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UNITED STATES 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 July 2, 2000 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 1-10746 JONES APPAREL GROUP, INC. (Exact name of registrant as specified in its charter) (215) 785-4000 Not Applicable 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 1934 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date. <PAGE> 2 JONES APPAREL GROUP, INC. - 2 - <PAGE> 3 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Jones Apparel Group, Inc. See accompanying notes to consolidated financial statements - 3 - <PAGE> 4 Jones Apparel Group, Inc. See accompanying notes to consolidated financial statements (1) Reflects a non-cash increase in cost of goods sold attributable to the fair value
of inventory over cost, recorded as a result of the acquisition of Nine West Group Inc. as
required by the purchase method of accounting. - 4 - <PAGE> 5 Jones Apparel Group, Inc. See accompanying notes to consolidated financial statements - 5 - <PAGE> 6 Jones Apparel Group, Inc. See accompanying notes to consolidated financial statements - 6 - <PAGE> 7 JONES APPAREL GROUP, INC. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Jones
Apparel Group, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"). The financial statements have been prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") for interim financial
information and in accordance with the requirements of Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete financial
statements. The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements and the footnotes therein included
within the Company's Annual Report on Form 10-K. As used in this Report, "Sun"
and "Nine West" refer to the Company's wholly-owned subsidiaries Sun Apparel,
Inc. and Nine West Group Inc. (acquired June 15, 1999), respectively. The results of Nine
West are included in the Company's operating results from the date of acquisition and,
therefore, the Company's operating results for the periods presented are not comparable. In the opinion of management, the information presented reflects all
adjustments necessary for a fair statement of interim results. All such adjustments are of
a normal and recurring nature. The foregoing interim results are not necessarily
indicative of the results of operations for the full year ending December 31, 2000. The
Company reports interim results in 13 week quarters; however, the annual reporting period
is the calendar year. ACCRUED RESTRUCTURING COSTS In connection with the acquisitions of Nine West and Sun (acquired
October 2, 1998), the Company assessed and formulated plans to restructure certain
operations of each company. These plans involved the closure of manufacturing facilities,
certain offices, foreign subsidiaries, and selected domestic and international retail
locations. The objectives of the plans were to eliminate unprofitable or marginally
profitable lines of business and reduce overhead expenses. The accrual of these costs and
liabilities was recorded as an increase to goodwill and include: Estimated severance payments and other employee costs of $20.9
million accrued at July 2, 2000 relate to the remaining estimated severance for
approximately 1,200 employees at locations to be closed, costs associated with employees
transferring to continuing offices and other related costs. Employee groups affected
(totaling an estimated 4,100 employees) include retail sales personnel at closed store
locations, accounting, administrative, customer service and management personnel at closed
facilities, manufacturing and production personnel at closed plant locations and duplicate
- 7 - <PAGE> 8 JONES APPAREL GROUP, INC. corporate headquarters management and administrative personnel. During the six months
ended July 2, 2000, payments of $16.7 million to approximately 1,030 employees were made
and charged against the reserve. Accrued liabilities for the closing of Nine West retail stores of
$4.8 million at July 2, 2000 relate primarily to lease obligations and other closing costs
for the remaining 91 stores to be closed after July 2, 2000 from the approximately 250
stores originally identified to be closed. The $14.8 million accrued at July 2, 2000 for the consolidation of
facilities relate primarily to expected costs to be incurred, including lease obligations,
for closing certain Nine West facilities in connection with consolidating their operations
into other existing Company facilities. The Company's plans have not been finalized in all areas, and
additional restructuring costs may result as the Company continues to evaluate and assess
the impact of underperforming retail locations and international operations. Any
additional costs relating to Nine West or Sun will be charged to operations in the period
in which they occur. INVENTORIES Inventories are summarized as follows (in millions): SUBSEQUENT EVENT On July 31, 2000, the Company purchased 100% of the outstanding
securities of Victoria + Co Ltd., a privately-held corporation ("Victoria").
Victoria is a leading designer and marketer of branded and private label costume jewelry.
The total purchase price was $93.6 million, including $16.6 in cash payments (of which
$2.0 million is payable in 2002) and the assumption of $77.0 of Victoria's funded debt and
accrued interest. This funded debt was refinanced by the Company through its existing
credit facilities. In addition, the stockholders of Victoria are entitled to receive
future payments in the form of cash and common stock of the Company if certain earnings
targets are met in 2001, 2002 and 2003. - 8 - <PAGE> 9 JONES APPAREL GROUP, INC. STATEMENT OF CASH FLOWS NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which requires entities to
recognize all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133, as amended by SFAS
Nos. 137 and 138, is effective for all fiscal years beginning after June 15, 2000. The
Company is currently reviewing SFAS No. 133 (as amended) and has of yet been unable to
fully evaluate the impact, if any, it may have on future operating results or financial
statement disclosures. SEGMENT INFORMATION The Company's operations are comprised of three reportable segments:
wholesale apparel, wholesale footwear and accessories, and retail. The Company identifies
operating segments based on, among other things, the way that the Company's management
organizes the components of the Company's business for purposes of allocating resources
and assessing performance. Segment revenues are generated from the sale of apparel,
footwear and accessories through wholesale channels - 9 - <PAGE> 10 JONES APPAREL GROUP, INC. and the Company's own retail locations. The wholesale segments include wholesale
operations with third party department and retail stores while the retail segment includes
retail operations by Company-owned retail stores. The Company defines segment profit as
operating income before amortization of goodwill, interest expense and income taxes.
Summarized below are the Company's segment revenues and income by reportable segments for
the quarters ended July 2, 2000 and July 4, 1999. - 10 - <PAGE> 11 JONES APPAREL GROUP, INC. SUPPLEMENTAL SUMMARIZED FINANCIAL INFORMATION Certain of the Company's subsidiaries function as obligors and
co-obligors of the Company's outstanding debt, including Jones Apparel Group USA, Inc.
("Jones USA"), Jones Apparel Group Holdings, Inc. ("Jones Holdings")
and Nine West. Jones and Jones Holdings function as co-obligors with respect to the
outstanding debt securities of Jones USA and certain of the outstanding debt securities of
Nine West. In addition, Nine West functions as a co-obligor with respect to all of Jones
USA's outstanding debt securities, and Jones USA functions as a co-obligor with respect to
the outstanding debt securities of Nine West as to which Jones and Jones Holdings function
as co-obligors. The following summarized financial information represents the
results of Jones USA and Nine West. Separate financial statements and other disclosures
concerning Jones USA, Nine West and Jones Holdings are not presented, because management
has determined that such information is not material to the holders of the outstanding
debt. - 11 - <PAGE> 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations General The following discussion provides information and analysis of the
Company's results of operations for the quarterly and six month periods ended July 2, 2000
and July 4, 1999, respectively, and its liquidity and capital resources. The following
discussion and analysis should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto included elsewhere herein. On June 15, 1999, the Company completed its acquisition of Nine
West. The results of operations of Nine West are included in the Company's operating
results from the date of acquisition. Accordingly, the financial position and results of
operations presented and discussed herein are not directly comparable between years. The Company operates in three reportable segments: wholesale
apparel, wholesale footwear and accessories, and retail. Results of Operations Statements of Income Expressed as a Percentage of Total Revenues Totals may not agree due to rounding.
Pennsylvania
(State or other jurisdiction of
incorporation or organization)06-0935166
(I.R.S. Employer
Identification No.)
250 Rittenhouse Circle
Bristol, Pennsylvania
(Address of principal executive offices)19007
(Zip Code)
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Class of Common
Stock
$.01 par valueOutstanding at
August 9, 2000
118,720,245
Index Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
July 2, 2000 and December 31, 1999........................... 3
Consolidated Statements of Income
Quarters and Six Months ended July 2, 2000 and July 4, 1999.. 4
Consolidated Statements of Stockholders' Equity
Six Months ended July 2, 2000 and July 4, 1999............... 5
Consolidated Statements of Cash Flows
Six Months ended July 2, 2000 and July 4, 1999............... 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 17
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 5. Other Information............................................... 18
Item 6. Exhibits and Reports on Form 8-K................................ 19
Signatures.............................................................. 20
Index to Exhibits....................................................... 20
Consolidated Balance Sheets
(All amounts in millions except per share data)
July 2, 2000 December 31, 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 54.6 $ 47.0
Accounts receivable, net of allowance for doubtful
accounts of $14.9 and $26.6 428.3 271.1
Inventories 591.3 619.6
Prepaid and refundable income taxes 11.6 34.5
Deferred taxes 77.6 98.9
Prepaid expenses and other current assets 59.2 59.5
-------- --------
TOTAL CURRENT ASSETS 1,222.6 1,130.6
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated
depreciation and amortization 230.8 239.8
GOODWILL, less accumulated amortization 1,065.8 989.9
OTHER INTANGIBLES, at cost, less accumulated amortization 346.6 345.4
OTHER ASSETS 107.0 86.3
-------- --------
$2,972.8 $2,792.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portion of long-term
debt and capital lease obligations $ 435.9 $ 266.9
Accounts payable 203.2 205.1
Accrued restructuring costs 45.2 61.1
Accrued employee compensation 25.7 34.1
Accrued expenses and other current liabilities 96.8 94.2
-------- --------
TOTAL CURRENT LIABILITIES 806.8 661.4
-------- --------
NONCURRENT LIABILITIES:
Long-term debt 809.3 801.5
Obligations under capital leases 30.9 32.7
Other 46.7 55.4
-------- --------
TOTAL NONCURRENT LIABILITIES 886.9 889.6
-------- --------
TOTAL LIABILITIES 1,693.7 1,551.0
-------- --------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value - shares
authorized 1.0; none issued - -
Common stock, $.01 par value - shares authorized
200.0; issued 136.2 and 134.6 1.4 1.4
Additional paid-in capital 725.7 693.0
Retained earnings 908.3 782.2
Accumulated other comprehensive income 1.6 0.3
-------- --------
1,637.0 1,476.9
Less treasury stock, 17.5 and 12.0 shares, at cost (357.9) (235.9)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 1,279.1 1,241.0
-------- --------
$2,972.8 $2,792.0
======== ========
Consolidated Statements of Income (Unaudited)
(All amounts in millions except per share data) Quarter Ended Six Months Ended
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
Net sales $ 901.1 $ 505.9 $ 1,978.6 $ 1,080.8
Licensing income (net) 5.5 4.5 10.4 8.7
--------- --------- --------- ---------
Total revenues 906.6 510.4 1,989.0 1,089.5
Cost of goods sold 527.7 303.9 1,172.3 668.7
Purchase accounting adjustments
to cost of goods sold (1) - 6.5 - 6.5
--------- --------- --------- ---------
Gross profit 378.9 200.0 816.7 414.3
Selling, general and
administrative expenses 251.5 134.1 536.9 249.8
Amortization of goodwill 9.2 3.8 17.8 6.5
--------- --------- --------- ---------
Operating income 118.2 62.1 262.0 158.0
Interest income 0.4 0.9 0.6 2.1
Interest expense and
financing costs (26.1) (10.7) (52.4) (18.6)
--------- --------- --------- ---------
Income before provision
for income taxes 92.5 52.3 210.2 141.5
Provision for income taxes 37.0 20.4 84.1 55.2
--------- --------- --------- ---------
Net income $ 55.5 $ 31.9 $ 126.1 $ 86.3
========= ========= ========= =========
Earnings per share
Basic $0.47 $0.29 $1.06 $0.81
Diluted $0.46 $0.28 $1.04 $0.78
Weighted average common
shares and share
equivalents outstanding
Basic 118.5 108.5 118.9 106.0
Diluted 121.6 113.1 121.8 110.1
Consolidated Statements of Stockholders' Equity (Unaudited)
(All amounts in millions) Total Accumulated
stock- Additional other
holders' Common paid-in Retained comprehensive Treasury
equity stock capital earnings income stock
Balance, January 1, 1999: $ 594.4 $ 1.2 $ 234.8 $ 593.8 $ (2.3) $ (233.1)
Six months ended July 4, 1999:
Comprehensive income:
Net income 86.3 - - 86.3 - -
Foreign currency
translation adjustments 0.7 - - - 0.7 -
--------
Total comprehensive income 87.0
--------
Amortization of deferred
compensation in connection
with executive stock options 0.1 - 0.1 - - -
Exercise of stock options 9.9 - 9.9 - - -
Tax benefit derived from
exercise of stock options 6.9 - 6.9 - - -
Stock issued as additional
consideration for acquisition
of Sun Apparel, Inc. 14.3 - 14.3 - - -
Stock and options issued for
acquisition of Nine West Group
Inc. net of issuance costs 421.6 0.1 421.5 - - -
-----------------------------------------------------------
Balance, July 4, 1999 $1,134.2 $ 1.3 $ 687.5 $ 680.1 $ (1.6) $ (233.1)
===========================================================
Balance, January 1, 2000: $1,241.0 $ 1.4 $ 693.0 $ 782.2 $ 0.3 $ (235.9)
Six months ended July 2, 2000:
Comprehensive income:
Net income 126.1 - - 126.1 - -
Foreign currency
translation adjustments 1.3 - - - 1.3 -
--------
Total comprehensive income 127.4
--------
Amortization of deferred
compensation in connection
with executive stock options 1.0 - 1.0 - - -
Exercise of stock options 8.8 - 8.9 - - (0.1)
Tax benefit derived from
exercise of stock options 4.5 - 4.5 - - -
Treasury stock acquired (121.9) - - - - (121.9)
Stock issued as additional
consideration for acquisition
of Sun Apparel, Inc. 18.3 - 18.3 - - -
-----------------------------------------------------------
Balance, July 2, 2000 $1,279.1 $ 1.4 $ 725.7 $ 908.3 $ 1.6 $ (357.9)
===========================================================
Consolidated Statements of Cash Flows (Unaudited)
(All amounts in millions)Six Months Ended July 2, 2000 July 4, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 126.1 $ 86.3
-------- --------
Adjustments to reconcile net income to net cash used
in operating activities, net of acquisitions:
Amortization of goodwill 17.8 6.5
Depreciation and other amortization 34.7 16.6
Provision for losses on accounts receivable 2.3 2.3
Deferred taxes 36.2 (0.4)
Other 2.4 1.0
Decrease (increase) in:
Accounts receivable, including a $67.0 payment
in 2000 to terminate Nine West's accounts
receivable securitization program (166.8) (46.4)
Inventories 29.9 (21.5)
Prepaid and refundable income taxes 22.6 (28.4)
Prepaid expenses and other current assets 2.2 (5.6)
Other assets (7.8) 24.1
Increase (decrease) in:
Accounts payable (1.5) 39.5
Accrued expenses and other current liabilities (70.0) (18.8)
-------- --------
Total adjustments (98.0) (31.1)
-------- --------
Net cash provided by operating activities 28.1 55.2
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26.2) (10.4)
Loans to officers (18.5) -
Acquisition of Canadian Polo Ralph Lauren
licenses and related assets (15.0) -
Acquisition of Nine West Group Inc. net of cash acquired (0.1) (433.5)
Additional consideration paid for acquisition
of Sun Apparel, Inc. (26.6) (20.1)
Acquisition of intangibles (0.9) (6.2)
Proceeds from sale of property, plant and equipment 2.3 0.1
-------- --------
Net cash used in investing activities (85.0) (470.1)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 7.5% Senior Notes, net of discount - 173.5
Issuance of 7.875% Senior Notes, net of discount - 222.8
Debt issuance costs - (5.6)
Repurchase of 9% Senior Notes - (93.9)
Premiums paid on repurchase of Senior Notes - (10.3)
Net borrowings under long-term credit facilities 177.1 37.4
Principal payments on capital leases (2.0) (2.3)
Purchases of treasury stock (121.9) -
Proceeds from exercise of stock options 8.7 9.9
-------- --------
Net cash provided by financing activities 61.9 331.5
-------- --------
EFFECT OF EXCHANGE RATES ON CASH 2.6 -
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7.6 (83.4)
CASH AND CASH EQUIVALENTS, BEGINNING 47.0 129.0
-------- --------
CASH AND CASH EQUIVALENTS, ENDING $ 54.6 $ 45.6
======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Balance at Net Balance at
(in millions) December 31, 1999 Additions Utilized July 2, 2000
Severance and other
employee costs $ 26.7 $ 10.9 $ 16.7 $ 20.9
Closing of retail stores 15.0 (10.2) - 4.8
Consolidation of
facilities 14.4 3.4 3.0 14.8
Other 5.0 (0.1) 0.2 4.7
------ ------ ------ ------
Total $ 61.1 $ 4.0 $ 19.9 $ 45.2
====== ====== ====== ======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) July 2, December 31,
2000 1999
Raw materials $ 28.1 $ 25.6
Work in process 54.8 42.5
Finished goods 508.4 551.5
------ ------
$591.3 $619.6
====== ======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Six Months Ended: July 2, July 4,
(In millions) 2000 1999
Supplemental disclosures of cash
flow information:
Cash paid (received) during the quarter for:
Interest $ 47.0 $ 17.7
Income taxes, net of refunds 52.3 67.2
Supplemental disclosures of
non-cash investing and
financing activities:
Tax benefits related to stock options 4.5 6.9
Common stock issued as additional
consideration for the acquisition of Sun 18.3 14.3
Detail of acquisitions:
Fair value of assets acquired $ 15.6 $1,665.9
Liabilities assumed (0.6) (810.7)
Common stock and options issued - (421.7)
------ --------
Net cash paid for acquisitions 15.0 433.5
Cash acquired in acquisitions - 29.8
------ --------
Cash paid for acquisitions $ 15.0 $ 463.3
====== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (In millions) Wholesale
Wholesale Footwear & Other &
Apparel Accessories Retail Eliminations Consolidated
For the quarter ended July 2, 2000
Revenues from external customers $ 441.4 $ 191.6 $ 268.1 $ 5.5 $ 906.6
Intersegment revenues 20.5 28.8 - (49.3) -
-------------------------------------------------------------------
Total revenues 461.9 220.4 268.1 (43.8) 906.6
-------------------------------------------------------------------
Segment income $ 57.0 $ 51.8 $ 28.3 $ (9.7) 127.4
===================================================
Amortization of goodwill (9.2)
Net interest expense (25.7)
--------
Income before provision for
income taxes $ 92.5
========
For the quarter ended July 4, 1999
Revenues from external customers $ 376.0 $ 53.7 $ 76.2 $ 4.5 $ 510.4
Intersegment revenues 16.1 8.0 - (24.1) -
-------------------------------------------------------------------
Total revenues 392.1 61.7 76.2 (19.6) 510.4
-------------------------------------------------------------------
Segment income $ 63.2 $ 5.4 $ 6.4 $(9.1) 65.9
===================================================
Amortization of goodwill (3.8)
Net interest expense (9.8)
--------
Income before provision for
income taxes $ 52.3
========
For the six months ended July 2, 2000
Revenues from external customers $1,036.6 $ 437.4 $ 504.6 $ 10.4 $1,989.0
Intersegment revenues 46.9 61.9 - (108.8) -
-------------------------------------------------------------------
Total revenues 1,083.5 499.3 504.6 (98.4) 1,989.0
-------------------------------------------------------------------
Segment income $ 172.8 $ 108.8 $ 22.7 $ (24.5) 279.8
===================================================
Amortization of goodwill (17.8)
Net interest expense (51.8)
--------
Income before provision for
income taxes $ 210.2
========
For the six months ended July 4, 1999
Revenues from external customers $ 918.2 $ 53.7 $ 108.9 $ 8.7 $1,089.5
Intersegment revenues 44.3 8.0 - (52.3) -
-------------------------------------------------------------------
Total revenues 962.5 61.7 108.9 (43.6) 1,089.5
-------------------------------------------------------------------
Segment income $ 171.7 $ 5.4 $ 7.6 $ (20.2) 164.5
===================================================
Amortization of goodwill (6.5)
Net interest expense (16.5)
--------
Income before provision for
income taxes $ 141.5
========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other and
(In millions) Jones USA Nine West Eliminations Consolidated
On or for the six months ended July 2, 2000:
Current assets $ 1,413.5 $ 529.9 $ (720.8) $ 1,222.6
Noncurrent assets 156.4 1,049.3 544.5 1,750.2
Current liabilities 863.8 452.8 (509.8) 806.8
Noncurrent liabilities 707.1 177.2 2.6 886.9
Total revenues 721.3 879.9 387.8 1,989.0
Gross profit 270.0 408.5 138.2 816.7
Operating income 94.1 108.9 59.0 262.0
Net income 25.6 58.4 42.1 126.1
On or for the six months ended July 4, 1999:
Current assets $ 1,053.4 $ 633.9 $ (430.2) $ 1,257.1
Noncurrent assets 154.8 1,018.4 438.7 1,611.9
Current liabilities 500.7 323.7 (244.8) 579.6
Noncurrent liabilities 707.4 443.6 4.2 1,155.2
Total revenues 650.0 89.5 350.0 1,089.5
Gross profit 238.4 31.7 144.2 414.3
Operating income 83.4 2.3 72.3 158.0
Net income 38.9 - 47.4 86.3
Quarter Ended Six Months Ended
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
Net sales 99.4% 99.1% 99.5% 99.2%
Licensing income (net) 0.6% 0.9% 0.5% 0.8%
------ ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 58.2% 59.5% 58.9% 61.4%
------ ------ ------ ------
Gross profit before purchase
accounting adjustments 41.8% 40.5% 41.1% 38.6%
Purchase accounting adjustments - 1.3% - 0.6%
------ ------ ------ ------
Gross profit 41.8% 39.2% 41.1% 38.0%
Selling, general and
administrative expenses 27.7% 26.3% 27.0% 22.9%
Amortization of goodwill 1.0% 0.7% 0.9% 0.6%
------ ------ ------ ------
Operating income 13.0% 12.2% 13.2% 14.5%
Net interest expense 2.8% 1.9% 2.6% 1.5%
------ ------ ------ ------
Income before provision for
income taxes 10.2% 10.2% 10.6% 13.0%
Provision for income taxes 4.1% 4.0% 4.2% 5.1%
------ ------ ------ ------
Net income 6.1% 6.2% 6.3% 7.9%
====== ====== ====== ======
Quarter Ended July 2, 2000 Compared to Quarter Ended July 4, 1999
Revenues. Total revenues for the 13 weeks ended July 2, 2000 (hereinafter referred to as the "second quarter of 2000") increased 77.6%, or $396.2 million, to $906.6 million, compared to $510.4 million for the 13 weeks ended July 4, 1999 (hereinafter referred to as the "second quarter of 1999"). The revenue growth resulted primarily from the net sales of product lines added as a result of the Nine West acquisition ($335.1 million of the increase). The breakdown of total revenues for both periods is as follows:
- 12 -
<PAGE> 13
Second Second Quarter Quarter Percent (in millions) of 2000 of 1999 Increase Change Wholesale apparel $441.4 $376.0 $ 65.4 17.4% Wholesale footwear and accessories 191.6 53.7 137.9 256.8% Retail 268.1 76.2 191.9 251.8% Other 5.5 4.5 1.0 22.2% -------------------------------- Total revenues $906.6 $510.4 $396.2 77.6% ================================
Wholesale apparel revenues increased primarily as a result of increases
in shipments of Lauren by Ralph Lauren, Ralph by Ralph Lauren and Polo Jeans
Company products, partially offset by planned lower shipments of Rena Rowan
products. The increases in wholesale footwear and accessories and retail revenues are the
result of the acquisition of Nine West.
Gross Profit. The gross profit margin increased to 41.8% in the second quarter of 2000 compared to 39.2% in the second quarter of 1999, primarily due to proportionally higher retail sales (attributable to the Nine West acquisition) in the second quarter of 2000. Gross profit was negatively impacted during the second quarter of 1999 by a $6.5 million writeoff of adjustments required under purchase accounting to mark up acquired Nine West inventory to market value upon acquisition; without this charge, the gross profit margin for the second quarter of 1999 would have been 40.5%. Wholesale apparel gross profit margins decreased to 33.5% in the second quarter of 2000 compared to 38.4% in the second quarter of 1999, resulting from higher shipments of off-price goods in the second quarter of 2000 than in the prior year. Retail gross profit margins increased to 55.2% from 50.5%, primarily due to the acquisition of Nine West.
Selling, general and administrative ("SG&A") expenses. SG&A expenses of $251.5 million in the second quarter of 2000 represented an increase of $117.4 million over the second quarter of 1999. As a percentage of total revenues, SG&A expenses increased to 27.7% in the second quarter of 2000 from 26.3% for the comparable period in 1999. Nine West accounted for $109.2 million of the increase, with the remainder primarily due to increased royalty expenses.
Operating Income. The resulting second quarter of 2000 operating income of $118.2 million increased 90.3%, or $56.1 million, over the $62.1 million for the second quarter of 1999. The operating margin increased to 13.0% in the second quarter of 2000 from 12.2% in the second quarter of 1999, due to the factors discussed above partially offset by the amortization of goodwill resulting from the Nine West acquisition.
Net Interest Expense. Net interest expense was $25.7 million in the second quarter of 2000 compared to $9.8 million in the comparable period of 1999, primarily as a result of the debt incurred to finance the Nine West acquisition and repurchase treasury shares during the first six months of 2000.
Provision for Income Taxes. The effective income tax rate was 40.0% for the second quarter of 2000 compared to 39.0% for the second quarter of 1999. The increase was primarily due to the nondeductibility of the additional goodwill amortization in the second quarter of 2000.
Net Income. Net income increased 74.0% to $55.5 million in the second quarter of 2000, an increase of $23.6 million over the net income of $31.9 million earned in the second quarter of 1999. Net income
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as a percentage of total revenues was 6.1% in the second quarter of 2000 and 6.2% in the second quarter of 1999. Excluding the amortization of goodwill, net income for the second quarters of 2000 and 1999 would have been $64.7 million and $35.7 million, respectively ($0.53 and $0.32 per diluted share, respectively).
Six Months Ended July 2, 2000 Compared to Six Months Ended July 4, 1999
Revenues. Total revenues for the 26 weeks ended July 2, 2000 (hereinafter referred to as the "first six months of 2000") increased 82.6%, or $0.9 billion, to $2.0 billion, compared to $1.1 billion for the 26 weeks ended July 4, 1999 (hereinafter referred to as the "first six months of 1999"). The revenue growth resulted primarily from the net sales of product lines added as a result of the Nine West acquisition ($790.4 million of the increase). The breakdown of total revenues for both periods is as follows:
First First Six Months Six Months Percent (in millions) of 2000 of 1999 Increase Change Wholesale apparel $1,036.6 $ 918.2 $118.4 12.9% Wholesale footwear and accessories 437.4 53.7 383.7 714.5% Retail 504.6 108.9 395.7 363.4% Other 10.4 8.7 1.7 19.5% ------------------------------------ Total revenues $1,989.0 $1,089.5 $899.5 82.6% ====================================
Wholesale apparel revenues increased primarily as a result of increases
in shipments of Lauren by Ralph Lauren, Ralph by Ralph Lauren and Polo Jeans
Company products, partially offset by planned lower shipments of Jones New York
and Rena Rowan products. The increases in wholesale footwear and accessories and
retail revenues are the result of the acquisition of Nine West.
Gross Profit. The gross profit margin increased to 41.1% in the first six months of 2000 compared to 38.0% in the first six months of 1999, primarily due to proportionally higher retail sales (attributable to the Nine West acquisition) in the first six months of 2000. Gross profit was negatively impacted during the first six months of 1999 by a $6.5 million writeoff of adjustments required under purchase accounting to mark up acquired Nine West inventory to market value upon acquisition; without this charge, the gross profit margin for the first six months of 1999 would have been 38.6%. Wholesale apparel gross profit margins decreased to 35.8% in the first six months of 2000 compared to 36.9% in the first six months of 1999, resulting from higher shipments of off-price goods in the second quarter of 2000 than in the prior year. Retail gross profit margins increased to 52.5% from 51.5%, primarily due to the acquisition of Nine West.
Selling, general and administrative expenses. SG&A expenses of $536.9 million in the first six months of 2000 represented an increase of $287.1 million over the first six months of 1999. As a percentage of total revenues, SG&A expenses increased to 27.0% in the first six months of 2000 from 22.9% for the comparable period in 1999. Nine West accounted for $259.8 million of the increase, with the remainder primarily due to increased royalty expenses.
Operating Income. The resulting first six months of 2000 operating income of $262.0 million increased 65.8%, or $104.0 million, over the $158.0 million for the first six months of 1999. The
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operating margin decreased to 13.2% in the first six months of 2000 from 14.5% in the first six months of 1999, due to the factors discussed above and the amortization of goodwill resulting from the Nine West acquisition.
Net Interest Expense. Net interest expense was $51.8 million in the first six months of 2000 compared to $16.5 million in the comparable period of 1999, primarily as a result of the debt incurred to finance the Nine West acquisition and repurchase treasury shares during the first six months of 2000.
Provision for Income Taxes. The effective income tax rate was 40.0% for the first six months of 2000 compared to 39.0% for the first six months of 1999. The increase was primarily due to the nondeductibility of the additional goodwill amortization in the first six months of 2000.
Net Income. Net income increased 46.1% to $126.1 million in the first six months of 2000, an increase of $39.8 million over the net income of $86.3 million earned in the first six months of 1999. Net income as a percentage of total revenues was 6.3% in the first six months of 2000 and 7.9% in the first six months of 1999. Excluding the amortization of goodwill, net income for the first six months of 2000 and 1999 would have been $143.9 million and $92.8 million, respectively ($1.18 and $0.84 per diluted share, respectively).
Liquidity and Capital Resources
The Company's principal capital requirements have been to fund acquisitions, working capital needs, capital expenditures and repurchases of the Company's common stock on the open market. The Company has historically relied primarily on internally generated funds, trade credit, bank borrowings and the issuance of notes to finance its operations and expansion.
Cash Provided by Operations. Operating activities provided $28.1 million of cash in the first six months of 2000 and $55.2 million in the first six months of 1999. The change from the first six months of 2000 over the prior period was primarily due to a higher increase in accounts receivable, including a $67.0 million payment in the first quarter of 2000 to discontinue Nine West's five-year Receivables Facility (see below), offset by higher net income before depreciation and amortization.
Cash Used in Investing Activities. Investing activities used $85.0 million during the first six months of 2000, compared to $470.1 million during the first six months of 1999. Excluding $433.5 million in cash paid to acquire Nine West in the second quarter of 1999, investing activities used $48.4 million more in the first six months of 2000 than in the first six months of 1999, primarily due to a higher level of capital expenditures, the acquisition of the Canadian licenses for several Polo Ralph Lauren brands (including eight retail stores, related inventory and other assets) and $18.5 million in loans made to company officers, of which $18.0 million was loaned to the Company's Chairman and Chief Executive Officer for his purchase of a residence in New York City. The loan, which will replace an arrangement under which the Chairman has been provided the use of a Company-owned apartment, is secured by the residence and bears interest at the applicable federal rate under IRS regulations. Total capital expenditures for 2000 are expected to be approximately $60.0 million.
Cash Provided by Financing Activities. Financing activities provided $61.9 million of cash in the first six months of 2000, compared to $331.5 million in the first six months of 1999. Proceeds from higher borrowings under the Company's long-term credit facilities in the first six months of 2000 were primarily used to purchase treasury stock. The first six months of 1999 included $286.5 million related to the issuance of various Senior Notes used for the acquisition of Nine West and the repurchase of a portion of Nine West's outstanding Senior Subordinated Notes.
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The Company repurchased $121.9 million of its common stock on the open market during the first six months of 2000. As of July 2, 2000, a total of $356.9 million has been expended under announced programs to acquire up to $500.0 million of such shares. The Company may authorize additional share
repurchases in the future depending on, among other things, market conditions and the Company's financial condition. Proceeds from the issuance of common stock to employees exercising stock options amounted to $8.7 million and $9.9 million in the first six months of 2000 and 1999, respectively.
Liquidity. The terms of the acquisition agreement for Sun require the Company to pay the former Sun shareholders additional consideration of $2.00 for each $1.00 of Sun's earnings before interest and taxes (as defined in the merger agreement) for each of the years 1998 through 2001 that exceeds certain targeted levels. This additional consideration is to be paid 59% in cash and 41% in the Company's common stock, the value of which will be determined by the prices at which the common stock trades in a defined period preceding delivery in each year. On April 5, 2000, the Company paid $26.6 million in cash and issued 669,323 shares of common stock (valued at $18.3 million) as additional consideration for the Sun acquisition related to 1999 earnings, which was recorded as additional goodwill in the second quarter of 2000.
During the first quarter of 2000, the Company terminated a five-year Receivables Facility (created in 1995 and amended in 1998) which permitted Nine West to obtain up to $132.0 million of funding based on the sale, without recourse, of eligible Nine West accounts receivable. As a result of this termination, reported net accounts receivable will no longer be reduced by proceeds received under the Receivables Facility. This termination will not affect the Company's liquidity.
At July 2, 2000, the Company had credit agreements with several lending institutions to borrow an aggregate principal amount of up to $1.45 billion under Senior Credit Facilities. These facilities, of which the entire amount is available for letters of credit or cash borrowings, provide for a $750.0 million 364-Day Revolving Credit Facility (increased from $500.0 million during the second quarter of 2000) and a $700.0 million Five-Year Revolving Credit Facility. At July 2, 2000, $322.3 million was outstanding under the 364-Day Revolving Credit Facility (comprised of $278.5 million in outstanding letters of credit and $43.8 million in cash borrowings) and $375.0 million in cash borrowings was outstanding under the Company's Five-Year Revolving Credit Facility. Borrowings under the Senior Credit Facilities may also be used for working capital and other general corporate purposes, including permitted acquisitions and stock repurchases. The Senior Credit Facilities are unsecured and require the Company to satisfy both a coverage ratio of earnings before interest, taxes, depreciation, amortization and rent to interest expense plus rents and a net worth maintenance covenant, as well as other restrictions, including (subject to exceptions) limitations on the Company's ability to incur additional indebtedness, prepay subordinated indebtedness, make acquisitions, enter into mergers, and pay dividends.
The Company also has a total of approximately $49.0 million of unsecured foreign lines of credit in Europe, Australia and Canada, under which $18.8 million was outstanding at July 2, 2000.
On July 31, 2000, the Company purchased 100% of the outstanding securities of Victoria + Co Ltd., a privately-held corporation ("Victoria"). Victoria is a leading designer and marketer of branded and private label costume jewelry. The total purchase price was $93.7 million, including $16.7 in cash payments (of which $2.0 million is payable in 2002) and the assumption of $77.0 of Victoria's funded debt and accrued interest. This funded debt was refinanced by the Company through its existing credit facilities. In addition, the stockholders of Victoria are entitled to receive future payments in the form of cash and common stock of the Company if certain earnings targets are met in 2001, 2002 and 2003.
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The Company believes that funds generated by operations, the Senior Credit Facilities and the foreign lines of credit will provide the financial resources sufficient to meet its foreseeable working capital, letter of credit, capital expenditure and stock repurchase requirements and any ongoing obligations to the former Sun and Victoria shareholders.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133, as amended by SFAS Nos. 137 and 138, is effective for all fiscal years beginning after June 15, 2000. The Company is currently reviewing SFAS No. 133 (as amended) and is not yet able to fully evaluate the impact, if any, it may have on future operating results or financial statement disclosures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The market risk inherent in the Company's financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in interest rates or foreign currency exchange rates. The Company manages this exposure through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Company policy allows the use of derivative financial instruments for identifiable market risk exposures, including interest rate and foreign currency fluctuations. The Company does not enter into derivative financial contracts for trading or other speculative purposes.
The Company employs an interest rate hedging strategy utilizing swaps to effectively float a portion of its interest rate exposure on its fixed rate financing arrangements. The primary interest rate exposures on floating rate financing arrangements are with respect to United States, Canada, United Kingdom and Australian short-term local currency rates. The Company had approximately $1.5 billion in variable rate financing arrangements at July 2, 2000. Other than the interest rate swaps, there were no outstanding derivative financial contracts at July 2, 2000.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 6, 2000, the Company and Nine West entered into settlement agreements with the Attorneys General of the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, the Northern Mariana Islands and Guam (the "States"), and with the Federal Trade Commission, resolving allegations that Nine West engaged in violations of the antitrust laws by coercing retailers to adhere to resale prices of its products. Both agreements are without any admission of liability on the part of Nine West.
The agreement with the States resolves ongoing investigations and a parens patriae action brought on behalf of consumers in the United States District Court for the Southern District of New York in White Plains. The settlement consists of injunctive relief in the form of a consent decree which specifies the manner in which Nine West may implement its resale pricing policies with its retailer customers, along with a payment of $34.0 million which will be used to benefit consumers. The settlement agreement received preliminary court approval on June 2, 2000. The States have begun
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notifying the class members of the settlement of the action. A hearing is scheduled for December 14, 2000, at which time the court will hear any objection to the settlement and will decide whether to give the agreement final approval.
In a separate settlement on March 6, 2000, Nine West agreed to a consent order with the Federal Trade Commission which also specifies the manner in which Nine West may implement its resale pricing policies with its retailer customers. The consent order, which resolved an ongoing investigation by the FTC, was given final approval by the Commission on April 11, 2000.
There have been no other material changes from the information previously reported under Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Stockholders was held on May 24, 2000. The proposals submitted to the vote of the stockholders and the results of the votes were as follows:
Broker For Against Withheld Abstain Non-votes Election of Directors Sidney Kimmel 112,305,915 * 750,254 * - Jackwyn Nemerov 112,311,824 * 744,345 * - Irwin Samelman 112,300,265 * 755,904 * - Geraldine Stutz 112,548,926 * 507,243 * - Howard Gittis 112,495,126 * 561,043 * - Eric A. Rothfeld 112,558,904 * 497,265 * - Ratification of the Selection of BDO Seidman, LLP as the Independent Certified Public Accountants 112,997,819 34,625 * 23,725 - Approval of Amendments to the 1999 Stock Option Plan 86,793,892 26,107,570 * 154,707 - ____________________ *Not Applicable
Item 5. Other information
Statement Regarding Forward-looking Disclosure
This Report includes, and incorporates by reference, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding the Company's expected financial position, business and financing plans are forward-looking statements. The words "believes," "expects," "plans," "intends," "anticipates" and similar expressions identify forward-looking statements. Forward-looking statements also include representations of the Company's expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of national and regional economic conditions, the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, customer acceptance of both new designs and newly-introduced product lines, financial
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difficulties encountered by customers, the effects of vigorous competition in the markets in which the Company operates, the integration of Nine West, Sun, Victoria or other acquired businesses into the Company's existing operations, the termination or non-renewal of the licenses with Polo Ralph Lauren Corporation, the Company's extensive foreign operations and manufacturing, pending litigation and investigations, the failure of customers or suppliers to achieve Year 2000 compliance, changes in the costs of raw materials, labor and advertising, and the Company's ability to secure and protect trademarks and other intellectual property rights. All statements other than statements of historical facts included in this Report, including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed in this Report in conjunction with the forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the quarter ended July 2, 2000, the Company filed the following two Current Reports on Form 8-K with the Securities and Exchange Commission:
(1) A Current Report on Form 8-K, dated June 2, 2000, announcing the preliminary approval by the United States District Court for the Southern District of New York in White Plains to the previously-announced antitrust settlement agreement by the Company and Nine West, with the Attorneys General of the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, the Northern Mariana Islands and Guam.
(2) A Current Report on Form 8-K, dated June 12, 2000, announcing the Company's signing of a letter of intent on that date to purchase 100% of the issued and outstanding capital stock of Victoria.
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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.
JONES APPAREL GROUP, INC.
(Registrant)
Date: August 10, 2000
By /s/ Sidney Kimmel
SIDNEY KIMMEL
Chief Executive OfficerBy /s/ Wesley R. Card
WESLEY R. CARD
Chief Financial Officer
INDEX TO EXHIBITS
Number Description 2.1* Securities Purchase and Sale Agreement dated as of July 31, 2000, by and among the Company, Jones Apparel Group Holdings, Inc., Victoria + Co Ltd. and the Shareholders and Warrantholders of Victoria + Co Ltd. 10.1* Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000, by and among Jones Apparel Group USA, Inc., the Additional Obligors referred to therein, the Lenders referred to therein, Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. 10.2 Jones Apparel Group, Inc. 1999 Stock Incentive Plan (incorporated by reference to Annex A of the Company's Proxy Statement for the Company's 2000 Annual Meeting of Stockholders). 27* Financial Data Schedule (filed only electronically). ________ * Filed herewith.
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SECURITIES PURCHASE AND SALE AGREEMENT
by and
among
JONES APPAREL GROUP, INC.
JONES APPAREL GROUP HOLDINGS, INC.
and
VICTORIA + CO LTD.
