-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNiZ4z+Ny+nMtTjaCU8dssQN8hSKuRxdVFTnLNlhmKTRDSn8RTUDN8xKlAoRt9Cl 8Vg5EjFeZcGcJ3ptHxDFIw== 0000950152-99-004924.txt : 19990624 0000950152-99-004924.hdr.sgml : 19990624 ACCESSION NUMBER: 0000950152-99-004924 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990527 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GREETINGS CORP CENTRAL INDEX KEY: 0000005133 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [2771] IRS NUMBER: 340065325 STATE OF INCORPORATION: OH FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13859 FILM NUMBER: 99635820 BUSINESS ADDRESS: STREET 1: 10500 AMERICAN RD CITY: CLEVELAND STATE: OH ZIP: 44144 BUSINESS PHONE: 2162527300 MAIL ADDRESS: STREET 1: 10500 AMERICAN ROAD CITY: CLEVELAND STATE: OH ZIP: 44144 10-K405 1 AMERICAN GREETINGS CORPORATION 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Commission File Ended February 28, 1999 Number 1-13859 ----------------- ------- AMERICAN GREETINGS CORPORATION -------------------------------------------------- (Exact name of registrant as specified in Charter) OHIO 34-0065325 - ------------------------ ---------------- (State of incorporation) (I.R.S. Employer Identification No.) One American Road , Cleveland, Ohio 44144 - ---------------------------------------- ------------ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (216) 252-7300 ----------------- Securities registered pursuant to Section 12 (b) of the Act: Class A Common Shares, Par Value $1.00 Securities registered pursuant to Section 12 (g) of the Act: Class B Common Shares, Par Value $1.00 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 30, 1999 - $1,692,936,713 Number of shares outstanding as of April 30, 1999: CLASS A COMMON - 62,724,828 CLASS B COMMON - 4,673,939 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement filed with the Securities and Exchange Commission on May 17, 1999 with respect to the 1999 Annual Meeting of Shareholders called for June 25, 1999, are incorporated by reference into Part III. 2 PART I Item 1. Business American Greetings Corporation and its subsidiaries operate predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. Greeting cards, gift wrap, paper party goods, candles, balloons, stationery and giftware are manufactured and /or sold in the United States by American Greetings Corporation, Plus Mark, Inc., Carlton Cards Retail, Inc., and Quality Greeting Card Distributing Company; in Canada by Carlton Cards Limited; in the United Kingdom by Carlton Cards Limited, Camden Graphics Group, Hanson White Ltd., and Carlton Cards Ltd. (Ireland); in France by Carlton Cards (France) SNC; in Mexico by Carlton Mexico, S.A. de C.V. ; in Australia by John Sands (Australia) Ltd.; in New Zealand by John Sands (N.Z.) Ltd.; and in South Africa by S.A. Greetings Corporation (PTY) Ltd. (80% owned). Interactive Marketing, Inc. (formerly CreataCard Interactive, Inc.) markets e-mail greetings, personalized greeting cards and other social expression products through the Corporation's website www.americangreetings.com, co-branded websites and on-line services. Interactive Marketing, Inc. also provides design and verse content which is included in various CD-Rom software products for use on personal computers. Magnivision, Inc. produces and sells non-prescription reading glasses and eyeware accessories, and Learning Horizons distributes supplemental educational products. Design licensing and character licensing are done by AGC, Inc. and Those Characters From Cleveland, Inc., respectively. AG Industries, Inc. manufactures custom display fixtures for the Corporation's products and products of others. (Although other subsidiaries of American Greetings Corporation exist, they are either inactive, of minor importance or of a holding company nature.) Personalized greeting cards were sold through CreataCard machines by CreataCard, Inc. in the United States, by CreataCard Canada, Inc. in Canada and by CreataCard (UK) Ltd. in the United Kingdom. However, during the fourth quarter of 1999, the Corporation discontinued this business in the U.S. and Canada. 2 3 Many of the Corporation's products are manufactured at common production facilities and marketed by a common sales force. Marketing and manufacturing functions in the United States and Canada are combined; dual priced cards are produced and distributed in both countries. Information concerning sales by major product classifications is included in Part II, Item 7. Additionally, information by business segment and geographic area is included in Note M to the Consolidated Financial Statements included in Part II, Item 8. The Corporation's products are primarily sold in about 110,000 retail outlets worldwide. In addition, the Corporation licenses its designs to various foreign licensees, so that in total, the Corporation's products and designs are available in more than 84 nations around the world. The greeting card and gift wrap industry is intensely competitive. Competitive factors include quality, design, customer service and terms, which may include payments and other concessions to retail customers under long-term agreements. These agreements are discussed in greater detail below. There are an estimated 500 companies in this industry. The Corporation's principal competitors, however, are Hallmark Cards, Incorporated and Gibson Greetings, Inc. Based upon its general familiarity with the greeting card and gift wrap industry and limited information as to its competitors, the Corporation believes that it is the second largest company in the industry and the largest publicly owned company in the industry. The greeting card and gift wrap industry is generally mature. Total unit sales of greeting cards for the Corporation increased 4% in 1999 after increasing 1% in 1998. Excluding acquisitions, 1999 total unit sales would have decreased 1% from 1998. Production of the Corporation's products is generally on a level basis throughout the year. Everyday inventories remain relatively constant throughout the year, while seasonal inventories peak in advance of each major holiday season, including Christmas, Valentine's Day, Easter, Mother's Day, Father's Day and Graduation. Also characteristic of the business, accounts receivable for seasonal merchandise are carried for relatively long periods, as product is normally shipped three to five months prior to a holiday. Payments for seasonal shipments are generally received during the month in which the major holiday occurs, or shortly thereafter. Extended payment terms may also be offered in response to competitive situations with individual customers. The Corporation and many of its competitors sell seasonal greeting cards with the right of return. During the fiscal year, the Corporation experienced no difficulty in obtaining raw materials from suppliers. At February 28, 1999, the Corporation employed approximately 14,700 full-time employees and approximately 20,775 part-time employees which, when jointly considered, equate to approximately 20,100 full-time employees. Approximately 3,100 of the Corporation's hourly plant employees are unionized, of which approximately 2,400 are covered by the following collective bargaining agreements: 3 4
