any therein; provided, however, that the License is limited to use in connection with Licensed Products manufactured and sold, or imported and sold, pursuant to the License Agreement and only for the seasonal collection for which such Design Concepts are approved. All other rights in and to the designs furnished hereunder, including without limitation all rights to use such designs in connection with products other than Licensed Products (as defined in the License Agreement) and in territories other than the Territory (as defined in the License Agreement) are expressly reserved by the Design Partnership. The License shall continue only for such period as this Agreement shall be effective. The Design Partnership shall execute and deliver to the Company all documents and instruments necessary to perfect or evidence the License. Upon termination of this Agreement, for any reason whatsoever, any and all of the Company's right, title and interest in and to the License shall forthwith and without further act or instrument be assigned to, revert to and be the sole and exclusive property of the Design Partnership, and the Company shall have no further or continuing right or interest therein, except the limited right to complete the manufacture of and sell Licensed Products during the Disposal Period, as set forth in paragraph 6.3 hereof. In addition, the Company shall thereupon (i) execute and deliver to the Design Partnership all documents and instruments necessary to perfect or evidence such reversion, (ii) refrain from further use of any of the Design Concepts and (iii) refrain from manufacturing, selling or distributing any products (whether or not they bear the Trademarks) which are confusingly similar to or derived from the Licensed Products or Design Concepts. 2.4 Company shall not sublicense any of the rights granted hereunder without first obtaining the Design Partnership's prior written consent in connection therewith, which consent may be withheld by the Design Partnership in its sole discretion. 2.5 The Design Partnership represents and warrants to the Company that it has full right, power and authority to enter into this Agreement, to perform all of its obligations hereunder and to consummate all of the transactions contemplated herein. 2.6 The Company represents and warrants to the Design Partnership that the Company has full right, power and authority to enter into this Agreement, to perform all of its obligations hereunder and to consummate all the transactions contemplated herein. 3. Licensed Products. 3.1 The Company shall obtain the written approval of the Design Partnership, of all Licensed Products to be manufactured or caused to be manufactured by the Company, by submitting a Prototype, as hereinafter defined, of each different 5 design or model of a Licensed Product, including, but not limited to, the type and quality of materials, colors and workmanship to be used in connection therewith, prior to any commercial production thereof. In the event that the Design Partnership rejects a particular Prototype or Prototypes, the Design Partnership shall so notify the Company and shall in certain cases where the Design Partnership desires to include the prototype in the collection, provide the Company with suggestions for modifying the particular Prototype or Prototypes which the Design Partnership is rejecting. The Company shall promptly correct said Prototype or Prototypes, resubmit said Prototype or Prototypes to the Design Partnership and seek the Design Partnership's approval under the same terms and conditions as set forth herein with respect to the first submission of Prototypes. As used herein, the term "Prototype" shall mean any and all models, or actual samples, of Licensed Products; and the term "Final Prototype" shall mean the actual final sample of a Licensed Product from which the first commercial production thereof will be made and which has been approved by the Design Partnership prior to the first commercial production thereof pursuant to this paragraph 3. 3.2 The written approval of the Design Partnership of the Prototypes for each seasonal collection shall be evidenced by a written list, signed on behalf of the Design Partnership, setting forth those Prototypes which have been approved for inclusion in such collection. Prototypes so approved shall be deemed Final Prototypes in respect of such collection. Approval of any and all Prototypes as Final Prototypes shall be in the sole discretion of the Design Partnership. The Company shall present for sale, through the showing of each seasonal collection of the trade, all Final Prototypes so approved in respect of such collection. 3.3 The Licensed Products thereafter manufactured and sold by the Company shall strictly adhere, in all respects, including, without limitation, with respect to materials, color, workmanship, designs, dimensions, styling, detail and quality, to the Final Prototypes approved by the Design Partnership. 3.4 In the event that any Licensed Product is, in the judgment of the Design Partnership, not being manufactured or sold in strict adherence to the materials, color, workmanship, designs, dimensions, styling detail and quality, embodied in the Final Prototypes, or is otherwise not in accordance with the Final Prototypes, the Design Partnership shall notify the Company thereof in writing and the Company shall promptly repair or change such Licensed Product to conform strictly thereto. If any item of Licensed Product as repaired or changed does not strictly conform to the Final Prototypes and such strict conformity cannot be obtained after at least one (1) resubmission, the Trademarks shall be promptly removed from the item, at the option of the Design Partnership, in which event the item may be sold by the Company, provided it is in no way identified as a Licensed 6 Product. Notwithstanding anything in this paragraph 3.4 to the contrary, sales of all products using the Design Concepts, whether or not bearing the Trademarks, shall be subject to compensation payments pursuant to paragraph 4 hereof. 