THE SHAREHOLDERS OF THE COMPANY
and
THE WARRANTHOLDERS OF THE COMPANY
Dated as of
July 31, 2000
<PAGE> i
INDEX TO AGREEMENT
Page
ARTICLE 1. DEFINITIONS.......................................................2 ARTICLE 2. PURCHASE AND SALE OF COMPANY SHARES AND WARRANTS; CLOSING TRANSACTIONS ........................................................8 2.1 Purchase and Sale of Company Shares and Warrants.....................8 2.2 Consideration........................................................8 2.3 Closing; Additional Closing Transactions............................10 2.4 Closing Deliveries..................................................11 2.5 Further Assurances..................................................12 2.6 Contingent Payments to Securityholders..............................12 2.7 Timing of Contingent Payments.......................................15 2.8 Directors and Officers of the Company...............................17 2.9 Securityholders Representatives....................................17 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................20 3.1 Corporate Organization; Etc.........................................20 3.2 Capitalization of the Company.......................................20 3.3 Subsidiaries........................................................20 3.4 Authorization; No Conflicts.........................................21 3.5 Financial Statements................................................22 3.6 No Undisclosed Liabilities; Etc.....................................22 3.7 Accounts Receivable.................................................22 3.8 Inventory...........................................................22 3.9 Absence of Certain Changes..........................................23 3.10 Title to Properties: Encumbrances..................................25 3.11 Plants, Structures and Equipment...................................26 3.12 Patents, Trademarks, Trade Names, Etc..............................26 3.13 Leases.............................................................26 3.14 Taxes..............................................................27 3.15 Material Contracts.................................................27 3.16 Customers and Suppliers............................................28 3.17 Orders, Commitments and Returns....................................29 3.18 Agreements in Full Force and Effect................................29 3.19 Insurance..........................................................29 3.20 Labor, Customs, Health and Safety Law Matters......................30 3.21 Employee Benefit Plans.............................................31 3.22 Litigation.........................................................34 3.23 No Condemnation or Expropriation...................................35 3.24 Permits, Consents and Approvals of Governmental Authorities........35
(i)
<PAGE> ii 3.25 Consents...........................................................35 3.26 Compliance with Law................................................35 3.27 Compliance with Environmental Laws.................................36 3.28 No Other Agreements................................................39 3.29 Brokers and Finders................................................39 3.30 Personnel..........................................................39 3.31 Insider Interests..................................................40 3.32 Bank Accounts......................................................40 3.33 Disclosure.........................................................40 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS................40 4.1 Authorization and Due Execution; No Conflicts.......................40 4.2 No Distribution.....................................................41 4.3 Legend..............................................................41 4.4 Review of Applicable Laws...........................................41 4.5 Knowledge and Experience............................................42 4.6 Availability of Information.........................................42 4.7 Restrictions on Transfers...........................................42 4.8 Ownership of Stock and Warrants.....................................43 4.9 Brokers and Finders.................................................43 4.10 Organization and Authority.........................................43 ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF JONES AND HOLDINGS ............44 5.1 Corporate Organization; Etc.........................................44 5.2 Financial Statements................................................44 5.3 Capitalization......................................................45 5.4 Jones Common Stock..................................................45 5.5 Authorization; Etc..................................................45 5.6 No Conflicts........................................................45 5.7 SEC Reports.........................................................46 5.8 Litigation..........................................................46 5.9 Consents............................................................46 5.10 Financing..........................................................46 5.11 Disclosure.........................................................47 ARTICLE 6. ADDITIONAL COVENANTS OF THE COMPANY, JONES AND HOLDINGS..........47 6.1 Access to the Company...............................................47 6.2 Access to Jones.....................................................47 6.3 Amendment of Disclosure Schedule....................................48 6.4 Repayment of Indebtedness...........................................48 ARTICLE 7. ADDITIONAL COVENANTS OF THE PARTIES..............................48
(ii)
<PAGE> iii
7.1 Employment Agreements...............................................48 7.2 Registration........................................................48 7.3 Confidentiality.....................................................50 7.4 Antitrust Laws......................................................50 7.5 Consents............................................................50 7.6 Management of the Company after the Closing.........................50 7.7 Directors' and Officers' Indemnification and Insurance..............50 7.8 Bank Accounts.......................................................51 7.9 Securities Exchange Act Filings.....................................51 7.10 Tax Audits.........................................................51 ARTICLE 8. CONDITIONS TO SECURITYHOLDERS AND THE COMPANYS OBLIGATIONS.................................................................52 8.1 Representations and Warranties True.................................52 8.2 Performance.........................................................52 8.3 No Injunction or Restraint..........................................52 8.4 Payment of the Aggregate Purchase Price and Closing Date Debt.......52 8.5 HSR Act.............................................................52 8.6 Jones and Holdings Legal Opinions...................................52 ARTICLE 9. CONDITIONS TO OBLIGATIONS OF JONES AND HOLDINGS..................53 9.1 Representations and Warranties True.................................53 9.2 Performance.........................................................53 9.3 No Injunction or Restraint..........................................53 9.4 Payoff Letters......................................................53 9.5 Delivery of Stock Certificates or Warrants..........................53 9.6 Termination of Affiliate Agreements and Certain Resignations........53 9.7 HSR Act.............................................................54 9.8 Approval of Certain Payments........................................54 9.9 Releases............................................................54 9.10 Hilfiger and Givenchy Licenses.....................................54 9.11 Company and Securityholders Legal Opinions.........................54 ARTICLE 10. CONDUCT OF THE COMPANYS BUSINESS PENDING CLOSING AND RISK OF LOSS................................................................54 10.1 Regular Course of Business.........................................54 10.2 Organization.......................................................55 10.3 Certain Changes....................................................55 10.4 Contracts..........................................................56 10.5 Insurance of Property..............................................56 10.6 No Default.........................................................56 10.7 Risk of Loss.......................................................56
(iii)
<PAGE> iv
ARTICLE 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.............................................................57 11.1 Survival of Representations and Warranties.........................57 11.2 Indemnification....................................................57 11.3 Satisfaction of Securityholders Indemnification Obligations; Holdback and Set-Off...............................................60 11.4 Exclusive Remedy...................................................61 11.5 Tax Indemnity......................................................61 ARTICLE 12. TERMINATION AND ABANDONMENT.....................................62 12.1 Methods of Termination.............................................62 12.2 Termination Under Certain Circumstances............................62 12.3 Procedure Upon Termination.........................................63 ARTICLE 13. MISCELLANEOUS PROVISIONS........................................63 13.1 Amendment and Modification.........................................63 13.2 Waivers............................................................64 13.3 Expenses, Etc......................................................64 13.4 Interest on Late Payments..........................................64 13.5 Notices............................................................64 13.6 Assignment.........................................................67 13.7 Publicity..........................................................67 13.8 Governing Law; Forum...............................................67 13.9 Counterparts.......................................................67 13.10 Headings..........................................................68 13.11 Entire Agreement..................................................68 13.12 Third Parties.....................................................68 13.13 Materiality and Immateriality.....................................68 13.14 Severability......................................................68 13.15 Cumulative Remedies...............................................68 13.16 Limited Recourse..................................................68 13.17 Obligations Several and Not Joint.................................69
Exhibit A-1 Form of Amendment to Andreoli Employment Agreement Exhibit A-2 Form of Amendment to Other Executive Employment Agreements
(iv)
<PAGE> v
The Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.
Disclosure Schedule
Section 2.2 Sample Calculation of Aggregate Purchase Price Components Section 3.1 Foreign Qualifications Section 3.2 Outstanding Rights to Acquire Capital Stock of the Company Section 3.3 Subsidiaries Section 3.4(b) Conflicts Section 3.6 Undisclosed Liabilities Section 3.8 Inventory Section 3.9 Certain Changes Section 3.10(a) Title to Real Property Section 3.10(b) Properties and Assets Acquired Since the Date of the Balance Sheet Section 3.10(c) Liens, Title Defects, Etc. Section 3.10(d) Real Property Rights of Way, Encroachments, Etc. Section 3.11 Material Defects to Structures and Equipment; Notices of Violations Section 3.12(a) Patents, Trademarks, Tradenames, Etc. Section 3.12(b) Intellectual Property Conflicts Section 3.13(a) Leases and Subleases Section 3.13(b) Lease Defaults Section 3.14 Contested Taxes; Agreements Related to Tax Returns Section 3.15(a) Material Contracts Section 3.15(b) Material Contract Exceptions Section 3.16(a) Customers Section 3.16(b) Suppliers Section 3.16(c) Changes in Relationship with Customers or Suppliers Section 3.17(a) Accepted and Unfulfilled Orders Section 3.17(b) Open Purchase Orders Section 3.17(c) Returns Section 3.17(d) Chargebacks and Allowances Section 3.18 Exceptions to Validity of Material Contracts Section 3.19(a) Insurance Section 3.19(b) Self Insured Risks Section 3.19(c) Claims for Which Insurance Has Denied Coverage or Reserved Right to Deny Coverage Section 3.20(a) Compliance with Labor, Customs, Health and Safety Law Section 3.20(b) Compliance with Customs, Health and Safety Laws Section 3.20(c) Company Guidelines Regarding Monitoring of Company Subsidiaries Section 3.21(b) Employee Plans Section 3.21(c) Exceptions to Pension Plans, Multiemployer Plans, Welfare Plans, Etc.
(v)
<PAGE> vi Section 3.21(vii) Acceleration or Creation of Rights Section 3.22 Litigation Section 3.25 Consents Section 3.26 Exceptions to Compliance with Laws Section 3.27(b) Exceptions to Compliance with Environmental Laws Section 3.27(c) Permits Required By Environmental Laws; Compliance Exceptions Section 3.27(d) Required Permit Applications, Etc. Section 3.27(e) Notices of Alleged Violations of Environmental Laws Section 3.27(f) Pending or Threatened Actions With Respect to Environmental Laws or Hazardous Substances Section 3.27(g) Consents, Judgments, Orders With Respect to Environmental Laws Section 3.27(h) Hazardous Substances Used, Generated, Stored, Etc. Section 3.27(i) Exception to Compliance in Handling Hazardous Substances Section 3.27(j) Known Liabilities and Notices of Potential Liabilities Under CERCLA or RCRA Section 3.27(k) Underground Storage Tanks And Pipelines Section 3.27(l) List of Environmental Audits, Assessments and Other Reports Section 3.27(m) Material Contracts Which Include Obligations or Benefits Regarding Environmental Laws Section 3.27(n) Releases and Waivers Concerning Environmental Laws Section 3.27(o) Exceptions to Notice, Warning, Reports and Records Regarding Environmental Laws Section 3.28 Other Agreements to Sell Equity or Assets of Company or any Subsidiary Section 3.29 Brokers and Finders Section 3.30 Directors, Elected and Appointed Officers and Salary Information Section 3.31 Insider Interests Section 3.32 Bank Accounts Section 4.8 Ownership of Stock
Other Schedules
Schedule 2.2(a) Closing Date Debt Schedule 2.2(b)(iii) Series C Percentage Schedule 2.6 Contingent Payments Percentage Schedule 2.9(a)(i) Institutional Securityholders Schedule 2.9(a)(ii) Individual Securityholders
(vi)
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SECURITIES PURCHASE AND SALE AGREEMENT
SECURITIES PURCHASE AND SALE AGREEMENT (together with all Exhibits and Schedules, this "Agreement") dated as of July 31, 2000, by and among JONES APPAREL GROUP, INC., a Pennsylvania corporation ("Jones"), JONES APPAREL GROUP HOLDINGS, INC., a wholly-owned subsidiary of Jones organized under the laws of the State of Delaware ("Holdings"), VICTORIA + CO LTD., a Rhode Island corporation (the "Company"), and the holders of all of the Companys issued and outstanding capital stock whose names are set forth on the signature pages hereto ("Shareholders") and the holders of all the Companys outstanding warrants whose names are set forth on the signature pages hereto ("Warrantholders"). (The Shareholders and Warrantholders are referred to herein collectively as the "Securityholders").
RECITALS
WHEREAS, the Company is a corporation duly organized and validly existing under the laws of the State of Rhode Island, having an authorized capitalization consisting of 50,000 shares of Common Stock, no par value (the "Company Common Stock"), of which as of the date hereof, 3,500 shares are issued and outstanding, and 6,600 shares of preferred stock, no par value per share, of which as of the date hereof, 4,400 shares are designated Series A Convertible Participating Preferred Stock and are issued and outstanding (the "Series A Preferred Stock"), 2,100 shares are designated Series B Convertible Participating Preferred Stock and are issued and outstanding (the "Series B Preferred Stock") and 100 shares are designated Series C Preferred Stock and are issued and outstanding (the "Series C Preferred Stock," and together with the Series A Preferred Stock and the Series B Preferred Stock, the "Company Preferred Stock") and Warrants to acquire 4,448.47 shares of Common Stock, no par value (the "Warrants");
WHEREAS, the Shareholders are the holders of all of the issued and outstanding shares of Company Common Stock and Company Preferred Stock (collectively, the "Company Shares") and desire to sell such Company Shares, and Holdings desires to purchase such Company Shares, on the terms and conditions set forth herein; and
WHEREAS, the Warrantholders are the holders of all of the issued and outstanding Warrants and desire to sell such Warrants, and Holdings desires to purchase such Warrants, on the terms and conditions set forth herein;
WHEREAS, each of the holders of the Series A Preferred Stock has waived its rights to a liquidation preference, other than in respect of accrued but unpaid dividends, and Prudential has waived any rights to a portion of the make-whole payment pursuant to that certain loan agreement with the Company;
WHEREAS, each of the holders of the Series B Preferred Stock will receive the amounts set forth herein in respect of the liquidation preference to which it would otherwise be entitled;
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NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements, and upon the terms and subject to the conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
1.1 "Acquisition Amount" shall have the meaning as specified in Section 2.6(b)(ii).
1.2 "Acquisition Interest Expense" shall have the meaning as specified in Section 2.6(b)(ii).
1.3 The terms "Affiliate" and "Associate" have the meanings prescribed by Rule 12b-2 of the regulations promulgated pursuant to the Securities Exchange Act of 1934, as amended.
1.4 "Aggregate Purchase Price" shall have the meaning as specified in Section 2.2(a)(i).
1.5 "Balance Sheet" shall have the meaning as specified in Section 3.5.
1.6 "Benefit Arrangement" shall have the meaning as specified in Section 3.21(a).
1.7 "Bonus Compensation Plan" shall have the meaning as specified in Section 2.3(b)(iii).
1.8 "Calculation Period" shall have the meaning as specified in Section 2.6(a).
1.9 "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act.
1.10 "Claim" shall have the meaning as specified in Section 11.2(d).
1.11 "Claim Notice" shall have the meaning as specified in Section 11.2(d).
1.12 "Closing" shall have the meaning as specified in Section 2.3.
1.13 "Closing Date" shall have the meaning as specified in Section 2.3.
1.14 "Closing Date Debt" shall have the meaning as specified in Section 2.3(b)(iv).
1.15 "Code" means the Internal Revenue Code of 1986, as amended.
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1.16 "Common Stock Equivalent" shall have the meaning as specified in Section 2.2(a)(v).
1.17 "Common Stock Per Share Value" shall have the meaning as specified in Section 2.2(a)(iv).
1.18 "Company Common Stock" shall have the meaning as specified in the Recitals.
1.19 "Company Preferred Stock" shall have the meaning as specified in the Recitals.
1.20 "Company Shares" shall have the meaning as specified in the Recitals.
1.21 "Company Subsidiary" means any corporation, limited liability company, partnership or other entity, (a) of which the Company directly or indirectly owns or controls at the time equity interests which have in ordinary circumstances (not dependent upon the happening of a contingency) voting power to elect a majority of the governing body of said entity, or (b) of which an equity interest of the character described in the foregoing clause (a) shall at the time be owned or controlled directly or indirectly by the Company and one or more Company Subsidiaries as defined in the foregoing clause (a) or by one or more such Company Subsidiaries.
1.22 "Contingent Payment Statement" shall have the meaning as specified in Section 2.7(a).
1.23 "Contingent Payments" shall have the meaning as specified in Section 2.6.
1.24 "Contingent Payments Percentage" shall have the meaning as specified in Section 2.6.
1.25 "Damages" shall have the meaning as specified in Section 11.2(a).
1.26 "Disclosure Schedule" means the schedule to be delivered by the Company to Jones containing the information required to be included therein pursuant to this Agreement. Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered section of the Disclosure Schedule.
1.27 "Distribution Amount" shall have the meaning as specified in Section 11.3.
1.28 "Due Date" shall have the meaning as specified in Section 13.4.
1.29 "EBIT" shall have the meaning as specified in Section 2.6(b).
1.30 "Employee Plans" shall have the meaning as specified in Section 3.21(a)(ii).
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1.31 "Employment Agreement Amendments" shall have the meaning as specified in Section 7.1.
1.32 "Environmental Condition" shall have the meaning as specified in Section 3.27(a).
1.33 "Environmental Laws" shall have the meaning as specified in Section 3.27(a).
1.34 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
1.35 "ERISA Affiliate" shall have the meaning as specified in Section 3.21.
1.36 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
1.37 "Facilities" shall have the meaning as specified in Section 3.27(a).
1.38 "Foothill" shall have the meaning as specified in Article 4.
1.39 "Foothill Loan" shall mean the loan from Foothill under the Amended and Restated Loan and Security Agreement dated as of March 23, 1999, as amended.
1.40 "Form 10-K" shall have the meaning as specified in Section 5.2(a).
1.41 "Form 10-Q" shall have the meaning as specified in Section 5.2(a).
1.42 "Hazardous Substance" shall have the meaning as specified in Section 3.27(a).
1.43 "Holdback Amount" shall have the meaning as specified in Section 2.2(c).
1.44 "Holdback Distribution Date" shall have the meaning as specified in Section 11.3.
1.45 "Holdback Percentage" shall have the meaning as specified in Section 2.2 (c).
1.46 "HSR Act" shall have the meaning as specified in Section 3.24.
1.47 "Institutional Representative" shall have the meaning as specified in Section 2.9(a).
1.48 "Institutional Securityholders" shall have the meaning as specified in Section 2.9(a).
1.49 "Intellectual Property" shall have the meaning as specified in Section 3.12.
1.50 "Intercompany Charges" shall have the meaning as specified in Section 2.6(b)(i).
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1.51 "Jones Balance Sheet" shall have the meaning as specified in Section 5.2(a).
1.52 "Jones Borrowing Rate" shall have the meaning as specified in Section 2.6(b)(ii).
1.53 "Jones Common Stock" means the common stock, $.01 par value, of Jones.
1.54 "Jones Contingent Stock" shall have the meaning as specified in Section 2.6(a).
1.55 "Jones Indemnified Parties" shall have the meaning as specified in Section 11.2(a).
1.56 "Knowledge of the Company" or "known to the Company" means actual knowledge of any of Robert M. Andreoli, Steven J. ONeil, Patricia Stensrud and Richard M. Andreoli and such knowledge as any of such officers reasonably ought to have in the exercise of their duties, and, with respect to the matters addressed in Section 3.27, assumes due inquiry of such other officers or key employees with responsibility for such matters.
1.57 "Liens" shall have the meaning as specified in Section 2.1.
1.58 "Lockbox Account" shall mean the depository account established pursuant to the Foothill Loan documents.
1.59 "Management Representative" shall have the meaning as specified in Section 2.9(a).
1.60 "Management Securityholder" shall have the meaning as specified in Section 11.5.
1.61 "Material Contracts" shall have the meaning as specified in Section 3.15(a).
1.62 "Maximum Obligation" shall have the meaning as specified in Section 11.2(e)(ii).
1.63 "Multiemployer Plan" shall mean any "Multiemployer Plan," as defined in Section 4001(a)(3) of ERISA.
1.64 "NYSE" shall have the meaning as specified in Section 2.6.
1.65 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.66 "Pension Plan" shall have the meaning as set forth in Section 3.21(a).
1.67 "Permits" shall have the meaning as specified in Section 3.24.
1.68 "Permitted Liens" shall have the meaning as specified in Section 3.10.
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1.69 "Pre-Target Year Cash Flow" shall have the meaning as specified in Section 2.6(b)(ii).
1.70 "Prudential" shall mean The Prudential Insurance Company of America.
1.71 "Prudential Indemnitee" shall mean Prudential, employees and directors, and their respective Affiliates and representatives
1.72 "RCRA" shall mean the Resource Conservation & Recovery Act.
1.73 "REI" shall mean Recovery Equity Investors II, L.P.
1.74 "REI Indemnitee" shall mean REI, its general and limited partners, and their respective Affiliates and representatives.
1.75 "Release" shall have the meaning as specified in Section 3.27(a).
1.76 "Representatives" shall have the meaning as specified in Section 2.9(a).
1.77 "Restricted Shareholders" shall have the meaning as specified in Section 4.7(a).
1.78 "SEC" means the Securities and Exchange Commission.
1.79 "Securityholder Auditors" shall have the meaning as specified in Section 2.7(b).
1.80 "Securityholders" shall have the meaning as specified in the Preamble.
1.81 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.82 "Series A Preference" shall have the meaning as specified in Section 2.2(a)(ii).
1.83 "Series A Preferred Stock" shall have the meaning as specified in the Recitals.
1.84 "Series B Preferred Stock" shall have the meaning as specified in the Recitals.
1.85 "Series C Percentage" shall have the meaning as specified in Section 2.2(b)(iii).
1.86 "Series C Preference" shall have the meaning as specified in Section 2.2(a)(iii).
1.87 "Series C Preferred Stock" shall have the meaning as specified in the Recitals.
1.88 "Stockholders Agreement" shall have the meaning as specified in Section 2.3(b)(i).
1.89 "Target Year" shall have the meaning as specified in Section 2.6.
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1.90 "Taxes" shall have the meaning as specified in Section 3.14.
1.91 "Threshold Amount" shall have the meaning as specified in Section 2.6.
1.92 "Total Debt" means all indebtedness of the Company and the Company Subsidiaries for money borrowed, plus capitalized lease obligations and accrued interest, in each case as of the Closing Date, plus all premiums, penalties, make whole payments and any other fees necessary to effectuate payment in full of any such indebtedness, but excluding trade account payables, preferred stock (including, without limitation, accrued dividends thereon) and accrued liabilities, all as shall be set forth in Schedule 2.2.
1.93 "Transfer" shall have the meaning as specified in Section 4.7(a).
1.94 "Undisputed Late Obligations" shall have the meaning as specified in Section 13.4.
1.95 "VAGI" shall have the meaning as specified in Article 4.
1.96 "VAGI Indemnitee" shall mean VAGI, its general and limited partners, and their respective Affiliates and representatives.
1.97 "Victoria Accounting Principles" means generally accepted accounting principles ("GAAP") as applied by the Company consistent with past practices through June 30, 2000.
1.98 "Victoria Division" means the existing businesses of the Company and the Company Subsidiaries conducted by Jones following the Closing, either as a separate corporation or as an operating division of Jones, as well as any business or businesses conducted by Jones, or by any subsidiary or affiliated corporations of Jones, which represent a succession to and a continuation of such businesses, as the same may be expanded from time to time.
1.99 "Voting Trust Agreement" shall have the meaning specified in Section 2.3(b)(ii).
1.100 "Warrants" shall have the meaning as specified in the Recitals.
1.101 "Warrantholders" shall have the meaning as specified in the Preamble.
1.102 "Welfare Plan" shall have the meaning as set forth in Section 3.21(a).
1.103 "Yield Maintenance Amount" shall have the meaning as specified in that certain Senior Note Purchase Agreement dated as of March 25, 1999 by and between the Company and Prudential and that certain Securities Purchase Agreement dated as of March 25, 1999 by and between the Company and Prudential, as amended by that certain Letter Agreement dated as of July 28, 2000.
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ARTICLE 2
PURCHASE AND SALE OF COMPANY SHARES AND WARRANTS;
CLOSING TRANSACTIONS
2.1 Purchase and Sale of Company Shares and Warrants. Subject to the terms and conditions of this Agreement, at the Closing (as defined in Section 2.3 hereof), each Securityholder shall sell, assign, transfer and deliver or cause to be sold, assigned, transferred and delivered to Holdings, and Holdings shall purchase and accept, all right, title and interest in and to the Company Shares and Warrants held by such Securityholder, free and clear of any liens, pledges, security interests, claims, charges, options, preemptive rights or other encumbrances of any kind or nature whatsoever (collectively, "Liens").
2.2 Consideration.
(a) For purposes of this Section 2.2 and Sections 2.3 and 2.6:
(i) "Aggregate Purchase Price" shall mean the sum of: (A) $90 million less the Total Debt of the Company plus (B) the tax benefits to Jones or the Company computed in the manner described below, arising from the payment by Jones of premiums, penalties, make whole payments, Yield Maintenance Amount, lenders out-of-pocket expenses and attorneys fees, and any other similar fees, and deductions for prepaid financing fees (such premiums, penalties, make whole payments, Yield Maintenance Amount, expenses and fees and deductions for prepaid financing fees, collectively the "Debt Deductions"), in connection with the payment by Jones at the Closing of the Closing Date Debt plus (C) the amount of any collections deposited in the Lockbox Account which has not been applied to the Foothill Loan as of the Closing Date, as certified by the Chief Financial Officer of the Company at the Closing. For purposes of this Agreement, such tax benefits shall be equal to the product of (x) the amount of the Debt Deductions multiplied by (y) an assumed tax rate of 37.5%, without regard to the actual tax position of Jones or the Company. Section 2.2(a) of the Disclosure Schedule sets forth a sample calculation of what the various components of the Aggregate Purchase Price and the Total Debt would have been if June 30, 2000 had been the Closing Date; at the Closing, the parties will agree upon and execute a similar schedule updated to the Closing Date, which shall be attached as Schedule 2.2 hereto and become a part hereof, and such schedule shall govern the composition of the Aggregate Purchase Price as of the Closing.
(ii) "Series A Preference" shall mean the sum of $1,200,000 plus $1,111 for each whole day that elapses between June 30, 2000 and the Closing Date.
(iii) "Series C Preference" shall mean an aggregate amount equal to three percent (3%) of the amount by which the Aggregate Purchase Price exceeds Six Million Dollars ($6,000,000).
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(iv) "Common Stock Per Share Value" shall mean the difference between the Aggregate Purchase Price and the sum of (A) the Series A Preference and (B) the Series C Preference, divided by the total number of shares of Company Common Stock that would be issued and outstanding on the Closing Date assuming the exercise, conversion or exchange of all Common Stock Equivalents for or into Company Common Stock.
(v) "Common Stock Equivalent" shall mean the Series A Preferred Stock, the Series B Preferred Stock and the Warrants.
(b) On the Closing Date, upon surrender by each Securityholder of the certificates or other instruments representing shares of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Company Common Stock and Warrants, as the case may be, held by such Securityholder, together with duly executed stock powers (in the case of Company Shares) or a duly executed warrant assignment (in the case of the Warrants), such Securityholder shall be entitled to receive in exchange therefor the following, subject in each case to the provisions of Section 2.2(c):
(i) The holder of the shares of Series A Preferred Stock issued and outstanding on the Closing Date shall be entitled to receive on the Closing Date, cash in an aggregate amount equal to the sum of (x) the Series A Preference and (y) the Common Stock Per Share Value times the number of shares of Company Common Stock into which the shares of Series A Preferred Stock are convertible, upon surrender of the certificates representing the shares of Series A Preferred Stock in the manner provided in Section 2.4.
(ii) The holder of the shares of Series B Preferred Stock issued and outstanding on the Closing Date shall be entitled to receive on the Closing Date, cash in an aggregate amount equal to the Common Stock Per Share Value multiplied by the number of shares of Company Common Stock into which the shares of Series B Preferred Stock are convertible, upon surrender of the certificates representing the shares of Series B Preferred Stock in the manner provided in Section 2.4.
(iii) Each holder of Series C Preferred Stock shall be entitled to receive on the Closing Date, cash in the amount of such holders ratable portion of the Series C Preference based upon each such holders respective ownership of shares of the Series C Preferred Stock, as set forth opposite such holders name on Schedule 2.2(b)(iii) hereto (in each case, the "Series C Percentage"), upon surrender of the certificate(s) representing the shares of Series C Preferred Stock, provided that such payment shall be subject to applicable tax withholding under federal, state and local laws.
(iv) Each holder of shares of Company Common Stock issued and outstanding on the Closing Date shall be entitled to receive on the Closing Date, cash in an aggregate amount equal to the Common Stock Per Share Value multiplied by the number of shares of Company Common Stock held by such holder, upon surrender of the certificate(s) representing such shares of Company Common Stock in the manner provided by Section 2.4.
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(v) Each holder of each Warrant issued and outstanding on the Closing Date shall be entitled to receive on the Closing Date, cash in an aggregate amount equal to the Common Stock Per Share Value multiplied by the number of shares of Company Common Stock for which such Warrant is exercisable on the Closing Date, upon surrender of the certificate or other instrument representing such Warrant in the manner provided by Section 2.4.
(c) Notwithstanding any provision hereof to the contrary, Two Million Dollars ($2,000,000) of the Aggregate Purchase Price (the "Holdback Amount") shall be subject to a holdback arrangement to secure the indemnity obligations of the Securityholders under Article 11 hereof, and the cash payable on the Closing Date to each Securityholder pursuant to this Section 2 shall be reduced by such Securityholders ratable portion (determined in reference to the amount of consideration received on the Closing Date) as indicated on Schedule 2.2(c) (the "Holdback Percentage") of the Holdback Amount. Each Securityholders Holdback Percentage of the Holdback Amount, net of any amounts deducted therefrom in accordance with Section 11.3 hereof, shall be distributed to such Securityholder on the Holdback Distribution Date (as defined in Section 11.3) as provided in Section 11.3.
(d) On the Closing Date, holders of Company Shares and Warrants shall deliver to Jones the certificates and/or other instrument(s) representing their Company Shares or Warrants (as the case may be), duly endorsed for transfer (or affidavits of lost certificate in form and substance reasonably acceptable to Jones) (or with accompanying stock powers or warrant assignments in proper form duly endorsed in blank for transfer) to Jones, and Jones shall pay to such holders the cash to which such holders are entitled on the Closing Date pursuant to Section 2.2(b) and 2.2(c), via wire transfer or intra-bank transfer of immediately available funds.
(e) Each Securityholder shall also be entitled to receive such Securityholders Contingent Payments Percentage of each Contingent Payment, if any, if and when due and payable in accordance with Sections 2.6 and 2.7.
2.3 Closing; Additional Closing Transactions.
(a) The closing (the "Closing") of the transactions contemplated by this Agreement will take place at the offices of Hinckley, Allen & Snyder LLP after the satisfaction or waiver of the conditions set forth in Articles 8 and 9 hereof (the "Closing Date"). Each party shall use its reasonable best efforts to satisfy the conditions precedent to be satisfied by such party on or before July 28, 2000.
(b) In addition to the purchase and sale of Company Shares and Warrants described in Section 2.1 above, the following additional transactions shall occur at the Closing:
(i) The Amended and Restated Stockholders Agreement dated as of March 25, 1999, as amended, by and among the Company and the Securityholders (the "Stockholders Agreement") shall terminate;
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(ii) The Voting Trust Agreement dated as of March 1, 1997, as amended, by and among the Company, certain Securityholders and Jeffrey A. Lipkin and Joseph J. Finn-Egan, as Trustees (the "Voting Trust Agreement") shall terminate;
(iii) The Bonus Compensation Plan effective June 18, 1999 (the "Bonus Compensation Plan") shall have been terminated and each participant in the Bonus Compensation Plan shall have executed and delivered a release of any rights in the Bonus Compensation Plan to the Company;
(iv) Jones shall pay all indebtedness of the Company and the Companys Subsidiaries for all borrowed money as of the Closing Date, as shall be set forth in Schedule 2.3, plus all premiums, penalties, make whole payments, Yield Maintenance Amount and any other fees necessary to effectuate payment in full of such indebtedness ("Closing Date Debt").
2.4 Closing Deliveries.
(a) At the Closing, the Company shall deliver to Jones and Holdings the following:
(i) all stock transfer books, stock ledgers and blank certificates for shares of Company Common Stock and Company Preferred Stock;
(ii) the payoff letters pursuant to Section 9.4;
(iii) such Form UCC-3 termination statements, satisfaction of mortgage documents, terminations of intellectual property collateral assignments, and other instruments and documents necessary to effectuate the release, upon the payment by Jones of the Closing Date Debt, by any and all holders of any part of the Closing Date Debt of their security interest and other Liens in, on and to the property and assets of the Company and the Company Subsidiaries;
(iv) Employment Agreement Amendments in the form of Exhibit A-1 and A-2 executed by Restricted Stockholders;
(v) the Form III Certification under the Connecticut Transfer Act, with the Company as the certifying party, as to environmental remediation of the Companys Meriden, Connecticut site;
(vi) documents reasonably satisfactory to Jones terminating agreements with Affiliates and evidencing the resignations required under Section 9.6 and terminating the Stockholders Agreement and the Voting Trust Agreement;
(vii) the consents and legal opinions pursuant to Sections 7.5, 9.10 and 9.11; and
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(viii) such certificates and other documents related to the consummation of the transactions contemplated hereby as may be reasonably requested by Jones or Holdings.
(b) At the Closing, each Securityholder shall deliver to Jones and Holdings the following:
(i) the certificates representing the Company Shares owned by such Securityholder, duly endorsed in blank or accompanied by stock transfer powers in proper form duly endorsed in blank with all requisite stock transfer taxes paid and stamps affixed (or affidavits of lost certificate in form and substance reasonably acceptable to Jones);
(ii) the Warrants owned by such Securityholder, accompanied by a duly executed assignment thereof in the form attached to such Warrant;
(iii) in the case of individual Securityholders, duly executed powers-of-attorney by such Securityholders appointing Robert M. Andreoli as their attorney-in-fact to execute this Agreement and stock powers on their behalf;
(iv) the legal opinion or opinions of counsel to such Securityholder pursuant to Section 9.11; and
(v) such certificates and other documents related to the consummation of the transactions contemplated hereby as may be reasonably requested by Jones or Holdings.
2.5 Further Assurances. After the Closing, each Securityholder shall from time to time, at the request of Jones or Holdings and without further cost or expense to Jones or Holdings, execute and deliver such other instruments of conveyance and transfer and take such other actions as Jones or Holdings may reasonably request, in order to effectuate the purchase of securities from such Securityholder and the other transactions contemplated hereby.
2.6 Contingent Payments to Securityholders. In addition to the Aggregate Purchase Price provided for under Section 2.2 hereof, the Securityholders shall be entitled to receive such additional consideration in respect of the sale or assignment of their Company Shares or Warrants as shall be payable in accordance with this Section 2.6. In each of the twelve (12)-month periods ending on the dates listed below (each a "Target Year") that EBIT (as defined below) of the Company and the Victoria Division exceeds the Threshold Amount listed below for such Target Year (the "Threshold Amount"), Jones will pay to the Securityholders in the aggregate $3.00 for each $1.00 of such excess (the "Contingent Payments"). Jones shall pay to each Securityholder such Securityholder's ratable portion, as indicated on Schedule 2.6 hereof (their respective "Contingent Payments Percentage"), of the Contingent Payment.
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Target Year |
Threshold Amount |
12-month Period Ending: |
(in millions) |
June 30, 2001 |
$19.2 |
June 29, 2002 |
$23.0 |
June 28, 2003 |
$27.6 |
(a) Manner of Payment. Each Contingent Payment payable to each Securityholder shall be payable to such Securityholder 50% in cash and 50% in Jones Common Stock. The number of shares of Jones Common Stock deliverable to each Securityholder with respect to any Target Year (the "Jones Contingent Stock") shall be determined by dividing that portion of the Contingent Payment due to such Securityholder in Jones Common Stock by the average daily last sale price of Jones Common Stock on the New York Stock Exchange ("NYSE"), the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other applicable exchange composite transactions tape during the last 20 days on which Jones Common Stock is traded during the month of the September following the Target Year (the "Calculation Period") or if not listed on the NYSE, NASDAQ or other stock exchange, as determined by a nationally-recognized investment bank mutually agreed to by the Representatives on one hand and Jones on the other hand. In the event that the record date for any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares of Jones Common Stock occurs during or after the Calculation Period but prior to the issuance of shares of Jones Contingent Stock with respect to any Target Year, the number of shares to be issued as Jones Contingent Stock shall be correspondingly adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares.
(b) Calculation of EBIT. For the purposes of this Section 2.6, the "EBIT" of the Victoria Division shall mean the net income, before extraordinary items (as defined in accordance with GAAP) of income, gain, loss and expense and before all income taxes and other taxes now or hereafter in effect that are assessed on or measured in whole or in part by income (including Rhode Island franchise taxes to the extent that such taxes are assessed on or measured in whole or in part by income) and before interest expense and finance charges (including bank financing costs, the interest portion of capital leases, bank commitment fees, amortization of loan origination costs, factoring interest charges, prepayment charges or penalties and other financing costs and expenses) of the Victoria Division, computed in accordance with Victoria Accounting Principles, except that any purchase accounting adjustments arising out of the transactions contemplated hereby and any transaction costs in connection with the negotiation and consummation of the transactions contemplated hereby shall be excluded from the computation. The following provisions shall govern the computation of EBIT of the Victoria Division for purposes of this Section 2.6:
(i) Jones may provide the Victoria Division with administrative, accounting, financial or other business services following the Closing, and the cost of such services (the "Intercompany Charges") shall be allocated to the Victoria Division in the same manner that Jones allocates such charges among its other divisions; provided, however, that EBIT shall be reduced only to the extent that charges by Jones to the Victoria Division for such
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Intercompany Charges do not exceed the charges for such services incurred by the Company during its last full fiscal year prior to the Closing for like services received by the Company prior to the Closing, and in no event shall the Victoria Division be charged with a general allocation of Jones corporate overhead expenses.
(ii) Any EBIT arising from acquisitions of businesses by the Victoria Division following the Closing shall be reduced by charges for goodwill and interest expense associated with the purchase and operation of such acquired business, calculated on the basis of Jones incremental borrowing rate (the "Jones Borrowing Rate") at the time of the closing of the applicable acquisition (the "Acquisition Interest Expense") (provided that such goodwill and interest expense was not otherwise deducted in determining EBIT), it being understood that the purchase price for any such acquisition will be deemed to be funded debt, whether or not the source of payment therefor was actually borrowed money. For purposes of calculating Acquisition Interest Expense for any Target Year, the purchase price of an acquired business ("Acquisition Amount") shall be reduced by the net positive cash flow of such acquired business (if any) generated during the period commencing with the date of such acquisition and ending on the day immediately preceding the first day of such Target Year ("Pre-Target Year Cash Flow"). If the Pre-Target Year Cash Flow exceeds the Acquisition Amount, EBIT for such Target Year shall be increased by an amount equal to the product of (x) such excess multiplied by (y) the Jones Borrowing Rate in effect on the first day of such Target Year.
(iii) Any compensation expense resulting from (A) the lapse of restrictions on restricted Company Common Stock on or prior to the Closing Date, (B) the issuance of the Series C Preferred Stock or (C) the issuance of Company Common Stock prior to the Closing Date shall be added back to EBIT for the period in which such compensation expense was charged.
(iv) To the extent that the Victoria Division incurs losses, charges or expenses for which the Securityholders make indemnification payments to Jones pursuant to Section 11.2, the amount of such indemnification payments (to the extent actually paid and not included in the computation) shall be added back to EBIT for the period in which such payments were charged.
(v) Jones and its Affiliates may enter into transactions with the Victoria Division following the Closing, including without limitation, the manufacture or sale by the Victoria Division of costume jewelry or other products for Jones or its Affiliates, or the license by the Victoria Division of trademark rights from Jones or its Affiliates. The parties agree that product price, license fees, royalties and all other terms and conditions of such transactions shall be determined on the basis of transactions between unrelated parties at arms length. The parties agree that this provision shall not permit Jones to impose Intercompany Charges other than as allowed under Section 2.6(b)(i) hereof.
(c) Post-Closing Conduct of Business by Jones. Following the Closing and through the end of the last Target Year, Jones shall:
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(i) provide the Victoria Division with adequate capital to support its capital expenditure plans consistent with the manner in which the Companys business has been conducted prior to the date hereof;
(ii) not, without the written consent of the Management Representative, cause the Victoria Division to terminate or reduce any existing business or line of business of the Victoria Division so long as such business or line of business has positive EBIT during the period consisting of the four full fiscal quarters ending at least 45 days prior to such termination or reduction;
(iii) at the written request of the Management Representative delivered to Jones prior to entering into any such new business or line of business, exclude from EBIT the results of any new business or new line of business into which Jones causes the Victoria Division to enter; and
(iv) provide the Victoria Division with adequate letters of credit and working capital as are reasonably necessary to operate the Victoria Division consistent with the manner in which the Companys business has been conducted prior to the date hereof.
(d) Further Assurances. In the event that Robert Andreoli is not employed by the Victoria Division, Jones shall, through the end of the last Target Year, cause the Victoria Division to be operated reasonably consistent with past practice so long as the Victoria Divisions EBIT has not failed to at least equal the Threshold Amounts during any prior Target Year. Through the end of the last Target Year, Jones shall not (A) change the manner in which it allocates expenses or charges for services provided to the Victoria Division or (B) contribute to the Victoria Division a business that, during the 12-month period prior to the date of such contribution, had a negative income before taxes.
(e) Due Dates. Each Contingent Payment shall be payable within the time provided in Section 2.7(a) below. On or prior to payment, any Contingent Payment payable to a Securityholder who is a reporting person under Section 16 of the Exchange Act with respect to ownership of Jones securities shall be approved by either (i) the Board of Directors of Jones or (ii) a committee comprised solely of two or more non-employee directors of Jones.
(f) Survival After Closing. The obligations of Jones under this Section 2.6 shall survive the Closing.
2.7 Timing of Contingent Payments.
(a) On the third business day after the end of each Calculation Period, Jones will deliver to each Securityholder a statement setting forth in reasonable detail its calculation of the EBIT of the Victoria Division during the Target Year and the amount of any Contingent Payments to be paid to the Securityholders pursuant to Section 2.6 (the "Contingent Payment Statement"), which statement shall be accompanied by payment to each Securityholder, by
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delivery of the Jones Contingent Stock and by wire transfer of immediately available funds to an account designated by such Securityholder, of the Contingent Payments shown thereon as being due to such Securityholder. If within 60 days after delivery of such Contingent Payment Statement neither Representative (as defined in Section 2.9) has given notice to Jones on behalf of the Securityholders disputing such Contingent Payment Statement, Jones shall thereafter have no further liability to Securityholders for the Contingent Payment with respect to such Target Year under Section 2.6.
(b) In the event either of the Representatives on behalf of the Securityholders give Jones such notice of dispute within such 60-day period, the Representative(s) and Jones will use their good faith, best efforts to settle the dispute within 30 days after the giving of such notice. In connection with such dispute, Jones shall provide the Representative(s) and Arthur Andersen LLP or another accounting firm of national reputation (in either case, the "Securityholder Auditors") such access to the financial books and records of the Victoria Division with respect to the Target Year as is reasonably necessary to determine the amount of EBIT for the Victoria Division for the Target Year and then verify that the Contingent Payment was calculated in conformity with the provisions of Section 2.6. Any information obtained by the Representative(s) and the Securityholder Auditors shall be kept confidential (except that such information may be provided to the disputing Securityholders who shall maintain the confidentiality thereof) and shall not be used by them other than in connection with the enforcement of the provisions of this Agreement. During such 30-day period, each party may make a written settlement proposal to the other or, failing such written proposal, shall be deemed to have made a written settlement proposal accepting the calculation proposed by Jones. Any dispute unresolved after such 30-day period shall be submitted to a "big four" accounting firm selected by mutual agreement of the Representatives and Jones, or, in the absence of agreement on such firm, to a "big four" accounting firm jointly designated by the Securityholder Auditors and the Jones auditors. Any public accounting firm selected pursuant to this Section 2.7 shall be provided by Jones with such access to the financial books and records of the Victoria Division that is reasonably necessary to determine EBIT. Such accounting firm shall render its final decision with respect to the resolution of such dispute within 60 days after all requested information and access has been provided, which decision shall be final and binding on the parties hereto, and shall deliver copies thereof to Jones and Securityholders. Jones shall issue any further Jones Contingent Stock and/or make further payments to Securityholders required in order to comply with such decision within five days after such decision is rendered. All reasonable costs and expenses of such accounting firm in resolving such dispute shall be borne by Jones if such decision shows EBIT greater than the amount in the Contingent Payment Statement first delivered by Jones to the Securityholders or by the disputing Securityholders (pro rata in proportion to their respective Contingent Payments Percentage) if the decision shows EBIT less than or equal to the amount shown on the Contingent Payment Statement first delivered by Jones to the Securityholders.
(c) Each of the Representatives shall be entitled to determine independently whether to dispute the Contingent Payment Statement. If only one of the Representatives elects to dispute Jones' determination of the Contingent Payment, then only those Securityholders
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represented by such Representative (who have not opted out of such dispute as provided in Section 2.9) shall bear the costs and expenses of such dispute (pro rata in the proportion that each such Securityholder's Contingent Payments Percentage bears to the aggregate Contingent Payments Percentages of all Securityholders represented by such Representative who have not opted out of such dispute). In such event, if the dispute results in an increase in the amount of the Contingent Payment, the full amount of such increase shall be allocated among and paid pro rata to the Securityholders represented by the disputing Representative.
(d) The obligations of Jones under this Section 2.7 shall survive the Closing.
2.8 Directors and Officers of the Company. The following persons shall be appointed to serve as the directors of the Company, effective upon the Closing:
Directors:
Sidney Kimmel, Jackwyn Nemerov, Wesley R. Card, Irwin Samelman, Robert M. Andreoli and Patricia Stensrud.
Chairman of the Board: Robert M. Andreoli.
In addition, immediately after the Closing all of the present officers of the Company shall continue to serve as officers of the Victoria Division until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. In the event that any person referred to above is unable or unwilling to serve as a director or officer and his successor has not yet been appointed and qualified, then the vacancy caused thereby shall be filled as provided in the By-Laws of the Company and applicable law. Such persons shall serve as officers and directors until the earlier of their resignation or removal or otherwise ceasing to serve or until their respective successors are duly elected and qualified, as the case may be. Notwithstanding anything in this Section 2.8, Andreoli shall be elected as a director of the Company for so long as he is employed under the Andreoli Employment Agreement.
2.9 Securityholders Representatives.
(a) By the execution and delivery of this Agreement, each of the institutional Securityholders listed on Schedule 2.9(a)(i) hereto (the "Institutional Securityholders") irrevocably constitutes and appoints Recovery Equity Investors II, L.P. as its true and lawful agent and attorney-in-fact (the "Institutional Representative") and each of the Securityholders listed in Schedule 2.9(a)(ii) hereto hereby irrevocably constitutes and appoints Robert M. Andreoli as his or her true and lawful agent and attorney-in-fact (the "Management Representative"; the Institutional Representative and the Management Representative are herein referred to collectively as the "Representatives"), in each case with full power of substitution to act in his, her or its name, place and stead with respect to all transactions contemplated by and all terms and provisions of this Agreement, and to act on his, her or its behalf in any dispute, litigation or arbitration involving this Agreement, do or refrain from doing all such further acts
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and things, and execute all such documents as the Representatives shall deem necessary or appropriate in connection with the transactions contemplated by this Agreement, including, without limitation, the power:
(i) to waive any condition to the obligations of the Company and the Securityholders to consummate the transactions contemplated by this Agreement (which waiver shall require the joint action of the Representatives) other than the obligations of Jones to make the payments to the Securityholders required to be made on the Closing Date;
(ii) to act for the group of Securityholders represented by it or him with regard to matters pertaining to indemnification referred to in this Agreement, including the power to compromise any claim on behalf of such Securityholders and to transact matters of litigation;
(iii) in the case of the Management Representative, to execute and deliver all ancillary agreements, certificates and documents, and to make representations and warranties therein, on behalf of the Securityholders represented by him which such Representative deems necessary or appropriate in connection with the consummation of the transactions contemplated by this Agreement;
(iv) to do or refrain from doing any further act or deed on behalf of the Securityholders represented by it or him which such Representative deems necessary or appropriate in its or his sole discretion relating to the subject matter of this Agreement, as fully and completely as each such Securityholder could do if personally present; and
(v) to receive all notices and service of process on behalf of the Securityholders represented by it or him in connection with any claims or matters under this Agreement (and the Representatives agree to deliver copies of all such notices and service of process to the Securityholders represented by them).
Notwithstanding the foregoing grant of authority by the Institutional Securityholders, the Institutional Representative shall not settle any monetary dispute without the prior written consent of each of the Institutional Securityholders and shall not take any other action as Institutional Representative that adversely affects any Institutional Securityholder without such Securityholders prior written consent. Furthermore, if the Institutional Representative elects to dispute the Contingent Payment Statement as provided in Section 2.7, it shall notify the Institutional Securityholders of such action within 60 days after the delivery of the Contingent Payment Statement. If within 20 days after delivery of such notice an Institutional Securityholder gives the Institutional Representative written notice that it opts out of any dispute under Section 2.7(b), such Institutional Securityholder shall be deemed to have accepted the Jones' determination of the Contingent Payment and shall not be responsible for any expenses incurred by the Institutional Representative in connection with such dispute. In the event the resolution of the dispute results in EBIT greater than the amount of the Contingent Payment Statement first delivered by Jones to the Securityholders, the additional Contingent Payment
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payable to the Securityholders in accordance with Section 2.7(b) shall be allocated among and paid pro rata solely to those Securityholders who did not opt out of the dispute.
(b) If Robert M. Andreoli dies or otherwise becomes incapacitated and unable to serve as Management Representative, then Richard M. Andreoli, Patricia Stensrud and Steven J. ONeil, together, shall serve as the new Management Representative and shall act by majority vote. The appointment of the Representatives shall be deemed coupled with an interest and shall be irrevocable, and Jones and any other person may conclusively and absolutely rely, without inquiry, upon any action of each Representative on behalf of the Securityholders represented by it or him in all matters referred to herein. All notices delivered by Jones or Holdings to the Representatives (whether pursuant hereto or otherwise) for the benefit of the Securityholders shall constitute notice by Jones or Holdings to the Securityholders represented by each Representative to whom such notice is delivered. The Representatives shall act for the Securityholders whom they represent on all of the matters set forth in this Agreement in the manner the Representatives believe to be in the best interest of the Securityholders whom they represent and consistent with their obligations under this Agreement, but the Representatives shall not be responsible to the Securityholders for any loss or damages the Securityholders may suffer by reason of the performance by the Representatives of their duties under this Agreement, other than loss or damage arising from willful violation of this Agreement or the law or gross negligence in the performance of their duties under this Agreement.
The Securityholders agree to indemnify and hold harmless their respective Representative for any loss or damage arising from the performance of his or its duties as their Representative hereunder, including without limitation the cost of any accounting firm (including the Representative Auditors) or legal counsel retained by such Representative on behalf of such Securityholders, but excluding any loss or damage arising from willful violation of this Agreement or the law or gross negligence in the performance of it or his duties under this Agreement.
(c) All actions, decisions and instructions of the Institutional Representative taken, made or given pursuant to the authority granted to such Institutional Representative pursuant to paragraph (a) above shall be conclusive and binding upon all Institutional Securityholders and all actions, decisions and instructions of the Management Representative taken, made or given pursuant to the authority granted to such Management Representative pursuant to paragraph (a) above shall be conclusive and binding upon all individual Securityholders. Jones hereby acknowledges that either of the Representatives may with respect to any particular action, decision or instruction solicit the consent of the Securityholders it or he represents before acting.
(d) The provisions of this Section 2.9 are independent and severable, shall constitute an irrevocable power of attorney, coupled with an interest and surviving death or dissolutions, granted by the Securityholders to the Representatives and shall be binding upon the executors, heirs, legal representatives, successors and assigns of each such Securityholder.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Jones and Holdings as follows:
3.1 Corporate Organization; Etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Rhode Island and has full corporate power and authority to carry on its business as it is now being conducted and to own the properties and assets it now owns; is duly qualified or licensed to do business as a foreign corporation in good standing in the jurisdictions listed in Section 3.1 of the Disclosure Schedule which are all the jurisdictions in which such qualification is required except jurisdictions in which the Companys failure to qualify to do business will not reasonably be likely to have a material adverse effect on the business, prospects, operations, properties, assets or condition (financial or otherwise) of the Company. The copies of the articles of incorporation and by-laws and all amendments thereto of the Company heretofore delivered to Jones are complete and correct copies of such instruments as presently in effect.
3.2 Capitalization of the Company. As of the date of this Agreement, the authorized capital stock of the Company consists of the Company Common Stock, of which 3,500 shares are issued and outstanding, and the Company Preferred Stock, of which 6,600 shares are issued and outstanding. All issued and outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable. Except as set forth in Section 3.2 of the Disclosure Schedule, there are no outstanding (a) securities convertible into or exchangeable for the Companys capital stock; (b) options, warrants or other rights to purchase or subscribe to capital stock of the Company or securities convertible into or exchangeable for capital stock of the Company; or (c) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance of any capital stock of the Company, any such convertible or exchangeable securities or any such options, warrants or rights.
3.3 Subsidiaries. Section 3.3 of the Disclosure Schedule sets forth the name, jurisdiction of organization and capitalization of each Company Subsidiary and the jurisdictions in which each Company Subsidiary is qualified to do business. Except as disclosed in Section 3.3 of the Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock or other equity securities of any corporation, limited liability company, partnership or any other entity or have any direct or indirect equity or ownership interest in any business. Except as and to the extent set forth in Section 3.3 of the Disclosure Schedule, all of the outstanding equity securities of each Company Subsidiary are owned directly or indirectly by the Company, free and clear of all liens, options or encumbrances of any kind and all claims or charges of any kind, and are validly issued, fully paid and nonassessable, and there are no outstanding options, rights or agreements of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities of any such Company Subsidiary to any person except the Company. Each
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Company Subsidiary (i) is an entity duly organized, validly existing and in good standing under the laws of its state of organization; and (ii) has full power and authority to carry on its business as it is now being conducted and to own the properties and assets it now owns. Each Company Subsidiary is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction listed opposite the name of such Company Subsidiary in Section 3.3 of the Disclosure Schedule, which are the only jurisdictions in which the properties owned or leased or the nature of the business conducted by it makes such qualification necessary. The copies of the certificate of incorporation and by-laws or other organizational certificate and all amendments thereto of each Company Subsidiary heretofore delivered to Jones are complete and correct copies of such instruments as presently in effect.
3.4 Authorization; No Conflicts.
(a) The Company has full corporate power and authority necessary to enter into this Agreement and to carry out the transactions contemplated hereby. The Board of Directors of the Company and Shareholders have taken all action required by law, the Companys articles of incorporation, its by-laws or otherwise to be taken by them to authorize the execution, delivery and performance of this Agreement by the Company and each other agreement, document and instrument to be executed and delivered by the Company pursuant hereto and the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company, and this Agreement and each agreement, document and instrument to be executed by the Company pursuant to this Agreement, constitutes, or when executed and delivered will constitute, a legal, valid and binding obligation of the Company enforceable against it in accordance with their respective terms except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(b) Except as set forth in Section 3.4(b) of the Disclosure Schedule (and other than (i) leases entered into in the ordinary course of business which individually either require annual payments of less than $25,000 or have terms of less than three years or (ii) other commitments requiring payments not exceeding $100,000 in the aggregate), neither the execution and delivery of this Agreement and each other agreement, document and instrument referred to in Section 3.4(a), nor the consummation of the transactions contemplated hereby or thereby will violate any provision of the articles or certificate of incorporation or by-laws or other organizational documents of the Company or any Company Subsidiary, or to the knowledge of the Company, be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any debt or obligation pursuant to, or result in the creation or imposition of any security interest, lien or other encumbrance upon any property or assets of the Company or any Company Subsidiary under any agreement or commitment to which the Company or any Company Subsidiary is a
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party or by which the Company or any Company Subsidiary is bound, or to which the property of the Company or any Company Subsidiary is subject, or violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority applicable to the Company or any Company Subsidiary.
3.5 Financial Statements. The Company has heretofore delivered to Jones and Holdings: (i) a consolidated balance sheet of the Company and the Company Subsidiaries as at June 30 in each of the years 1998 and 1999; and consolidated statements of income, changes in shareholders equity (deficit) and cash flows for each of the years then ended, all audited and certified by Arthur Andersen, LLP, whose reports thereon are included therein; and (ii) an unaudited consolidated balance sheet of the Company and the Company Subsidiaries as at May 31, 2000 (the "Balance Sheet"), and unaudited consolidated statements of income, shareholders equity (deficit) and cash flows for the 11-month period then ended. Such consolidated balance sheets and the notes thereto fairly present the consolidated assets, liabilities and financial condition of the Company and the Company Subsidiaries as at the respective dates thereof, and such consolidated statements of income, changes in shareholders equity (deficit) and cash flows and the notes thereto fairly present the results of operations for the periods therein referred to; all in accordance with generally accepted accounting principles consistently applied throughout the periods involved except, in the case of unaudited statements, for normal year-end adjustments, which adjustments will not be material either individually or in the aggregate.
3.6 No Undisclosed Liabilities; Etc. As of May 31, 2000, neither the Company nor any Company Subsidiary had liabilities or obligations of any nature (absolute, accrued, contingent or otherwise), and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability or obligation, not otherwise disclosed herein which are not reflected or reserved against in the Balance Sheet, which, in accordance with generally accepted accounting principles, should have been shown or reflected in the Balance Sheet, and which, individually or in the aggregate, would be material.
3.7 Accounts Receivable. All accounts receivable of the Company and each Company Subsidiary (including factored accounts), whether reflected in the Balance Sheet or otherwise, arose in the ordinary course of business in a manner consistent with past practices for goods or services delivered or rendered and are not subject to refunds, counterclaims or set offs, and have been, or to the knowledge of the Company, will be, collected, subject to the applicable reserves set forth in the Balance Sheet.
3.8 Inventory. Except as otherwise set forth in Section 3.8 of the Disclosure Schedule, (i) all of the inventories of the Company and each Company Subsidiary whether reflected on the Balance Sheet or otherwise consist of a quality and quantity usable and salable in the ordinary and usual course of business, except for items of obsolete materials and materials of below-standard quality and shrinkage, all of which have been written off or written down to fair market value; (ii) all inventories not written off have been properly priced at the lower of cost or market in accordance with generally accepted accounting principles consistently applied; (iii) the quantities of each type of inventory (whether raw materials, work-in-process, or finished goods)
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are not excessive or slow moving, but are reasonable and warranted in the present circumstances of the Company and each Company Subsidiary; and (iv) to the knowledge of the Company, all work in process and finished goods inventory are free of any material defect or other material deficiency in design, material and workmanship and is usable and suitable for its intended purpose. Section 3.8 of the Disclosure Schedule sets forth the name and address of each location of inventory of the Company and each Company Subsidiary (wherever located) and the type and amount of such inventory.
3.9 Absence of Certain Changes. Except as and to the extent set forth in Section 3.9 of the Disclosure Schedule, since May 31, 2000, neither the Company nor any Company Subsidiary has:
(a) Suffered any material adverse change in its working capital, condition (financial or otherwise), assets, liabilities (absolute, accrued, contingent or otherwise), reserves, properties, prospects, business or operations;
(b) Incurred any liabilities or commitments or obligations including commitments to make capital expenditures, except for items which were incurred in the ordinary course of business, none of which in the singular or aggregate exceeds $25,000 (counting all periodic installments or payments under any lease or other agreement providing for periodic installments or payments, as a single obligation or liability), or increased, or experienced any change in any assumptions underlying or methods of calculating, any bad debt, contingency or other reserves;
(c) Entered into, extended, materially modified, terminated or renewed any contract, lease, license, permit or commitment, except in the ordinary course of business and on terms no less favorable to the Company than previously existed, or (ii) made purchases of raw materials or supplies, or sold or purchased any assets except for:
(A) contracts or commitments for the purchase of, and purchases of, raw material or supplies, made in the ordinary course of business and consistent with past practice,
(B) normal contracts or commitments for the sale of, and normal sales of, inventory in the ordinary course of business and consistent with past practice, and
(C) other contracts, commitments, purchases or sales (other than of inventory) in the ordinary course of business and consistent with past practice, the value of which does not exceed $25,000;
(d) Paid, discharged or satisfied any claim, liabilities or obligations other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past
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practice of liabilities and obligations reflected or reserved against in the Balance Sheet or incurred in the ordinary course of business since the date of the Balance Sheet;
(e) Failed to pay or satisfy its uncontested accounts payable, debts, obligations and other liabilities for a period of 30 days after due;
(f) Permitted or allowed any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien, security interest, encumbrance, restriction or charge of any kind, except for Permitted Liens (as defined in Section 3.10).
(g) Written down or up the value of any inventory (including write-downs by reason of shrinkage or mark-down) or written off as uncollectible any notes or accounts receivable, except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice;
(h) Canceled any debts in excess of $10,000 individually or in the aggregate or waived any claims or rights of substantial value;
(i) Disposed of or permitted to lapse any rights to the use of any of the Intellectual Property (as defined in Section 3.12), or disposed of or disclosed (except as necessary in the conduct of its business) to any person other than representatives of Jones any trade secret, formula, process or know-how not theretofore a matter of public knowledge;
(j) Granted or otherwise committed to make any increase in the compensation or fringe benefits, payable or to become payable, of those directors, officers or salaried employees (including any such increase pursuant to any bonus, pension, profit sharing or other plan or commitment) or make any bonus, severance, or termination or similar payments to, or establish, adopt or amend any employee retirement or benefit plan or program; or entered into any collective bargaining agreement, service or termination agreement;
(k) Declared any dividends (other than regularly scheduled dividends in respect of the Company Preferred Stock) or made any other form of capital distribution affecting its equity, or paid or incurred directors fees;
(l) Made any change in any method of accounting or accounting practice;
(m) Paid, loaned or advanced any amount to, or sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, or entered into any agreement or arrangement with, any of its officers or directors or any affiliate or associate of any of its officers or directors except for compensation to directors and officers at rates not exceeding the rates of compensation paid during the fiscal year of the Company ended June 30, 1999;
(n) To the knowledge of the Company, failed to comply in all material respects with all laws applicable to the conduct of business; or
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(o) Agreed, whether in writing or otherwise, to take any action prohibited by this Section.
3.10 Title to Properties: Encumbrances. Section 3.10(a) of the Disclosure Schedule identifies all parcels of property owned in fee by the Company or any Company Subsidiary, and indicates which, if any, of such parcels is not presently used in the conduct of the Companys business or has been assigned or subleased to another person or entity. Each of the Company and the Company Subsidiaries has good, valid and marketable title to all properties and assets which it purports to own (real, personal and mixed, tangible and intangible), including, without limitation, all the properties and assets reflected in the Balance Sheet (except for inventory and obsolete equipment sold since the date of the Balance Sheet in the ordinary course of business and consistent with past practice), and all the properties and assets purchased by the Company and Company Subsidiaries since the date of the Balance Sheet, which subsequently acquired properties and assets (other than real property and inventory) are disclosed in Section 3.10(b) of the Disclosure Schedule (other than immaterial properties and assets acquired in the ordinary course of business), except in each case for (i) liens for taxes which are not material in amount and which are not yet due and payable or which are being contested in good faith with the appropriate taxing authorities, (ii) statutory, common law, builder, mechanic, warehouseman, materialmen, contractor, workmen, repairmen, carrier or other liens which do not interfere with the use by the Company and the Company Subsidiaries of the assets relating to the business of the Company and the Company Subsidiaries or (iii) other imperfections of title which are not substantial in character, amount or extent in relation to the property and which do not materially interfere with the conduct of the ordinary course of business of the Company and the Company Subsidiaries or materially impair the use or value of the property (collectively, "Permitted Liens"). Except as set forth in Section 3.10(c) of the Disclosure Schedule, all such properties and assets are free and clear of all title defects or objections, Liens, including, without limitation leases (except as set forth in Section 3.13(a) of the Disclosure Schedule), chattel mortgages, deed of trusts, conditional sales contracts, collateral security arrangements, environmental liens, including environmental land use restrictions, and other title or interest retention arrangements, and are not, in the case of real property, except as set forth in Section 3.10(d) of the Disclosure Schedule, subject to any rights of way, encroachments, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever or other right of third parties, whether voluntarily incurred or arising by operation of law, including without limitation, any agreement to give any of the foregoing in the future and any contingent sale or other title retention agreement, except in each case (i) with respect to all such properties and assets, liens securing specified liabilities or obligations shown on the Balance Sheet and (ii) for Permitted Liens. The rights, properties and other assets presently owned, leased or licensed by the Company and the Company Subsidiaries and described elsewhere in this Agreement include all rights, properties and other assets necessary to permit each of the Company and the Company Subsidiaries to conduct its business in all material respects in the same manner as its business has been conducted prior to the Closing Date. All of the properties and assets of the Company and the Company Subsidiaries are maintained and operated in conformity with all applicable laws,
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ordinances, and regulations relating thereto currently in effect, except where such nonconformity would not have a material adverse effect on the business or operations of Company.
3.11 Plants, Structures and Equipment. Except as set forth in Section 3.11 of the Disclosure Schedule, to the knowledge of the Company, the plants, structures and equipment of the Company and each Company Subsidiary are structurally sound with no known defects which would materially adversely affect the value, use or operation thereof, and are in good operating condition and repair and are adequate for the uses to which they are being put; and none of such plants, structures or equipment are in need of maintenance or repairs except for ordinary, routine maintenance and repairs which are not material in nature or cost. Except as set forth in Section 3.11 of the Disclosure Schedule, neither the Company nor any Company Subsidiary has received notification that it is in violation of any applicable building, zoning, anti-pollution, health or other law, ordinance or regulation in respect of its plants or structures or their operations and to the knowledge of the Company, no such violation exists.
3.12 Patents, Trademarks, Trade Names, Etc. The Company and each Company Subsidiary owns, or is licensed or otherwise has the right to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of the business as heretofore conducted by it (the "Intellectual Property"). Section 3.12(a) of the Disclosure Schedule lists (a) all patents and patent applications and all registrations and applications for registration of trademarks, trade names and copyrights used or proposed to be used by the Company or any Company Subsidiary, including, with respect to each such trademark, a list of each jurisdiction in which such trademark is registered or in which applications for registration have been filed, any opposition filed and pending, the status of such registrations, oppositions and expirations dates, and a listing of all written licenses and other agreements relating thereto and (b) a listing of all written agreements relating to technology, know-how or processes which the Company or any Company Subsidiary is licensed or authorized to use by others. Except as set forth in Section 3.12(b) of the Disclosure Schedule, the Company and each Company Subsidiary has the sole and exclusive right to use the Intellectual Property, and the consummation of the transactions contemplated hereby will not alter or impair any such rights. To the knowledge of the Company, no claims have been asserted by any person relating to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any such license or agreement relating to the use of the Intellectual Property, and the Company does not know of any valid basis for any such claim; and to the knowledge of the Company, the use of the Intellectual Property by the Company or any Company Subsidiary does not infringe on the rights of any person.
3.13 Leases. Section 3.13(a) of the Disclosure Schedule lists all leases and subleases pursuant to which the Company or any Company Subsidiary leases real property, and all material leases and subleases pursuant to which the Company or any Company Subsidiary leases personal property, copies of which have previously been delivered to Jones. Except as set forth in Schedule 3.13(b) of the Disclosure Schedule, to the knowledge of the Company, all such leases are in full force and effect; there are no existing material defaults by the Company or any Company Subsidiary and, to the knowledge of the Company, no event has occurred which
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(whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a material default thereunder.
3.14 Taxes. Each of the Company and the Company Subsidiaries has timely filed all tax reports and returns required to be filed by it and have duly withheld and paid all taxes, levies, duties, tariffs and governmental impositions and other charges of any kind in the nature of taxes ("Taxes"), required to be withheld and paid by it (whether or not shown on any tax return) or claimed to be due from it by federal, state, local or foreign taxing authorities (including, without limitation, those due in respect of the properties, income, franchises, licenses, sales or payrolls of any of them); the reserves for Taxes reflected in the Balance Sheet are adequate; there are no tax liens upon any property or assets of the Company or any Company Subsidiary except liens for current Taxes not yet due or which are being contested in good faith with the appropriate taxing authorities as disclosed in Section 3.14 of the Disclosure Schedule. Except to the extent set forth in Section 3.14 of the Disclosure Schedule, there are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return for any period. Except to the extent set forth in Section 3.14 of the Disclosure Schedule, since July 1, 1996, no claim has been received in writing by the Company, there are no pending or threatened audits, and the Company is not aware that there has been, during the past 12 months, any oral notice, from an authority in a jurisdiction where any of the Company or Company Subsidiaries does not file tax returns that the Company or any of the Company Subsidiaries is or may be subject to taxation by that jurisdiction.
3.15 Material Contracts.
(a) The Company has provided or made available to Jones (i) true and complete copies of all material contracts and agreements ("Material Contracts") relating to the business of the Company and the Company Subsidiaries, each of which is included on Section 3.15(a) of the Disclosure Schedule, or (ii) with respect to such Material Contracts that have not been reduced to writing, a written description thereof, each of which is listed on Section 3.15(a) of the Disclosure Schedule. Neither the Company nor any Company Subsidiary is, or has received any notice or has any knowledge that any other party is, in default in any respect under any such Material Contract; and to the knowledge of the Company, there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute a default under the Material Contracts.
(b) In addition, except as set forth on Section 3.15(b) of the Disclosure Schedule:
(i) Neither the Company nor any Company Subsidiary has any outstanding contracts with officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors or dealers that are not cancelable by it on notice of not longer than 30 days without liability, penalty or premium or any agreement or arrangement providing for the payment of any bonus or commission based on sales or earnings;
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(ii) Neither the Company nor any Company Subsidiary has any employment agreements, or any other agreements, understandings or commitments that contain any severance liabilities or obligations;
(iii) Neither the Company nor any Company Subsidiary has any collective bargaining or union contracts or agreements;
(iv) Neither the Company nor any Company Subsidiary is restricted by agreement from carrying on its business anywhere it is presently conducting business;
(v) To the knowledge of the Company, neither the Company nor any Company Subsidiary is under any liability or obligation with respect to the return of inventory or merchandise in the possession of wholesalers, distributors, retailers or its customers other than in the ordinary course of business consistent with past practice;
(vi) Neither the Company nor any Company Subsidiary has guaranteed the obligations of others in writing or, to the knowledge of the Company, orally, other than guarantees of the Company of obligations of the Company Subsidiaries and guarantees of the Company Subsidiaries of obligations of each other or of the Company; and
(vii) Neither the Company nor any Company Subsidiary has any power of attorney outstanding or any obligations or liabilities (whether absolute, accrued, contingent or otherwise) evidenced in writing or, to the knowledge of Securityholders, given or incurred orally, as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the obligation of any person, corporation, partnership, joint venture, association, organization or other entity, other than guarantees of the Company of obligations of the Company Subsidiaries and guarantees of the Company Subsidiaries of obligations of each other or of the Company.
3.16 Customers and Suppliers. Sections 3.16 (a) and (b) of the Disclosure Schedule, respectively, sets forth: (a) a complete and accurate list of the names of the 10 largest customers of the Company, including the Company Subsidiaries (on a consolidated basis), in terms of sales during fiscal 1998 and 1999, the 20 largest customers for the nine-month period ended March 31, 2000, showing the approximate total sales by the Company to each such customer during such periods; and (b) a complete and accurate list of the 10 largest suppliers of the Company and the Company Subsidiaries (on a consolidated basis) in terms of purchases by the Company during fiscal 1998 and 1999 and the 20 largest suppliers for the nine-month period ended March 31, 2000 showing the approximate total purchases by the Company, including the Company Subsidiaries, from each such supplier during such periods. Except to the extent set forth in Section 3.16(c) of the Disclosure Schedule, there has not been any material adverse change in the business relationship of the Company or any Company Subsidiary with any customer or supplier named in Sections 3.16(a) and 3.16(b) of the Disclosure Schedule. Except for customers and suppliers named in Schedules 3.16(a) and 3.16(b) of the Disclosure Schedule, neither the Company nor any Company Subsidiary had any customer who accounted for more than 5% of the Companys sales (on a consolidated basis) during fiscal 1999 or the nine-month period ended
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March 31, 2000 or any supplier from whom it purchased more than 5% of the goods or services which it purchased during fiscal 1999 or the nine-month period ended March 31, 2000.
3.17 Orders, Commitments and Returns.
(a) Accepted and Unfulfilled Orders. Section 3.17(a) of the Disclosure Schedule sets forth the aggregate amounts of all accepted and unfulfilled orders for the sale of merchandise entered into by the Company or any Company Subsidiary as of June 30, 2000.
(b) Open Purchase Orders. Section 3.17(b) of the Disclosure Schedule sets forth the aggregate amount to be paid by the Company or any Company Subsidiary pursuant to all contracts or commitments for the purchase of supplies involving (in each case) payments in excess of $50,000 by it as of June 30, 2000, all of which orders, contracts and commitments have been made in the ordinary course of business.
(c) Returns. Section 3.17(c) of the Disclosure Schedule sets forth as of July 26, 2000, each known claim against the Company or any Company Subsidiary to return merchandise in excess of $5,000 by reason of alleged overshipments, defective merchandise or otherwise, or of merchandise in the hands of customers under an understanding that such merchandise would be returnable or would give rise to a discount on future purchases or other allowance of any type.
(d) Chargebacks and Allowances. Section 3.17(d) of the Disclosure Schedule sets forth the aggregate chargebacks and allowances (whether claimed or allowed) for fiscal 1999 and through June 30, 2000.
3.18 Agreements in Full Force and Effect. Except as set forth in Section 3.18 of the Disclosure Schedule, to the knowledge of the Company, all contracts, agreements, plans, leases, policies and licenses referred to in Section 3.15 of the Disclosure Schedule are valid and in full force and effect. True and complete copies thereof, with all amendments and supplements thereto, have been heretofore delivered by the Company to Jones.
3.19 Insurance. Section 3.19(a) of the Disclosure Schedule contains an accurate and complete list of all policies and binders of fire, liability, workmens compensation, products liability and all other forms of insurance maintained by the Company and each Company Subsidiary (except for insurance maintained for employees, which is set forth in Section 3.21(b) of the Disclosure Schedule), and other forms of insurance owned or held by the Company and each Company Subsidiary. All such policies are in full force and effect, all premiums due and payable with respect thereto covering all periods up to and including the Closing Date have been or will be paid, and no notice of cancellation or termination has been received with respect to any such policy. To the knowledge of Securityholders, such policies are sufficient for compliance with all requirements of law and of all agreements to which the Company and each Company Subsidiary is a party; are valid, outstanding and enforceable; provide adequate insurance coverage for the assets and operations of the Company and each Company Subsidiary; and will
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remain in full force and effect until the Closing. Section 3.19(b) of the Disclosure Schedule identifies all risks which the Company and each Company Subsidiary has designated as being self insured. Section 3.19(c) of the Disclosure Schedule identifies those pending (or, to the knowledge of Securityholders, threatened) claims as to which the insurance carrier has denied coverage or has advised the Company or any Company Subsidiary that it is defending such claim under reservation of rights. Neither the Company nor any Company Subsidiary has been refused any insurance with respect to its assets or operations, nor has its coverage been limited, by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last three years.
3.20 Labor, Customs, Health and Safety Law Matters.
(a) Employment Law Matters. Except to the extent set forth in Section 3.20 of the Disclosure Schedule, (a) to the knowledge of the Company, the Company, all Company Subsidiaries and their respective subcontractors are in compliance in all material respects with (i) all applicable laws respecting employment and employment practices, terms and conditions of employment and wages (including overtime wages) and hours and (ii) all child and other labor laws and regulations of the United States and other countries in which the Companys products are manufactured or assembled; (b) to the knowledge of the Company, the Company and the Company Subsidiaries are not engaged in any unfair labor practice; (c) there is no unfair labor practice complaint against the Company or any Company Subsidiary pending before the National Labor Relations Board; (d) there is no labor strike, slowdown or work stoppage actually pending or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary; (e) to the knowledge of the Company, no representation question exists respecting the employees of the Company or any Company Subsidiary; (f) no grievance which would have a material adverse effect on the Company or any Company Subsidiary or the conduct of its business nor any arbitration proceeding arising out of or under collective bargaining agreements is pending and, to the knowledge of the Company, no such grievance or arbitration proceeding is threatened; (g) there is no collective bargaining agreement binding on the Company or any Company Subsidiary; and (h) neither the Company nor any Company Subsidiary has experienced any work stoppage or other labor strike or, to the knowledge of the Company, attempts to organize employees of the Company or any Company Subsidiary by organized labor in the past four years.
(b) Customs, Health and Safety Law Matters. Except as set forth in Section 3.20 of the Disclosure Schedule, all of the Companys and the Company Subsidiaries products are manufactured, offered for sale, sold, labeled, packaged and distributed, and advertised, marketed, promoted, publicized and otherwise exploited in accordance with all applicable customs requirements and country of origin regulations and all applicable laws and regulations relating to health and safety, and those laws and regulations relating to the disclosure of information to the consumer, such as truth-in-advertising and materials content labeling laws and regulations.
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(c) Compliance Monitoring. Included in Section 3.20 of the Disclosure Schedule is a copy of the guidelines pursuant to which the Company and Company Subsidiaries monitor the performance of their respective subcontractors to assure compliance with the laws and regulations described in the foregoing paragraphs.
3.21 Employee Benefit Plans.
(a) Definitions. The following terms, when used in this Section 3.21, shall have the following meanings. Any of these terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference.
(i) Benefit Arrangement. "Benefit Arrangement" shall mean any employment, consulting, severance or other similar contract, arrangement or policy, practice and procedure, and each plan, arrangement (written or oral), program, agreement or commitment providing for insurance coverage (including without limitation any self-insured arrangements), workers compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, disability or accident benefits (including without limitation any "voluntary employees beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (A) is not a Welfare Plan, Pension Plan, or Multiemployer Plan, (B) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by the Company or any ERISA Affiliate or under which the Company or any ERISA Affiliate may incur any liability, and (C) covers any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities).
(ii) Employee Plans. "Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.
(iii) ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
(iv) Multiemployer Plan. "Multiemployer Plan" shall mean any "Multiemployer Plan," as defined in Section 4001(a)(3) of ERISA, (A) which the Company or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, after September 25, 1980, maintained, administered, contributed to or was required to contribute to, or under which the Company or any ERISA Affiliate may incur any liability and (B) which covers any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities).
(v) PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation.
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(vi) ERISA Affiliate. "ERISA Affiliate" shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with or under "common control" with the Company as defined in Section 414(b) or (c) of the Code.
(vii) Pension Plan. "Pension Plan" shall mean any "employee pension benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which the Company or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the five years to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company or any ERISA Affiliate may incur any liability and (B) which covers any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities).
(viii) Welfare Plan. "Welfare Plan" shall mean any "employee welfare benefit plan" as defined in Section 3(1) of ERISA, (A) which the Company or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or under which the Company or any ERISA Affiliate may incur any liability and (B) which covers any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities).
(b) Disclosure: Delivery of Copies of Relevant Documents and Other Information. Section 3.21(b) of the Disclosure Schedule contains a complete list of the Companys Employee Plans. True and complete copies of each of the following documents have been previously delivered by the Company to Jones and Holdings: (i) each Welfare Plan, Pension Plan and Multiemployer Plan (and, if applicable, related trust agreements) and all amendments thereto, the most recent summary plan description thereof (if required by ERISA) and all annuity contracts or other funding instruments, (ii) each Benefit Arrangement, including written interpretations thereof and written descriptions thereof which have been distributed to the Companys employees (including descriptions of the number and level of employees covered thereby) and a complete description of any Benefit Arrangement which is not in writing, (iii) the most recent determination or opinion letter issued by the Internal Revenue Service with respect to each Pension Plan and each Welfare Plan (other than a "multiemployer plan," as defined in Section 3(37) of ERISA), (iv) for the three most recent plan years, Annual Reports on Form 5500 required to be filed with any governmental agency for each Pension Plan and (v) a description setting forth the amount of any liability of the Company as of the Closing Date for payments more than 30 calendar days past due with respect to each Welfare Plan.
(c) Representations. Except as set forth in Section 3.21(c) of the Disclosure Schedule, the Company represents and warrants as follows:
(i) Pension Plans.
(A) Neither the Company nor any ERISA Affiliate maintains or contributes to or has maintained or contributed to a Pension Plan which is subject to the minimum funding requirements of Section 412 of the Code
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or Part 3 of Title I of ERISA. Neither the Company nor any ERISA Affiliate has any liability for any unpaid contributions due with respect to any Pension Plan.
(B) Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which covers or has covered employees or former employees of the Company (with respect to their relationship with such entities) has been determined by the Internal Revenue Service to be qualified and tax-exempt under the provisions of Sections 401(a) (or 403(a), as appropriate) and 501(a) of the Code and the Company is not aware of any circumstances that could reasonably be expected to result in revocation of such determination.
(C) No Pension Plan, related trust agreement, annuity contract or other funding instrument which covers or has covered employees or former employees of the Company (with respect to their relationship with such entities), has been maintained, both as to form and in operation in such a manner that could reasonably be expected to cause the Company to incur any liability under any statute, order, rule and regulation which is applicable to such plans, including without limitation, ERISA and the Code.
(D) Neither the Company nor any ERISA Affiliate maintains or contributes to or has maintained or contributed to a Pension Plan subject to Title IV of ERISA.
(E) Any terminated Pension Plan received a favorable determination letter from the Internal Revenue Service with respect to its termination.
(ii) Multiemployer Plans. Neither the Company nor any ERISA Affiliate contributes to, or within the past four years has been obligated to contribute to, a Multiemployer Plan.
(iii) Welfare Plans.
(A) None of the Companys Welfare Plans has any present or future obligation to make any payment to, or with respect to any present or former employee of the Company, or such employees, dependents or spouse, pursuant to, any retiree medical benefit plan, or other retiree Welfare Plan.
(B) No Welfare Plan which is a "group health plan," as defined in Section 607(1) of ERISA, has been operated in such a manner that could
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reasonably be expected to cause the Company to incur any liability under any statute, order, rule or regulation which is applicable to such plans, including, without limitation, ERISA and the Code.
(iv) Litigation. There is no action, order, writ, injunction, judgment or decree or claim, suit, litigation, proceeding, arbitral action, governmental audit or investigation relating to or seeking benefits (other than a routine claim for benefits pursuant to the terms of the plan) under any Employee Plan that is pending or, to the Companys knowledge, threatened or anticipated against the Company, any ERISA Affiliate or any Employee Plan.
(v) No Amendments. Neither the Company nor any ERISA Affiliate has announced any plan or legally binding commitment to create any additional Employee Plans which are intended to cover employees or former employees of the Company (with respect to their relationship with such entities) or to amend or modify any existing Employee Plan.
(vi) Insurance Contracts. Neither the Company nor any Pension Plan (other than a Multiemployer Plan) holds as an asset of any Pension Plan any interest in any annuity contract, guaranteed investment contract or any other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship or rehabilitation proceedings.
(vii) No Acceleration or Creation of Rights. Except as set forth in Section 3.21(vii) of the Disclosure Schedule, neither the execution and delivery of this Agreement or other related agreements by the Company nor the consummation of the transactions contemplated hereby or the related transactions will result in (i) the acceleration or creation of any rights of any person to benefits under any Employee Plan (including, without limitation, the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock (or the acceleration or creation of any rights under any severance, parachute or change in control agreement) or (ii) require the Company to make a larger contribution to, or pay greater benefits or provide other rights under, any Employee Plan than it otherwise would, whether or not some other subsequent action or event would be required to cause such payment or provision to be triggered or (iii) create or give use to any additional vested rights or service credits under any Employee Plan whether or not some other subsequent action or event would be required to cause such creation or acceleration to be triggered.
3.22 Litigation. Except as set forth in Section 3.22 of the Disclosure Schedule, there is no order, writ, injunction, judgment or decree outstanding, or any claim, action, suit, litigation, labor dispute, arbitrational action, inquiry, proceeding or investigation by or before any court or governmental or other regulatory or administrative agency or commission pending, or to the knowledge of the Company, threatened, against or involving the Company or any Company Subsidiary, or which questions or challenges the validity of this Agreement or any action taken or to be taken by Securityholders pursuant to this Agreement or in connection with the transactions contemplated hereby. Except as set forth in Section 3.22 of the Disclosure Schedule, to the knowledge of the Company, neither the Company nor any Company Subsidiary
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is in default under or in violation of, nor has the Company or any Company Subsidiary received any notice for any claim or default under or violation of, any contract or commitment to which it is a party or by which it is bound. Neither the Company nor any Company Subsidiary is subject to any judgment, order or decree entered in any lawsuit or proceeding which would have a material adverse effect on its business practices or on its ability to conduct its business in the manner as it is conducted as of the Closing Date or in any other manner.
3.23 No Condemnation or Expropriation. Neither the whole nor any portion of the leaseholds or any other real property of the Company or any Company Subsidiary is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Company, has any such condemnation, expropriation or taking been proposed.