3.5 The Design Partnership and its duly authorized representative shall have the right, upon reasonable notice during normal business hours, to inspect all facilities utilized by the Company (and its contractors and suppliers) in connection with the preparation of Prototypes and the manufacture, sale, storage or distribution of Licensed Products pursuant thereto and to examine Licensed Products in process of manufacture and when offered for sale within the Company's operations. The Company hereby consents to the Design Partnership's examination of Licensed Products held by its customers for resale provided the Company has such right of examination. The Company shall take all necessary steps, and all steps reasonably requested by the Design Partnership, to prevent or avoid any misuse of the licensed designs by any of its customers, contractors or other resources. 3.6 The Company shall comply with all laws, rules regulations and requirements of any governmental body which may be applicable to the manufacture, distribution, sale or promotion of Licensed Products. The Company shall advise the Design Partnership to the extent any Final Prototype does not comply with any such law, rule, regulation or requirement. 3.7 The Company shall upon request make its personnel, and shall use its best efforts to make the personnel of any of its contractors, suppliers and other resources, available by appointment during normal business hours for consultation with the Design Partnership. The Company shall make available to the Design Partnership, upon reasonable notice, marketing plans, reports and information which the Company may have with respect to Licensed Products. 3.8 The Company may employ subcontractors for the manufacture of Licensed Products, provided that (a) Company shall have obtained prior written approval from the Design Partnership, (b) Company maintains appropriate quality controls, (c) such subcontractors shall comply with the quality requirements of the Agreement, and (d) such subcontractors shall execute a copy and comply with the Trademark and Design Agreement attached hereto and made a part hereof. 3.9 The Company shall include within each seasonal collection of Licensed Products a fully representative assortment of designs therefor designated by the Design Partnership for inclusion therein. Notwithstanding anything to the contrary contained herein or in the License Agreement, in the event the Company chooses not to or is unable to include within a seasonal collection of Licensed Products a particular Licensed Product which the Design Partnership has designed or designated for 7 inclusion in such collection, the Design Partnership shall be entitled to authorize third parties to manufacture such Licensed Product(s) on behalf of the Company and the Company shall display, present and sell such Licensed Product(s) in its showroom for Licensed Products. 4. Compensation; Accounting. 4.1 As compensation for the designs and services rendered hereunder, the Company shall pay minimum compensation to the Design Partnership each year during the term of this Agreement. The minimum compensation to the Design Partnership in connection with the manufacture and sale and importation and sale of Licensed Products for each year shall be as follows: Year 1 (1996) $ Year 2 $ Year 3 $ Year 4 $ Year 5 $ Year 6 $ Minimum compensation for each year shall be paid on a quarterly basis, on the last day of each month following the end of each calendar quarter during the term hereof (e.g., April 30 for the quarter ending March 31), commencing with the first quarterly payment to be made on April 30, 1996. The amount of earned compensation paid, pursuant to paragraph 4.2 hereof, with respect to sales of Licensed Products in each calendar quarter, shall be deducted from the minimum compensation payment due for such quarter, it being the parties' intent that the Company shall pay the Design Partnership an amount equal to the greater of (i) aggregate minimum compensation for each year of the initial term or (ii) aggregate earned compensation for each year of the initial term. However, no credit shall be permitted against minimum compensation payable in any year on account of actual or minimum compensation paid in any other year, and minimum compensation shall not be returnable. For each year during any renewal term of this Agreement, minimum compensation shall be an amount equal to % of the aggregate earned compensation accrued with respect to the sale of all Licensed Products during the immediately preceding year; provided, however, that (i) the minimum compensation in each year shall in no event be less than the minimum compensation due for the immediately preceding year and (ii) the minimum compensation in each year shall in no event be less than $ . For the purposes of this Agreement, the term "year" shall mean a period of twelve (12) months commencing on each January 1 during the term hereof. 