3.24 Permits, Consents and Approvals of Governmental Authorities. Each of the Company and the Company Subsidiaries has all permits, licenses, franchises, approvals, registrations, authorizations, consents or orders of, or filings (collectively the "Permits") with any governmental authority, whether foreign, federal, state or local, that are required and necessary to conduct its business in substantially the manner in which it is currently being conducted, except where the failure to have any such Permits would not individually or in the aggregate be reasonably expected to (a) have a material adverse effect on the ability of the Company or any Company Subsidiary to conduct its business in the normal course or (ii) subject the Company to any material cost or expense. To the knowledge of the Company, all such Permits are valid and in full force and effect. Other than filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") by REI, and the Form III filing under the Connecticut Transfer Act, and except as set forth in Section 3.27 of the Disclosure Schedule, no consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby by the Company and Securityholders.
3.25 Consents. Section 3.25 of the Disclosure Schedule sets forth and identifies, including the name of the party and the address, all consents, assignments, releases, waivers and approvals required of any third person or entity necessary to consummate the transactions contemplated hereby by the Company and Securityholders.
3.26 Compliance with Law. Except as set forth in Section 3.26 of the Disclosure Schedule, the business of the Company and the Company Subsidiaries is, and since July 1, 1996 has been, conducted in accordance with and in compliance with, or in conformity with, all applicable laws, statutes, rules, orders, ordinances, judgments, decrees, or regulations and other requirements of all national governmental authorities, and of all states, municipalities and other political subdivisions, courts, departments, authorities, and agencies thereof, having jurisdiction over the Company and the Company Subsidiaries, except where any violations would not individually or in the aggregate be reasonably expected to (i) have a material adverse effect on the ability of the Company or any Company Subsidiary to conduct its business in the ordinary
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course or (ii) to the knowledge of the Company, subject the Company or any Company Subsidiary to any material cost or expense. Except as set forth in Section 3.26 of the Disclosure Schedule, since July 1, 1996, neither the Company any Company Subsidiary has received notice to the effect that it is not in compliance with such laws, statutes, rules, ordinances, judgments, decrees, regulations or other requirements.
3.27 Compliance with Environmental Laws.
(a) Definitions. The following terms, when used in this Section 3.27, shall have the following meanings. Any of these terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference.
(i) "Release" shall mean and include any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing on, in or into the environment of any Hazardous Substance.
(ii) "Hazardous Substance" shall mean any quantity of asbestos in any form, formaldehyde, PCBs, radon gas, crude oil or any fraction thereof, solvents, cutting oils, degreasers, machine tool oils, all forms of natural gas, petroleum products, by-products or wastes, any radioactive substance, any solid waste, any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound and any other hazardous substance, material or waste (as defined in or for purposes of any Environmental Law) whether solid, semi-solid, liquid or gas, and any other substance which is now subject to regulation or control under any Environmental Law.
(iii) "Environmental Condition" shall mean conditions with respect to air, water, groundwater, soil or other media, in which the presence of Hazardous Substances could create liability or responsibility to remediate or give rise to any claim, including third party claims.
(iv) "Environmental Laws" shall mean all applicable federal, state, local or foreign laws, statutes, ordinances, regulations, rules, judgments, orders and licenses which (i) regulate or relate to the protection or remediation of the environment, the use, treatment, storage, transportation, handling or disposal of Hazardous Substances, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources, or the health and safety of persons or property (but not including protection of the health and safety of employees) or (ii) impose liability with respect to any of the foregoing, including without limitation the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Sections 201, 300), Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), or any other similar federal, state or local law or foreign law of similar effect, each as amended.
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(v) "Facilities" shall mean all current and former plants, offices, manufacturing facilities, stores, warehouses, improvements, administration buildings and real property, whether owned or leased, of the Company and the Company Subsidiaries.
(b) Facilities. Except as set forth on Section 3.27 of the Disclosure Schedule, the Company and the Company Subsidiaries have operated the Facilities in compliance with all Environmental Laws, except for any noncompliance as would not have a material adverse effect on the Companys or the Companys Subsidiaries properties or operations.
(c) Permits. Section 3.27 of the Disclosure Schedule lists all Permits which the Company and the Company Subsidiaries currently have which are required under any Environmental Law with respect to their activities and their Facilities. Except as set forth in Section 3.27 of the Disclosure Schedule, the Company and the Company Subsidiaries are in compliance with all such Permits, except for any noncompliance as would not have a material adverse effect on the Companys or the Companys Subsidiaries properties or operations.
(d) Permits Required. Except as set forth on Section 3.27 of the Disclosure Schedule, the consummation of any of the transactions contemplated by this Agreement will not require an application by the Company or any Company Subsidiaries, for issuance, renewal, transfer or extension of, or any other administrative action regarding, any Permit required or any requirement under any Environmental Law.
(e) Information Request and Notice of Violation. Except as set forth in Section 3.27 of the Disclosure Schedule, neither the Company nor any Company Subsidiary has received any written notice with respect to any current or former Facilities alleging that the Company or any Company Subsidiary is in violation of or in non-compliance with the conditions, requirements, standards or limits of any Permit required under any Environmental Law or the provisions of any Environmental Law, nor has the Company or any Company Subsidiary received a written information request with respect to such alleged or potential violations.
(f) Pending Actions. Except as set forth on Section 3.27 of the Disclosure Schedule, there is not now pending or, to the knowledge of the Company, threatened, any action against the Company or any Company Subsidiary with respect to any of its past or current activities at any time under any Environmental Law or otherwise with respect to any Release or mishandling of any Hazardous Substance.
(g) Judgments. Except as set forth on Section 3.27 of the Disclosure Schedule, there are no consent decrees, judgments, judicial or administrative orders, or similar decrees, judgments or orders under foreign law, or agreements with, or liens by, any governmental authority, quasi-governmental entity or any other person or entity relating to any Environmental Law which currently regulates, obligates, binds or in any way affects the Company or any Company Subsidiary with respect to past or current activities, the business or any current or former Facility.
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(h) Hazardous Substances. Except as set forth on Section 3.27 of the Disclosure Schedule, there has been no Release of Hazardous Substances by the Company or, to the knowledge of the Company, by any third party and there is not and has not been any Hazardous Substance used, generated, treated, stored, transported, disposed of, handled by the Company or, to the knowledge of the Company, by any third party, or otherwise currently existing on, about or from the Facilities or, to the knowledge of the Company, formerly existing on, under, about or from the Facilities, except for quantities of any such Hazardous Substances stored or otherwise held on, under or about the Facilities in full compliance with all Environmental Laws, or as would not have a material adverse effect on the Companys or the Companys Subsidiaries properties or operations.
(i) Handling of Hazardous Substances. Except as set forth on Section 3.27 of the Disclosure Schedule, the Company has at all times, with respect to its business, used, generated, treated, stored, transported, disposed of or otherwise handled its Hazardous Substances in compliance with all Environmental Laws, except for any noncompliance as would not have a material adverse effect on the Companys or the Companys Subsidiaries properties or operations.
(j) CERCLA or RCRA. Except as set forth on Section 3.27 of the Disclosure Schedule, no current or past use, generation, treatment, transportation, storage, disposal or handling practice of the Company or any Company Subsidiary with respect to any Hazardous Substance has resulted in any known liability at the Facilities or at any other site, nor has the Company received any formal notice that it is a responsible party or potentially responsible party, under CERCLA or RCRA or any applicable state, local or foreign law of similar effect.
(k) Storage Tank or Pipeline. Except as set forth in Section 3.27 of the Disclosure Schedule, and except for connections with public utilities and discharges to, and intakes from, sewer lines, to the knowledge of the Company, there are no underground or above ground storage tanks or pipelines at any of the current Facilities of the Company or any Company Subsidiary, and there have been no Releases of Hazardous Substances from any such current underground or above ground storage tanks or pipelines, or from previously removed or closed underground or above ground storage tanks or pipelines, including without limitation any Release from or in connection with the filling or emptying of any such tank.
(l) Environmental Audits or Assessments. True, complete and correct copies of the written reports, and all parts thereof, of all environmental audits or assessments which are in the possession or control of the Company or any Company Subsidiary and which have been conducted at the Facilities either by the Company or any Company Subsidiary or any attorney, environmental consultant or engineer engaged for such purpose or by any governmental agency, have been previously delivered to Jones and a list of all such reports, audits and assessments and any other similar report, audit or assessment of which the Company has knowledge is included in Section 3.27 of the Disclosure Schedule.
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(m) Indemnification Agreements. Except as set forth in Section 3.27 of the Disclosure Schedule, neither the Company nor any Company Subsidiary is a party, whether as a direct signatory or as successor, assign or third party beneficiary, or otherwise bound, to any Material Contract (excluding insurance policies disclosed on the Disclosure Schedule or leases or other agreements entered into in the ordinary course of business (such as agreements with vendors or vendees)) under which the Company or any Company Subsidiary is obligated by or entitled to the benefits of, directly or indirectly, any representation, warranty, indemnification, covenant, restriction or other undertaking concerning environmental conditions or claims under any Environmental Law.
(n) Releases or Waivers. Except as set forth in Section 3.27 of the Disclosure Schedule, since July 1, 1996, neither the Company nor any Company Subsidiary has released in writing any other person or entity from any claim under any Environmental Law or waived in writing any rights concerning liability in connection with any Hazardous Substance.
(o) Notices, Warnings and Records. Except as set forth on Section 3.27 of the Disclosure Schedule, each of the Company and the Company Subsidiaries has given all notices and warnings, made all reports, and has kept and maintained all records required by and in compliance with all Environmental Laws, except where the failure to do so would not have a material adverse effect on the Companys or the Companys Subsidiaries properties or operations.
3.28 No Other Agreements. Except as set forth in Section 3.28 of the Disclosure Schedule, the Company has no commitment or legal obligation, absolute or contingent, to any other person or firm to sell or effect a sale of all or substantially all of the assets of the Company or any Company Subsidiary, to sell or effect a sale of any equity interests of the Company or any Company Subsidiary, to effect any merger, consolidation or the reorganization of the Company or any Company Subsidiary, or to enter into any agreement or cause the entering into of an agreement with respect thereto.
3.29 Brokers and Finders. None of the Company or any officers, directors or employees of the Company has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the transactions contemplated by this Agreement.
3.30 Personnel. Section 3.30 of the Disclosure Schedule sets forth a true and complete list of:
(a) the names and current salaries of all directors and elected and appointed officers of the Company and the Company Subsidiaries;
(b) the salaries for all salaried employees of the Company and the Company Subsidiaries by classification, and the date of the last increase in compensation through July 25, 2000.
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3.31 Insider Interests. Except as set forth in Section 3.31 of the Disclosure Schedule, to the knowledge of the Company, no officer, director or Securityholder of the Company is presently a party to any transaction with the Company or any Company Subsidiary including, without limitation, any contract, agreement or arrangement: (i) providing for the furnishing of services, (ii) providing for rental of real or personal property, or (iii) otherwise requiring payments to or from any such person or any trust, corporation, partnership or entity in which such person has any interest including in any property, real or personal, tangible or intangible, including without limitation, inventions, patents, trademarks or trade names, used in or pertaining to the business of the Company.
3.32 Bank Accounts. Section 3.32 of the Disclosure Schedule sets forth the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company or any Company Subsidiary maintains safe deposit boxes or accounts of any nature.
3.33 Disclosure. Neither this Agreement nor any Schedule, Exhibit, or other document delivered or to be delivered by the Company to Jones or Holdings in accordance with the terms hereof contain (or will contain) any untrue statement of material fact or omit (or will omit) to state any material fact, necessary in order to make the statements herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS
Each Securityholder, individually as to itself only and not jointly or jointly and severally with any other Securityholder, represents and warrants to Jones and Holdings as set forth in Sections 4.1 through 4.6 and Sections 4.8 through 4.9. REI, Prudential, Foothill Capital Corporation ("Foothill") and VAGI Associates, L.P. ("VAGI"), individually as to itself only and not jointly or jointly and severally with any other Securityholder, represents and warrants to Jones and Holdings as set forth in Section 4.10(a), (b), (c) or (d), respectively. The Restricted Shareholders (as defined in Section 4.7) individually as to himself or herself only and not jointly or jointly and severally covenant as set forth in Section 4.7.
4.1 Authorization and Due Execution; No Conflicts.
(a) Such Securityholder, if a corporation, has taken all action required by law, its charter, by-laws, or otherwise, and such Securityholder, if a limited partnership, has taken all action required by law, its certificate of limited partnership, partnership agreement, or otherwise, to be taken by it to authorize the execution, delivery and performance by such Securityholder of this Agreement and each other agreement, document and instrument to be executed and delivered by it pursuant to this Agreement and the consummation by such Securityholder of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by such Securityholder, and constitutes, and each other agreement, document and
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instrument to be executed and delivered by such Securityholder pursuant to this Agreement, when so executed and delivered, will constitute, a legal, valid and binding obligation of such Securityholder, enforceable against such Securityholder in accordance with its terms except as (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(b) Neither the execution and delivery of this Agreement and each other agreement, document or instrument to be executed and delivered by such Securityholder pursuant to this Agreement, nor the consummation of the transactions contemplated hereby or thereby by such Securityholder, will violate any provisions of the respective charter, by-laws, certificate of limited partnership, partnership agreement or other organizational documents, as applicable, of such Securityholder or, to its, his or her knowledge, be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any debt or obligation pursuant to, or result in the creation or imposition of any security interest, lien or other encumbrance upon the Company Shares or the Warrants, as applicable, owned by such Securityholder under, any agreement or commitment to which such Securityholder is a party or by which such Securityholder is bound, or violate any applicable statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority applicable to such Securityholder or the Company Shares or Warrants held by such Securityholder.
4.2 No Distribution. The Jones Contingent Stock which may be acquired by such Securityholder hereunder will be acquired for his/its own account, for investment and not with a view to or for resale in connection with any "distribution" thereof as such term is used in connection with the registration provisions of the Securities Act of 1933, as amended (the "Securities Act"), except pursuant to the provisions of Section 7.2 hereof.
4.3 Legend. Such Securityholder acknowledges that the following legend shall be affixed to the certificates for any Jones Contingent Stock issued pursuant to this Agreement:
The securities represented by this Certificate have not been registered under the Securities Act of 1933, as amended, nor the laws of any state. Accordingly, these securities may not be offered, sold, transferred, pledged or hypothecated in the absence of registration, or the availability, in the opinion of counsel reasonably satisfactory to the issuer, of an exemption from registration under the Securities Act of 1933, as amended, or the securities laws of any state. Therefore, the stock transfer agent will effect transfer of this Certificate only in accordance with the above instructions.
4.4 Review of Applicable Laws. Such Securityholder acknowledges that Jones has informed it that any shares of Jones Contingent Stock to be received by such Securityholder
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pursuant hereto have not been registered under the Securities Act and may not be sold until they have been registered or an exemption from such registration is available.
4.5 Knowledge and Experience. Such Securityholder has the knowledge and experience in financial and business matters necessary for making an informed decision on the merits and risk of the investment in the Jones Contingent Stock pursuant hereto.
4.6 Availability of Information. Such Securityholder has had an opportunity to meet personally or by telephone conference with officers or representatives of Jones and has been provided with a full opportunity to ask questions of and receive answers from such persons concerning the business and affairs of Jones, its past and current operations and financial condition, and the transactions provided for in this Agreement.
4.7 Restrictions on Transfers.
(a) Robert M. Andreoli, Steven J. ONeil, Patricia Stensrud, Richard M. Andreoli and Lauren Mandel (collectively, the "Restricted Shareholders") shall not sell, assign or transfer ("Transfer") their Jones Contingent Stock during the period of 12 months following the date of issuance of such Jones Contingent Stock.
(b) The restrictions on transfer set forth in paragraph (a) of this Section 4.7 shall terminate with respect to a Restricted Shareholder in the event that:
(i) such Restricted Shareholder dies;
(ii) such Restricted Shareholder becomes disabled to the extent that he or she is incapable of performing the essential functions of the duties required by such Restricted Shareholders Employment Agreement for 120 or more consecutive days, even with reasonable accommodation;
(iii) an arbitration tribunal or court of competent jurisdiction renders a final and non-appealable decision finding that such Restricted Shareholders employment was terminated without "Cause" (as such term is defined in such Employment Agreement) or that such Restricted Shareholder terminated his or her employment for "Good Reason" (as such term is defined in such Restricted Shareholders Employment Agreement);
(iv) Jones agrees in writing that such Restricted Shareholders employment has been terminated without Cause or that such Restricted Shareholder terminated his or her employment, as the case may be, for Good Reason; or
(c) Notwithstanding any provision herein to the contrary, a Restricted Shareholder may at any time Transfer his or her Jones Contingent Stock to any member of such Restricted Shareholder's family or to any trust or other entity for the benefit of any member of such Restricted Shareholder's family.
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4.8 Ownership of Stock and Warrants.
(a) Such Securityholder is the sole beneficial and record owner of the number (and type) of Company Shares listed opposite the name of such Securityholder in Section 4.8 of the Disclosure Schedule, free and clear of any Liens, other than as described in Section 4.8 of the Disclosure Schedule. Subject to the terms and conditions of this Agreement, such Securityholder is selling, assigning, transferring and delivering to Holdings hereunder all of its right, title and interest in and to such Company Shares, free and clear of any Liens, other than as described in Section 4.8 of the Disclosure Schedule.
(b) Such Securityholder is the sole beneficial and record owner of the Warrants listed opposite the name of such Securityholder in Section 4.8 of the Disclosure Schedule, free and clear of any Liens, other than as described in Section 4.8 of the Disclosure Schedule. Subject to the terms and conditions of this Agreement, such Securityholder is selling, assigning, transferring and delivering to Holdings hereunder all of its right, title and interest in and to such Warrants, free and clear of any Liens, other than as described in Section 4.8 of the Disclosure Schedule.
(c) Except for the Stockholders Agreement, the Voting Trust Agreement, and as set forth in Section 4.8 of the Disclosure Schedule: (i) such Securityholder is not a party or bound by any voting trust agreements, proxies or other contracts or arrangements restricting or relating to the Company Shares or Warrants owned by such Securityholder; and (ii) such Securityholder is not a party to any option, warrant, purchase right or other commitment which could require such Securityholder to sell, transfer or otherwise dispose of any Company Shares or Warrants, other than this Agreement.
(d) There is no order, writ, injunction, judgment or decree outstanding, or any claim, action, suit, litigation, labor dispute, arbitrational action, inquiry, proceeding or investigation by or before any court or governmental or other regulatory or administrative agency or commission pending, or to the knowledge of such Securityholder, threatened, against or involving the Company Shares or Warrants owned by such Securityholder, or which questions or challenges any action taken or to be taken by such Securityholder pursuant to this Agreement or in connection with the transactions contemplated hereby.
4.9 Brokers and Finders. Such Securityholder has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the transactions contemplated by this Agreement.
4.10 Organization and Authority.
(a) REI is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has full partnership power and authority necessary to enter into this Agreement and to carry out the transactions contemplated hereby.
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(b) Prudential is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey and has full corporate power and authority necessary to enter into this Agreement and to carry out the transactions contemplated hereby.
(c) Foothill is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has full corporate power and authority necessary to enter into this Agreement and to carry out the transactions contemplated hereby.
(d) VAGI is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Rhode Island and has full partnership power and authority necessary to enter into this Agreement and to carry out the transactions contemplated hereby.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF JONES AND HOLDINGS
Jones and Holdings jointly represent and warrant to the Securityholders as follows:
5.1 Corporate Organization; Etc. Each of Jones and Holdings is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has full corporate power and authority to carry on its business as it is now being conducted and to own the properties and assets it now owns; is duly qualified or licensed to do business as a foreign corporation in good standing in the jurisdictions in which such qualification is required except jurisdictions in which failure to qualify to do business will have no material adverse effect on the business, prospects, operations, properties, assets or condition (financial or otherwise) of Jones. The copies of the certificate of incorporation and by-laws and all amendments thereto of Jones heretofore delivered to the Company and are complete and correct copies of such instruments as presently in effect.
5.2 Financial Statements.
(a) Jones has heretofore delivered to the Company and Securityholders (i) a copy of Jones Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (the "Form 10-K"), which contains audited consolidated financial statements of Jones and its subsidiaries consisting of consolidated balance sheets as of December 31, 1999 and 1998 and consolidated statements of operations, stockholders equity and cash flows for each of the three years in the period ended December 31, 1999, and (ii) a copy of the Jones Quarterly Report on Form 10-Q for the three-month period ended April 2, 2000 (the "Form 10-Q"), which contains an unaudited consolidated balance sheet of Jones and its subsidiaries as of April 2, 2000 (the "Jones Balance Sheet") and unaudited consolidated statements of operations and cash flows for the three-month period ended April 2, 2000.
(b) The Jones Balance Sheet and all other financial statements described above or contained in the Form 10-K and Form 10-Q, including the notes and schedules thereto,
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have been prepared in accordance with generally accepted accounting principles, applied on a consistent basis and present fairly the consolidated financial position and results of the operations and cash flows of Jones at the dates and for the periods indicated, subject, in the case of the unaudited interim financial statements, to normal year-end adjustments.
5.3 Capitalization. As of July 27, 2000, (i) the authorized capital stock of Jones is set forth in the Form 10-K, of which 118,702,812 shares are issued and outstanding and 14,250,983 shares are subject to options, warrants or other rights to purchase or subscribe for capital stock of Jones, and (ii) the authorized capital stock of Holdings is 1,000 shares of Common Stock, of which 1,000 shares are issued and outstanding. All issued and outstanding shares of capital stock of Jones are validly issued, fully paid and nonassessable. Except as set forth in the Form 10-K, there are no outstanding (a) securities convertible into or exchangeable for capital stock of either Jones or Holdings; (b) options, warrants or other rights to purchase or subscribe for capital stock of either Jones or Holdings other than employee stock options granted by Jones; or (c) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance of any capital stock of either Jones or Holdings, any such convertible or exchangeable securities or any such options, warrants or rights.
5.4 Jones Common Stock. The shares of Jones Contingent Stock have been duly authorized and will be, when issued to Securityholders in accordance with the terms hereof, validly issued, fully paid and nonassessable, and the issuance of such shares in accordance with the terms of this Agreement will be exempt from registration under the Securities Act of 1933 and applicable state securities laws.
5.5 Authorization; Etc. Each of Jones and Holdings has full corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. The Board of Directors of each of Jones and Holdings and Jones, as the sole shareholder of Holdings, have taken all action required by law, its certificate of incorporation and by-laws or otherwise to be taken by them to authorize the execution, delivery and performance of this Agreement and each other agreement, document and instrument to be executed and delivered by Jones and/or Holdings pursuant hereto and the consummation of the transactions contemplated hereby and thereby, and this Agreement has been duly executed and delivered by Jones and Holdings and this Agreement and each agreement, document and instrument to be executed and delivered by Jones and/or Holdings pursuant to this Agreement constitutes, or when executed and delivered, will constitute, a valid and binding agreement of Jones and/or Holdings enforceable against Jones and/or Holdings in accordance with its terms except as (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
5.6 No Conflicts. Neither the execution and delivery of this Agreement and each other agreement, document or instrument referred to in Section 5.5, nor the consummation of the transactions contemplated hereby or thereby, will violate any provisions of the respective
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certificate of incorporation, by-laws or other organizational documents of Jones or Holdings or, to the knowledge of Jones and Holdings, be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any debt or obligation pursuant to, or result in the creation or imposition of any security interest, lien or other encumbrance upon any property or assets of Jones or Holdings under, any agreement or commitment to which Jones or Holdings is a party or by which Jones or Holdings is bound, or violate any applicable statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority applicable to Jones or Holdings.
5.7 SEC Reports. The Form 10-K and Form 10-Q, and all other reports and proxy statements required to be filed by Jones under the Securities Exchange Act of 1934, as amended (the "Exchange Act") since January 1, 1997, have been duly and timely filed by Jones and, at the time of their filing, were in compliance with the requirements of their respective forms in all material respects and were complete and correct in all material respects, and contained no untrue statement of a material fact nor omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
5.8 Litigation. There is no order, writ, injunction, judgment or decree outstanding, or any claim, action, suit, litigation, labor dispute, arbitrational action, inquiry, proceeding or investigation by or before any court or governmental or other regulatory or administrative agency or commission pending or, to the knowledge of Jones or Holdings, threatened, against or involving Jones or Holdings, or which questions or challenges the validity of this Agreement or any action taken or to be taken by Jones or Holdings pursuant to this Agreement or in connection with the transactions contemplated hereby. To the knowledge of Jones and Holdings, neither Jones nor Holdings nor any of their subsidiaries is in default under or in violation of, nor has Jones nor Holdings nor any of their subsidiaries received any notice for any claim or default under or violation of, any contract or commitment to which it is a party or by which it is bound. Neither Jones nor Holdings nor any of their subsidiaries is subject to any judgment, order or decree entered in any lawsuit or proceeding which would have a material adverse effect on its business practices or on its ability to conduct its business in the manner as it is conducted as of the Closing Date.
5.9 Consents. Except for filings under the HSR Act, the registration of the Jones Contingent Stock under the Securities Act and applicable state securities laws, and the listing of the Jones Contingent Stock on the NYSE and any other applicable securities exchange, no approvals are required of any third person or entity necessary to consummate the transactions contemplated hereby by Jones and Holdings.
5.10 Financing. Jones will have, at or prior to the Closing and at or prior to the due date of each Contingent Payment, as the case may be, sufficient funds available to pay (i) the Aggregate Purchase Price and the Closing Date Debt and (ii) each Contingent Payment as and when due pursuant to this Agreement, respectively.
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5.11 Disclosure. Neither this Agreement nor any Schedule, Exhibit or certificate or other document delivered or to be delivered by Jones or Holding to the Company or the Securityholders in accordance with the terms hereof, contains (or will contain) any untrue statement of a material fact, or omits (or will omit) any statement of a material fact, necessary in order to make the statements contained herein or therein not misleading.
ARTICLE 6
ADDITIONAL COVENANTS OF THE COMPANY, JONES AND HOLDINGS
The Company, Jones and Holdings hereby covenant and agree with each other and the Securityholders as follows:
6.1 Access to the Company. Until the Closing, the Company shall afford to Jones, its counsel, accountants and other representatives, reasonable access during normal business hours to the plants, offices, warehouses, properties, books and records of the Company and the Company Subsidiaries in order that Jones may have full opportunity to make such investigations as it shall desire to make of the affairs of the Company; and the Company shall cause its officers and accountants to furnish such additional financial and operating data and other information as Jones shall from time to time reasonably request; provided, however, that any such investigation shall be conducted in such a manner as not to interfere with the operation of the business of the Company. Jones independent investigation of the business of the Company shall not relieve, release, or otherwise constitute a waiver of Securityholders indemnification obligations to Jones and Holdings hereunder for breach of the Companys warranties and representations in this Agreement or the Companys obligation to make true and complete disclosure to Jones and Holdings, except to the extent that Jones or Holdings had actual knowledge of any such breach as a result of such independent investigation.
6.2 Access to Jones. Until the Closing, Jones shall afford to the Company and the Securityholders, their counsel, accountants and other representatives, reasonable access during normal business hours to the plants, offices, warehouses, properties, books and records of Jones and its subsidiaries in order that the Company and the Securityholders may have full opportunity to make such investigations as they shall desire to make of the affairs of Jones; and Jones will cause its officers and accountants to furnish such additional financial and operating data and other information as the Company or the Securityholders shall from time to time reasonably request; provided, however, that any such investigation shall be conducted in such a manner as not to interfere with the operation of the business of Jones. The Company's independent investigation of the business of Jones shall not relieve, release or otherwise constitute a waiver of Jones' liability and obligations to the Securityholders for breach of Jones' warranties and representations in this Agreement and to make true and complete disclosure to the Company and the Securityholders, except to the extent that the Company or the Securityholders had actual knowledge of any such breach as a result of such independent investigation.
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6.3 Amendment of Disclosure Schedule. On or prior to July 31, 2000, the Company may supplement or amend the Disclosure Schedule with respect to any matter existing or occurring at or prior to the date hereof. In the event that the Company so supplements or amends the Disclosure Schedule, Jones shall have the right, in its sole and absolute discretion, exercisable by written notice delivered to the Company on or prior to the Closing, to terminate this Agreement. In the event of the termination of this Agreement pursuant to this Section 6.3, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto or any of its Affiliates, directors, officers or stockholders, except for the provisions of Sections 7.3, 13.3, 13.7 and 13.11, which shall survive such termination. Unless Jones terminates this Agreement in accordance with the foregoing sentence, any such supplements or amendments to the Disclosure Schedule shall be deemed to have been included in the Disclosure Schedule delivered as of the date hereof for all purposes of this Agreement.
6.4 Repayment of Indebtedness. At the Closing, Jones will take all action necessary to repay, discharge and obtain releases in respect of the Closing Date Debt.
ARTICLE 7
ADDITIONAL COVENANTS OF THE PARTIES
7.1 Employment Agreements. Concurrently with the execution of this Agreement, the Company will enter into amendments to the employment agreements with Robert M. Andreoli, Richard M. Andreoli, Steven J. ONeil, Patricia Stensrud and Lauren Mandell in the form annexed hereto as Exhibits A-1 and A-2 (the "Employment Agreement Amendments"), each of which will become effective at the Closing.
7.2 Registration.
(a) Jones shall file with the SEC a registration statement on Form S-3 for the resale of the shares of Jones Contingent Stock issuable to the Securityholders in consummation of this Agreement and to use its best efforts to cause such registration statement to be declared effective and to maintain the effectiveness of such registration statement until such time as such shares of Jones Contingent Stock may be resold by or on behalf of the Securityholders pursuant to Rule 144(k). The parties agree that Jones shall have met its obligation to file a registration statement if Jones commences preparation of a registration statement or a post-effective amendment to an existing registration statement which covers the Jones Contingent Stock to be issued to Securityholders expeditiously after the end of the Calculation Period and such registration statement or amendment is filed no later than 20 days after such issuance. Jones shall also file a listing application and use its best efforts to cause the shares of Jones Contingent Stock to be listed on the NYSE (or such other securities exchange or quotation system on which Jones common stock is then listed or quoted). Such obligation to file a listing application shall have been fulfilled if a listing application for such purpose is filed with the NYSE or other applicable stock exchange no later than 20 days after such issuance.
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(b) Jones will indemnify each Securityholder with respect to which registration of Jones Contingent Stock has been effected (and such Securityholders general and limited partners and their respective Affiliates and representatives) against all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, registration statement or other document incident to any registration effected pursuant to Section 7.2(a) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Jones of the Securities Act or any rule or regulation thereunder applicable to Jones and relating to action or inaction of Jones in connection with any such registration; provided, that Jones will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on written information furnished to Jones by such Securityholder specifically for inclusion therein or any grossly negligent or fraudulent action or inaction of such Securityholder.
(c) Each Securityholder with respect to which registration of Jones Contingent Stock has been effected will indemnify Jones against all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, registration statement or other document incident to any registration effected pursuant to Section 7.2(a) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Jones of the Securities Act or any rule or regulation thereunder applicable to Jones and relating to action or inaction of Jones in connection with any such registration, in each case to the extent that such untrue statement (or alleged untrue statement), omission (or alleged omission) or violation arises out of or is based upon written information furnished to Jones by such Securityholder specifically for inclusion therein or any grossly negligent or fraudulent action or inaction of such Securityholder.
(d) If the indemnification provided for in this Section 7.2 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a Securityholder under this Section 7.2(d) exceed the net proceeds from the offering received by such Securityholder, except in the case of willful fraud by such Securityholder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the
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parties relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
(e) Jones shall bear all expenses incurred by it in fulfilling its obligations under Section 7.2(a), and the Securityholders with respect to which registration of the Jones Contingent Stock is being effected shall bear all selling commissions, and marketing expenses relating to the shares of Jones Contingent Stock being registered and all fees and expenses of their counsel in connection with such registration.
7.3 Confidentiality. The parties agree that Section 2 of Part B of the letter of intent from Jones to the Company dated June 12, 2000 shall survive the execution of this Agreement and shall continue in effect in accordance with its terms or, if sooner, until the Closing.
7.4 Antitrust Laws. The Company and/or Shareholders and Jones shall make any and all filings which are required under the HSR Act. The Company and/or Shareholders will furnish to Jones such necessary information and reasonable assistance as Jones may request in connection with its preparation of necessary filings or submissions to any governmental agency, including, without limitation, any filings necessary under the provisions of the HSR Act.
7.5 Consents. Each party hereto shall use its reasonable efforts to obtain, prior to the Closing, all consents (including each consent to be obtained by such party set forth in Section 3.25 of the Disclosure Schedule, other than those which are being delivered as of the date hereof), assignments, releases, waivers, approvals, permits, registrations and conveyances necessary and appropriate to effect the consummation of the transactions contemplated hereby by such party and will use its reasonable best efforts to cause all conditions precedent to its obligations to consummate the transactions contemplated by this Agreement to be expeditiously satisfied.
7.6 Management of the Company after the Closing. Jones agrees that from the Closing Date until June 28, 2003, it shall operate the Victoria Division as an identifiable division for operational and financial accounting purposes and that so long as Andreoli is employed by the Victoria Division or Jones, Andreoli shall be the Chairman of the Victoria Division and will have the responsibilities provided under the Andreoli Employment Agreement.
7.7 Directors and Officers Indemnification and Insurance
(a) For a period of six (6) years after the Closing, the Company shall indemnify all present and former directors, officers, employees and agents of the Company for acts or omissions occurring prior to the Closing to the fullest extent now provided in the Companys certificate of incorporation and by-laws consistent with applicable law, to the extent such acts or omissions are uninsured, and shall, in connection with defending against any action for which indemnification is available hereunder, reimburse and advance expenses to such officers, directors, employees and agents, from time to time upon receipt of supporting
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documentation, for any reasonable costs and expenses reasonably incurred by such officers, directors, employees and agents in connection with such defense.
(b) The indemnification referred to in the foregoing paragraph shall in no way limit or abrogate the obligations of the Securityholders to indemnify Jones and Holdings pursuant to Article 11 hereof.
7.8 Bank Accounts. From the date hereof until the Closing, the Company shall use its reasonable best efforts to deliver to Jones true, correct and complete lists of (i) the locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company or any Company Subsidiary maintains safe deposit boxes or accounts of any nature and (ii) all persons authorized to draw thereon, make withdrawals therefrom or have access thereto.
7.9 Securities Exchange Act Filings. Jones will file on a timely basis with the SEC all filings and reports required to be filed by Jones under the Exchange Act in order to permit the Securityholders to sell the Jones Contingent Stock held by them pursuant to Rule 144.
7.13 Tax Audits. In the event that Jones receives notice of a claim, audit or other proceeding against the Company involving Taxes for which the Securityholders may be obligated to indemnify Jones or the Company pursuant to Section 11.2(a) with respect to any pre-Closing tax period, Jones shall promptly notify the Representatives of such claim; provided, however, that the failure to give such notice shall not relieve the Securityholders of the obligation to indemnify Jones, except to the extent of actual prejudice or actual damages suffered as a result thereof. Jones shall have control over the conduct of any such audit or other proceeding, and the Representatives shall have the right to participate at the Company's expense. Notwithstanding the foregoing, Jones agrees not to enter into any agreement or settlement with a tax jurisdiction with respect to any such audit or dispute with respect to any such Taxes without the consent of the Representatives, which consent shall not be unreasonably withheld. If any such settlement or other Damages involving Taxes for which the Securityholders are obligated to indemnify Jones or the Company hereunder result in a deduction, accelerated depreciation or other tax benefit to Jones or the Company with respect to any period, then the liability of the Securityholders hereunder with respect to such Damages shall be reduced by the amount of the discounted present value thereof, calculated using the Jones Borrowing Rate then in effect.
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ARTICLE 8
CONDITIONS TO SECURITYHOLDERS AND THE COMPANYS OBLIGATIONS
Each and every obligation of Securityholders and the Company to consummate the transactions contemplated by this Agreement shall be subject to satisfaction, on or before Closing, of each of the following conditions, unless waived in writing by the Company and the Representatives:
8.1 Representations and Warranties True. The representations and warranties of Jones and Holdings contained herein shall be in all material respects true and accurate as of the date hereof and as of the Closing Date, as though made at and as of the Closing Date, except for changes expressly permitted or contemplated by the terms of this Agreement.
8.2 Performance. Jones and Holdings shall have performed and complied in all material respects with all agreements, obligations, conditions and covenants required by this Agreement to be performed or complied respectively with by Jones or Holdings on or prior to the Closing.
8.3 No Injunction or Restraint. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other governmental entity preventing the Closing shall be in effect; provided, however, that the party invoking this condition shall have used its reasonable best efforts to prevent the entry of any such temporary restraining order, injunction or other order against it and to appeal as promptly as possible any injunction or other order that may be entered against it.
8.4 Payment of the Aggregate Purchase Price and Closing Date Debt. At the Closing, Jones shall have delivered to Securityholders the Aggregate Purchase Price and shall have paid the Closing Date Debt in full.
8.5 HSR Act. The waiting period (and any extension thereof) applicable to the purchase and sale of securities contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.
8.6 Jones and Holdings Legal Opinions. The Company and the Securityholders shall have received from counsel to Jones and Holdings a legal opinion or legal opinions addressed to the Company and the Securityholders satisfactory in form and substance to the Company and the Securityholders.
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ARTICLE 9
CONDITIONS TO OBLIGATIONS OF JONES AND HOLDINGS
Each and every obligation of Jones or Holdings to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing, of each of the following conditions, unless waived in writing by Jones or Holdings, as the case may be:
9.1 Representations and Warranties True. The representations and warranties contained in Article 3 and Article 4 hereof shall be in all material respects true, complete and accurate as of the date hereof and as of the Closing Date, as though made at and as of the Closing Date, except for changes expressly permitted or contemplated by the terms of this Agreement, and the aggregate effect of all inaccuracies in such representations and warranties (without taking into account any qualifications as to materiality contained therein) after giving effect to such changes does not and will not have a material adverse effect on the condition (financial or otherwise), properties, prospects, business or operations of the Company.
9.2 Performance. The Company and the Securityholders shall have performed and complied in all material respects with all agreements, obligations, conditions and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing.
9.3 No Injunction or Restraint. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other governmental entity preventing the consummation of the transactions contemplated by this Agreement shall be in effect; provided, however, that the party invoking this condition shall have used its reasonable best efforts to prevent the entry of any such temporary restraining order, injunction or other order against it and to appeal as promptly as possible any injunction or other order that may be entered against it.
9.4 Payoff Letters. Jones shall have received from each holder of any part of the Closing Date Debt to be paid at Closing a letter reasonably satisfactory to Jones stating the amount necessary as of the Closing Date to pay and discharge in full the Closing Date Debt held by each such holder.
9.5 Delivery of Stock Certificates or Warrants. At or prior to the Closing, the Securityholders shall have delivered to Jones the certificates representing their Company Shares (or affidavits of lost certificate in the form and substance reasonably acceptable to Jones), and shall have delivered to the Company the certificates or other instruments representing their Warrants and assignments thereof, as the case may be, pursuant to Section 2.4.
9.6 Termination of Affiliate Agreements and Certain Resignations. Jones shall have received documents reasonably satisfactory to Jones terminating the following agreements with Affiliates of the Company or evidencing certain resignations:
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(a) the Stockholders Agreement;
(b) the Voting Trust Agreement;
(c) the Bonus Compensation Plan; and
(d) resignations of all current directors of the Company and all Company Subsidiaries other than Robert M. Andreoli.
9.7 HSR Act. The waiting period (and any extension thereof) applicable to the purchase and sale of securities contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.
9.8 Approval of Certain Payments. The holders of the capital stock of the Company shall have approved the transactions contemplated by this Agreement in accordance with Sections 280G(b)(5)(A)(ii)(II) and 280G(b)(5)(B) of the Code, and shall have approved in particular the issuance of the Series C Preferred Stock in satisfaction of the Company's obligations under the Bonus Compensation Plan.
9.9 Releases. At or prior to the Closing, each participant in the Bonus Compensation Plan shall have executed and delivered to the Company a release of any rights under the Bonus Compensation Plan.
9.10 Hilfiger and Givenchy Licenses. The Company shall have obtained any necessary or appropriate consents to the transactions contemplated hereby of: (i) Givenchy Corporation, and (ii) Tommy Hilfiger Licensing, Inc. ("THL") and, in the case of THL, its agreement to eliminate, from and after the Closing, any and all restrictions under its license agreements with the Company on the right of Jones and its Affiliates to manufacture, sell and distribute costume jewelry under any trademarks or tradenames owned by Jones or its Affiliates.
9.11 Company and Securityholders Legal Opinions. Jones shall have received from counsel to the Company and counsel to REI, Prudential, Foothill and VAGI legal opinions addressed to Jones and Holdings satisfactory in form and substance to Jones and Holdings.
ARTICLE 10
CONDUCT OF THE COMPANYS
BUSINESS PENDING CLOSING AND RISK OF LOSS
From the date hereof to the Closing Date, and except as otherwise expressly consented to or approved by Jones or Holdings in writing:
10.1 Regular Course of Business. The Company and each Company Subsidiary shall (i) carry on its business in the ordinary course consistent with past practice and to use reasonable
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best efforts to preserve intact its business organization and assets and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates and (ii) not engage in any transaction or activity, or enter into any agreement or make any commitment or take any action, inconsistent with, or which would adversely affect its ability to perform any of its material obligations under, this Agreement.
10.2 Organization. The Company shall use its commercially reasonable best efforts to preserve its corporate existence and business organization intact, to keep available to Jones its officers and key employees, and to preserve for Jones its relationships with key licensors, suppliers, distributors, customers and others having business relations with it.
10.3 Certain Changes. The Company shall not take any of the following actions without the written consent of Jones:
(a) Borrow or agree to borrow any funds or incur, or assume or become subject to, whether directly or by way of guarantee or otherwise, any obligation or liability (absolute or contingent), except current obligations and liabilities incurred in the ordinary course of business and consistent with the past practice;
(b) Permit or allow any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien or encumbrance, except for Liens arising under a mortgage, pledge or security agreement disclosed in Section 3.10 of the Disclosure Statement or the Balance Sheet, purchase money mortgages or Permitted Liens;
(c) Dispose of or permit to lapse any rights, contract, licenses, permits or any other rights to the use of any Intellectual Property, or dispose of or disclose to any person, other than an employee in the ordinary course of business and consistent with past practices, any trade secret, formula, process or know-how not theretofore a matter of public knowledge;
(d) Take any action with respect to the grant of any increase in the compensation of officers, directors or key employees, grant any bonus, severance or termination pay (including such benefits pursuant to any pension, profit sharing or other plan or commitment) or any increase in the compensation or fringe benefits payable or to become payable to any officer or key employee, or commit to, or implement or otherwise modify or amend any Benefit Arrangement, collective bargaining agreement, employment policy or practice except as permitted by this Agreement;
(e) Make in the aggregate capital expenditures and commitments in excess of $25,000 for additions to property, plant or equipment without the prior written approval of Jones;
(f) Hire any employee, consultant or independent contractor for compensation, on an annualized basis, exceeding $50,000 per annum (provided, however, that Jones shall not, solely on the basis of the amount of compensation, disapprove of an employee, consultant or independent contractor who is proposed to be hired as a replacement for a
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terminated or departed employee, consultant or independent contractor at a comparable compensation level); or enter into or become bound by any employment or consulting contract or legally binding understanding or arrangement regarding such employment.
(g) Fail to maintain the Companys assets in substantially their state of repair as of the date of this Agreement except normal wear and tear or fail to replace consistent with the Companys past practice and in accordance with the terms of this Agreement inoperable, worn-out or destroyed assets.
(h) Make, declare or pay any dividend or other distribution (other than regularly scheduled dividends in respect to the Company Preferred Stock) with respect to the Company Common Stock or Company Preferred Stock.
(i) Dispose of or discontinue any portion of its business which is material to the Company and the Company Subsidiaries taken as a whole or acquire all or any portion of the business of any other entity.
10.4 Contracts. No contract, lease, license, permit or commitment will be entered into, extended, materially modified, terminated or renewed except in the ordinary course of business and no purchase of raw material or supplies and no sale of assets will be made, by or on behalf of the Company, except (i) normal contracts or commitments for the purchase of, and normal purchases of, raw materials or supplies, made in the ordinary course of business and consistent with past practice, (ii) normal contracts or commitments for the sale of, and normal sales of, inventory in the ordinary course of business and consistent with past practice, and (iii) other contracts, commitments, purchases or sales in the ordinary course of business and consistent with past practice not in excess of $25,000.
10.5 Insurance of Property. The Company shall adequately insure all property, real, personal and mixed, owned or leased by the Company, against all ordinary and insurable risks; and all such property shall be used, operated, maintained and repaired in a manner consistent with past practices. The Company shall not allow or permit to be done any act by which insurance policies may be impaired, terminated or canceled.
10.6 No Default. The Company shall do no act or omit to do any act, or permit any act or omission to act, which will cause a breach of any Material Contract of the Company or which would cause the breach in any material respect of any representation, warranty, or covenant made hereunder.
10.7 Risk of Loss. If any portion of the Companys property is destroyed or damaged by fire or any other cause on or prior to the Closing Date, other than use, wear or loss in the ordinary course of business, the Company shall give written notice to Jones as soon as practicable (but in no event later than five (5) calendar days) after discovery of such damage or destruction, the amount of insurance, if any, covering such property and the amount, if any, which the Company is otherwise entitled to receive as a consequence.
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ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. The representations, warranties, covenants and agreements of the Company, each Securityholder, Jones and Holdings contained herein shall survive the consummation of the transactions contemplated hereby and the Closing Date. All such representations and warranties and all claims and causes of action with respect thereto shall terminate 18 months from the Closing Date; provided, however, that (i) the representations and warranties made pursuant to Sections 3.4(a), 4.1, 4.7, 4.8(a)-(c), 4.10, 5.4 and 5.5 shall survive without time limitation, (ii) the representations and warranties made pursuant to Section 3.27 shall survive for a period of three years from the Closing Date and, (iii) the representations and warranties made pursuant to Sections 3.14 and 5.10 shall survive until the expiration of the applicable statute of limitations. The termination of the representations and warranties provided herein shall not affect the rights of a party in respect of any Claim (defined in Section 11.2(d) below) made by such party in a Claim Notice (as defined in Section 11.2(d) below) received by the indemnifying party prior to the expiration of the applicable survival period provided herein. Notwithstanding the foregoing, all Claims for Damages (defined in Section 11.2(a) below) based on fraudulent actions shall survive without time limitation.
11.2 Indemnification.
(a) By Securityholders.
(i) General. Subject to the maximum and minimum amounts and other limitations and provisions set forth in this Article 11, each Securityholder, severally and not jointly, shall indemnify, save and hold harmless Jones, Holdings, their respective Affiliates and subsidiaries, and their respective representatives (the "Jones Indemnified Parties"), from and against any and all costs, losses (including without limitation diminution in value), taxes, liabilities, obligations, damages (excluding consequential damages and lost profits), lawsuits, deficiencies, claims, demands, and expenses (whether or not arising out of third-party claims), including without limitation interest, penalties, costs of mitigation, and reasonable attorneys fees and all other amounts paid in investigation, defense, settlement or other resolution of any of the foregoing less the amount of any related tax benefits and insurance benefits actually received by Jones, Holdings or the Company (herein "Damages"), incurred in connection with, arising out of, or resulting from any breach of any representation or warranty or the inaccuracy of any representation made by the Company or such Securityholder in this Agreement.
(ii) Special Environmental Indemnification. Notwithstanding the provisions of Section 6.1 hereof or any other provision of this Agreement, but subject to the maximum and minimum amounts and other limitations and provisions set forth in this Article 11, each Securityholder, severally and not jointly, shall indemnify, save and hold harmless the Jones Indemnified Parties from and against any Damages sustained by Jones or Holdings as a result of a Release, Environmental Condition or breach of any Environmental Law or the terms of any
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Permit thereunder occurring or existing at any Facility on or before the Closing of which Jones or Holdings had actual knowledge as of the Closing Date, but only to the extent that such Damages exceed the aggregate amount reserved therefor on the Balance Sheet, and, such excess Damages together with all other Damages for which the Jones Indemnified Parties are entitled to indemnity hereunder, exceed the $250,000 threshold set forth in Section 11.2(e)(i) hereof. Nothing in this Section 11.2(a)(ii) shall in any way be construed to otherwise limit or expand the Jones Indemnified Parties' right to indemnification for breach of any representation or warranty contained in Section 3.27 hereof.
(b) By Jones and Holdings. Jones shall indemnify and save and hold harmless the Securityholders, their respective general and limited partners, Affiliates and their respective representatives (the "Seller Indemnified Parties") from and against any and all Damages incurred in connection with, arising out of or resulting from (i) any breach of any representation or warranty or the inaccuracy of any representation made by Jones or Holdings in this Agreement; and (ii) any breach of any covenant or agreement made by Jones or Holdings in this Agreement.
(c) Cooperation. If the indemnifying party shall have assumed the defense of a third party claim pursuant to Section 11.2(d), the indemnified party shall cooperate in all reasonable respects with the indemnifying party and its attorneys in the response to, investigation, trial, defense or other resolution of any actual or threatened lawsuit or action relating to such Claim and any appeal arising therefrom; provided, however, that the indemnified party may, at its own cost, participate in the response to, investigation, trial, defense or other such resolution of such Claim and any appeal arising therefrom. The parties shall cooperate with each other in any notifications to insurers.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall give written notice (a "Claim Notice") to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 11.2 (and, in the case of a third party claim, in any event within thirty (30) calendar days after the service of the citation or summons or other notice). The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates actual damage caused by such failure. Such Claim Notice shall state the information then available regarding the amount and nature of such Claim and shall specify the provision or provisions of this Agreement under which the liability or obligation is asserted. After receipt of such Claim Notice, the indemnifying party shall be entitled, if it so elects, (i) to take control of the response to, defense, investigation or other resolution of such Claim, (ii) to employ and engage attorneys of its own choice to handle and defend the same, at the indemnifying partys cost and expense, and (iii) to compromise or settle such Claim, it being understood that, notwithstanding anything in this Agreement to the contrary, no such compromise or settlement shall be made without the written consent of the indemnified party, such consent not to be unreasonably withheld. After notice from the indemnifying party to such indemnified party of its election so to assume the defense of
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any claim, the indemnifying party will not be liable to such indemnified party for any legal fees and expenses subsequently incurred by the latter in connection with the defense thereof, unless the named parties to such action or proceeding include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, in which case the indemnifying party shall not be liable for the fees and expenses of more than one counsel (in addition to any local counsel) for all indemnified parties in connection with any one action or separate but similar or related actions. If the indemnifying party fails to assume the defense of such Claim within fifteen (15) calendar days after receipt of the Claim Notice, the indemnified party against which such Claim has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying partys cost and expense, the defense, compromise, settlement or other resolution of such Claim; provided, however, that such Claim shall not be compromised, settled or otherwise resolved without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. In the event the indemnified party undertakes the defense of the Claim, the indemnified party will keep the indemnifying party reasonably informed of the progress of any such defense, compromise, settlement or other resolution. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party will have the right to retain, at its own expense, counsel with respect to the defense of a Claim.
(e) Limitations on Liability for Breach of Representations and Warranties.
(i) "Basket." Neither Jones on the one hand, nor any Securityholder on the other hand, shall be liable to any Seller Indemnified Party or any Jones Indemnified Party (as applicable) under this Section 11.2 for any Damages with respect to the assertion of any Claims subject to indemnification pursuant to this Agreement until the aggregate amount of Damages incurred by the Seller Indemnified Parties or the Jones Indemnified Parties (as applicable) in connection with such claims equals or exceeds an accumulated total of $250,000. Once such claims equal or exceed the $250,000 threshold, the applicable indemnified parties will be entitled to the full amount of all indemnified claims in excess of such $250,000; provided, however, that such $250,000 threshold shall not apply with respect to fraudulent misrepresentations at the time of Closing contained in this Agreement.
(ii) Maximum Liability. The maximum liability of each Securityholder for all indemnifiable Claims asserted by the Jones Indemnified Parties against such Securityholder pursuant to this Article 11 shall not exceed the sum of (A) such Securityholders Holdback Percentage of $2.0 million plus (B) such Securityholders Contingent Payments Percentage of the Contingent Payments if any, which have not been paid (whether or not earned) as of the date a Claim Notice has been given in accordance with Section 11.2(d); provided, however, that with respect to fraudulent misrepresentations in Article 4 made by a Securityholder and in Article 3 with respect to which a Securityholder participated, the maximum liability of such Securityholder for Damages arising from the fraudulent misrepresentation shall be the sum of the Aggregate Purchase Price plus the Contingent
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Payments, provided, however, that with respect to Damages arising from any fraudulent misrepresentations on the part of any Securityholder or the Company, no Securityholder shall be liable with respect to any such Damages arising from the fraudulent misrepresentation(s) of any other Securityholder or the Company unless and to the extent that such Securityholder participated in such fraudulent misrepresentation.
(iii) Limitation on Indemnification by Securityholders. Subject to the exceptions set forth in clause (ii) of this Section 11.2(e) with respect to fraudulent misrepresentations, with respect to any particular Damages asserted by the Jones Indemnified Parties under Section 11.2(a) and within the maximum and minimum amounts set forth above, the maximum liability of any Securityholder with respect to such Damages shall be in an amount equal to the aggregate liability of all the Securityholders with respect to such Damages multiplied by the Securityholders Holdback Percentage with respect to Claims as to which Jones has delivered a Claim Notice on or before the Holdback Distribution Date and with respect to Claims as to which Jones has delivered a Claim Notice after the Holdback Distribution Date by the Securityholder's Contingent Payments Percentage.
(f) Any indemnity payment under this Agreement shall be treated by the parties for Tax purposes as an adjustment to the purchase price hereunder.
11.3 Satisfaction of Securityholders Indemnification Obligations; Holdback and Set-Off. In order to secure the indemnification obligations of the Securityholders pursuant to Section 11.2(a) hereof, the Holdback Amount shall be withheld by Holdings at the Closing pursuant to Section 2.2(c) hereof. Jones shall have a right of set-off with respect to each Securityholder against the Holdback Amount, not exceeding such Securityholder's Holdback Percentage thereof in order to satisfy any finally determined indemnification obligation of such Securityholder pursuant to Section 11.2(a). Not later than February 1, 2002 (the "Holdback Distribution Date"), Jones shall pay to each Securityholder an amount equal to such Securityholders Holdback Percentage of the Holdback Amount net of any set-offs for Damages as finally determined against such Securityholder (the "Distribution Amount") as of the Holdback Distribution Date, together with interest at the rate of Jones Borrowing Rate on the Closing Date; provided, however, that in the event that prior to the Holdback Distribution Date, Jones has delivered to the Representatives one or more Claim Notices in accordance with Section 11.2(d) and, subject to the limitations of Section 11.2(e)(i), any Claims of any of the Jones Indemnified Parties are pending against such Securityholder as of the Holdback Distribution Date, Jones shall withhold from the Distribution Amount to the Securityholder an amount equal to the aggregate dollar amount of such pending Claims against such Securityholder until the final resolution of such Claims (as evidenced by a settlement agreement executed by Jones and the Representatives or a final judgment entered by a court of competent jurisdiction from which no appeal may then be taken as to the disposition of the Claim) is determined, and shall distribute the balance to the Securityholder within five (5) days following such final determination, provided, however, that if any such pending Claim is made with respect to the representations and warranties contained in Article 4 which are made severally by a Securityholder as to himself or itself only, then the amount of such pending Claim shall be withheld solely from the amount to be distributed to such
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Securityholder. In addition, notwithstanding any provision hereof to the contrary, in order to satisfy any indemnification obligations of any Securityholder pursuant to Section 11.2(a), Jones shall have a right of set-off against any Contingent Payments otherwise due to such Securityholder pursuant to Article 2 hereof; provided, however, that Jones shall not have any right of set-off against either the Holdback Amount or any Contingent Payments if (i) Jones shall have failed to give written notice of the relevant Claim promptly after assertion of a written claim by any third party or the discovery of facts upon which the Claim is based, which notice specified in reasonable detail the amount, nature and source of the Damages, and such failure to give written notice shall have actually and materially prejudiced the ability of the indemnifying party to defend against, compromise or otherwise resolve such Claim; (ii) Jones shall have failed to respond to reasonable requests of such Securityholder (or the Representative thereof) for information with respect to the relevant Claim; or (iii) in the case of third party claims, such Securityholder (or the Representative thereof) shall have chosen to contest such claim in legal proceedings which have not yet been finally resolved. Any portion of the Contingent Payments which is not validly setoff by Jones against Damages in accordance with this Section 11.3 shall be paid in accordance with Article 2.
11.4 Exclusive Remedy. Jones, Holdings, the Securityholders, and the Company hereby agree that their sole and exclusive remedies with respect to a breach of this Agreement or any matters related to the Company are (with the exception of a remedy in the case of fraud) the remedies set forth in this Article 11. Except with respect to the remedies referred to in the preceding sentence and the other rights provided in this Agreement, Jones, Holdings, the Securityholders and the Company hereby waive, to the fullest extent permitted under applicable law, and forever release each other from, any claims related to this Agreement and/or the Company. Jones and Holdings further agree that except for Damages arising from fraud, the sole and exclusive source of any indemnity payable by the Securityholders pursuant to this Article 11 shall be the Holdback Amount and Contingent Payments (if any).
11.5 Tax Indemnity. Jones shall pay, or cause to be paid, and shall indemnify each Prudential Indemnitee, each REI Indemnitee and each VAGI Indemnitee and protect, save and hold each Prudential Indemnitee, each REI Indemnitee and each VAGI Indemnitee harmless from and against, and no Prudential Indemnitee, no REI Indemnitee and no VAGI Indemnitee shall bear any liability to Jones or the Company under this Agreement or otherwise in respect of, any and all Damages arising from or in respect of any Tax (including any withholding of Tax) that relates to any compensation paid or deemed to be paid after the date of the Balance Sheet to any Securityholder who is an employee of the Company ("Management Securityholder"). The indemnity provisions contained in this Section 11.5 shall not be subject to the limitations contained in Section 11.2(e). The provisions of Section 11.2(c) and (d) shall apply to any indemnity under this Section 11.5. Jones shall have a right of set-off against Contingent Payments due to a Management Securityholder if and to the extent Jones incurs any indemnity obligations under this Section 11.5 with respect to compensation paid or deemed to be paid to such Management Securityholder.
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ARTICLE 12
TERMINATION AND ABANDONMENT
12.1 Methods of Termination. The transactions contemplated herein may be terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual written consent of Jones, Holdings, the Company and the Securityholders; or
(b) By Jones or Holdings:
(i) on August 31, 2000, if (x) all of the conditions to closing provided for in Articles 8 and 9 of this Agreement shall have been met or waived in writing prior to such date and (y) Jones and Holdings shall be ready, willing and able to close and the Company or Securityholders shall refuse to close, or
(ii) on or after August 31, 2000, if any of the conditions to closing provided for in Article 9 of this Agreement shall not have been met or waived in writing by Jones or Holdings prior to such date;
provided, however, that no such termination shall result in Jones or Holdings waiving any rights they may have pursuant to the proviso to Section 12.3(c) hereof; or
(c) By the Company or the Securityholders:
(i) on August 31, 2000, if (x) all of the conditions to closing provided for in Articles 8 and 9 of this Agreement shall have been met or waived in writing prior to such date and (y) the Company and the Securityholders shall be ready, willing and able to close and Jones or Holdings shall refuse to close, or
(ii) on or after August 31, 2000, if any of the conditions to closing provided for in Article 8 of this Agreement shall not have been met or waived in writing by the Company and the Securityholders prior to such date;
provided, however, that no such termination shall result in the Company or the Securityholders waiving any rights they may have pursuant to the proviso to Section 12.3(c) hereof.
12.2 Termination Under Certain Circumstances. The Company, each Securityholder and Jones agrees to use its reasonable best efforts to cure the breach of any representation or warranty by it and the nonperformance of any covenant or agreement made by it in this Agreement, and termination pursuant to clauses (b) and (c) of Section 12.1 shall not be available to any party if the Closing shall have been delayed by any breach of any provision of this Agreement by such party.
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12.3 Procedure Upon Termination. In the event of termination and abandonment by Jones, Holdings, the Company or the Securityholders, or all, pursuant to Section 12.1 hereof, written notice thereof shall forthwith be given to the other parties and the transactions contemplated by this Agreement shall be terminated and/or abandoned, without further action by Jones, Holdings, the Company or Securityholders. If the transactions contemplated by this Agreement are terminated and/or abandoned as provided herein:
(a) Each party will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same;
(b) All confidential information received by any party hereto with respect to the business of any other party or its subsidiaries shall be treated in the manner confidential information is treated in the letter of intent referred to in Section 7.6; and
(c) In consideration for the time and expense that each party has expended in the due diligence and negotiation of this transaction, no party hereto shall have any liability or further obligation to any other party to this Agreement (including, without limitation, under Article 11 hereof) except as stated in subparagraphs (a) and (b) of this Section 12.3, and neither party shall make any claim, including any action for equitable relief or specific performance, against any other party nor be liable for the costs, expenses, or damages that may result to any other party in the event of the others withdrawal prior to Closing of the transactions contemplated by this Agreement; provided, however, that termination will not relieve a breaching party from liability for any willful breach of this Agreement giving rise to such termination.
(d) Section 13.7 shall survive any termination of this Agreement.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified and supplemented only by written agreement duly and validly executed by Jones, Holdings, the Company and the Representatives (provided that the Representatives are duly authorized to do so under Section 2.9 hereof) any time prior to the Closing with respect to any terms contained herein; provided, however, that any such amendment, modification or supplement consented to by the Representatives in accordance herewith shall be binding on all Securityholders; and provided further, however, that, no amendment may be made which would (i) alter or change the consideration to be received in exchange for all or any of the Company Common Stock, Company Preferred Stock or the Warrants of the Company, or (ii) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the Securityholders of the Company, in each case, without the written agreement of each affected Securityholder.
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13.2 Waivers. Any failure of the Company or any Securityholder, on the one hand, or Jones or Holdings, on the other, to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by the Chairman, President or Chief Financial Officer of Jones or Holdings or the Company, or by the Representatives, (provided that the Representatives are duly authorized to do so under Section 2.9 hereof), respectively, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure, nor shall any waiver on the part of any party of any right, power or privilege hereunder, or any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.
13.3 Expenses, Etc. All of the fees and expenses incurred by Jones and Holdings in connection with the transactions contemplated by this Agreement shall be borne by them, all of the fees and expenses incurred by the Company in connection with the transactions contemplated by this Agreement shall be borne by the Company, and all fees and expenses incurred by each Securityholder in connection with the transactions contemplated by this Agreement shall be borne by such Securityholder (or if such transaction shall fail to close, by the Company), in each case, including, without limitation, all fees of counsel, advisors, investment bankers, experts, actuaries and accountants of such parties.
13.4 Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date (defined below) until paid in full at annual rate of two percent (2.0%) plus the prime rate as declared from time to time by the Chase Manhattan Bank. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation for monies under this Agreement owing from one party to another which remains unpaid five days after written notice thereof is delivered to the other party in accordance with Section 13.5 below (the "Due Date"), which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.
13.5 Notices. All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as duly given on (a) the date of delivery, if delivered in person, if sent by Federal Express or other similar overnight delivery service or transmitted by facsimile subsequently confirmed or (b) three days after mailing, if mailed from within the continental United States by registered or certified mail, return receipt requested, to the party entitled to receive the same, at the address provided in this Section.
Any party hereto may change its address by giving notice to the other stating its new address, all in the manner provided herein. Such newly designated address shall thereafter be such partys address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement.
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(a) If to the Company, to:
Victoria + Co Ltd.
30 Jefferson Park Road
Warwick, Rhode Island 02888
Attn: Robert M. Andreoli
Fax: (401) 941-5891with a copy to:
Hinckley Allen & Snyder LLP
1500 Fleet Center
Providence, Rhode Island 02903-2393
Attn: Stephen J. Carlotti, Esq.
Fax: (401) 277-9600(b) If to Jones or Holdings, to:
Jones Apparel Group, Inc.
1411 Broadway
New York, New York 10018
Attn: Ira M. Dansky, Esq.
Fax: (212) 790-9988(c) If to the Management Representative or Robert M. Andreoli, as follows:
Robert M. Andreoli
30 Jefferson Park Road
Warwick, Rhode Island 02888
Fax: (401) 941-5891with a copy to:
Hinckley, Allen & Snyder LLP
1500 Fleet Center
Providence, Rhode Island 02903-2393
Attn: Stephen J. Carlotti, Esq.
Fax: (401) 277-9600
65
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(d) If to REI:
Recovery Equity Investors II, L.P.
555 Twin Dolphin Drive
Suite 185
Redwood City, California 94065
Attn: Joseph J. Finn-Egan and Jeffrey A. Lipkin
Fax: (650) 622-9776
with a copy to:
Morgan, Lewis & Bockius, LLP
101 Park Avenue
New York, New York 10178-0060
Attn: James A. Mercadante, Esq.
Fax: (212) 309-6273
(e) If to Prudential:
The Prudential Insurance Company of America
c/o Prudential Capital Group Corporate Finance
Four Embarcadero Center, Suite 2700
San Francisco, California 94111-4180
Attention: Joseph Alouf
Fax: 415-296-6233with a copy to:
Schiff, Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Attention: Mark C. Zaander, Esq.
Fax: 312-258-5700
(f) If to Foothill:
Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, CA 90404
Attn: Jeff Nikora
Fax: 310-453-7470
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with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Mark Broude, Esq.
Fax: (212) 593-5955
If to any other Securityholder, to such Securityholders address as set forth on the signature page hereof.
13.6 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto without the prior written consent of the other parties. Any such purported assignment or delegation without such consent shall be void.
13.7 Publicity. Prior to the Closing Date, none of the parties hereto shall make or issue, or cause to be made or issued, any announcement or written statement concerning this Agreement or the transactions contemplated hereby for dissemination to the general public without the prior consent of the other parties. This provision shall not apply, however, to any announcement or written statement required to be made by law or the regulations of any federal or state governmental agency or the NYSE, except that the party required to make such announcement shall, to the fullest extent possible, consult with the other parties concerning the timing and content of such announcement and obtain such other parties consent before such announcement is made.
13.8 Governing Law; Forum. This Agreement and the legal relations among the parties hereto shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts of law doctrine. Each party agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach of this Agreement may be commenced and prosecuted in a court in the State of New York. Each party consents and submits to the non-exclusive personal jurisdiction of any court in the State of New York in respect of any such proceeding. Each party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable laws and rules. Each party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of New York and any claim that it may now or hereafter have that any such proceeding in any court in the State of New York has been brought in an inconvenient forum.
13.9 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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13.10 Headings. The headings of the Sections and Articles of this Agreement are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Agreement.
13.11 Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, and all documents, instruments and certificates required to be delivered pursuant to the terms hereof, set forth the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and supersede all prior negotiations, understandings, discussions, agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto whether written or oral.
13.12 Third Parties. Except as specifically set forth or referred to in Article 7 or 11 or elsewhere herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement.
13.13 Materiality and Immateriality. None of the threshold dollar amounts listed herein shall be deemed an admission that an amount greater than such threshold is material or that an amount less than such threshold is immaterial.
13.14 Severability. If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the parties as expressed therein, and the benefits of the parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding or such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement.
13.15 Cumulative Remedies. All rights and remedies of any party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.
13.16 Limited Recourse. Notwithstanding anything in this Agreement to the contrary, except as expressly provided herein, the representations, warranties, covenants and other obligations of any Securityholder shall be without recourse to any of such Securityholders limited or general partners, its and their respective Affiliates, directors, employees, officers or agents and shall be limited to the assets of such Securityholder.
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13.17 Obligations Several and Not Joint. The obligations of each Securityholder under this Agreement are several and not joint and are only as to itself, and no Securityholder shall be liable or otherwise responsible in any manner for any violation or breach of, or any failure to perform, any provision of this Agreement on the part of any other Securityholder.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be affixed hereto, all as of the day and year first above written.
JONES APPAREL GROUP, INC.
By: /s/ Wesley R. Card
Name: Wesley R. Card
Title: Chief Financial OfficerJONES APPAREL GROUP HOLDINGS, INC.
By: /s/ Ira M. Dansky
Name: Ira M. Dansky
Title: PresidentVICTORIA + CO LTD.
By: /s/ Robert M. Andreoli
Name: Robert M. Andreoli
Title: ChairmanSECURITYHOLDERS
/s/ Robert M. Andreoli
Robert M. Andreoli
*
Patricia Stensrud
*
Richard Andreoli
*
Steven J. ONeil
*
Steven Johns
*
Robert Conte
*
Paula Bonner
*
Frank Liberto
*
Sue Wiggins
*
Marian Mannion
*
Lauren Mandel
*
Lisa Otterman
*By: /s/ Robert M. Andreoli
Robert M. Andreoli, Attorney-in-fact
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS,II, L.P.
Its General Partner
By: /s/ Joseph J. Finn-Egan
Name: Joseph J. Finn-Egan
Title: General PartnerBy: /s/ Jeffrey A. Lipkin
Name: Jeffrey A. Lipkin
Title: General PartnerTHE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Stephen J. DeMartini
Name: Stephen J. DeMartini
Title: Vice PresidentFOOTHILL CAPITAL CORPORATION
By: /s/ Paul G. Chao
Name: Paul G. Chao
Title: Vice PresidentVAGI Associates, L.P.
By: VAGI Inc., its General Partner
By: /s/ Robert M. Andreoli
Robert M. Andreoli, President
$750,000,000
THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
dated as of June 13, 2000,
by and among
JONES APPAREL GROUP USA, INC.,
the Additional Obligors referred to herein,
the Lenders referred to herein,
CHASE SECURITIES INC. and SALOMON SMITH BARNEY INC. as Joint Lead Arrangers
FIRST UNION NATIONAL BANK, as Administrative Agent,
and
THE CHASE MANHATTAN BANK and CITIBANK, N.A., as Syndication Agents
<PAGE> i
TABLE OF CONTENTS Page ARTICLE I DEFINITIONS......................................................1 SECTION 1.1 Definitions..................................................1 SECTION 1.2 General.....................................................12 SECTION 1.3 Other Definitions and Provisions............................12 ARTICLE II REVOLVING CREDIT FACILITY......................................13 SECTION 2.1 Revolving Credit Loans......................................13 SECTION 2.2 Procedure for Advances of Revolving Credit Loans............13 SECTION 2.3 Repayment of Revolving Credit Loans.........................13 SECTION 2.4 Evidence of Debt............................................14 SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment......14 SECTION 2.6 Termination of Revolving Credit Facility....................15 ARTICLE III LETTER OF CREDIT FACILITY.....................................16 SECTION 3.1 L/C Commitment..............................................16 SECTION 3.2 Procedure for Issuance of Letters of Credit.................16 SECTION 3.3 Fees and Other Charges......................................17 SECTION 3.4 L/C Participations..........................................17 SECTION 3.5 Reimbursement...............................................18 SECTION 3.6 Provisions Regarding National Currency Units and the Euro...18 SECTION 3.7 Obligations Absolute........................................20 SECTION 3.8 Effect of Application.......................................20 ARTICLE IV [RESERVED].....................................................20 ARTICLE V GENERAL LOAN PROVISIONS.........................................20 SECTION 5.1 Interest....................................................20 SECTION 5.2 Notice and Manner of Conversion or Continuation of Revolving Credit Loans......................................22 SECTION 5.3 Fees........................................................22 SECTION 5.4 Manner of Payment...........................................22 SECTION 5.5 Crediting of Payments and Proceeds..........................23 SECTION 5.6 Adjustments.................................................23 SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent...........23 SECTION 5.8 Joint and Several Liability of the Credit Parties ..........24 SECTION 5.9 Changed Circumstances.......................................25 SECTION 5.10 Indemnity..................................................27 SECTION 5.11 Capital Requirements.......................................27 SECTION 5.12 Taxes......................................................28 ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING...................29 SECTION 6.1 Closing.....................................................29 SECTION 6.2 Conditions to Closing and Initial Revolving Credit Loans and Letters of Credit. ...............................29 SECTION 6.3 Conditions to All Extensions of Credit......................32 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES..........32 SECTION 7.1 Representations and Warranties..............................32 SECTION 7.2 Survival of Representations and Warranties, Etc. ...........36 ARTICLE VIII FINANCIAL INFORMATION AND NOTICES ...........................36 SECTION 8.1 Financial Statements and Projections........................36 SECTION 8.2 Officer's Compliance Certificate............................37 SECTION 8.3 Accountants' Certificate....................................37 SECTION 8.4 Other Reports...............................................37 SECTION 8.5 Notice of Litigation and Other Matters......................37 SECTION 8.6 Accuracy of Information.....................................38 ARTICLE IX AFFIRMATIVE COVENANTS..........................................38
i <PAGE> ii
SECTION 9.1 Preservation of Corporate Existence and Related Matters.....38 SECTION 9.2 Maintenance of Property.....................................38 SECTION 9.3 Insurance. .................................................38 SECTION 9.4 Accounting Methods and Financial Records ...................38 SECTION 9.5 Payment and Performance of Obligations......................38 SECTION 9.6 Compliance With Laws and Approvals .........................39 SECTION 9.7 Environmental Laws..........................................39 SECTION 9.8 Compliance with ERISA.......................................39 SECTION 9.9 Conduct of Business.........................................39 SECTION 9.10 Visits and Inspections ....................................39 SECTION 9.11 Use of Proceeds ...........................................40 ARTICLE X FINANCIAL COVENANTS.............................................40 SECTION 10.1 Interest Coverage Ratio....................................40 SECTION 10.2 Minimum Net Worth. As of the end of any fiscal quarter, permit Consolidated Net Worth to be less than $905,772,400.40 ARTICLE XI NEGATIVE COVENANTS.............................................40 SECTION 11.1 Limitations on Debt and Guaranty Obligations...............40 SECTION 11.2 [Reserved].................................................41 SECTION 11.3 Limitations on Liens ......................................41 SECTION 11.4 Limitations on Loans, Advances, Investments and Acquisitions...............................................43 SECTION 11.5 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except so long as no Default or Event of Default has occurred and is continuing, or would result therefrom:.....................44 SECTION 11.6 Limitations on Sale or Transfer of Assets..................44 SECTION 11.7 Limitations on Dividends and Distributions.................44 SECTION 11.8 Transactions with Affiliates...............................45 SECTION 11.9 Changes in Fiscal Year End.................................45 SECTION 11.10 Amendments; Payments and Prepayments of Material Debt and Subordinated Debt ....................................45 ARTICLE XII DEFAULT AND REMEDIES..........................................45 SECTION 12.1 Events of Default .........................................45 SECTION 12.2 Remedies ..................................................47 SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; Etc. ..........47 ARTICLE XIII THE ADMINISTRATIVE AGENT.....................................48 SECTION 13.1 Appointment ...............................................48 SECTION 13.2 Delegation of Duties.......................................48 SECTION 13.3 Exculpatory Provisions.....................................48 SECTION 13.4 Reliance by the Administrative Agent.......................48 SECTION 13.5 Notice of Default..........................................49 SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders.49 SECTION 13.7 Indemnification............................................49 SECTION 13.8 The Administrative Agent in Its Individual Capacity........50 SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent.......................................50 SECTION 13.10 Syndication Agents........................................50 ARTICLE XIV MISCELLANEOUS.................................................50 SECTION 14.1 Notices ...................................................50 SECTION 14.2 Expenses; Indemnity........................................51 SECTION 14.3 Set-off....................................................52 SECTION 14.4 Governing Law..............................................52 SECTION 14.5 Consent to Jurisdiction....................................52 SECTION 14.6 Waiver of Jury Trial. .....................................52 SECTION 14.7 Reversal of Payments.......................................52 SECTION 14.8 Injunctive Relief; Punitive Damages........................52 SECTION 14.9 Accounting Matters.........................................53 SECTION 14.10 Successors and Assigns; Participations....................53 SECTION 14.11 Amendments, Waivers and Consents..........................56
ii <PAGE> iii
SECTION 14.12 Performance of Duties ....................................57 SECTION 14.13 All Powers Coupled with Interest..........................57 SECTION 14.14 Survival of Indemnities...................................57 SECTION 14.15 Titles and Captions.......................................57 SECTION 14.16 Severability of Provisions................................57 SECTION 14.17 Counterparts..............................................57 SECTION 14.18 Term of Agreement.........................................57 SECTION 14.19 Inconsistencies with Other Documents; Independent Effect of Covenants ......................................57
Exhibits Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Revolving Credit Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
The Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules to the Commission upon request.
Schedules Schedule 1.1(a) - Lenders and Revolving Credit Commitments
Schedule 1.1(b) - Outstanding Letters of Credit
Schedule 7.1(b) - Subsidiaries and Capitalization
Schedule 7.1(p) - Debt and Guaranty Obligations
Schedule 7.1(q) - Litigation
Schedule 11.3 - Existing Liens
Schedule 11.4 - Existing Loans, Advances and Investments
iii <PAGE> 1
THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT, dated as of the 13th day of June, 2000, by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation, the Additional Obligors (as defined below), the Lenders who are or may become a party to this Agreement, CHASE SECURITIES INC. and SALOMON SMITH BARNEY INC., as Joint Lead Arrangers, FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders, and THE CHASE MANHATTAN BANK and CITIBANK, N.A., as Syndication Agents.
STATEMENT OF PURPOSE
The Borrower (as defined below) has requested and the Lenders have agreed to amend and restate the Prior Credit Agreement (as defined below) as set forth herein to amend and restate, and as of the Closing Date replace, on substantially the same terms, the Obligations provided for in the Prior Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this Agreement shall have the meanings assigned to them below:
"Additional Debt Securities" shall have the meaning set forth in Section 11.1(f).
"Additional Obligors" means, the collective reference to Jones Apparel Group, Jones Apparel Group Holdings and Nine West Group in their capacities as co-obligors under this Agreement.
"Administrative Agent" means First Union in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to Section 13.9.
"Administrative Agent's Office" means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 14.1(c).
"Affiliate" means, with respect to any Person, any other Person (other than a Subsidiary) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its Subsidiaries. The term "control" means the possession, directly or indirectly, of any power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
"Agreement" means this Third Amended and Restated 364-Day Credit Agreement, as amended, restated, supplemented or otherwise modified.
"Alternative Currency" means (i) Pounds Sterling, (ii) any national currency of Italy, Spain, the Federal Republic of Germany or the Republic of France (in each case, so long as such national currency unit continues to be available as legal tender for obligations of the same type and character as the obligations set forth in this Agreement, is freely convertible and is not subject to exchange controls), (iii) the euro or (iv) any other lawful currency (other than Dollars) acceptable to the Issuing Lenders which, in the case of this clause (iv), is freely transferable and convertible into Dollars in the United States currency market and is freely available to all Issuing Lenders in the London interbank deposit market.
"Alternative Currency L/C Commitment" means the lesser of (a) One Hundred Million Dollars ($100,000,000) and (b) the L/C Commitment.
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"Applicable Law" means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.
"Applicable Margin" means, for purposes of calculating (a) the Base Rate and LIBOR Rate for purposes of Section 5.1(a), (b) the L/C Fee for purposes of Section 3.3(a) or (c) the Facility Fee for purposes of Section 5.3(a), the corresponding rate set forth below for the applicable rating of the senior, unsecured, long-term debt of the Credit Parties, on a collective basis (the "Debt Rating") publicly announced by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies ("S&P") and Moody's Investors Service, Inc. ("Moodys") as follows:
Applicable Margin Per Annum -------------------------------------------- Level S&P Moodys LIBOR Base Trade Standby Facility Rating Rating Rate Rate L/C Fee L/C Fee Fee
I >=A- >=A3 0.350% 0.000% 0.150% 0.350% 0.100% II >=BBB+ >=Baa1 0.500% 0.000% 0.200% 0.500% 0.125% III >=BBB >=Baa2 0.600% 0.000% 0.225% 0.600% 0.150% IV >=BBB- >=Baa3 0.800% 0.000% 0.300% 0.800% 0.200% V <=BB+ <=Ba1 1.125% 0.000% 0.350% 1.125% 0.250%
provided, that if both Moodys and S&P shall not have in effect a Debt Rating (other than by reason of the circumstances referred to in the last sentence of this definition), then such Debt Rating shall be deemed to be Level V. In the event that the corresponding Debt Ratings publicly announced by S&P and Moodys listed above differ by (a) one pricing level, the Applicable Margin shall be based on the higher of the two ratings, and (b) two or more pricing levels, the Applicable Margin shall be based on the rating one rating below the higher of the two ratings. Any change in the Applicable Margin shall be effective as of the Business Day on which the applicable rating is announced or is publicly available. If the rating system of S&P and Moodys shall change, or if both of such rating agencies shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agencies and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined by reference to the rating most recently in effect prior to such change or cessation.
"Application" means an application, in the form specified by any Issuing Lender from time to time, requesting such Issuing Lender to issue a Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in Section 14.10.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and (b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Revolving Credit Loan bearing interest at a rate based upon the Base Rate as provided in Section 5.1(a).
"beginning of the Third State of EMU" means January 1, 1999.
"Borrower" means Jones Apparel Group USA, Inc.
2 <PAGE> 3
"Business Day" means (a) any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina, Philadelphia, Pennsylvania and New York, New York, are not authorized or required by law to remain closed for the conduct of their commercial banking business, (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, the term "Business Day" shall also exclude any day on which banks are not open for trading in Dollar deposits in the London interbank market, and (c) with respect to all notices and determinations in connection with, and payment of principal and interest on, any L/C Obligation denominated in an Alternative Currency; the term "Business Day" shall also exclude any day on which banks in London do not provide quotations for deposits denominated in such Alternative Currency.
"Capital Lease" means, with respect to the Credit Parties and their Subsidiaries, any lease of any property that should, in accordance with GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of the Credit Parties and their Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in Section 12.1(h).
"Closing Date" means the date of this Agreement or such later Business Day upon which each condition described in Section 6.2 shall be satisfied or waived in all respects.
"Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time.
"Consolidated" means, when used with reference to financial statements or financial statement items of the Credit Parties and their Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.
"Correspondent" means any financial institution designated by an Issuing Lender to act as such Issuing Lender's correspondent hereunder with respect to the distribution and payment of Letters of Credit denominated in an Alternative Currency.
"Credit Facility" means the collective reference to the Revolving Credit Facility and the L/C Facility.
"Credit Parties" means each of the Additional Obligors and the Borrower.
"Debt" means, with respect to the Credit Parties and their Subsidiaries at any date and without duplication, the sum of the following calculated in accordance with GAAP: (a) all liabilities, obligations and indebtedness, in each case for borrowed money including but not limited to obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person, (b) all obligations to pay the deferred purchase price of property or services of any such Person, except trade payables arising in the ordinary course of business, (c) all obligations of any such Person as lessee under Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset of any such Person, (e) all Guaranty Obligations of any such Person, (f) all obligations, contingent or otherwise, of any such Person relative to the amount of drawn letters of credit not reimbursed as required by the terms thereof, including without limitation any Reimbursement Obligation not reimbursed as required by the terms hereof, and banker's acceptances issued for the account of any such Person, and (g) all obligations incurred by any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 12.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default.
"Dollar Amount" shall mean (a) with regard to any Obligation denominated in Dollars, the amount thereof and (b) with regard to any Obligation denominated in an Alternative Currency, the amount of Dollars which is equivalent to the sum of (i) the amount so expressed in an Alternative Currency at the applicable-quoted spot rate on the appropriate page of the Reuter's
3 <PAGE> 4
Screen as determined by the Administrative Agent at the relevant time; plus (ii) any amounts owed by the Borrower pursuant to Section 3.5(b).
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States.
"EBITDAR" means, with respect to the Credit Parties and their Subsidiaries on a Consolidated basis for any period, the sum of (a) Net Income for such period, plus (b) the sum of the following to the extent deducted in the determination of Net Income: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization, depreciation, extraordinary non-cash losses and any other non-cash charges (including amortization of goodwill, transaction expenses, covenants not to compete and other intangible assets, and non-cash charges resulting from purchase accounting related to the Nine West Acquisition) and (iv) Rental Expense less (c) any items of extraordinary gain which were included in determining Net Income.