4.2 The Company shall pay to the Design Partnership earned compensation based on the net sales price of Licensed Products manufactured or imported and sold by the Company hereunder. Earned compensation shall equal percent ( %) of the net sales price of all Licensed Products 8 sold under this Agreement, including, without limitation, sales made pursuant to paragraphs 3.4 and 6.3 hereof; provided, however, that (i) the earned compensation rate with respect to sales of Licensed Products on or before December 31, 1996 shall be percent ( %) and (ii) earned compensation payable to the Design Partnership on Licensed Product design "close-outs", which were sold at least percent ( %) below Company's regular selling price shall be percent ( %) of the net sales of such Licensed Products. The Company shall prepare or cause to be prepared statements of operations for each month during the term hereof, which shall be furnished to the Design Partnership together with the earned compensation due for each such month on the last day of the following month (e.g., July 31 for month of June). The term "net sales price" shall mean the gross sales price to retailers who are not affiliates of the Company or, with respect to Licensed Products that are not sold directly or indirectly to retailers, other ultimate consumers (as in the case of accommodation sales by Licensee to its employees), of all sales of Licensed Products under this Agreement, less trade discounts and allowances and merchandise returns. No other deductions shall be taken. Any merchandise returns shall be credited in the three (3) month period in which the returns are actually made. For purposes of this Agreement, affiliates of the Company shall mean all persons and business entities, whether corporations, partnerships, joint ventures or otherwise, which now or hereafter control, or are owned or controlled, directly or indirectly by the Company, or are under common control with the Company. It is the intention of the parties that compensation payments will be based on bona fide wholesale prices at which the Company sells Licensed Products to independent retailers in arms' length transactions. In the event the Company shall sell Licensed Products to its affiliates, compensation payments shall be calculated on the basis of such a bona fide wholesale price irrespective of the Company's internal accounting treatment of such sale. The Company shall identify separately in the statements of operations provided to the Design Partnership pursuant to paragraph 4.6 hereof, all sales to its affiliates. 4.3 The Company shall reimburse the Design Partnership for all its travel and promotion expenses incurred by the Design Partnership or Polo in the performance of the Design Partnership's duties under this Agreement, such amounts to include first class travel and hotel accommodations. Amounts payable to the Design Partnership pursuant to this paragraph shall become due and payable monthly within thirty (30) days of the date of mailing of the invoices, accompanied by corresponding receipts, for such costs incurred during the preceding month. 4.4 If the payment of any installment of compensation is delayed for any reason, interest shall accrue on the unpaid principal amount of such installment from and after the date on which the same became due pursuant to paragraphs 4.1 or 4.2 hereof at the lower of the highest rate permitted by law in 9 New York and the prime rate of interest in effect from time to time at Chemical Bank, New York, New York or its successor. 4.5 Provided that (a) no event of default under this Agreement has occurred and no default under this Agreement then exists and (b) this Agreement and the License are then in full force and effect, and (c) Company cooperates with the Design Partnership, The Polo/Lauren Company, L.P. ("PLC") and their licensees in connection with the manufacture and sale of Chaps Licensed Products in Canada, the Design Partnership shall pay to the Company an amount equal to ( %) percent of net compensation paid to the Design Partnership with respect to sales of Chaps Licensed Products made in Canada by any licensee of the Design Partnership, other than the Company. Company's cooperation under clause (c) of the foregoing sentence shall consist of, but shall not be limited to, the sharing of designs and information with respect to suppliers and contractors in connection with Chaps Licensed Products. Payments by the Design Partnership to the Company, if any, pursuant to this paragraph 4.5, shall be made within thirty (30) days after the Design Partnership's receipt thereof from its foreign licensee, if any, and shall be accompanied by a statement of the foreign license payments received by the Design Partnership pursuant to which the payment to the Company is being made. 4.6 The Company shall at all times keep an accurate account of all operations within the scope of this Agreement and shall render a full statement of such operations in writing to the Design Partnership in accordance with paragraph 4.1 hereof. Such statements shall account separately for each different product category and shall include all aggregate gross sales, trade discounts, merchandise returns, sales of miscuts and damaged merchandise and net sales price of all sales for the preceding three (3) month period. Such statements shall be in sufficient detail to be audited from the books of the Company. Once annually, which may be in connection with the regular annual audit of the Company's books, the Company shall furnish an annual statement of the aggregate gross sales, trade and prompt payment discounts, merchandise returns and net sales price of all Licensed Products made or sold by the Company, certified by Company's independent accountant. Each quarterly financial statement furnished by Company shall be certified by the chief financial officer of the Company or a certified public accountant who may be in the employ of the Company. The books of account of the Company with respect to such sales shall be available for inspection and audit by the Design Partnership or its agent at all reasonable times during the Company's usual working hours, but such audit shall be made only upon reasonable notice to Licensee, shall not be made more than once in each year and shall be made by the Design Partnership at its own expense; provided, however, that if there shall have been an error in favor of the Company in excess of percent ( %) in computing compensation for the period audited, all reasonable expenses in connection with such inspection and audit shall be borne by the Company. 10 4.7 The obligation of the Company to pay compensation hereunder shall be absolute notwithstanding any claim which the Company may assert against Polo or the Design Partnership. The Company shall not have the right to set-off, compensate or make any deduction from such compensation payments for any reason whatsoever. 5. Death or Incapacity of Lauren. The Design Partnership shall perform its obligations hereunder notwithstanding any death or incapacity of Lauren and the Company shall accept the services of the Design Partnership. 6. Term and Termination. 6.1 Unless sooner terminated in accordance with the terms and provisions hereof, this Agreement shall continue in effect for so long as the License Agreement is in effect and shall terminate upon the termination of the License Agreement. 6.2 Each of the following shall constitute an event of default ("Event of Default") hereunder: (i) any compensation is not paid when due and such default continues for more than ten (10) days after notice thereof; (ii) the Company shall fail to timely present for sale to the trade a broadly representative and fair collection of each seasonal collection of Licensed Products designed by the Design Partnership or the Company shall fail to timely ship a material portion of the orders of Licensed Products it has accepted; (iii) the Company shall use the designs in an unauthorized or improper manner and/or Company shall make an unauthorized disclosure of confidential information or materials given or loaned to Company by the Design Partnership or Polo; or (iv) the Company defaults in performing any of the other terms of this Agreement and continues in such default for a period of thirty (30) days after notice thereof (unless the default cannot be cured within such thirty (30) day period and the Company shall have commenced to cure the default and proceeds diligently thereafter to cure within a reasonable time); (v) an event of default shall occur under the License Agreement or any other design agreement entered into between the Company and the Design Partnership or license agreement between the Company and Polo; or (vi) the License Agreement shall be terminated for any reason whatsoever. If any Event of Default other than that described in paragraph 6.2(vi) shall occur, the Design Partnership shall have the right, exercisable in its sole discretion, to terminate this Agreement upon ten (10) days' written notice to the Company of its intention to do so. Upon the expiration of such ten (10) day period, this Agreement shall terminate and come to an end and, subject to paragraph 6.3 hereof, all rights of the Company in and to the designs furnished or used hereunder and all copyrights and designs patents therein and their contemplated use shall terminate. If the Event of Default described in paragraph 6.2(vi) shall occur, this Agreement and the License shall thereupon forthwith terminate and come to an end without any need 11 for notice to the Company. Termination of this Agreement shall be without prejudice to any remedy of the Design Partnership for the recovery of any monies then due to it under this Agreement or in respect to any antecedent breach of this Agreement, and without prejudice to any other right of the Design Partnership, including without limitation, damages for breach to the extent that the same may be recoverable. 6.3 In the event Polo chooses not to exercise the option referred to in paragraph 10.1 of the License Agreement with respect to all or any portion of the Licensed Products (as therein defined), the Company may dispose of Licensed Products, to the extent permitted by and in the manner set forth in paragraph 10.2 of the License Agreement. Such sales shall be subject to the payment of earned compensation pursuant to paragraph 4.2 hereof. Upon the conclusion of the disposal period all rights and interests in and to the designs furnished or used hereunder and design patents therein and all copyrights licensed hereby shall belong to and be the property of the Design Partnership, and the Company shall have no further or continuing right or interest therein. 6.4 The Company acknowledges and admits that there would be no adequate remedy at law for its failure to cease the manufacture or sale of Licensed Products at the termination of this Agreement, by expiration or otherwise, and the Company agrees that in the event of such failure, the Design Partnership shall be entitled to relief by way of temporary or permanent injunction and such other and further relief as any court with jurisdiction may deem proper. 