"Eligible Assignee" means, with respect to any assignment of the rights, interest and obligations of a Lender hereunder, a Person that is at the time of such assignment (a) a commercial bank organized under the laws of the United States or any state thereof, having combined capital and surplus in excess of $500,000,000, (b) a commercial bank organized under the laws of any other country that is a member of the Organization of Economic Cooperation and Development, or a political subdivision of any such country, having combined capital and surplus in excess of $500,000,000, (c) a finance company, insurance company or other financial institution which in the ordinary course of business extends credit of the type extended hereunder and that has total assets in excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original party to this Agreement or as the assignee of another Lender) or an Affiliate of a Lender hereunder, (e) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Lender, (f) any SPC solely to the extent permitted by Section 14.10(h), or (g) any other Person that has been approved in writing as an Eligible Assignee by the Borrower and the Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate.
"EMU" mean economic and monetary union as contemplated in the Treaty on European Union.
"EMU Legislation" means legislative measures of the European Council (or any duly authorized successor thereto) for the introduction of the change over to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the beginning of the Third Stage of EMU.
"Environmental Laws" means any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, binding interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time.
"ERISA Affiliate" means any Person who together with the Borrower is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.
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"euro" means the single currency to which Participating Member States of the European Union have converted.
"euro unit" means the currency unit of the euro.
"Eurodollar Reserve Percentage" means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. "Event of Default" means any of the events specified in Section 12.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied.
"Existing Debt Securities" means the 6.25% Senior Notes due 2001, the 7.50% Senior Notes due 2004 and the 7.875% Senior Notes due 2006 of Jones Apparel Group.
"Existing Loans" shall have the meaning assigned thereto in Section 6.2(f).
"Extensions of Credit" means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, and (ii) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, or (b) the making of any loan or participation in any Letter of Credit by such Lender, as the context requires.
"Facility Fee" shall have the meaning assigned thereto in Section 5.3(a).
"FDIC" means the Federal Deposit Insurance Corporation, or any successor thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the Administrative Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Administrative Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" shall mean a daily rate which is determined, in the opinion of the Administrative Agent, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the rate for the most immediate preceding Business Day.
"First Union" means First Union National Bank, a national banking association, and its successors.
"Fiscal Year" means the fiscal year of the Credit Parties and their Subsidiaries ending on December 31.
"Five-Year Credit Agreement" means the Five-Year Credit Agreement as of June 15, 1999 by and among the Borrower, the Additional Obligors, the Administrative Agent and the financial institutions party thereto, as amended, restated, supplemented or otherwise modified from time to time.
"Five-Year Credit Agreement Obligations" means the obligations of the Borrower and the Additional Obligors under the Five-Year Credit Agreement. "Fixed Exchange Rate" means the exchange rate for a national currency unit into a euro unit set in accordance with EMU Legislation in effect from time to time.
"Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States
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of America, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Credit Parties and their Subsidiaries throughout the period indicated.
"Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
"Granting Lender" shall have the meaning assigned thereto in Section 14.10(h).
"Guaranty Obligation" means, with respect to the Credit Parties and their Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include (i) endorsements for collection or deposit in the ordinary course of business or (ii) a contractual commitment by one Person to invest in another Person for so long as such investment is expected to constitute a permitted investment under Section 11.4. "Hazardous Materials" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any Environmental Law, (d) the discharge or emission or release of which requires a permit or license under any Applicable Law or other Governmental Approval, or (e) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest rate swap, collar, cap, floor or forward rate agreement or other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Credit Party, and any confirming letter executed pursuant to such hedging agreement, all as amended, restated or otherwise modified from time to time.
"Interest Coverage Ratio" shall have the meaning assigned thereto in Section 10.1.
"Interest Expense" means, for any period, total interest expense (including, without limitation, interest expense attributable to Capital Leases) determined on a consolidated basis, without duplication, for the Credit Parties and their Subsidiaries in accordance with GAAP. "Interest Period" shall have the meaning assigned thereto in Section 5.1(b).
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"ISP 98" means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590.
"Issuing Lender" means (a) First Union and The Chase Manhattan Bank, each in its capacity as issuer of any Letter of Credit, and any other Lender mutually acceptable and on terms satisfactory to the Borrower and the Administrative Agent and (b) with regard to any Letter of Credit denominated in an Alternative Currency the Correspondent of any entity identified in clause (a); and Issuing Lenders means all such Lenders.
"Jones Apparel Group" means Jones Apparel Group, Inc., a Pennsylvania corporation.
"Jones Apparel Group Holdings" means Jones Apparel Group Holdings, Inc., a Delaware corporation.
"L/C Commitment" means Seven Hundred Fifty Million Dollars ($750,000,000).
"L/C Facility" means the letter of credit facility established pursuant to Article III hereof.
"L/C Fee" shall have the meaning assigned thereto in Section 3.3(a).
"L/C Obligations" means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5; provided that the amount of L/C Obligations shall be deemed to be reduced on any day by the amount on deposit in a cash collateral account on such day after giving effect to cash collateral funded by the Borrower or by the proceeds of Base Rate Loans in accordance with Section 2.6.
"L/C Participants" means the collective reference to all the Lenders having a Revolving Credit Commitment other than the applicable Issuing Lender. "Lender" means each Person executing this Agreement as a Lender set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to Section 14.10 other than any party hereto that ceases to be a party hereto pursuant to any Assignment and Acceptance.
"Lending Group Members" means the collective reference to (a) the Lenders party to this Agreement and (b) the lenders party to the Five Year Credit Agreement.
"Lending Office" means, with respect to any Lender, the office of such Lender maintaining such Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section 3.1.
"LIBOR" means the rate of interest per annum determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to the applicable Interest Period which appears on the Dow Jones Market Screen 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest one hundredth of one percent (1/100%)). If, for any reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR" shall be determined by the Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the nearest one-hundredth of one percent (1/100%)) of the rate per annum at which deposits in Dollars would be offered by the Reference Group in the London interbank market to
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the Administrative Agent as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the applicable Revolving Credit Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:
LIBOR RATE = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Revolving Credit Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 5.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset.
"Loan Documents" means, collectively, this Agreement, the Revolving Credit Notes, the Applications and each other document, instrument and agreement executed and delivered by any Credit Party, its Subsidiaries or their counsel in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended, restated or otherwise modified.
"Material Adverse Effect" means, with respect to the Credit Parties or any of their Subsidiaries, a material adverse effect on the business, assets, operations or financial condition of the Credit Parties and their Subsidiaries taken as a whole or the ability of any such Person to perform its obligations under the Loan Documents, in each case to which it is a party. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making (or has made), or is accruing (or has accrued) an obligation to make, contributions either presently or within the preceding six years.
"national currency unit" means the unit of currency (other than a euro unit) of a Participating Member State.
"Net Income" means, with respect to the Credit Parties and their Subsidiaries for any period, the Consolidated net income (or loss) of the Credit Parties and their Subsidiaries for such period determined in accordance with GAAP; provided, that there shall be excluded from net income (or loss), the income (or loss) of any Person (other than a Subsidiary of such Person) in which such Person has an ownership interest unless received by such Person in a cash distribution.
"Net Worth" means, with respect to the Credit Parties and their Subsidiaries, as of any date, the total shareholders' equity that would appear on a Consolidated balance sheet of the Credit Parties and their Subsidiaries prepared as of such date in accordance with GAAP.
"Nine West Acquisition" means the acquisition of all of the outstanding stock of the predecessor company to Nine West Group one of the Credit Parties.
"Nine West Group" means Nine West Group Inc., a Delaware corporation.
"Non-Consenting Lenders" shall have the meaning assigned thereto in Section 2.6.
"Notice of Account Designation" shall have the meaning assigned thereto in Section 2.2(b).
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"Notice of Conversion/Continuation" shall have the meaning assigned thereto in Section 5.2.
"Notice of Prepayment" shall have the meaning assigned thereto in Section 2.3(c).
"Notice of Revolving Credit Borrowing" shall have the meaning assigned thereto in Section 2.2(a).
"Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Revolving Credit Loans, (b) the L/C Obligations, (c) all payment and other obligations owing by the Credit Parties to any Lender or Affiliate of a Lender or the Administrative Agent under any Hedging Agreement with any Lender or Affiliate of a Lender (which such Hedging Agreement is permitted hereunder), and (d) all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Credit Parties to the Lenders or the Administrative Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note, in each case under or in respect of this Agreement, any Revolving Credit Note, any Letter of Credit or any of the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned thereto in Section 8.2.
"Operating Lease" shall mean, as to any Person, as determined in accordance with GAAP, any lease of property (whether real, personal or mixed) by such Person as lessee which is not a Capital Lease.
"Other Taxes" shall have the meaning assigned thereto in Section 5.12(b).
"Outstanding Letters of Credit" means each letter of credit described on Schedule 1.1(b) and outstanding as of the Closing Date.
"Outstanding Nine West Debt Obligations" means the collective reference to (a) the existing 8-3/8% Series B Senior Notes due 2005 of Nine West Group (the "Nine West Senior Notes"), (b) the existing 9% Series B Senior Subordinated Notes due 2007 of Nine West Group (the "Nine West Senior Subordinated Notes") and (c) the existing 5-1/2% Convertible Subordinated Notes due 2003 of Nine West Group (the "Nine West Convertible Subordinated Notes").
"Participating Member State" means each state so described in any EMU Legislation.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code.
"Permitted Lines of Business" shall have the meaning assigned thereto in Section 9.9.
"Person" means an individual, corporation, limited liability company, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or any other form of entity or group thereof.
"Pounds Sterling" means, unless otherwise qualified, pounds sterling in lawful currency of the United Kingdom.
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"Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by First Union as its prime rate in effect at its principal office in Charlotte, North Carolina. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by First Union as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.
"Prior Credit Agreement" means the Second Amended and Restated 364-Day Credit Agreement dated as of June 15, 1999, by and among the Borrower, the Prior Lenders and First Union, as administrative agent.
"Prior Lenders" means, collectively, the lenders party to the Prior Credit Agreement.
"Reference Group" shall mean the Lenders party to this Agreement on the Closing Date.
"Register" shall have the meaning assigned thereto in Section 2.4(a).
"Reimbursement Obligation" means the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit.
"Rental Expense" means, all obligations of the Credit Parties or any of their Subsidiaries for payments under Operating Leases.
"Required Agreement Lenders" means, at any date, any combination of Lenders whose Revolving Credit Commitment Percentage equals at least fifty-one percent (51%) of the Revolving Credit Commitment or if the Revolving Credit Commitment has been terminated, any combination of Lenders who collectively hold at least fifty-one percent (51%) of the aggregate unpaid principal amount of the Extensions of Credit.
"Required Lenders" means, at any date, any combination of Lending Group Members whose Total Committed Percentage equals at least fifty-one percent (51%) of the Total Committed Amount.
"Responsible Officer" means any of the following: the chairman, president, chief executive officer, chief financial officer or vice president and corporate controller of the Borrower or Jones Apparel Group or any other officer of the Borrower or Jones Apparel Group reasonably acceptable to the Administrative Agent.
"Revolving Credit Commitment" means (a) as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a) hereto as such amount may be reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate Revolving Credit Commitment of all Lenders to make Revolving Credit Loans, as such amount may be reduced at any time or from time to time pursuant to the terms hereof. The Revolving Credit Commitment of all Lenders on the Closing Date shall be Seven Hundred Fifty Million Dollars ($750,000,000).
"Revolving Credit Commitment Percentage" means, as to any Lender at any time, the ratio of (a) the amount of the Revolving Credit Commitment of such Lender to (b) the Revolving Credit Commitment of all of the Lenders.
"Revolving Credit Facility" means the revolving credit facility established pursuant to Article II hereof.
"Revolving Credit Loans" means any revolving loan made to the Borrower pursuant to Section 2.1, and all such revolving loans collectively as the context requires.
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"Revolving Credit Notes" means the collective reference to the Revolving Credit Notes made by the Borrower under this Agreement payable to the order of any such Lender requesting such note, substantially in the form of Exhibit A hereto, evidencing the obligation owed to such Lender under the Revolving Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part; "Revolving Credit Note" means any of such Revolving Credit Notes.
"Revolving Credit Termination Date" means the earliest of the dates referred to in Section 2.6.
"SPC" shall have the meaning assigned thereto in Section 14.10(h).
"Subordinated Debt" means the collective reference to Debt on Schedule 7.1(p) hereof designated as Subordinated Debt and any other Debt of the Credit Parties or any Subsidiary thereof subordinated in right and time of payment to the Obligations and otherwise permitted hereunder.
"Subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be Consolidated with those of the parent in the parent's Consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Borrower.
"Sun Acquisition Agreement" means the Agreement and Plan of Merger dated September 10, 1998 by and among the Borrower, SAI Acquisition Corp., Sun Apparel, Inc. and the Shareholders of Sun Apparel, Inc., as amended and modified from time to time.
"Syndication Agents" means The Chase Manhattan Bank and Citibank, N.A., each in their capacity as syndication agent hereunder, and any successor thereto.
"Taxes" shall have the meaning assigned thereto in Section 5.12(a). "Termination Event" means: (a) a "Reportable Event" described in Section 4043 of ERISA, or (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Third Stage Cutoff Date" shall have the meaning assigned to such term in Section 3.6(c) hereof.
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"Total Committed Amount" means (a) as to any Lending Group Member, the sum of (i) the Revolving Credit Commitment of such Lending Group Member (or, if such Revolving Credit Commitment has been terminated, the aggregate unpaid principal amount of all outstanding Extensions of Credit of such Lending Group Member) plus (ii) the Revolving Credit Commitment (as defined in the Five Year Credit Agreement) of such Lending Group Member (or, if such Revolving Credit Commitment has been terminated, the aggregate unpaid principal amount of all outstanding Extensions of Credit (as defined in the Five Year Credit Agreement) of such Lending Group Member) and (b) as to all Lenders, the aggregate Total Committed Amount of all Lending Group Members.
"Total Committed Percentage" means, as to any Lending Group Member at any time, the ratio of (a) the amount of the Total Committed Amount of such Lending Group Member to (b) the aggregate Total Committed Amount of all Lending Group Members.
"Treaty on European Union" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (signed February 7, 1992), as amended from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of New York, as amended, restated or otherwise modified from time to time. "Uniform Customs " the Uniform Customs and Practice for Documentary Credits (1994 Revision), International Chamber of Commerce Publication No. 500.
"United States" means the United States of America.
"Utilization Fee" shall have the meaning assigned thereto in Section 5.3(b).
"Wholly-Owned" means, with respect to a Subsidiary, that all of the shares of capital stock or other ownership interests of such Subsidiary are, directly or indirectly, owned or controlled by any Credit Party and/or one or more of its Wholly-Owned Subsidiaries.
SECTION 1.2 General. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, Schedule or Exhibit of this Agreement. Terms defined in this Agreement and the Five-Year Credit Agreement shall be construed consistently and no term defined herein shall be limited or restricted by any similar definition in the Five-Year Credit Agreement nor shall any such term herein limit or restrict any similar definition in the Five-Year Credit Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions. (a) Use of Capitalized Terms. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (c) Any reference or usage of the word "amount" herein as it pertains to any Obligation denominated in an Alternative Currency shall be deemed to be a reference or usage of the term "Dollar Amount."
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ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing Date through the Revolving Credit Termination Date as requested by the Borrower in accordance with the terms of Section 2.2; provided, that (a) the aggregate principal amount of all outstanding Revolving Credit Loans (after giving effect to any amount requested) shall not exceed the Revolving Credit Commitment less the sum of all outstanding L/C Obligations (after giving effect to the deposit of any amount requested into a cash collateral account in accordance with Section 2.6) and (b) the principal amount of outstanding Revolving Credit Loans from any Lender to the Borrower shall not at any time exceed such Lender's Revolving Credit Commitment. Each Revolving Credit Loan by a Lender shall be in a principal amount equal to such Lender's Revolving Credit Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Termination Date.
SECTION 2.2 Procedure for Advances of Revolving Credit Loans. (a) Requests for Borrowing. The Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached hereto as Exhibit B (a "Notice of Revolving Credit Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be in an amount equal to the unused amount of the Revolving Credit Commitment, or if less, (x) with respect to Base Rate Loans in an aggregate principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof and (y) with respect to LIBOR Rate Loans in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, (C) whether such Revolving Credit Loan is to be a LIBOR Rate Loan or Base Rate Loan, and (D) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. Notices received after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of each Notice of Revolving Credit Borrowing.
(b) Disbursement of Revolving Credit Loans. Not later than 2:00 p.m. (Charlotte time) on the proposed borrowing date, each Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, such Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date. The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.2 in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice of account designation, substantially in the form of Exhibit C hereto (a "Notice of Account Designation"), delivered by the Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the Administrative Agent from time to time. Subject to Section 5.7 hereof, the Administrative Agent shall not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan requested pursuant to this Section 2.2 for which any Lender is responsible to the extent that such Lender has not made available to the Administrative Agent its Revolving Credit Commitment Percentage of such Revolving Credit Loan.
SECTION 2.3 Repayment of Revolving Credit Loans. (a) Repayment on Termination Date. The Borrower shall repay the outstanding principal amount of all Revolving Credit Loans in full on the Revolving Credit Termination Date, with all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Excess Extensions of Credit. (i) If at any time the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding L/C Obligations exceeds the Revolving Credit Commitment, the Borrower shall repay immediately upon notice from the Administrative Agent, by payment to the Administrative Agent for the account of the Lenders, Revolving Credit Loans and/or furnish cash collateral reasonably satisfactory to the Administrative Agent or repay the
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L/C Obligations in an amount equal to such excess. Such cash collateral shall be applied in accordance with Section 12.2(b).
(ii) Excess Alternative Currency Letters of Credit. If the Administrative Agent shall determine that the outstanding principal Dollar Amount of all outstanding Letters of Credit denominated in an Alternative Currency exceeds one hundred and five percent (105%) of the lesser of (A) the L/C Commitment less the sum of the outstanding principal Dollar Amount of all L/C Obligations and (B) the Alternative Currency L/C Commitment, in each case as of the last Business Day of any calendar month during the term hereof, then not later than three (3) Business Days after notice of the amount of such excess from the Administrative Agent to the Borrower, the Borrower shall deposit an amount in Dollars equal to such excess with the Administrative Agent to be held as cash collateral in accordance with Section 12.2(b).
(c) Optional Repayments. The Borrower may at any time and from time to time repay the Revolving Credit Loans, in whole or in part, upon at least three (3) Business Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans and one (1) Business Day irrevocable notice with respect to Base Rate Loans, in the form attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and amount of repayment and whether the repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender. If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial repayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $250,000 in excess thereof with respect to Base Rate Loans and $5,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 5.10 hereof. SECTION 2.4 Evidence of Debt. (a) The Administrative Agent shall maintain a register and a subaccount therein for each Lender (the "Register"), in which shall be recorded (i) the amount of each Revolving Credit Loan made hereunder, including each Revolving Credit Loan evidenced by a Revolving Credit Note, and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.
(b) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.4(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded, absent manifest error; provided, however, that the failure of the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Revolving Credit Loans made to the Borrower in accordance with the terms of this Agreement.
(c) The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a Revolving Credit Note of such Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A.
SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment (a) Voluntary Reduction. The Borrower shall have the right at any time and from time to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to permanently reduce, without premium or penalty, (i) the entire Revolving Credit Commitment at any time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate principal amount not less than $5,000,000 or any whole multiple of $1,000,000 in excess thereof.
(b) Each permanent reduction of the Revolving Credit Commitment made pursuant to this Section 2.5 shall be accompanied, if necessary, by a payment of principal sufficient to reduce the
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aggregate outstanding Revolving Credit Loans and L/C Obligations, as applicable, after such reduction to the Revolving Credit Commitment as so reduced and if the Revolving Credit Commitment as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrower shall be required to deposit in a cash collateral account opened by the Administrative Agent an amount equal to the amount by which the aggregate then undrawn and unexpired amount of such Letters of Credit exceeds the Revolving Credit Commitment as so reduced. Any reduction of the Revolving Credit Commitment to zero (including upon termination of the Revolving Credit Facility on the Revolving Credit Termination Date) shall be accompanied by payment of all outstanding Revolving Credit Loans (and furnishing of cash collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment and the Revolving Credit Facility. Such cash collateral shall be applied in accordance with Section 12.2(b). If the reduction of the Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.10 hereof.
SECTION 2.6 Termination of Revolving Credit Facility. The Revolving Credit Facility shall terminate on the earliest of (a) June 12, 2001, (b) the date of termination of the entire Revolving Credit Commitment by the Borrower pursuant to Section 2.5(a), and (c) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 12.2(a); provided, that the Borrower may request on an annual basis a 364-day extension of the date set forth in clause (a) above by providing the Administrative Agent and each of the Lenders with a written request for such extension not more than sixty (60) days and not fewer than fifty (50) days prior to the then existing Revolving Credit Termination Date; provided further that each such extension shall be subject to the satisfaction by the Borrower of each of the conditions set forth in Section 6.3 on the then existing Revolving Credit Termination Date. Each of the Lenders shall provide written notice to the Administrative Agent on or prior to the thirtieth (30th) day (the "Consent Date") before the then existing Revolving Credit Termination Date of its desire to extend (any such Lender, a "Consenting Lender") or not to so extend (any such Lender, a "Non-Consenting Lender") such date; provided further, that the Termination Date shall not in any event extend beyond June 13, 2004. No Lender shall be under any obligation or commitment to extend such date and no such obligation or commitment on the part of any Lender shall be inferred from the provisions of this Section 2.6. Failure on the part of any Lender to respond to such request by the required date set forth above shall be deemed to be a denial by such Lender of such request and all Revolving Credit Loans of such Non-Consenting Lender shall be subject to the then existing Revolving Credit Termination Date. If Lenders holding Revolving Credit Commitment Percentages aggregating less than one hundred percent (100%) of the Revolving Credit Commitment consent to such extension, the Borrower may elect by written notice to the Administrative Agent and Lenders to (i) continue the Revolving Credit Facility for such additional period with a Revolving Credit Commitment equal to the then effective Revolving Credit Commitment less the total Revolving Credit Commitment of the Non-Consenting Lenders or (ii) require any such Non-Consenting Lender to transfer and assign without recourse (in accordance with the provisions of Section 14.10) its Revolving Credit Commitment and other interests, rights and obligations under this Agreement to an Eligible Assignee (who consents thereto), which shall assume such obligations upon its consent to assume such obligations; provided that (A) no such assignment shall conflict with any Applicable Law, (B) such assignment shall be at the cost and expense of the Borrower and (C) the purchase price to be paid to such Non-Consenting Lender shall be an amount equal to the outstanding principal amount of the Revolving Credit Loans of such Non-Consenting Lender plus all interest accrued and unpaid thereon and all other amounts owing to such Non-Consenting Lender thereon. To the extent the Administrative Agent is a Consenting Lender, the Administrative Agent agrees to use reasonable efforts to assist the Borrower in the syndication of the total Revolving Credit Commitment of the Non-Consenting Lenders after such extension; provided that any such syndication is made on customary terms and the Administrative Agent is compensated for such services in an amount reasonably acceptable to it. The Administrative Agent shall provide a written list of the Consenting Lenders and Non-Consenting Lenders to the Borrower and the Lenders promptly following the Consent Date (but in no event less than twenty-five (25) days prior to the existing Revolving Credit Termination Date). If (x) the sum of the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding L/C Obligations on the third (3 rd ) Business Day prior to the existing Revolving Credit Termination Date exceeds (y) the aggregate amount of the Revolving Credit Commitments of the Consenting Lenders, each Issuing Bank may require, and the Borrower hereby agrees to so provide, cash collateral satisfactory to the Administrative Agent in an amount equal to such
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excess not later than three (3) Business Days prior to the existing Revolving Credit Termination Date to be deposited in a cash collateral account and applied in accordance with Section 12.2(b). To the extent that the Borrower fails to timely provide such cash collateral, the Administrative Agent shall so notify each L/C Participant whereupon each L/C Participant shall pay an amount in Dollars equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of the payment required to be paid by the Borrower, such payment by the L/C Participants to be made by the making of a Base Rate Loan in Dollars pursuant to Section 3.5(c) below on or prior to the existing Revolving Credit Termination Date and the proceeds of such Base Rate Loans shall be deposited in a cash collateral account and applied in accordance with Section 12.2(b). If the extension is granted, upon the then existing date set forth in clause (a) of this Section 2.6, such date shall be extended to the date which is 364 days from the then current date set forth therein.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue trade and standby letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day from the Closing Date through but not including the Revolving Credit Termination Date in such form as may be approved from time to time by such Issuing Lender; provided, that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the L/C Obligations on account of Letters of Credit denominated in an Alternative Currency would exceed the Alternative Currency L/C Commitment or (c) the aggregate principal amount of outstanding Revolving Credit Loans, plus the aggregate principal amount of L/C Obligations would exceed the Revolving Credit Commitment after giving pro forma effect to any reduction of the Revolving Credit Commitment resulting from the failure to fully syndicate the total Revolving Credit Commitment of any Non-Consenting Lenders under Section 2.6. Each Letter of Credit shall (i) be denominated in (A) Dollars, if such Letter of Credit is a standby Letter of Credit, or (B) Dollars or an Alternative Currency, if such Letter of Credit is a trade Letter of Credit, (ii) be a trade or standby letter of credit issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no later than (A) two hundred twenty-five (225) days from the date of issuance thereof for trade Letters of Credit and (B) one (1) year from the date of issuance thereof for standby Letters of Credit, and (iv) be subject to the Uniform Customs and/or ISP 98, as set forth in the Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of New York. No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law. References herein to "issue" and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any existing Letters of Credit, unless the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that any Issuing Lender issue a Letter of Credit (or amend, extend or renew an outstanding Letter of Credit) by delivering to such Issuing Lender at any Issuing Lender's office at any address mutually acceptable to the Borrower and such Issuing Lender an Application therefor, including, if applicable, the office of such Issuing Lender's Correspondent, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may reasonably request. Upon receipt of any Application, such Issuing Lender shall process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article VI hereof, promptly issue the Letter of Credit (or amend, extend or renew the outstanding Letter of Credit) requested thereby (but in no event shall any Issuing Lender be required to issue any Letter of Credit (or amend, extend or renew an outstanding Letter of Credit) earlier than three (3) Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Lender and the Borrower. Within fifteen (15) Business Days after the end of each
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month, the Administrative Agent shall report to each Lender the average daily outstandings for each day in such month for all Letters of Credit during the previous month.
SECTION 3.3 Fees and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of each Issuing Lender and the L/C Participants, a letter of credit fee (the "L/C Fee") (i) with respect to each trade Letter of Credit, in an amount equal to the Applicable Margin for trade Letters of Credit times the average daily undrawn amount of such issued Letter of Credit as reported by the Administrative Agent pursuant to Section 3.2 and (ii) with respect to each standby Letter of Credit, in an amount equal to the Applicable Margin for standby Letters of Credit times the face amount of such Letter of Credit. Such fee shall be payable quarterly in arrears (x) for trade Letters of Credit, within fifteen (15) Business Days after the end of each calendar quarter and on the Revolving Credit Termination Date and (y) for standby Letters of Credit, on the last Business Day of each calendar quarter and on the Revolving Credit Termination Date.
(b) In addition to the foregoing commission, the Borrower shall pay the Issuing Lenders an issuance fee of one eighth percent (1/8%) per annum on the face amount of each standby Letter of Credit, payable quarterly in arrears on the last Business Day of each calendar quarter and on the Revolving Credit Termination Date.
(c) The Administrative Agent shall, promptly following its receipt thereof, distribute to each Issuing Lender and the L/C Participants all fees received by the Administrative Agent in accordance with their respective Revolving Credit Commitment Percentages.
SECTION 3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce such Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in such Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at such Issuing Lender's address for notices specified herein an amount in Dollars equal to such L/C Participant's Revolving Credit Commitment Percentage of the Dollar Amount of such draft, or any part thereof, which is not so reimbursed, such payment to be made by the making of a Base Rate Loan in Dollars pursuant to Section 3.5(c) below.
(b) Upon becoming aware of any amount required to be paid by any L/C Participant to any Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit, the Administrative Agent shall notify each L/C Participant of the amount and due date of such required payment and such L/C Participant shall pay to such Issuing Lender the amount specified on the applicable due date. If any such amount is paid to such Issuing Lender after the date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of any Issuing Lender with respect to any amounts owing under this Section 3.4(b) shall be conclusive in the absence of manifest error. With respect to payment to any Issuing Lender of the unreimbursed amounts described in this Section 3.4(b), if the L/C Participants receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due that Business Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due on the following Business Day. (c) Whenever, at any time after any Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment Percentage of
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such payment in accordance with this Section 3.4, such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, or any payment of interest on account thereof), such Issuing Lender will distribute to such L/C Participant its pro rata share thereof in accordance with such L/C Participant's Revolving Credit Commitment Percentage; provided, that in the event that any such payment received by such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to it.
SECTION 3.5 Reimbursement. (a) Reimbursement by the Borrower. The Borrower agrees to reimburse each Issuing Lender on each date the Administrative Agent notifies the Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by any Issuing Lender in connection with such payment (other than those payable pursuant to Section 3.5(b) below). Each such payment shall be made to any Issuing Lender at its address for notices specified herein (i) in Dollars if such Letter of Credit was denominated in Dollars or (ii) in Dollars or the applicable Alternative Currency, at the option of the Borrower, if such Letter of Credit was denominated in an Alternative Currency, and in each case, in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Article III from the day immediately following the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue.
(b) Exchange Indemnification and Increased Costs. The Borrower shall, upon demand from any Issuing Lender or L/C Participant, pay to such Issuing Lender or L/C Participant, the amount of (i) any loss or cost or increased cost incurred by such Issuing Lender or L/C Participant, (ii) any reduction in any amount payable to or in the effective return on the capital to such Issuing Lender or L/C Participant, (iii) any currency exchange loss, in each case with respect to clauses (i), (ii) and (iii), that such Issuing Lender or L/C Participant sustains as a result of the Borrower's repayment in Dollars of any Letter of Credit denominated in an Alternative Currency or (iv) any interest or any other return, including principal, foregone by such Issuing Lender as a result of the introduction of, change over to or operation of the euro in any member state participating in the euro. A certificate of such Issuing Lender setting forth in reasonable detail the basis for determining such additional amount or amounts necessary to compensate such Issuing Lender shall be conclusively presumed to be correct save for manifest error.
(c) Reimbursement by the Lenders. If the Borrower fails to timely reimburse such Issuing Lender on the date the Borrower receives the notice referred to in this Section 3.5, the Borrower shall be deemed to have timely given a Notice of Revolving Credit Borrowing pursuant to Section 2.2 hereunder to the Administrative Agent requesting the Lenders to make a Base Rate Loan on such date in an amount in Dollars equal to the Dollar Amount (as of the date of funding of such Base Rate Loan by each Lender) of such draft paid, together with any taxes, fees, charges or other costs or expenses incurred by any Issuing Lender and to be reimbursed pursuant to this Section 3.5 and, regardless of whether or not the conditions precedent specified in Article VI have been satisfied, the Lenders shall make Base Rate Loans in such amount, the proceeds of which shall be applied to reimburse such Issuing Lender for the amount of the related drawing and costs and expenses. Notwithstanding the foregoing, nothing in this Section 3.5 shall obligate the Lenders to make such Base Rate Loans if the making of such Base Rate Loans would violate the automatic stay under federal bankruptcy laws.
SECTION 3.6 Provisions Regarding National Currency Units and the Euro. (a) Effectiveness of Provisions. To the extent that any provision of this Section 3.6 relates to any state (or the national currency unit of such state) that is not a Participating Member State at the beginning on the Third Stage of EMU, such provision shall become effective in relation to such state (and the national currency unit of such state) at and from the date on which such state becomes a Participating Member State.
(b) Continuity of Contract. The Administrative Agent, the Lenders and the Borrower agree that the occurrence or non-occurrence of EMU, any event or events associated with EMU and/or the introduction of the euro in all or any part of the European Union will not result in the discharge, cancellation, rescission or termination in whole or in part of any agreement between the Administrative Agent, any Lender and the Borrower or give the Administrative Agent, any Lender or the Borrower the
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right to cancel, rescind, terminate or vary any agreement, other than as specifically provided in this Agreement.
(c) Redenomination and Alternative Currencies. Each obligation of any party under this Agreement which has been denominated in the national currency unit of a Participating Member State shall be automatically redenominated into the euro unit at the Fixed Exchange Rate on January 1, 2002 (the "Third Stage Cutoff Date") and shall thereafter be payable solely in euro; provided, that if and to the extent that any EMU Legislation provides that following the beginning of the Third Stage of EMU, and prior to the Third Stage Cutoff Date, an amount denominated either in the euro unit or in the national currency unit of a Participating Member State and payable within the Participating Member State by crediting an account of a creditor can be paid by a debtor either in the euro unit or in that national currency unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro unit or in such national currency unit; provided, however, any amount paid in a national currency unit shall equal, at the Fixed Exchange Rate for that national currency unit, the required amount stated to be due in euro units.
(d) Payments. Those Sections of this Agreement providing for payment or repayment by the Borrower in a national currency unit shall be construed so that, in relation to the payment of any amount of euro units or national currency units, such amount shall be made available to the Administrative Agent, any Issuing Lender or any Lender, as applicable, in immediately available, freely transferable, cleared funds to such account with each bank (in such principal financial center) as the Administrative Agent, any Issuing Lender or any Lender, as applicable, may from time to time nominate for this purpose.
(e) Payments by the Administrative Agent and Issuing Lenders Generally. With respect to the payment of any amount denominated in the euro unit or in a national currency unit, the Administrative Agent and the Issuing Lenders shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent or any Issuing Lender, as applicable, if the Administrative Agent or any Issuing Lender, as applicable, has made reasonable effort to effect all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro unit or, as the case may be, in a national currency unit) to the account with the bank in the principal financial center in the Participating Member State which the Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph, "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent or any Issuing Lender, as applicable, may from time to time reasonably believe to be in effect for the purpose of clearing or settling payment of the euro.
(f) Rounding and Other Consequential Changes. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU Legislation and without prejudice to the respective liabilities for indebtedness of the Borrower to the Administrative Agent, any Issuing Lender or any Lender, as applicable, and the Administrative Agent, any Issuing Lender or any Lender, as applicable, to the Borrower under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a national currency unit to be paid to or by the Administrative Agent, any Issuing Lender or any Lender, as applicable, shall be replaced by a reference to such reasonably comparable amount (or an integral multiple thereof) in the euro unit as the Administrative Agent may from time to time specify; and
(ii) except as expressly provided in this Agreement, each provision of this Agreement, including, without limitation, the right to combine currencies to affect a set off, shall be subject to such reasonable changes of interpretation as the Administrative Agent may from time to time specify to be necessary or appropriate to reflect the introduction of or change over to the euro in Participating Member States necessary or appropriate to reflect the implementation of
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EMU to place the parties hereto in substantially the position they would have occupied had EMU not been implemented.
(g) Further Assurance. The Borrower agrees, at the request of the Administrative Agent or any Issuing Lender, at the time of or at any time following the implementation of EMU, to enter into an agreement amending this Agreement in such manner as the Administrative Agent or such Issuing Lender reasonably shall request in order to reflect the implementation of EMU to place the parties hereto in the position they would have been in had EMU not been implemented.
SECTION 3.7 Obligations Absolute. The Borrower's obligations under this Article III (including without limitation the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against any Issuing Lender or any beneficiary of a Letter of Credit. The Borrower also agrees with each Issuing Lender that no Issuing Lender shall be responsible for, and the Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by such Issuing Lender's gross negligence or willful misconduct. The Borrower agrees that any action taken or omitted by any Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Customs and/or ISP 98, as set forth in the Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of New York, shall be binding on the Borrower and shall not result in any liability of any Issuing Lender to the Borrower. The responsibility of each Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.8 Effect of Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
[RESERVED]
ARTICLE V
GENERAL LOAN PROVISIONS
SECTION 5.1 Interest. (a) Interest Rate Options. Subject to the provisions of this Section 5.1, at the election of the Borrower, the aggregate principal balance of any Revolving Credit Loans shall bear interest at (i) the Base Rate plus the Applicable Margin or (ii) the LIBOR Rate plus the Applicable Margin; provided that LIBOR Rate Loans shall not be available until three (3) Business Days after the Closing Date unless the Borrower executes and delivers an indemnity in favor of the Administrative Agent and the Lenders in form and substance satisfactory to them. The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Revolving Credit Loan at the time a Notice of Revolving Credit Borrowing is given pursuant to Section 2.2 or at the time a Notice of Conversion/Continuation is given pursuant to Section 5.2. Each Revolving Credit Loan or portion thereof bearing interest based on the Base Rate shall be a "Base Rate Loan", and each Revolving Credit Loan or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any Revolving Credit Loan or any portion thereof as to
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which the Borrower has not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by giving notice at the times described in Section 5.1(a), shall elect an interest period (each, an "Interest Period") to be applicable to such Revolving Credit Loan, which Interest Period shall, unless otherwise agreed by the Administrative Agent and the Lenders, be a period of one (1), two (2), three (3), or six (6) months with respect to each LIBOR Rate; provided that:
(i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Revolving Credit Termination Date; and (v) there shall be no more than six (6) Interest Periods in effect at any time.
(c) Default Rate. Subject to Section 12.3, at the discretion of the Administrative Agent and Required Lenders, upon the occurrence and during the continuance of an Event of Default, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans, as applicable, until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans. Interest shall continue to accrue on the amount of Revolving Credit Loans outstanding after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign.
(d) Interest Payment and Computation. Interest on each Base Rate Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing June 30, 2000; and interest on each LIBOR Rate Loan shall be payable on the last day of each Interest Period applicable thereto, and if such Interest Period exceeds three (3) months, at the end of each three (3) month interval during such Interest Period. Interest on LIBOR Rate Loans and all fees payable hereunder shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed and interest on Base Rate Loans shall be computed on the basis of a 365/66-day year and assessed for the actual number of days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Loan Documents charged or collected pursuant to the terms of this Agreement or pursuant to any other Loan Document exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent's option (i) promptly refund to the Borrower any interest received by Lenders in excess of the
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maximum lawful rate or (ii) shall apply such excess to the principal balance of the Obligations. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law.
SECTION 5.2 Notice and Manner of Conversion or Continuation of Revolving Credit Loans. Provided that no Event of Default has occurred and is then continuing, the Borrower shall have the option (a) to convert all or any portion of its outstanding Base Rate Loans in a principal amount equal to $5,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans and (b), (i) to convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $1,000,000 or a whole multiple of $250,000 in excess thereof into Base Rate Loans or (ii) to continue such LIBOR Rate Loans as LIBOR Rate Loans for an additional Interest Period; provided that if any conversion or continuation is made prior to the expiration of any Interest Period, the Borrower shall pay any amount required to be paid pursuant to Section 5.10 hereof. Whenever the Borrower desires to convert or continue Revolving Credit Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached as Exhibit E (a "Notice of Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a proposed conversion or continuation of such Revolving Credit Loan is to be effective (except in the case of a conversion of a LIBOR Rate Loan to a Base Rate Loan in which case same day notice by the Borrower shall be sufficient) specifying (A) the Revolving Credit Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Revolving Credit Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the Lenders of such Notice of Conversion/Continuation.
SECTION 5.3 Fees. (a) Facility Fees. The Borrower shall pay to the Administrative Agent, for the account of the Lenders, a non-refundable facility fee (the "Facility Fee") at a rate per annum equal to the Applicable Margin on the full amount of the Revolving Credit Commitment, regardless of usage. The Facility Fee shall be payable in arrears on the last Business Day of each calendar quarter for the period commencing on the Closing Date and ending on the Revolving Credit Termination Date. The Facility Fee shall be distributed by the Administrative Agent to the Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment Percentages.
(b) Utilization Fee. The Borrower shall pay a utilization fee (the "Utilization Fee") at a rate per annum equal to 0.125% on the average amount of outstanding Revolving Credit Loans during each fiscal quarter that such average exceeds 50% of the Revolving Credit Commitments (exclusive of any issued and outstanding Letters of Credit). The average amount of Revolving Credit Loans for any fiscal quarter shall be calculated by the Administrative Agent (which such calculation shall be conclusively presumed correct save manifest error) as follows: (i) the sum of the principal amount of outstanding Revolving Credit Loans at the close of business for each day during such fiscal quarter, divided by (ii) the total number of days of such fiscal quarter. The Utilization Fee shall be payable in arrears on the fifteenth (15th) day following written notification by the Administrative Agent to the Borrower of the average for the preceding quarter and the resulting Utilization Fee. The Utilization Fee shall be distributed by the Administrative Agent to the Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment Percentage.
(c) Administrative Agent's and Other Fees. In order to compensate the Administrative Agent for its obligations hereunder, the Borrower agrees to pay to the Administrative Agent, for its account, the fees set forth in the separate fee letter agreement executed by the Borrower and the Administrative Agent dated April 26, 2000.
SECTION 5.4 Manner of Payment. Each payment by the Borrower on account of the principal of or interest on the Revolving Credit Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lenders under this Agreement or any other Loan Document shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office for the account of the Lenders
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(other than as set forth below) pro rata in accordance with their respective Revolving Credit Commitment Percentages (except as specified below), in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 12.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall distribute to each Lender at its address for notices set forth herein its pro rata share of such payment in accordance with such Lender's Revolving Credit Commitment Percentage (except as specified below), and shall wire advice of the amount of such credit to each Lender. Each payment to the Administrative Agent of the L/C Participants' commissions shall be made in like manner, but for the account of the L/C Participants. Each payment to the Administrative Agent of Administrative Agent's fees or expenses shall be made for the account of the Administrative Agent and any amount payable to any Lender under Section 5.9, 5.10, 5.11, 5.12 or 14.2 shall be paid to the Administrative Agent for the account of the applicable Lender. Subject to Section 5.1(b)(ii), if any payment under this Agreement or any other Loan Document shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment.