6.5 It is expressly understood that under no circumstances shall the Company be entitled, directly or indirectly, to any form of compensation or indemnity from the Design Partnership, Lauren, Polo or their affiliates as a consequence to the termination of this Agreement, whether as a result of the passage of time, or as the result of any other cause of termination referred to in this Agreement. Without limiting the generality of the foregoing, by its execution of the present Agreement, the Company hereby waives any claim which it has or which it may have in the future against the Design Partnership, Lauren, Polo, Polo Ralph Lauren Corporation or their affiliates, arising from any alleged goodwill created by the Company for the benefit of any or all of the said parties or from the alleged creation or increase of a market for Licensed Products. 7. Indemnity. 7.1 The Company shall indemnify and save and hold the Design Partnership, Lauren, Polo, and Polo Ralph Lauren Corporation, and their assignees, directors, officers, servants, agents and employees harmless of and from any and all liability, claims, causes of action, suits, damages and expenses (including 12 reasonable attorney's fees and expenses in actions involving third parties or between the parties hereto), which he or they are or become liable for, or may incur, or be compelled to pay by reason of any acts, whether of omission or commission, that may be committed or suffered by the Company or any of its directors, officers, servants, agents or employees in connection with the Company's performance of this Agreement, in connection with Licensed Products manufactured by or on behalf of the Company or otherwise in connection with the Company's business; provided, however, that the Company shall not be responsible for any liability, claims, causes of action, suits, damages or expenses incurred or suffered by the Design Partnership, Lauren, Polo, Polo Ralph Lauren Corporation and their directors, officers, servants, agents and employees in connection with any suit or proceeding for infringement of another's design patent, trademark, copyright or other proprietary rights brought against them as a result of the Company's use of the Trademarks, or the Design Concepts furnished by the Design Partnership hereunder, in accordance with the terms of this Agreement. 8. Disclosure. The Design Partnership and the Company, and their affiliates, employees, attorneys, bankers and accountants, shall hold in confidence and not use or disclose, except as permitted by this Agreement, (i) confidential information of the other or (ii) the terms of this Agreement, except upon consent of the other or pursuant to, or as may be required by law, or in connection with regulatory or administrative proceedings and only then with reasonable advance notice of such disclosure to the other. Licensee shall take all reasonable precautions to protect the secrecy of the materials, samples, sketches, designs, artwork, logos and other materials used pursuant to this Agreement prior to the commercial distribution or the showing of samples for sale and shall not sell any merchandise employing or adapted from any of said designs, sketches, artwork, logos, and other materials or their use except under the Trademarks. 9. Miscellaneous. 9.1 All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been properly given or sent (i) on the date when such notice, request, consent or communication is personally delivered and acknowledged, or (ii) five (5) days after the same was sent, if sent by certified or registered mail or (iii) one (1) day after the same was sent, if sent by overnight courier delivery, as follows: (a) if to the Company, addressed as follows: Warnaco Inc. 90 Park Avenue New York, New York 10016 13 Attention: President with a copy to: Warnaco Inc. 90 Park Avenue New York, New York 10016 Attention: General Counsel (b) if to the Design Partnership, addressed as follows: Polo Ralph Lauren Enterprises, L.P. 650 Madison Avenue New York, New York 10022 Attention: President with a copy to: Victor Cohen, Esq. Eighth Floor 650 Madison Avenue New York, New York 10022 Anyone entitled to notice hereunder may change the address to which notices or other communications are to be sent to it by notice given in the manner contemplated hereby. 9.2 Nothing herein contained shall be construed to place the parties in the relationship of partners or joint venturers, and neither the Design Partnership nor the Company shall have any power to obligate or bind the other in any manner whatsoever, except as otherwise provided for herein. 9.3 None of the terms hereof can be waived or modified except by an express agreement in writing signed by the party to be charged. The failure of any party hereto to enforce, or the delay by any party in enforcing, any of its rights hereunder shall not be deemed a continuing waiver or a modification thereof and any party may, within the time provided by applicable law, commence appropriate legal proceedings to enforce any and all of such rights. All rights and remedies provided for herein shall be cumulative and in addition to any other rights or remedies such parties may have at law or in equity. Any party hereto may employ any of the remedies available to it with respect to any of its rights hereunder without prejudice to the use by it in the future of any other remedy with respect to any of such rights. No person, firm or corporation, other than the parties hereto and Polo, shall be deemed to have acquired any rights by reason of anything contained in this Agreement. 9.4 The Design Partnership may assign its right to receive compensation under this Agreement and, in addition, this 14 Agreement may be assigned by the Design Partnership to a corporation, partnership or joint venture, or any other such entity, to which the right to own or use the Trademarks has been assigned, or to an affiliate of any such entity, subject to the Company's rights hereunder. The Company may not assign its rights and obligations under this Agreement without the prior written consent of the Design Partnership. 9.5 The Company will comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the operations of the Company contemplated hereby, including, without limitation, as they relate to the manufacture, distribution, sale or promotion of Licensed Products, notwithstanding the fact that the Design Partnership may have approved such item or conduct. 9.6 This Agreement shall be binding upon and inure to the benefit of the successors, heirs and permitted assigns of the parties hereto. 9.7 This Agreement shall be construed in accordance with and governed by the laws of the State of New York, applicable to contracts made and to be wholly performed therein without regard to its conflicts of law rules. 9.8 If any dispute between the parties leads to litigation, the parties agree that the courts of the State of New York in the City of New York, or the federal courts in that City, shall have the exclusive jurisdiction and venue over such litigation. All parties consent to personal jurisdiction in the State of New York, and agree to accept service of process outside of the State of New York as if service had been made in that state. Any claim by the Company arising hereunder shall be asserted by the Company exclusively against the Design Partnership, and the Company shall not have nor claim to have any recourse for any such claim against any general or limited partner of the Design Partnership. 9.9 In the event of a breach or threatened breach of this Agreement by the Company, the Design Partnership shall have the right, without the necessity of proving any actual damages, to obtain temporary or permanent injunctive or mandatory relief in a court of competent jurisdiction, it being the intention of-the parties that this Agreement be specifically enforced to the maximum extent permitted by law. 9.10 Provisions of this Agreement are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such provision, or part thereof, in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction, or any other provision in this Agreement in any jurisdiction. To the extent legally permissible, an arrangement which reflects the original intent of 15 the parties shall be substituted for such invalid or unenforceable provision. As of the effective date hereof, this agreement supersedes the agreement dated as of July 1, 1995 between the Company and the Design Partnership, but neither the Company nor the Design Partnership waives any rights arising under such prior agreement. The Company shall not be required to seek the Design Partnership's approval with respect to any Licensed Products or other materials approved by the Design Partnership pursuant to the prior agreement solely as a result of the execution of this Agreement. 9.11 The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.12 This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused the same to be executed by a duly authorized officer as of the day and year first above written. POLO RALPH LAUREN ENTERPRISES, L.P. By: Polo Ralph Lauren Corporation, General Partner By: ______________________________ WARNACO INC. By: ______________________________ EX-11 10 EXHIBIT 11.1 EXHIBIT 11.1 THE WARNACO GROUP, INC. CALCULATION OF INCOME PER COMMON SHARE
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ------------------------ OCTOBER 4, OCTOBER 5, OCTOBER 4, OCTOBER 5, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT SHARE DATA) Net income (loss).............................. $32,081 $5,811 $67,362 $(32,454) ------- ------ ------- -------- ------- ------ ------- -------- Weighted average number of shares outstanding during the period: Shares outstanding during the period...... 50,130,376 49,729,964 49,770,781 49,421,416 Restricted shares issued during the period.................................. -- -- 68,939 88,015 Shares issued due to exercise of options................................. 92,863 24,038 184,346 85,496 Add: common equivalent shares using the treasury stock method................... 5,157,242 3,889,143 4,969,650 4,180,441 Less: treasury stock...................... (750,912) (286,600) (683,175) (286,600) ---------- ---------- ---------- ---------- Weighted average number of shares.............. 54,629,569 53,356,545 54,310,541 53,488,768 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income per share........................... $0.59 $0.11 $1.24 $(0.61) ----- ----- ----- ------- ----- ----- ----- -------
15 EX-27.1 11 ARTICLE 5 FDS 3RD QTR 1997 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE WARNACO GROUP, INC. FOR THE NINE MONTHS ENDED OCTOBER 4, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-03-1998 JAN-04-1997 OCT-04-1997 11,685 0 279,085 7,121 530,751 855,895 235,119 100,069 1,383,489 287,983 561,172 0 0 580 522,392 1,383,489 875,143 875,143 559,093 559,093 174,719 682 31,999 108,650 41,288 67,362 0 0 0 67,362 1.24 1.24
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