SECTION 5.5 Crediting of Payments and Proceeds. In the event that the Borrower shall fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to Section 12.2, all payments received by the Lenders upon the Obligations and all net proceeds from the enforcement of the Obligations shall be applied first to all expenses then due and payable by the Borrower hereunder, then to all indemnity obligations then due and payable by the Borrower hereunder, then to all Administrative Agent's fees then due and payable, then to all commitment and other fees and commissions then due and payable, then to accrued and unpaid interest hereunder or under any other Loan Document, and Reimbursement Obligation (pro rata in accordance with all such amounts due), then to the principal amount hereunder or under any other Loan Document, Reimbursement Obligation and any termination payments due in respect of a Hedging Agreement with any Lender or Affiliate of a Lender (which Hedging Agreement is permitted hereunder) (pro rata in accordance with all such amounts due) and then to the cash collateral account described in Section 12.2(b) hereof to the extent of any L/C Obligations then outstanding, in that order.
SECTION 5.6 Adjustments. If any Lender (a "Benefited Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or interest thereon, or if any Lender shall at any time receive any collateral in respect to the Obligations owing to it (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such payment to and collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, or interest thereon, such Benefited Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Extensions of Credit, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Extensions of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.
SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent. The obligations of the Lenders under this Agreement to make the Revolving Credit Loans and issue or participate in Letters of Credit are several and are not joint or joint and several. Unless the Administrative Agent shall have received notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender's ratable portion of the amount to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to the
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Administrative Agent on the proposed borrowing date in accordance with Sections 2.2(b) and 4.2, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the amount not made available by such Lender in accordance with the terms hereof, times (b) the daily average Federal Funds Rate during such period as determined by the Administrative Agent, times (c) a fraction the numerator of which is the number of days that elapse from and including such borrowing date to the date on which such amount not made available by such Lender in accordance with the terms hereof shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent with respect to any amounts owing under this Section 5.7 shall be conclusive, absent manifest error. If such Lender's Revolving Credit Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three (3) Business Days of such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the Administrative Agent with interest thereon at the rate per annum applicable to such borrowing, on demand, from the Borrower. The failure of any Lender to make available its Revolving Credit Commitment Percentage of any Revolving Credit Loan requested by the Borrower shall not relieve it or any other Lender of its obligation hereunder to make its Revolving Credit Commitment Percentage of such Revolving Credit Loan available on the borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Revolving Credit Commitment Percentage of such Revolving Credit Loan available on the borrowing date.
SECTION 5.8 Joint and Several Liability of the Credit Parties. (a) Each of the Credit Parties is jointly and severally liable not merely as a surety but as a co-debtor for each and every Obligation. Each of the Credit Parties is accepting joint and several liability hereunder in consideration of the financial accommodations to be provided by the Lenders under this Agreement, for the mutual benefit, directly or indirectly, of each of the Credit Parties and in consideration of the undertakings of each of the Credit Parties to accept joint and several liability for the Obligations.
(b) Except as otherwise expressly provided herein, each Credit Party hereby waives promptness, diligence, presentment, demand, protest, notice of acceptance of its joint and several liability, notice of any and all advances of the Revolving Credit Loans and Letters of Credit made under this Agreement and the other Loan Documents, notice of occurrence of any Default or Event of Default, or of any demand for any payment under this Agreement and notice of any action at any time taken or omitted by the Administrative Agent or any Lender under or in respect of any of the Obligations hereunder. Each Credit Party hereby waives all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshaling of assets of any of the Credit Parties and any other entity or person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Each Credit Party hereby assents to, and waives notice of, any extension or postponement of the time for the payment, or place or manner for payment, compromise, refinancing, consolidation or renewals of any of the Obligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or any Lender at any time or times in respect of any default by any Credit Party in the performance or satisfaction of any term, covenant, condition or provision of this Agreement and the other Loan Documents, any and all other indulgences whatsoever by the Administrative Agent or any Lender in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations or the addition, substitution or release, in whole or in part, of any Credit Party or any other entity or person primarily or secondarily liable for any Obligation. If for any reason any of the Credit Parties has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from any of the Credit Parties by reason of such Credit Party's insolvency, bankruptcy or reorganization or by other operation of law or for any reason, this Agreement and the other Loan Documents shall nevertheless be binding on each of the other Credit Parties to the same extent as if such Credit Party at all times had been the sole obligor on such Obligations. The Obligations of each Credit Party under this Section 5.8 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any reconstruction or similar proceeding with respect to any Credit Party, the Administrative Agent or any Lender.
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(c) If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any of the Credit Parties, or otherwise, the provisions of this Section 5.8 will forthwith be reinstated in effect as though such payment had not been made.
(d) Until the payment and performance in full of all the Obligations, none of the Credit Parties shall exercise and each hereby waives any rights against the other Credit Parties as a result of payment by such Credit Party hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and none of the Credit Parties will prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in bankruptcy, insolvency, or reorganization proceedings of any nature; none of the Credit Parties will claim any set-off, recoupment or counterclaim against any of the other Credit Parties in respect of any liability of one Credit Party to another Credit Party. Each of the Credit Parties hereby agrees that the payment of any amounts due with respect to any indebtedness owing by any of the Credit Party to any other Credit Party is hereby subordinated to the prior payment in full in cash of the Obligations. Each Credit Party agrees that, after the occurrence and during the continuance of any Default or Event of Default hereunder, none of the Credit Parties will demand, sue for or otherwise attempt to collect any indebtedness of any other Credit Party to such Credit Party until all of the Obligations of the Credit Parties hereunder shall have been paid in full in cash. If, notwithstanding the foregoing sentence, any Credit Party shall collect, enforce or receive any amounts in respect of such indebtedness in violation of the foregoing sentence while any Obligations of the Credit Parties are still outstanding, such amounts shall be collected, enforced and received by such Credit Party as trustee for the Administrative Agent and the Lenders and be paid over to the Administrative Agent on account of the Obligations without affecting in any manner the liability of such Credit Party under the other provisions hereof.
SECTION 5.9 Changed Circumstances. (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest Period: (i) the Administrative Agent or any Lender (after consultation with Administrative Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars, in the applicable amounts are not being quoted via Dow Jones Market Screen 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) or offered to the Administrative Agent or such Lender for such Interest Period; or (ii) the Required Lenders reasonably determine (which determination shall be conclusive) and notify the Administrative Agent that the LIBOR Rate will not adequately and fairly reflect the cost to the Required Lenders of funding LIBOR Rate Loans for such Interest Period; then the Administrative Agent shall forthwith give notice thereof to the Borrower. Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Revolving Credit Loan to or continue any Revolving Credit Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) issued after the date hereof of any such Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Lenders. Thereafter, until
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the Administrative Agent notifies the Borrower that such circumstances no longer exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Revolving Credit Loan or continue any Revolving Credit Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) issued after the date hereof of such Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their respective Lending Offices) to any tax, duty or other charge with respect to any Revolving Credit Loan, Letter of Credit or Application or shall change the basis of taxation of payments to any of the Lenders (or any of their respective Lending Offices) of the principal of or interest on any Revolving Credit Loan, Letter of Credit or thereof (except for changes in the rate of tax on the overall net income of any of the Lenders or any of their respective Lending Offices imposed by the jurisdiction in which such Lender is organized or is or should be qualified to do business or such Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance or capital or similar requirement against assets of, deposits with or for the account of, or credit extended by any of the Lenders (or any of their respective Lending Offices) or shall impose on any of the Lenders (or any of their respective Lending Offices) or the foreign exchange and interbank markets any other condition affecting any Revolving Credit Loan; and the result of any of the foregoing is to increase the costs to any of the Lenders of maintaining any LIBOR Rate Loan or issuing or participating in Letters of Credit or to reduce the yield or amount of any sum received or receivable by any of the Lenders under this Agreement or under any other Loan Document in respect of a LIBOR Rate Loan or Letter of Credit or Application, then such Lender may promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Borrower of such fact and demand compensation therefor and, within fifteen (15) days after such notice by the Administrative Agent, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or Lenders for such increased cost or reduction. The Administrative Agent and the applicable Lender will promptly notify the Borrower of any event of which it has knowledge which will entitle such Lender to compensation pursuant to this Section 5.9(c); provided, that the Administrative Agent shall incur no liability whatsoever to the Lenders or the Borrower in the event it fails to do so. The amount of such compensation shall be determined, in the applicable Lender's reasonable discretion, based upon the assumption that such Lender funded its Revolving Credit Commitment Percentage of the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such Lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error.
(d) Mitigation Obligations; Replacement of Lenders.
(i) If any Lender requests compensation under this Section 5.9, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of
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any Lender pursuant to Section 5.12, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Revolving Credit Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to this Section 5.9 or Section 5.12, as the case may be, in the future and (B) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(ii) If any Lender requests compensation under this Section 5.9, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.12, or if any Lender defaults in its obligation to fund Revolving Credit Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 14.10), all its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent (and, if an L/C Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (C) in the case of any such assignment resulting from a claim for compensation under this Section 5.9, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
SECTION 5.10 Indemnity. The Borrower hereby indemnifies each of the Lenders against any loss or expense which may arise or be attributable to each Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Revolving Credit Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified therefor in a Notice of Revolving Credit Borrowing or Notice of Continuation/Conversion or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount of such loss, cost or expense to any Lender shall be deemed to equal an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid, were it to bid, at the commencement of such period, for Dollar deposits of a comparable amount and period from other banks in the London interbank market; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such Lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error.
SECTION 5.11 Capital Requirements. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request issued after the date hereof from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Lender or any corporation
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controlling such Lender as a consequence of, or with reference to any Lender's Revolving Credit Commitment and other commitments of this type, below the rate which the Lender or such other corporation could have achieved but for such introduction, change or compliance, then within five (5) Business Days after written demand by any such Lender, the Borrower shall pay to such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender or other corporation for such reduction; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error.
SECTION 5.12 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder or under the Revolving Credit Notes or the Letters of Credit shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Lender and the Administrative Agent, income and franchise taxes imposed on (or measured by) its net income by the United States of America or by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or its principal office is located or is or should be qualified to do business or any political subdivision thereof, or in the case of any Lender, in which its applicable Lending Office is located (provided, however, that no Lender shall be deemed to be located in any jurisdiction solely as a result of taking any action related to this Agreement or the Revolving Credit Notes or Letters of Credit) and (ii) any branch profits tax imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (i) above (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 Revolving Credit Note or Letter of Credit to any Lender or the Administrative Agent, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.12) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (D) the Borrower shall deliver to the Administrative Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 5.12(d). The Borrower shall not, however, be required to pay any amounts pursuant to clause (A) of the preceding sentence to any Foreign Lender or the Administrative Agent not organized under the laws of the United States of America or a state thereof (or the District of Columbia) if such Foreign Lender or the Administrative Agent fails to comply with the requirements of paragraph (e) of this Section 5.12 or Section 5.9(d), as the case may be.
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Revolving Credit Loans, the Letters of Credit, the other Loan Documents (hereinafter referred to as "Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 5.12) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and reasonable expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. A certificate as to the amount of such payment or liability prepared by a Lender or the Administrative Agent, absent manifest error, shall be conclusive, provided that if the Borrower reasonably believes that such Taxes or Other Taxes were not correctly or legally asserted, such Lender or the Administrative Agent (as the case may be) shall use reasonable efforts to cooperate with the Borrower, at the Borrower's expense, to obtain a refund of such Taxes or Other Taxes. Such
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indemnification shall be made within thirty (30) days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. If a Lender or the Administrative Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes, it promptly shall notify the Borrower of the availability of such refund and shall, within sixty (60) days after receipt of a request by the Borrower pursue or timely claim such refund at the Borrower's expense. If any Lender or the Administrative Agent receives a refund in respect of any Taxes or Other Taxes for which such Lender or the Administrative Agent has received payment from the Borrower hereunder, it promptly shall repay such refund (plus interest received, if any) to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 5.12 with respect to Taxes or Other Taxes giving rise to such refund), provided that the Borrower, upon the request of such Lender or the Administrative Agent, agrees to return such refund (plus any penalties, interest or other charges required to be paid) to such Lender or the Administrative Agent in the event such Lender or the Administrative Agent is required to repay such refund to the relevant taxing authority.
(d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 14.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Foreign Lender shall deliver to the Borrower, with a copy to the Administrative Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms W-8ECI or Forms W-8BEN, as applicable (or successor forms) properly completed and certifying in each case that such Foreign Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each Foreign Lender further agrees to deliver to the Borrower, with a copy to the Administrative Agent, a Form W-8BEN or W-8ECI and Form W-8 or W-9, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such Foreign Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Foreign Lender notifies the Borrower and the Administrative Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 5.12 shall survive the payment in full of the Obligations and the termination of the Revolving Credit Commitment.
ARTICLE VI
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 6.1 Closing. The closing shall take place at the offices of Shearman & Sterling at 10:00 a.m. on June 13, 2000 or at such other location, on such other date and at such other time as the parties hereto shall mutually agree.
SECTION 6.2 Conditions to Closing and Initial Revolving Credit Loans and Letters of Credit. The obligation of the Lenders to close this Agreement and to make the initial Revolving Credit Loans or issue the initial Letters of Credit is subject to the satisfaction or waiver of each of the following conditions:
(a) Executed Loan Documents. This Agreement and the Revolving Credit Notes (to the extent requested as provided herein) shall have been duly authorized, executed and delivered
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to the Administrative Agent by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Administrative Agent. (b) Closing Certificates; Etc. (i) Officers' Certificate of the Borrower. The Administrative Agent shall have received a certificate from a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete in all material respects; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that each of the closing conditions has been satisfied or waived (assuming satisfaction of the Administrative Agent where not advised otherwise).
(ii) General Certificate of the Borrower. The Administrative Agent shall have received a certificate of the secretary, assistant secretary or general counsel of the Borrower certifying as to the incumbency and genuineness of the signature of each officer of the Borrower executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the articles of incorporation of the Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation, (B) the bylaws of the Borrower as in effect on the date of such certifications, (C) resolutions duly adopted by the Board of Directors of the Borrower authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 6.2(b)(iii). (iii) Certificates of Good Standing. The Administrative Agent shall have received long-form certificates as of a recent date of the good standing of the Borrower under the laws of its jurisdiction of organization and short-form certificates as of a recent date of the good standing of the Borrower under the laws of each of California, Georgia, New York, North Carolina, Texas, Tennessee, Virginia and Washington.
(iv) Opinions of Counsel. The Administrative Agent shall have received favorable opinions of Ira M. Dansky, General Counsel to the Borrower, Cravath, Swaine & Moore, special counsel to the Borrower, and Mesirov, Gelman, Jaffe, Cramer & Jamieson, Pennsylvania counsel to the Borrower, addressed to the Administrative Agent and the Lenders with respect to the Borrower, the Loan Documents and such other matters as the Lenders shall reasonably request.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. The Borrower shall have obtained all material approvals, authorizations and consents of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents. (ii) No Event of Default. No Default or Event of Default shall have occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The Administrative Agent shall have received the audited Consolidated financial statements of Jones Apparel Group and its Subsidiaries for the Fiscal Year ended on December 31, 1999 and the unaudited financial statements of Jones Apparel Group and its Subsidiaries for the fiscal quarter ended on April 2, 2000.
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(ii) Financial Condition Certificate. The Borrower shall have delivered to the Administrative Agent a certificate, in form and substance reasonably satisfactory to the Administrative Agent, and certified by a Responsible Officer, that the financial projections previously delivered to the Administrative Agent were prepared in good faith based upon assumptions believed to be reasonable at the time.
(iii) Payment at Closing; Fee Letters. The Borrower shall have paid the fees set forth or referenced in Section 5.3(c) and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, reasonable legal fees and expenses) to the Administrative Agent and Lenders, and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. The Administrative Agent shall have received duly authorized and executed copies of the fee letter agreement referred to in Section 5.3(c).
(e) Miscellaneous.
(i) Notice of Revolving Credit Borrowing. The Administrative Agent shall have received a Notice of Revolving Credit Borrowing from the Borrower in accordance with Section 2.2(a) and Section 4.2, and a Notice of Account Designation specifying the account or accounts to which the proceeds of any Revolving Credit Loans made after the Closing Date are to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Lenders.
(iii) Investment Policy. The Borrower shall have delivered to the Administrative Agent a true and complete copy of the investment policy referenced in Section 11.4(b) in form and content reasonably acceptable to the Administrative Agent.
(f) Refinancing. On the Closing Date hereunder, (i) all outstanding loans under the Prior Credit Agreement ("Existing Loans") shall be replaced by Revolving Credit Loans hereunder and the Administrative Agent shall make such transfers of funds as are necessary in order that the outstanding balance of such Revolving Credit Loans, together with any Revolving Credit Loans funded on the Closing Date, reflect the Revolving Credit Commitment of the Lenders hereunder, (ii) all outstanding letters of credit issued pursuant to the Prior Credit Agreement shall be deemed Letters of Credit hereunder and each Lender shall purchase a participation therein pursuant to Section 3.4 in accordance with its Revolving Credit Commitment Percentage, (iii) there shall have been paid in cash in full all accrued but unpaid interest due on the Existing Loans up to but excluding the Closing Date, (iv) there shall have been paid in cash in full all accrued but unpaid fees due under the Prior Credit Agreement up to but excluding the Closing Date and all other amounts, costs and expenses then owing to any of the Prior Lenders and/or any Agent, as agent under the Prior Credit Agreement, in each case to the satisfaction of such Agent or Prior Lender, as the case may be, regardless of whether or not such amounts would otherwise be due and payable at such time pursuant to the terms of the Prior Credit Agreement, (v) all outstanding promissory notes issued by the Borrower to the Prior Lenders under the Prior Credit Agreement shall be deemed canceled and the originally executed copies thereof shall be canceled and promptly returned to the Administrative Agent who shall promptly forward such notes to the Borrower and (vi) the commitments and, except as expressly set forth in the Prior Credit Agreement, other obligations and rights of the Borrower and the Prior Lenders shall be terminated without any further action hereunder or thereunder.
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SECTION 6.3 Conditions to All Extensions of Credit. The obligations of the Lenders to make any Extensions of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing or issue date, as applicable:
(a) Continuation of Representations and Warranties. The representations and warranties contained in Article VII shall be true and correct on and as of such borrowing or issuance date with the same effect as if made on and as of such date; except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have occurred and be continuing hereunder (i) on the borrowing date with respect to such Revolving Credit Loan or after giving effect to the Revolving Credit Loans to be made on such date or (ii) on the issue, extension or renewal date with respect to such Letter of Credit or after giving effect to such Letter of Credit on such date.
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES
SECTION 7.1 Representations and Warranties. To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the Credit Parties hereby represent and warrant to the Administrative Agent and Lenders that:
(a) Organization; Power; Qualification. Each of the Credit Parties and their Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b) Ownership. Each Subsidiary of each of the Credit Parties as of the Closing Date is listed on Schedule 7.1(b). As of the Closing Date, the capitalization of the Credit Parties and their Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.1(b). As of the Closing Date, all outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. The shareholders of the Subsidiaries of the Credit Parties and the number of shares owned by each as of the Closing Date are described on Schedule 7.1(b). As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Credit Parties or their Subsidiaries, except as described on Schedule 7.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Credit Parties and, if applicable, their Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of each of the Loan Documents to which it is a party in accordance with their respective terms. Each of the Loan Documents have been duly executed and delivered by the duly authorized officers of the Credit Parties and each of their Subsidiaries party thereto, as applicable, and each such document constitutes the legal, valid and binding obligation of the Credit Parties and, if applicable, each of their Subsidiaries party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies.
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(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the Credit Parties and their Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any of the Credit Parties or any of their Subsidiaries to obtain any Governmental Approval not otherwise already obtained or violate any Applicable Law relating to the Credit Parties or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Credit Parties or any of their Subsidiaries or any indenture or other material agreement or instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person except as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any material Lien upon or with respect to any property now owned or hereafter acquired by such Person.
(e) Compliance with Law; Governmental Approvals. Other than with respect to environmental matters, which are treated exclusively in Section 7.1(h) hereof, each of the Credit Parties and their Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding, and (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Laws relating to it or any of its respective properties; in each case, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(f) Tax Returns and Payments. Each of the Credit Parties and their Subsidiaries has timely filed or caused to be timely filed all federal and state, local and other tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal and state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except (a) taxes that are being contested in good faith by appropriate proceedings and for which such Credit Party or Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect. No Governmental Authority has asserted any material Lien or other claim against the Credit Parties or any Subsidiary thereof with respect to unpaid taxes (except for taxes not yet due) which has not been discharged or resolved.
(g) Intellectual Property Matters. Each of the Credit Parties and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. No event has occurred which, to the knowledge of the Credit Parties, permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and, to the knowledge of the Credit Parties, neither the Credit Parties nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations, except as could not reasonably be expected to have a Material Adverse Effect. (h) Environmental Matters. Except as could not reasonably be expected to have a Material Adverse Effect:
(i) The properties of the Credit Parties and their Subsidiaries do not contain, and to their knowledge have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to liability under applicable Environmental Laws;
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(ii) The properties of the Credit Parties and their Subsidiaries and all operations conducted in connection therewith are in compliance, and have been in compliance, with all applicable Environmental Laws, and there are no Hazardous Materials at, under or about such properties or such operations in amounts or concentrations which could reasonably be expected to interfere with the continued operation of such properties;
(iii) Neither any of the Credit Parties nor any Subsidiary thereof has received any notice of violation, alleged violation, non- compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws, nor does any of the Credit Parties or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened;
(iv) To the knowledge of the Credit Parties, Hazardous Materials have not been transported or disposed of from the properties of the Credit Parties or any of their Subsidiaries in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, Environmental Laws, nor, to the knowledge of the Credit Parties, have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner which could reasonably be expected to give rise to liability under, any Environmental Laws;
(v) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Credit Parties, threatened, under any Environmental Law to which any of the Credit Parties or any Subsidiary thereof will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the properties or operations of the Credit Parties and their Subsidiaries; and
(vi) To the knowledge of the Credit Parties, there has been no release, or to the best of the Credit Parties' knowledge, the threat of release, of Hazardous Materials at or from the properties of the Credit Parties or any of their Subsidiaries, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under Environmental Laws.
(i) ERISA.
(i) Each of the Credit Parties and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except where any such non-compliance could not reasonably be expected to have a Material Adverse Effect. Except for any failure that would not reasonably be expected to have a Material Adverse Effect, each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No liability that could reasonably be expected to result in a Material Adverse Effect has been incurred by the Credit Parties or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan;
(ii) No accumulated funding deficiency (as defined in Section 412 of the Code) has been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan;
(iii) Neither the Credit Parties nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which remains outstanding other than the payment of
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premiums and there are no premium payments which are due and unpaid, (C) failed to make a required contribution or payment to a Multiemployer Plan, or (D) failed to make a required installment or other required payment under Section 412 of the Code except where any of the foregoing individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect;
(iv) No Termination Event that could reasonably be expected to result in a Material Adverse Effect has occurred or is reasonably expected to occur; and
(v) No proceeding, claim, lawsuit and/or investigation is existing or, to the knowledge of the Credit Parties, threatened concerning or involving any Employee Benefit Plan that could reasonably be expected to result in a Material Adverse Effect.
(j) Margin Stock. Neither the Credit Parties nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used in Regulation U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Revolving Credit Loans or Letters of Credit will be used for purchasing or carrying margin stock, unless the Credit Parties shall have given the Administrative Agent and Lenders prior notice of such event and such other information as is reasonably necessary to permit the Administrative Agent and Lenders to comply, in a timely fashion, with all reporting obligations required by Applicable Law, or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Credit Parties nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the Credit Parties nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended.
(l) Burdensome Provisions. Neither the Credit Parties nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Credit Parties and their Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect.
(m) Financial Statements. The (i) Consolidated balance sheets of Jones Apparel Group and its Subsidiaries as of December 31, 1999, and the related statements of income, stockholders' equity and cash flows for the Fiscal Years then ended and (ii) unaudited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of April 2, 2000, and related unaudited interim statements of income, stockholders' equity and cash flows, copies of which have been furnished to the Administrative Agent and each Lender, are complete in all material respects and fairly present in all material respects the assets, liabilities and financial position of Jones Apparel Group and its Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended, subject to normal year end adjustments. All such financial statements, including the related notes thereto, have been prepared in accordance with GAAP.
(n) No Material Adverse Change. Since the later to occur of (i) April 2, 2000 or (ii) the date of the most recently delivered audited financial statements of Jones Apparel Group and its Subsidiaries, there has been no Material Adverse Effect.
(o) Liens. None of the properties and assets of the Credit Parties or any Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to Section 11.3.
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(p) Debt and Guaranty Obligations. Schedule 7.1(p) is a complete and correct listing of all Debt and Guaranty Obligations of the Credit Parties and their Subsidiaries as of the Closing Date in excess of $5,000,000.
(q) Litigation. Except for matters existing on the Closing Date and set forth on Schedule 7.1(q), there are no actions, suits or proceedings pending nor, to the knowledge of the Credit Parties, threatened against or affecting the Credit Parties or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority, which could reasonably be expected to have a Material Adverse Effect or which relate to the enforceability of any Loan Documents.
(r) Absence of Defaults. To the knowledge of the Credit Parties, no event has occurred or is continuing which constitutes a Default or an Event of Default.
(s) Accuracy and Completeness of Information. The Credit Parties have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which they or any of their Subsidiaries are subject, and all other matters known to them, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The written information, taken as a whole, furnished by or on behalf of the Credit Parties to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) does not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Credit Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
SECTION 7.2 Survival of Representations and Warranties, Etc. All representations and warranties set forth in this Article VII and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VIII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations (other than Obligations under Hedging Agreements) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties will furnish or cause to be furnished to the Administrative Agent and to the Lenders at their respective addresses as set forth on Schedule 1.1(a), or such other office as may be designated by the Administrative Agent and Lenders from time to time:
SECTION 8.1 Financial Statements and Projections. (a) Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days after the end of the first three fiscal quarters of each Fiscal Year, an unaudited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated statements of income, stockholders' equity and cash flows for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the preceding Fiscal Year and prepared by Jones Apparel Group in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by a Responsible Officer to present fairly in all material respects the financial condition of Jones Apparel Group and its Subsidiaries as of their
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respective dates and the results of operations of Jones Apparel Group and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, an audited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, stockholders' equity and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and prepared by a nationally recognized independent certified public accounting firm in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by Jones Apparel Group or any of its Subsidiaries or with respect to accounting principles followed by Jones Apparel Group or any of its Subsidiaries not in accordance with GAAP.
SECTION 8.2 Officer's Compliance Certificate. At each time financial statements are delivered pursuant to Section 8.1(a) or (b) a certificate of a Responsible Officer in the form of Exhibit F attached hereto (an "Officer's Compliance Certificate").
SECTION 8.3 Accountants' Certificate. At each time financial statements are delivered pursuant to Section 8.1(b), a certificate of the independent public accountants certifying such financial statements addressed to the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required to establish whether or not the Credit Parties and their Subsidiaries are in compliance with the financial covenants set forth in Article X hereof as at the end of each respective period.
SECTION 8.4 Other Reports. (a) Promptly but in any event within ten (10) Business Days after the filing thereof, a copy of (i) each report or other filing made by the Credit Parties or any or their Subsidiaries with the Securities and Exchange Commission and required by the Securities and Exchange Commission to be delivered to the shareholders of the Credit Parties or any or their Subsidiaries, (ii) each report made by the Credit Parties or any of their Subsidiaries to the Securities and Exchange Commission on Form 8-K and (iii) each final registration statement of the Credit Parties or any of their Subsidiaries filed with the Securities and Exchange Commission, except in connection with pension plans and other employee benefit plans; and
(b) Such other information regarding the operations, business affairs and financial condition of the Credit Parties or any of their Subsidiaries as the Administrative Agent or any Lender may reasonably request.
SECTION 8.5 Notice of Litigation and Other Matters. Prompt (but in no event later than ten (10) Business Days after a principal officer of the Credit Parties obtains knowledge thereof) telephonic (confirmed in writing) or written notice of:
(a) the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the Credit Parties or any Subsidiary thereof or any of their respective properties, assets or businesses which in the reasonable judgment of the Credit Parties could reasonably be expected to have a Material Adverse Effect;
(b) any notice of any violation received by the Credit Parties or any Subsidiary thereof from any Governmental Authority including, without limitation, any notice of violation of
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Environmental Laws, which in the reasonable judgment of the Credit Parties in any such case could reasonably be expected to have a Material Adverse Effect;
(c) any Default or Event of Default; and
(d) (i) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy thereof) which could reasonably be expected to have a Material Adverse Effect, (ii) all notices received by the Credit Parties or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iii) all notices received by the Credit Parties or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA which could reasonably have a Material Adverse Effect and (iv) the Credit Parties obtaining knowledge or reason to know that the Credit Parties or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA.
SECTION 8.6 Accuracy of Information. All written information, reports, statements and other papers and data furnished by or on behalf of the Credit Parties to the Administrative Agent or any Lender (other than financial forecasts) whether pursuant to this Article VIII or any other provision of this Agreement, shall be, at the time the same is so furnished, true and complete in all material respects.
ARTICLE IX
AFFIRMATIVE COVENANTS
Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner provided for in Section 14.11, the Credit Parties will, and will cause each of their Subsidiaries to:
SECTION 9.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 11.5, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction where the nature and scope of its activities require it to so qualify under Applicable Law in which the failure to so qualify would have a Material Adverse Effect.
SECTION 9.2 Maintenance of Property. Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property material to the conduct of its business, ordinary wear and tear excepted; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times.
SECTION 9.3 Insurance. Maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law.
SECTION 9.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties.
SECTION 9.5 Payment and Performance of Obligations. Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay (a) all material taxes, assessments and other
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governmental charges that may be levied or assessed upon it or any of its property, and (b) all other material indebtedness, obligations and liabilities in accordance with customary trade practices; provided, that the Credit Parties or such Subsidiary may contest any item described in clause (a) or (b) of this Section 9.5 in good faith so long as adequate reserves are maintained with respect thereto to the extent required by GAAP. It is expected that all payments in respect of the Obligations, the Existing Debt Securities and the Additional Debt Securities will be made by the Borrower.
SECTION 9.6 Compliance With Laws and Approvals. Observe and remain in compliance with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case applicable to the conduct of its business except where the failure to observe or comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 9.7 Environmental Laws. In addition to and without limiting the generality of Section 9.6, (a) comply with, and use best efforts to ensure such compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and use its best efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except where the failure to comply could not reasonably have a Material Adverse Effect, (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws except (i) where the failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) to the extent the Credit Parties or any of their Subsidiaries are contesting, in good faith, any such requirement, order or directive before the appropriate Governmental Authority so long as adequate reserves are maintained with respect thereto to the extent required by GAAP, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Credit Parties or such Subsidiaries, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 9.8 Compliance with ERISA. In addition to and without limiting the generality of Section 9.6, (a) comply with all applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, except where the failure to comply could not reasonably be expected to have a Material Adverse Effect, (b) not take any action or fail to take action the result of which would result in a liability to the PBGC or to a Multiemployer Plan in an amount that could reasonably be expected to have a Material Adverse Effect, and (c) furnish to the Administrative Agent upon the Administrative Agent's request such additional information about any Employee Benefit Plan concerning compliance with this covenant as may be reasonably requested by the Administrative Agent.
SECTION 9.9 Conduct of Business. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date (including, without limitation, the apparel and/or footwear industry generally) and in lines of business reasonably related thereto (collectively, "Permitted Lines of Business"), or as otherwise permitted pursuant to the terms of this Agreement. SECTION 9.10 Visits and Inspections. Permit representatives of the Administrative Agent or any Lender, from time to time upon reasonable prior notice to visit and inspect its properties; inspect and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects.
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SECTION 9.11 Use of Proceeds. The Credit Parties shall use the proceeds of the Revolving Credit Loans to (a) refinance certain existing Debt, (b) for working capital and general corporate purposes of the Credit Parties and their Subsidiaries, including acquisitions and stock repurchases and (c) the payment of certain fees and expenses incurred in connection with the transactions contemplated hereby or thereby.
ARTICLE X
FINANCIAL COVENANTS
Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties and their Subsidiaries on a Consolidated basis will not:
SECTION 10.1 Interest Coverage Ratio. As of the end of any fiscal quarter, permit the ratio (the "Interest Coverage Ratio") of (a) EBITDAR for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (b) the sum of (i) Interest Expense paid or payable in cash and (ii) Rental Expense, both for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, to be less than (i) 2.0 to 1.0 for the period from the Closing Date through and including the fiscal quarter ending closest to September 30, 2000; (ii) 2.25 to 1.0 thereafter for the period through and including the end of the fiscal quarter ending closest to September 30, 2001; (iii) 2.5 to 1.0 thereafter for the period through and including the fiscal quarter ending closest to September 30, 2002; and (iv) 2.75 to 1.0 for all times thereafter.
SECTION 10.2 Minimum Net Worth. As of the end of any fiscal quarter, permit Consolidated Net Worth to be less than $905,772,400.
ARTICLE XI
NEGATIVE COVENANTS
Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment has expired or been terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties will not and will not permit any of their Subsidiaries to:
SECTION 11.1 Limitations on Debt and Guaranty Obligations. Create, incur, assume or suffer to exist any Debt, including Guaranty Obligations, except:
(a) the Obligations of the Credit Parties;
(b) the Five-Year Credit Agreement Obligations;
(c) Debt existing on the Closing Date (other than the Five-Year Credit Agreement Obligations), including the Debt as set forth on Schedule 7.1(p);
(d) Debt in the form of additional credit facilities of the Credit Parties or their Subsidiaries for borrowings denominated in currencies other than Dollars; provided that the equivalent Dollar Amount of the aggregate commitment thereunder does not exceed $50,000,000 on any date of determination;
(e) Debt of the Credit Parties and their Subsidiaries, not otherwise permitted under this Section 11.1, incurred in connection with (i) Capitalized Leases, (ii) purchase money Debt, (iii) Debt of a Subsidiary incurred and outstanding on or prior to the date on which such Subsidiary was acquired by any Credit Party or otherwise became a Subsidiary of such Credit Party (other than Debt incurred as consideration in, or to provide all or any portion of the funds or
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credit support utilized to consummate, the transaction or series of transactions pursuant to which such Subsidiary became a Subsidiary of such Credit Party or was otherwise acquired by such Credit Party) and (iv) any other unsecured Debt of the Subsidiaries of the Credit Parties in an aggregate outstanding amount (excluding any attributable Debt from the contemplated sale leaseback transaction involving the Credit Parties' distribution warehouse at South Hill, Virginia) not to exceed fifteen percent (15%) of Consolidated Net Worth of the Credit Parties and their Subsidiaries on any date of determination;
(f) additional Debt of the Credit Parties, not otherwise permitted under this Section 11.1, arising under or in connection with public or privately placed notes, debentures, bonds, or debt securities or related indentures or other agreements (the "Additional Debt Securities") so long as no Default or Event of Default exists on the date any such Additional Debt Security is created or arises as a result of any borrowing thereunder, except in connection with the issuance of exchange securities in connection with any exchange offer registered under the Securities Act of 1933, as amended, following a private placement of Additional Debt Securities;
(g) other Debt of the Credit Parties, not otherwise permitted under this Section 11.1, in an aggregate outstanding amount not to exceed $300,000,000 on any date of determination;
(h) Debt of the Credit Parties to any Subsidiary or any other Credit Party and of any Subsidiary to the Credit Parties or any other Subsidiary;
(i) Debt incurred in respect of the extension, renewal, refinancing, replacement or refunding (collectively, the "refinancing") of Debt incurred pursuant to clause (a), (b), (c) or (e); provided, that (i) such Debt is an aggregate principal amount (or if incurred with original issue discount, an aggregate issue price) not in excess of the sum of (x) the aggregate principal amount (or if incurred with original issue discount, the aggregate accreted value) then outstanding of the Debt being refinanced and (y) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such refinancing, (ii) the average life of such Debt is equal to or greater than the average life of the Debt being refinanced, (iii) the stated maturity of such Debt is no earlier than the stated maturity of the Debt being refinanced; and (iv) the new Debt shall not be senior in right of payment to the Debt that is being refinanced; provided, that none of the Debt permitted to be incurred by this Section shall expressly restrict, limit or otherwise encumber (unless such restriction, limitation or other encumbrance is a Permitted Encumbrance (as defined below)), the ability of any Subsidiary of the Credit Parties to make any payment to the Credit Parties or any of their Subsidiaries (in the form of dividends, intercompany advances or otherwise) for the purpose of enabling the Credit Parties to pay the Obligations. For purposes of this Section 11.1, with regard to any Debt, a "Permitted Encumbrance" shall mean any restriction, limitation or other encumbrance that applies solely if a default or event of default (other than a default resulting solely from the breach of a representation or warranty) occurs and is continuing under such Debt; provided further that, with respect to any default or event of default (other than a payment default, including as a result of acceleration, or a bankruptcy event with respect to the obligor of such Debt), such encumbrance or restriction may not prohibit dividends to the Credit Parties or any Subsidiary hereof to pay the Obligations for more than one hundred eighty (180) days in any consecutive three hundred sixty (360) day period.
SECTION 11.2 [Reserved].
SECTION 11.3 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including without limitation shares of capital stock or other ownership interests), real or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace, if any, related thereto has not expired or which are
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being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation or obligations under customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which do not, in any case, materially detract from the value of such property or materially impair the use thereof in the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the Administrative Agent and the Lenders;
(f) Liens incurred in the ordinary course of business securing Debt of the Credit Parties permitted under Section 11.1 not to exceed $75,000,000 in the aggregate outstanding in addition to Liens existing on the Closing Date;
(g) Liens existing on any property or asset prior to the acquisition thereof by the Credit Parties or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary or is merged with or into the Credit Parties or any Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary or is so merged;
(h) Liens in existence on the Closing Date and described on Schedule 11.3;
(i) Liens securing Debt incurred in connection with Capitalized Leases and purchase money Debt permitted under Section 11.1(e); provided that (i) such Liens shall be created substantially simultaneously with the acquisition of the related asset, (ii) such Liens do not at any time encumber any property other than the property financed by such Debt, (iii) the amount of Debt secured thereby is not increased and (iv) the principal amount of Debt secured by any such Lien shall at no time exceed one hundred percent (100%) of the original purchase price of such property at the time it was acquired;
(j) Liens incurred to secure appeal bonds and judgment and attachment Liens in respect of judgments or orders that do not constitute an Event of Default under Section 12.1(m);
(k) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of setoff or similar rights and remedies, in each case as to deposit accounts or other funds maintained with a creditor depository institution;
(l) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(m) Liens arising in the ordinary course of business that do not secure monetary obligations;
(n) Liens arising by the terms of letters of credit entered into in the ordinary course of business to secure reimbursement obligations thereunder;
(o) Liens securing Debt or other obligations between the Credit Parties and a Subsidiary or between Subsidiaries or Credit Parties;
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(p) Liens granted to any bank or other institution securing the payments to be made to such bank or other institution by the Credit Parties or a Subsidiary of the Credit Parties pursuant to any Hedging Agreement; provided that, such agreements are entered into in, or are incidental to, the ordinary course of business; and (q) The refinancing of any Lien referred to in clause (g), (h), (i) or (p) provided, that the principal amount of Debt (or, if incurred with original issue discount, an aggregate issue price) secured thereby and not otherwise authorized by clause (g), (h), (i) or (p) shall not exceed the principal amount of Debt (or if incurred without original issue discount, the aggregate accreted value) plus any fees and expenses, including premiums and defeasance costs, payable in connection with any such extension, renewal, replacement or refunding, so secured at the time of such extension, renewal, replacement or refunding.
SECTION 11.4 Limitations on Loans, Advances, Investments and Acquisitions. Purchase, own, invest in or otherwise acquire, directly or indirectly, any capital stock (other than capital stock of the Credit Parties), interests in any partnership, limited liability company or joint venture (including without limitation the creation or capitalization of any Subsidiary), evidence of Debt or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person, or enter into, directly or indirectly, any commitment or option in respect of the foregoing (collectively, "Investments") except:
(a) Investments in Subsidiaries existing on the Closing Date and the other existing loans, advances and Investments described on Schedule 11.4;
(b) Investments made in accordance with the investment policy of the Credit Parties, provided that any material amendment or other material modification to such policy shall have been approved by the Administrative Agent and determined to be acceptable in its reasonable discretion;
(c) Investments by the Credit Parties or any Subsidiary in the form of acquisitions, including acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of capital stock, assets or any combination thereof) of any other Person, so long as (i) a Responsible Officer certifies to the Administrative Agent and the Required Lenders that no Default or Event of Default has occurred and is continuing or would result from the closing of such acquisition, such certification to include, for any acquisition involving a purchase price in excess of $50,000,000, either individually or in an series of related transactions, a financial condition certificate to which is attached a pro forma balance sheet of Jones Apparel Group and its Subsidiaries setting forth on a pro forma basis the financial conditions of Jones Apparel Group and its Subsidiaries on a Consolidated basis as of December 31, 1999, reflecting on a pro forma basis the effect of the transactions contemplated by such acquisition, including all fees and expenses in connection therewith, and evidencing compliance on a pro forma basis with the covenants contained in Article X hereof, and (ii) such acquisition meets either of the following requirements: (A) such acquisition is within a Permitted Line of Business, or (B) such acquisition is outside a Permitted Line of Business but the price for such acquisition, together with all other acquisitions outside the Permitted Lines of Business, does not exceed $50,000,000 in the aggregate;
(d) Investments (other than acquisitions) in the Permitted Lines of Business;
(e) Investments (other than acquisitions) outside Permitted Lines of Business not in excess of $50,000,000 in the aggregate;
(f) loans and advances to third party contractors in the ordinary course of business and consistent with past practice not to exceed in an aggregate outstanding amount $6,000,000 (excluding such loans and advances consisting of prepayments or advances for inventory or
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services); and loans and advances to employees of the Credit Parties and their Subsidiaries in an aggregate outstanding amount not to exceed $4,000,000; and
(g) intercompany loans and advances among the Credit Parties and their Subsidiaries so long as permitted under the terms of Sections 11.1 and 11.3.
SECTION 11.5 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except so long as no Default or Event of Default has occurred and is continuing, or would result therefrom:
(a) any Credit Party may merge with or into any Person; provided that (i) such Credit Party shall be the survivor of such merger or (ii) the survivor assumes and succeeds to the Obligations of such Credit Party pursuant to an assumption agreement in form reasonably satisfactory to the Administrative Agent and the Required Lenders;
(b) any Wholly-Owned Subsidiary of the Credit Parties may merge with or into any other Wholly-Owned Subsidiary of the Credit Parties;
(c) any Wholly-Owned Subsidiary may merge with or into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition permitted by Section 11.4(b), (c) or (d);
(d) any Wholly-Owned Subsidiary of the Credit Parties may merge with or into any Credit Party; provided that, such Credit Party is the survivor of such merger; and
(e) any Credit Party may merge with or into any other Credit Party.
SECTION 11.6 Limitations on Sale or Transfer of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired (collectively, "sale"), except for the following:
(a) the sale of inventory or the factoring of accounts receivable in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the business of the Credit Parties or any of their Subsidiaries;
(c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;
(d) the sale of assets between the Credit Parties and any Subsidiary or between Subsidiaries or Credit Parties;
(e) the sale of any other assets of the Credit Parties and their Subsidiaries outside the ordinary course of business so long as the total fair market value for all such sales on an aggregate basis does not at any time exceed thirty-three percent (33%) of Consolidated Net Worth; and
(f) the contemplated sale leaseback transaction involving the Credit Parties' distribution warehouse in South Hill, Virginia.
SECTION 11.7 Limitations on Dividends and Distributions. Declare or pay any dividends upon any of its capital stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock, or make any distribution of cash, property or assets among the holders of shares of its capital stock, or make any change in its capital structure that could reasonably be expected to have a Material Adverse Effect; provided that: (a) the Credit Parties may pay dividends solely in shares of their own capital stock or other ownership interest (including dividends consisting of rights to purchase such
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capital stock or other ownership interest), (b) any Subsidiary may pay dividends or make distributions to the Credit Parties or any Wholly-Owned Subsidiary of the Credit Parties, (c) any Credit Party may pay dividends or make distributions to any other Credit Party and (d) as long as no Default or Event of Default has occurred and is continuing or would be created thereby (i) the Credit Parties may declare and pay dividends on shares of their capital stock or other ownership interests, (ii) the Credit Parties or any Subsidiary may redeem shares of their capital stock or other ownership interest pursuant to a plan approved by the Board of Directors of the Credit Parties or such Subsidiary, as applicable and (iii) the Credit Parties or any Subsidiary may take any action otherwise prohibited by this Section 11.7.
SECTION 11.8 Transactions with Affiliates. Directly or indirectly enter into, or be a party to, any transaction with any of its Affiliates, except (i) on terms that are no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not its Affiliate, (ii) as contemplated by the Sun Acquisition Agreement or (iii) for transactions between Credit Parties or between Credit Parties and Subsidiaries of Credit Parties.
SECTION 11.9 Changes in Fiscal Year End. Change its Fiscal Year.
SECTION 11.10 Amendments; Payments and Prepayments of Material Debt and Subordinated Debt. Upon the occurrence and continuation of a Default or an Event of Default, amend or modify (or permit the modification or amendment of) in any manner materially adverse to the Lenders any of the terms or provisions of any Debt in excess of $25,000,000, including without limitation the Additional Debt Securities, if any, or any Subordinated Debt, or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including without limitation by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any Subordinated Debt.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement Obligations. The Borrower shall default in any payment of principal of any Revolving Credit Loan or Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Revolving Credit Loan or Reimbursement Obligation or the payment of any other Obligation (other than any Obligation under any Hedging Agreement), and such default shall continue unremedied for three (3) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed to be made by the Credit Parties or any of their Subsidiaries, if applicable, under this Agreement, any Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any of the Credit Parties shall default in the performance or observance of any covenant or agreement contained in Article X or XI of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any of the Credit Parties or any Subsidiary thereof, if applicable, shall default in the performance or observance of
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any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 12.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Administrative Agent.
(f) Hedging Agreement. Any termination payments in an amount greater than $35,000,000 shall be due by any Credit Party under any Hedging Agreement and such amount is not paid within thirty (30) Business Days of the due date thereof.
(g) Debt Cross-Default. Any of the Credit Parties or any of their Subsidiaries shall (i) default in the payment of any Debt (other than the Revolving Credit Loans or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $35,000,000, including, without limitation, the obligations under the Five-Year Credit Agreement, beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Revolving Credit Loans or any Reimbursement Obligation), including, without limitation, the obligations under the Five-Year Credit Agreement and any other documents executed in connection therewith, the aggregate outstanding amount of which Debt is in excess of $35,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired).
(h) Change in Control. Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) shall obtain ownership or control in one or more series of transactions of more than thirty three and one-third percent (33.33%) of the common stock or thirty-three and one-third percent (33.33%) of the voting power of any Credit Party entitled to vote in the election of members of the board of directors of such Credit Party or there shall have occurred under any indenture or other instrument evidencing any debt in excess of $35,000,000 any "change in control" (as defined in such indenture or other evidence of debt) obligating the Borrower to repurchase, redeem or repay all or any part of the debt or capital stock provided for therein (any such event, a "Change in Control"). Further, except as set forth in Section 11.5, Jones Apparel Group shall at all times own 100% of the capital stock of Jones Apparel Group Holdings and Jones Apparel Group Holdings shall at all times own 100% of the capital stock of the Borrower.
(i) Voluntary Bankruptcy Proceeding. Any Credit Party or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against any Credit Party or any Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for any Credit Party or any Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief
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requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered.
(k) [Reserved]
(l) Termination Event. The occurrence of any of the following events: (i) the Borrower or any ERISA Affiliate fails to make full payment to an Employee Benefit Plan when due (after giving effect to any applicable grace period) of contributions in excess of $2,000,000 (ii) an accumulated funding deficiency in excess of $2,000,000 occurs or exists, whether or not waived, with respect to any Pension Plan or (iii) a Termination Event that could reasonably be expected to result in liability in excess of $5,000,000 to the Borrower or any ERISA Affiliate.
(m) Judgment. A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $35,000,000 in any Fiscal Year shall be entered against any Credit Party or any Subsidiary thereof by any court and such judgment or order shall continue without discharge or stay for a period of thirty (30) days.
SECTION 12.2 Remedies. Upon the occurrence of an Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Credit Parties:
(a) Acceleration; Termination of Facilities. Declare the principal of and interest on the Revolving Credit Loans, the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents (other than any Hedging Agreement) (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and all other Obligations (other than Obligations owing under any Hedging Agreement), to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 12.1(i) or (j) with respect to the Credit Parties, the Credit Facility shall be automatically terminated and all Obligations (other than obligations owing under any Hedging Agreement) shall automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, require the Borrower at such time to deposit or cause to be deposited in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Amount of the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations. After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be promptly returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Obligations.
SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in
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addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Credit Parties, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default.
ARTICLE XIII
THE ADMINISTRATIVE AGENT
SECTION 13.1 Appointment. Each of the Lenders hereby irrevocably designates and appoints First Union as Administrative Agent of such Lender under this Agreement and the other Loan Documents for the term hereof and each such Lender irrevocably authorizes First Union as Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Administrative Agent. Any reference to the Administrative Agent in this Article XIII shall be deemed to refer to the Administrative Agent solely in its capacity as Administrative Agent and not in its capacity as a Lender.
SECTION 13.2 Delegation of Duties. The Administrative Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Administrative Agent with reasonable care.
SECTION 13.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries.
SECTION 13.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the holder of any Revolving Credit Loan as the owner thereof for all purposes unless such Revolving Credit Loan shall have been transferred
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in accordance with Section 14.10 hereof. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders (or, when expressly required hereby or by the relevant other Loan Document, all the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, when expressly required hereby, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Revolving Credit Loans.
SECTION 13.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, it shall promptly give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, except to the extent that other provisions of this Agreement expressly require that any such action be taken or not be taken only with the consent and authorization or the request of the Lenders or Required Lenders, as applicable.
SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in- fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Revolving Credit Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder or by the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 13.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such and (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Revolving Credit Commitment Percentage from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Revolving Credit Loans or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any
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action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent they result from the Administrative Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 13.7 shall survive the payment of the Revolving Credit Loans, any Reimbursement Obligation and all other amounts payable hereunder and the termination of this Agreement.
SECTION 13.8 The Administrative Agent in Its Individual Capacity. The Administrative Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not an Administrative Agent hereunder. With respect to any Revolving Credit Loans made or renewed by it and with respect to any Letter of Credit issued by it or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity.
SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent. Subject to the appointment and acceptance of a successor as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Credit Parties. Upon any such resignation, the Required Lenders shall have the right, subject to the approval of the Credit Parties (so long as no Default or Event of Default has occurred and is continuing), to appoint a successor Administrative Agent, which successor shall have minimum capital and surplus of at least $500,000,000. If no successor Administrative Agent shall have been so appointed by the Required Lenders, been approved (so long as no Default or Event of Default has occurred and is continuing) by the Credit Parties or have accepted such appointment within thirty (30) days after the Administrative Agent's giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably acceptable to the Credit Parties (so long as no Default or Event of Default has occurred and is continuing), which successor shall have minimum capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 13.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent.
SECTION 13.10 Syndication Agents. Each Syndication Agent in their capacity as Syndication Agent shall have no duties or responsibilities and no liabilities under this Agreement or any other Loan Document but shall be entitled, in such capacity, to the same protections afforded to the Administrative Agent under this Article XIII.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to the Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing.
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If to the Credit Parties
Jones Apparel Group, Inc. 250 Rittenhouse Circle Bristol, Pennsylvania 19007 Attention: Chief Financial Officer Telephone No.: (215) 785-4000 Telecopy No.: (215) 785-1228
If to First Union as
First Union National Bank Administrative Agent: One First Union Center, TW 4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone No.: (704) 374-2698 Telecopy No.: (704) 383-0288
With copies to:
First Union National Bank 1345 Chestnut Street, PA4830 Philadelphia, Pennsylvania 19107-7618 Attention: Syndication Agency Services Telephone No.: (215) 973-6621 Telecopy No.: (215) 973-1887
If to any Lender:
To the Address set forth on Schedule 1.1(a) hereto
(c) Administrative Agent's Office. The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and the Lenders, as the Administrative Agent's Office referred to herein, to which payments due are to be made and at which Revolving Credit Loans will be disbursed.
SECTION 14.2 Expenses; Indemnity. The Borrower will (a) pay all reasonable out-of-pocket expenses of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement and each other Loan Document, whenever the same shall be executed and delivered, including without limitation the reasonable out-of-pocket syndication and due diligence expenses and reasonable fees and disbursements of counsel for the Administrative Agent and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Administrative Agent or the Lenders relating to this Agreement or any other Loan Document, including without limitation reasonable fees and disbursements of counsel for the Administrative Agent, (b) pay all reasonable out-of-pocket expenses of the Administrative Agent actually incurred in connection with the administration of the Credit Facility, (c) pay all reasonable out-of-pocket expenses of the Administrative Agent and each Lender actually incurred in connection with the enforcement of any rights and remedies of the Administrative Agent and the Lenders under the Credit Facility, including to the extent reasonable under the circumstances consulting with accountants, attorneys and other Persons concerning the nature, scope or value of any right or remedy of the Administrative Agent or any Lender hereunder or under any other Loan Document or any factual matters in connection therewith, which expenses shall include without limitation the reasonable fees and disbursements of such Persons, and (d) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, Administrative Agents, officers and directors, from and against any losses, penalties, fines, liabilities, settlements, damages, costs and expenses, suffered by any such Person in connection with any claim, investigation, litigation or other proceeding (whether or not the
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Administrative Agent or any Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with this Agreement, any other Loan Document or the Revolving Credit Loans, including without limitation reasonable attorney's and consultant's fees, except to the extent that any of the foregoing result from the gross negligence or willful misconduct of any indemnified party.
SECTION 14.3 Set-off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders and any assignee or participant of a Lender in accordance with Section 14.10 are hereby authorized by the Credit Parties at any time or from time to time, without notice to the Credit Parties or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lenders, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Administrative Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 12.2 and although such Obligations shall be contingent or unmatured.
SECTION 14.4 Governing Law. This Agreement, the Revolving Credit Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York.
SECTION 14.5 Consent to Jurisdiction. Each of the parties hereto hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in New York County, New York, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. Each of the parties hereto hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by any other party hereto in connection with this Agreement or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 14.1. Nothing in this Section 14.5 shall affect the right of any of the parties hereto to serve legal process in any other manner permitted by Applicable Law or affect the right of any of the parties hereto to bring any action or proceeding against any other party hereto or its properties in the courts of any other jurisdictions.
SECTION 14.6 Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH CREDIT PARTY HEREBY ACKNOWLEDGE THEY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY JUDICIAL PROCEEDING, ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF, CONNECTED WITH OR RELATING TO THE LOAN DOCUMENTS ("Dispute") IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 14.7 Reversal of Payments. To the extent any Credit Party makes a payment or payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative Agent receives any payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent.
SECTION 14.8 Injunctive Relief; Punitive Damages. (a) Each of the parties to this Agreement recognizes that, in the event such party fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the other parties hereto. Therefore, each of the parties hereto agrees that the other parties hereto, at such other party's option,
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shall be entitled to pursue temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
(b) The Administrative Agent, Lenders and the Credit Parties (on behalf of themselves and their Subsidiaries) hereby agree that no such Person shall have a remedy of punitive or exemplary damages against any other party to a Loan Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in connection with any Dispute, whether such Dispute is resolved through arbitration or judicially.
SECTION 14.9 Accounting Matters. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time, provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance therewith.
SECTION 14.10 Successors and Assigns; Participations. (a) Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the Credit Parties, the Administrative Agent and the Lenders, all future holders of the Revolving Credit Notes, and their respective successors and permitted assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender other than pursuant to Section 11.5.
(b) Assignment by Lenders. Each Lender may, with the consent of the Borrower (so long as no Default or Event of Default has occurred and is continuing) and the consent of the Administrative Agent, which consents shall not be unreasonably withheld, assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Extensions of Credit at the time owing to it and the Revolving Credit Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's Revolving Credit Commitment and all other rights and obligations under this Agreement;
(ii) if less than all of the assigning Lender's Revolving Credit Commitment or Revolving Credit Loans is to be assigned, the Revolving Credit Commitment or Revolving Credit Loans so assigned shall not be less than $10,000,000;
(iii) 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 in the form of Exhibit G attached hereto (an "Assignment and Acceptance"), together with any Revolving Credit Note or Revolving Credit Notes subject to such assignment;
(iv) such assignment shall not, without the consent of the Borrower, on behalf of itself and the other Credit Parties, require the Borrower, or any Credit Party, to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Revolving Credit Loans or the Revolving Credit Notes under the blue sky laws of any state;
(v) the assigning Lender shall pay to the Administrative Agent an assignment fee of $3,000 upon the execution by such Lender of the Assignment and Acceptance; provided that no such fee shall be payable upon any assignment by a Lender to an Affiliate thereof; and
(vi) no consents will be required for assignments where the Eligible Assignee is an Affiliate of the assigning Lender.
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Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least ten (10) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned in such Assignment and Acceptance, have the rights and obligations of a Lender hereby and (B) the Lender thereunder shall, to the extent of the interest assigned in such assignment, be released from its obligations under this Agreement.
(c) Rights and Duties upon Assignment. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and record the names and addresses of the Lenders and the amount of the Extensions of Credit with respect to each Lender from time to time in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or Lender at any reasonable time and from time to time upon reasonable prior notice.
(e) Issuance of New Revolving Credit Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Eligible Assignee together with any Revolving Credit Note or Revolving Credit Notes if any have been issued pursuant to this Agreement, subject to such assignment and the written consent to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower, on behalf of itself and the other Credit Parties; and
(iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower.
Within ten (10) Business Days after receipt of notice, if requested by the Eligible Assignee the Borrower shall execute and deliver to the Administrative Agent, in exchange for the surrendered Revolving Credit Note or Revolving Credit Notes, a new Revolving Credit Note or Revolving Credit Notes to the order of such Eligible Assignee in amounts equal to the Revolving Credit Commitment assumed by it pursuant to such Assignment and Acceptance and a new Revolving Credit Note or Revolving Credit Notes to the order of the assigning Lender in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Revolving Credit Note or Revolving Credit Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Revolving Credit Note or Revolving Credit Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Revolving Credit Notes delivered to the assigning Lender. Each surrendered Revolving Credit Note or Revolving Credit Notes shall be canceled and returned to the Borrower.
(f) Participations. Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and/or obligations under this Agreement (including, without limitation, all or a portion of its Extensions of Credit and the Revolving Credit Notes held by it); provided that:
(i) each such participation shall be in an amount not less than $10,000,000;
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(ii) such Lender's obligations under this Agreement (including, without limitation, its Revolving Credit Commitment) shall remain unchanged; (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;
(iv) the Credit Parties, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement;
(v) such Lender shall not permit such participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on any Revolving Credit Loan or Reimbursement Obligation, extend the term or increase the amount of the Revolving Credit Commitment, reduce the amount of any fees to which such participant is entitled, or extend any scheduled payment date for principal, interest or fees of any Revolving Credit Loan, except as expressly contemplated hereby or thereby; and
(vi) any such disposition shall not, without the consent of the Borrower, on behalf of itself and the other Credit Parties, require the Borrower or any other Credit Party, to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Revolving Credit Loans or the Revolving Credit Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the prior written consent of the Credit Parties, (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, the Issuing Lenders or any Lender on a nonconfidential basis from a source other than the Credit Parties or (i) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information (customarily found in such publications) upon the Credit Parties' prior review and approval, which shall not be unreasonably withheld or delayed. For the purposes of this Section, "Information" means all information received from the Credit Parties or any of their Subsidiaries relating to the Credit Parties or their business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Credit Parties; provided that, in the case of information received from the Credit Parties after the Closing Date (other than certificates or other information specifically required by the terms of this Agreement), such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
(h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle organized for the specific purpose of making or acquiring participations or investing in loans of the type made pursuant to this Agreement (a "SPC"), correctly identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Extension of Credit that such Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to
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make any Extension of Credit and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Extension of Credit, the Granting Lender shall be obligated to make such Extension of Credit pursuant to the terms hereof. The making of an Extension of Credit by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Extension of Credit were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this clause, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interest in any Extension of Credit to the Granting Lender or to any financial institution (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Extensions of Credit and (ii) disclose on a confidential basis any non-public information relating to Extensions of Credit to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This clause may not be amended without the written consent of each SPC.
(i) Certain Pledges or Assignments. Nothing herein shall prohibit any Lender from pledging or assigning any Revolving Credit Note to any Federal Reserve Bank in accordance with Applicable Law.
SECTION 14.11 Amendments, Waivers and Consents. Except as set forth below, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, (a) in the case of an amendment, waiver or consent for which a substantially similar corresponding amendment, waiver or consent with regard to the Five-Year Credit Agreement will be made effective thereunder contemporaneously, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Credit Parties and (b) in the case of any other amendment, waiver or consent specifically impacting only this Agreement and the other Loan Documents, such amendment, waiver or consent is in writing signed by the Required Agreement Lenders (or by the Administrative Agent with the consent of the Required Agreement Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Credit Parties; provided, in each case, that:
(a) no amendment, waiver or consent shall (i) release any of the Credit Parties, (ii) increase the amount or extend the time of the obligation of the Lenders to make Revolving Credit Loans or issue or participate in Letters of Credit (except as expressly contemplated by Section 2.6), (iii) extend the originally scheduled time or times of payment of the principal of any Revolving Credit Loan or Reimbursement Obligation or the time or times of payment of interest or fees on any Revolving Credit Loan or Reimbursement Obligation, (iv) reduce the rate of interest or fees payable on any Revolving Credit Loan or Reimbursement Obligation, (v) reduce the principal amount of any Revolving Credit Loan or Reimbursement Obligation, (vi) permit any subordination of the principal or interest on any Revolving Credit Loan or Reimbursement Obligation, (vii) permit any assignment (other than as specifically permitted or contemplated in this Agreement) of any of the Credit Parties' rights and obligations hereunder or (viii) amend the provisions of this Section 14.11 or the definition of Required Lenders or Required Agreement Lenders, without the prior written consent of each Lender affected thereby; and
(b) no amendment, waiver or consent to the provisions of (i) Article XIII shall be made without the written consent of the Administrative Agent and (ii) Article III without the written consent of each Issuing Lender affected thereby.
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SECTION 14.12 Performance of Duties. The Credit Parties' obligations under this Agreement and each of the Loan Documents shall be performed by the Credit Parties at their sole cost and expense.
SECTION 14.13 All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Credit Facility has not been terminated.
SECTION 14.14 Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this Article XIV and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before.
SECTION 14.15 Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.
SECTION 14.16 Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 14.17 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 shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. Delivery of any executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 14.18 Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations (other than obligations owing by any Credit Party to any Lender or Affiliate of a Lender or the Administrative Agent under any Hedging Agreement) shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination.
SECTION 14.19 Inconsistencies with Other Documents; Independent Effect of Covenants. (a) In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control.
(b) The Borrower expressly acknowledges and agrees that each covenant contained in Article IX, X, or XI hereof shall be given independent effect.
[Signature pages to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their authorized officers, all as of the day and year first written above.
JONES APPAREL GROUP USA, INC. as Borrower
By: /s/ Wesley R. Card Name: Wesley R. Card Title: Chief Financial Officer
JONES APPAREL GROUP, INC. as Additional Obligor
By: /s/ Wesley R. Card Name: Wesley R. Card Title: Chief Financial Officer
JONES APPAREL GROUP HOLDINGS, INC. as Additional Obligor
By: /s/ Ira M. Dansky Name: Ira M. Dansky Title: President
NINE WEST GROUP INC. as Additional Obligor
By: /s/ Jeffrey K. Howald Name: Jeffrey K. Howald Title: Chief Financial Officer
[Signature pages continue]
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FIRST UNION NATIONAL BANK, as Administrative Agent, Issuing Lender and Lender
By: /s/ Joan Anderson Name: Joan Anderson Title: VP
[Signature pages continue]
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THE CHASE MANHATTAN BANK, as Issuing Lender and Lender
By: /s/ D. Reid Morgan Name: D. Reid Morgan Title: Managing Director
[Signature pages continue]
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CITIBANK, N.A., as Lender
By: /s/ Robert M. Spence Name: Robert M. Spence Title: Managing Director Branded Consumer 399 Park Ave./5th Fl./Zone 9 (212) 559-0312
[Signature pages continue]
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FLEET NATIONAL BANK as Lender
By: /s/ Stephen J. Garvin Name: Stephen J. Garvin Title: Director
[Signature pages continue]
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BANK OF AMERICA, N.A., as Lender
By: /s/ Deirdre B. Doyle Name: Deirdre B. Doyle Title: Principal
[Signature pages continue]
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ABN AMRO BANK, N.V. as Lender
By: /s/ Cameron Gateman Name: Cameron Gateman Title: Group Vice President
[Signature pages continue]
By: /s/ Tracie Elliot Name: Tracie Elliot Title: Vice President
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BANCA NAZIONALE DELL'AGRICOLTURA, NEW YORK BRANCH as Lender
By: /s/ Domenico P. Loschiavo Name: Domenico P. Loschiavo Title: Senior Vice President & Deputy Branch Mgr. #1744
By: /s/ Constantine I. Manzini Name: Constantine I. Manzini Title: Counsel #1532
[Signature pages continue]
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BANK ONE, NA as Lender
By: /s/ Vincent R. Henchek Name: Vincent R. Henchek Title: Vice President
[Signature pages continue]
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HSBC BANK USA, as Lender
By: /s/ Adriana D. Collins Name: Adriana D. Collins Title: Vice President
[Signature pages continue]
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THE BANK OF NEW YORK as Lender
By: /s/ Russell A. Buri Name: Russell A. Buri Title: SVP
[Signature pages continue]
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BANCO DI NAPOLI, as Lender
By: /s/ Vito Spaca Name: Vito Spaca Title: Executive Vice President
By: /s/ Claude P. Mapes Name: Claude P. Mapes Title: First Vice President
[Signature pages continue]
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BANK OF CHINA, NEW YORK BRANCH as Lender
By: /s/ Chuanjie Li Name: Chuanjie Li Title: General Manager
[Signature pages continue]
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LAND BANK OF TAIWAN, LOS ANGELES BRANCH as Lender
By: /s/ Mayer Chen Name: Mayer Chen Title: SVP & General Manager
[Signature pages continue]
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BANK OF TAIWAN, NEW YORK AGENCY as Lender
By: /s/ Maw-Yan Lin Name: Maw-Yan Lin Title: SVP & General Manager
[Signature pages continue]
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BANCA NATIONALE DEL LAVORO S.P.A. as Lender
By: /s/ Roberto Mancone Name: Roberto Mancone Title: Vice President
By: /s/ Leonardo Valentini Name: Leonardo Valentini Title: First Vice President
[Signature pages continue]
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THE DAI-ICHI KANGYO BANK, LTD. as Lender
By: /s/ Nicholas A. Fiore Name: Nicholas A. Fiore Title: Vice President
[Signature pages continue]
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DEN DANSKE BANK as Lender
By: /s/ John A. O'Neill Name: John A. O'Neill Title: Vice President
By: /s/ Peter L. Hargraves Name: Peter L. Hargraves Title: Vice President [Signature pages continue]
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THE FUJI BANK, LIMITED as Lender
By: /s/ Yeh Tanaka Name: Yeh Tanaka Title: Vice President & Manager
[Signature pages continue]
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BANCA MONTE DEI PASCHI DI SIENA, NEW YORK BRANCH as Lender
By: /s/ S. M. Sondak Name: S. M. Sondak Title: F.V.P. & Dep. General Manager
By: /s/ Brian R. Landy Name: Brian R. Landy Title: Vice President
[Signature pages continue]
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BANK OF NOVA SCOTIA as Lender
By: /s/ Philip N. Adsetts Name: Philip N. Adsetts Title: Director
[Signature pages continue]
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BANCO BILBAO VIZCAYA ARGENTARIA as Lender
By: /s/ Alan B. Lefkowitz Name: Alan B. Lefkowitz Title: Senior Vice President
By: /s/ Alberto Conde Name: Alberto Conde Title: Vice President Corporate Banking
[Signature pages continue]
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CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH as Lender
By: /s/ Wan-Tu Yeh Name: Wan-Tu Yeh Title: VP & General Manager
[Signature pages continue]
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FIRSTAR CORPORATION as Lender
By: /s/ Stephen M. Reese Name: Stephen M. Reese Title: Vice President
[Signature pages continue]
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HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY as Lender
By: /s/ Yun-Peng Chang Name: Yun-Peng Chang Title: SVP & General Manager
[Signature pages continue]
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BANQUE SUDAMERIS, MIAMI AGENCY as Lender
By: /s/ Hubert de la Feld Name: Hubert de la Feld Title: Senior Vice President and Manager
By: /s/ Efrain C. Lopez Name: Efrain C. Lopez Title: Assistant Vice President
[Signature pages continue]
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BANCA DI ROMA as Lender
By: /s/ James B. Sieger Name: James B. Sieger Title: Vice President
By: /s/ Allesandro Paoli Name: Allesandro Paoli Title: Asst. Treasurer
[Signature pages continue]
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BANK HAPOALIM as Lender
By: /s/ James P. Surless Name: James P. Surless Title: VP
By: /s/ Conrad Wagner Name: Conrad Wagner Title: First Vice President
[Signature pages continue]
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BANK LEUMI USA as Lender
By: /s/ Steven Farrow Name: Steven Farrow Title: Vice President
[Signature pages continue]
86 <PAGE> 87
NATIONAL CITY BANK as Lender
By: /s/ Tara M. Handforth Name: Tara M. Handforth Title: Corp. Banking Officer
[Signature pages continue]
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ISRAEL DISCOUNT BANK OF NEW YORK as Lender
By: /s/ Howard Weinberg Name: Howard Weinberg Title: First Vice President
By: /s/ R. David Korngrum Name: David Korngrum Title: Vice President
[Signature pages continue]
88 <PAGE> 89
FIRST COMMERCIAL BANK, NEW YORK AGENCY as Lender
By: /s/ Vincent T. Chen Name: Vincent T. Chen Title: SVP & GM
[Signature pages continue]
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PNC BANK, N.A. as Lender
By: /s/ William F. Cattell Name: William F. Cattell Title: Vice President
[Signature pages continue]
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EXHIBIT A To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF REVOLVING CREDIT NOTE
$_____________________________________________________, 2000
FOR VALUE RECEIVED, the undersigned JONES APPAREL GROUP USA, INC., a corporation organized under the laws of Pennsylvania, (the "Borrower"), JONES APPAREL GROUP, INC., a corporation organized under the laws of Pennsylvania, JONES APPAREL GROUP HOLDINGS, INC., a corporation organized under the laws of Delaware, and NINE WEST GROUP INC., a corporation organized under the laws of Delaware (collectively, with the Borrower, the "Debtors"), hereby jointly and severally promise to pay to the order of _________________, (the "Lender"), at the place and times provided in the Credit Agreement referred to below, the principal sum of ______________________ DOLLARS ($_____________) or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans made to the Borrower by the Lender pursuant to that certain Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement") by and among Jones Apparel Group USA, Inc., the Additional Obligors referred to therein, the Lenders who are or may become a party thereto (collectively, the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
The unpaid principal amount of Revolving Credit Loans from time to time outstanding is subject to mandatory repayment from time to time as provided in the Credit Agreement and shall bear interest as provided in Section 5.1 of the Credit Agreement. All payments of principal and interest on Revolving Credit Loans shall be payable in lawful currency of the United States of America in immediately available funds to the account designated in the Credit Agreement.
This Revolving Credit Note (the "Revolving Credit Note") is entitled to the benefits of, and evidences Obligations incurred under, the Credit Agreement, to which reference is made for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Obligations evidenced by this Revolving Credit Note and on which such Obligations may be declared to be immediately due and payable.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
The Debt evidenced by this Revolving Credit Note is senior in right of payment to all Subordinated Debt referred to in the Credit Agreement.
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The Debtors hereby waive all requirements as to diligence, presentment, demand of payment, protest and (except as required by the Credit Agreement) notice of any kind with respect to this Revolving Credit Note.
IN WITNESS WHEREOF, the undersigned have executed this Revolving Credit Note under seal as of the day and year first above written.
JONES APPAREL GROUP USA, INC.
By: Name: Title:
JONES APPAREL GROUP, INC.
By: Name: Title:
JONES APPAREL GROUP HOLDINGS, INC.
By: Name: Title:
NINE WEST GROUP INC.
By: Name: Title:
92 <PAGE> 93
EXHIBIT B To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF NOTICE OF REVOLVING CREDIT BORROWING
NOTICE OF REVOLVING CREDIT BORROWING
Dated as of: ______________
First Union National Bank, as Administrative Agent One First Union Center, TW-4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Revolving Credit Borrowing is delivered to you under Section 2.2(a) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents.
1. The Borrower hereby requests that the Lenders make a Revolving Credit Loan to the Borrower in the aggregate principal amount of $___________. (Complete with an amount in accordance with Section 2.2(a) of the Credit Agreement.)
2. The Borrower hereby requests that such Revolving Credit Loan be made on the following Business Day: _____________________. (Complete with a Business Day in accordance with Section 2.2(a) of the Credit Agreement).
3. The Borrower hereby requests that the Revolving Credit Loan bear interest at the following interest rate, plus the Applicable Margin, as set forth below:
93 <PAGE> 94
Termination Date for Interest Period (LIBOR Interest Period (If Component of Loan Interest Rate Rate only) applicable) - ----------------- ------------- ---------------------- --------------------
Base Rate or LIBOR Rate
4. The principal Dollar Amount of all Revolving Credit Loans and L/C Obligations outstanding as of the date hereof (including the requested Revolving Credit Loan) does not exceed the maximum Dollar Amount permitted to be outstanding pursuant to the terms of the Credit Agreement.
5. The Borrower hereby represents and warrants that the conditions specified in Section 6.3 of the Credit Agreement have been satisfied or waived as of the date hereof.
6. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Revolving Credit Borrowing as of the ____ day of _______, ____.
JONES APPAREL GROUP USA, INC.
By:______________________________ Name: Title:
94 <PAGE> 95
EXHIBIT C To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF NOTICE OF ACCOUNT DESIGNATION
NOTICE OF ACCOUNT DESIGNATION
Dated as of: _________
First Union National Bank, as Administrative Agent One First Union Center, TW-4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you under Section 2.2(b) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents.
1. The Administrative Agent is hereby authorized to disburse all Loan proceeds into the following account(s):
________________________________________ ABA Routing Number:_____________________ Account Number:_________________________
2. This authorization shall remain in effect until revoked or until a subsequent Notice of Account Designation is provided by the Borrower to the Administrative Agent.
3. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Notice of Account Designation as of the _____ day of _______, ____.
JONES APPAREL GROUP USA, INC.
By:_______________________ Name: Title:
96 <PAGE> 97
EXHIBIT D To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF NOTICE OF PREPAYMENT
NOTICE OF PREPAYMENT
Dated as of: _____________
First Union National Bank, as Administrative Agent One First Union Center 301 South College Street, TW-4 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you under Section 2.3(c) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement") by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents.
1. The Borrower hereby provides notice to the Administrative Agent that it shall repay the following [Base Rate Loans] and/or [LIBOR Rate Loans]: ____________________. (Complete with an amount in accordance with Section 2.3(c) of the Credit Agreement.)
2. The Borrower shall repay the above-referenced Revolving Credit Loans on the following Business Day: _______________. (Complete in accordance with Section 2.3(c) of the Credit Agreement.)
3. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment as of the ____ day of _______, ____.
JONES APPAREL GROUP USA, INC.
By:_______________________ Name: Title:
98 <PAGE> 99
EXHIBIT E To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF NOTICE OF CONVERSION/CONTINUATION
NOTICE OF CONVERSION/CONTINUATION
Dated as of: _____________
First Union National Bank, as Administrative Agent One First Union Center 301 South College Street, TW-4 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (the "Notice") is delivered to you under Section 5.2 of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents.
1. This Notice is submitted for the purpose of: (Check one and complete applicable information in accordance with the Credit Agreement.) Converting all or a portion of a Base Rate Loan into a LIBOR Rate Loan
(a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________.
(b) The principal amount of such Revolving Credit Loan to be converted is $_______________.
(c) The requested effective date of the conversion of such Revolving Credit Loan is _______________.
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(d) The requested Interest Period applicable to the converted Revolving Credit Loan is _______________.
Converting all or a portion of a LIBOR Rate Loan into a Base Rate Loan
(a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________
(b) The last day of the current Interest Period for such Revolving Credit Loan is _______________.
(c) The principal amount of such Revolving Credit Loan to be converted is $_______________.
(d) The requested effective date of the conversion of such Revolving Credit Loan is _______________.
Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan
(a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________.
(b) he last day of the current Interest Period for such Revolving Credit Loan is _______________.
(c) The principal amount of such Revolving Credit Loan to be continued is $_______________.
(d) The requested effective date of the continuation of such Revolving Credit Loan is _______________.
(e) The requested Interest Period applicable to the continued Revolving Credit Loan is _______________.
2. The principal Dollar Amount of all Revolving Credit Loans and L/C Ob ligations outstanding as of the date hereof does not exceed the maximum Dollar Amount permitted to be outstanding pursuant to the terms of the Credit Agreement.
3. The Borrower hereby represents and warrants that no Default or Event of Default (as defined in the Credit Agreement) has occurred and is continuing.
4. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Conversion/Continuation as of the ____ day of __________, ____.
JONES APPAREL GROUP USA, INC.
By:_________________________ Name: Title:
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EXHIBIT F To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of JONES APPAREL GROUP USA, INC. (the "Borrower"), hereby certifies to the Administrative Agent and the Lenders, each as defined in the Credit Agreement referred to below, as follows:
1. This Certificate is delivered to you pursuant to Section 8.2 of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among the Borrower, the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement.
2. I have reviewed the consolidated financial statements of Jones Apparel Group, Inc. and its Subsidiaries dated as of _______________ and for the _______________ period[s] then ended and such statements present fairly in all material respects the consolidated financial condition of Jones Apparel Group, Inc. and its Subsidiaries as of their respective dates and the results of the consolidated operations of Jones Apparel Group, Inc. and its Subsidiaries for the respective period[s] then ended, subject to normal year end adjustments for interim statements.
3. I have reviewed the terms of the Credit Agreement, and the related Loan Documents and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and the condition of Jones Apparel Group, Inc. and its Subsidiaries during the accounting period covered by the financial statements referred to in Paragraph 2 above. Such review has not disclosed the existence during or at the end of such accounting period of any condition or event that constitutes a Default or an Event of Default, nor do I have any knowledge of the existence of any such condition or event as at the date of this Certificate [except, if such condition or event existed or exists, describe the nature and period of existence thereof and what action the Borrower has taken, is taking and proposes to take with respect thereto].
4. The Applicable Margin and information as to the debt ratings necessary for determining such figure are set forth on the attached Schedule 1.
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5. Jones Apparel Group, Inc. and its Subsidiaries are in compliance with the financial covenants contained in Article X of the Credit Agreement as shown on such Schedule 1.
[Signature Page Follows]
WITNESS the following signature as of the _____ day of _________, ____.
JONES APPAREL GROUP USA, INC.
By:________________________ Name: Title:
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Schedule 1
to
Officer's Compliance Certificate
[To be provided by Borrower in form reasonably acceptable to the Administrative Agent]
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EXHIBIT F To
$750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE
Dated as of: _________
Reference is made to the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000, as amended, restated, supplemented or otherwise modified (the "Credit Agreement") by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein which are not defined herein shall have the meanings assigned thereto in the Credit Agreement.
___________________________ (the "Assignor") and _________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, as of the Effective Date (as defined below), a ____% interest in and to all of the Assignor's interest, rights and obligations with respect to its Revolving Credit Commitment and Revolving Credit Loans (including such percentage of the outstanding L/C Obligations), which percentage represents not less than $10,000,000, unless such percentage equals 100% of such Lender's Revolving Credit Commitment, and the Assignor thereby retains ____% of its interest therein.
This Assignment and Acceptance is entered pursuant to, and authorized by, Section 14.10 of the Credit Agreement.
2. The Assignor (i) represents that, as of the date hereof, its Revolving Credit Commitment Percentage (without giving effect to assignments thereof which have not yet become effective) under the Credit Agreement is ____%, the outstanding balances of its Revolving Credit Loans (including its Revolving Credit Commitment Percentage of the outstanding L/C Obligations); (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor is the legal and beneficial owner of the interest being assigned by it hereunder and that such
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interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or its Subsidiaries or the performance or observance by the Borrower or its Subsidiaries of any of their obligations under the Credit Agreement or any other instrument or document furnished or executed pursuant thereto; and (iv) to the extent it has received Revolving Credit Note(s) from the Borrower, attaches the applicable Revolving Credit Note(s) delivered to it under the Credit Agreement and requests that the Borrower exchange such Revolving Credit Note(s) for new Revolving Credit Notes payable to each of the Assignor and the Assignee as follows:
Revolving Credit Note Payable to the Order of: Principal Amount of Note:
_______________________ _______________________
_______________________ _______________________
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor or any other Lender or the Administrative Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender; (vii) agrees to hold all confidential information in accordance with the provisions of Section 14.10(g) of the Credit Agreement; and (viii) includes herewith for the Administrative Agent the forms required by Section 5.11(e) of the Credit Agreement (if not previously delivered).
4. The effective date for this Assignment and Acceptance shall be as set forth in Section 1 of Schedule 1 hereto (the "Effective Date"), subject to the consents referred to in the following sentence. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for, to the extent required by the Credit Agreement, consent by the Borrower and the Administrative Agent and acceptance and recording in the Register.
5. Upon such consents, acceptance and recording, from and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and the other Loan Documents to which Lenders are parties and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender under each such agreement, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents.
6. Upon such consents, acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the interest assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
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WITNESS the following signatures as of the ____ day of ______, ____.
ASSIGNOR: By: ___________________________ Title: ________________________
ASSIGNEE: By: ___________________________ Name: _________________________ Title: ________________________
Acknowledged and Consented to on behalf of the Credit Parties:
JONES APPAREL GROUP USA, INC.
By: ___________________________ Name: ________________________ Title: _________________________
Consented to and Accepted by:
FIRST UNION NATIONAL BANK, as Administrative Agent
By: ______________________________ Name: ___________________________ Title: ____________________________
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Schedule 1 to Assignment and Acceptance
1. Effective Date: _________________, ______
2. Assignor's Interest Prior to Assignment:
(a) Revolving Credit Commitment Percentage %
(b) Outstanding balance of Revolving Credit Loans $
(c) Outstanding balance of Assignor's Revolving Credit Commitment Percentage of the L/C Obligations $
3. Assigned Interest (from Section 1) of:
(a) Revolving Credit Loans %
4. Assignee's Extensions of Credit After Effective Date:
(a) Total outstanding balance of Assignee's Revolving Credit Loans (line 2(b) times line 3(a)) $
(b) Total outstanding balance of Assignee's Revolving Credit Commitment Percentage of the L/C Obligations (line 2(c) times line 3(a)) $
5. Retained Interest of Assignor after Effective Date:
(a) Retained Interest (from Section 1): (i) Revolving Credit Commitment Percentage %
(b) Outstanding balance of Assignor's Revolving Credit Loans (line 2(b) times line 5(a)(i)) $
(c) Outstanding balance of Assignor's Revolving Credit Commitment Percentage of L/C Obligations (line 2(c) times line 5(a)(i)) $
6. Payment Instructions:
(a) If payable to Assignor, to the account of Assignor to: ABA No.: Account Name: Account No. Attn: Ref:
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(b) If payable to Assignee, to the account of Assignee to: ABA No.: Account Name: Account No.: Attn: Ref:
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