Union Plant Location Contract Expiration Date - ------------------------- ------------------- ------------------------ International Brotherhood Bardstown, Kentucky 4/15/03 of Teamsters Corbin, Kentucky 12/01/02 Amalgamated Clothing & Greeneville, Tennessee 10/20/99 Textile Workers Union (Plus Mark) Communication, Energy Toronto, Ontario 1/31/01 and Paperworkers Canada (Carlton Cards Limited)
Other locations with unions are Cleveland, Ohio, the United Kingdom, Mexico, Australia, New Zealand, and South Africa. The Corporation's headquarters and other manufacturing locations are not unionized. Labor relations at each location have generally been satisfactory. The Corporation has a number of patents and registered trademarks which are used in connection with its products. The Corporation's designs and verses are protected by copyright. Although the licensing of copyrighted designs and trademarks produces additional revenue, in the opinion of the Corporation, the Corporation's operations are not dependent upon any individual patent, trademark, copyright or intellectual property license. The collective value of the Corporation's copyrights and trademarks is substantial and the Corporation follows an aggressive policy of protecting its patents, copyrights and trademarks. In fiscal 1999, the Corporation's major channel of distribution continued to be mass retail (which is comprised of mass merchandisers, chain drug stores and supermarkets), where it is the social expression industry leader. Other major channels of distribution include card and gift shops, military post exchanges, combo stores (stores combining food, general merchandise and drug items), variety stores, and department stores. Sales to the Corporation's five largest customers, which include mass merchandisers and major drug stores, accounted for approximately 32.0% of net sales in fiscal 1999. Sales to retail customers are made through 21 sales offices in the United States, Canada, the United Kingdom, Australia, New Zealand, France, Mexico and South Africa. The Corporation has agreements with various customers for the supply of greeting cards and related products. Contracts are separately negotiated to meet competitive situations; therefore, while some aspects of the agreements may be the same or similar, important contractual terms often vary from contract to contract. Under the agreements, customers typically receive allowances, discounts and/or advances in consideration for the Corporation being allowed to supply customers' stores for a stated term and/or specify a minimum sales volume commitment. 4 5 Some of these competitive agreements have been negotiated with customers covering a period following that covered by current agreements and requiring the Corporation to make advances prior to the start of such future period. The Corporation views the use of such agreements as advantageous in developing and maintaining business with retail customers. Although risk is inherent in the granting of advances, payments and credits, the Corporation subjects such customers to its normal credit review. Losses attributable to these agreements have historically not been material. Advances, payments and credits made under these agreements are accounted for as deferred costs. The current and long-term portions of such deferred costs, including future payment commitments, are disclosed in Note G to the Consolidated Financial Statements included in Part II, Item 8. Note G also discusses the amortization policy. The Corporation believes that these agreements represent a common practice within the industry. Since Hallmark Cards, one of the Corporation's two principal competitors, is a non-public company, public disclosure of its practices has been limited. Gibson Greetings, Inc., the Corporation's other principal competitor and a public company, has made comparable disclosures with respect to such agreements. The operations of the Corporation, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulation. These laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. The Corporation has implemented various programs designed to protect the environment and comply with applicable environmental laws and regulations. The costs associated with these compliance and remediation efforts have not and are not expected to have a material adverse effect on the financial condition, cash flows, or operating results of the Corporation. 5 6 Item 2. Properties As of February 28, 1999, the Corporation owns or leases approximately 16.2 million square feet of plant, warehouse, store and office space, of which approximately 6.0 million square feet are leased. Space needs in the United States have been met primarily through long-term leases of properties constructed and financed by community development corporations and municipalities. The following table summarizes the principal plants and materially important physical properties of the Corporation:
Expiration Approximate Square Date of Feet Occupied Material Principal Location Owned Leased Leases Activity - ----------------- ------------- -------------- -------------- --------- Cleveland, 1,635,000 International headquarters; Ohio general offices of U.S. Greeting Card Division, Plus Mark, Inc., AG Industries, Inc., Carlton Cards Retail, Inc., Interactive Marketing, Inc., Learning Horizons, Inc., and AGC, Inc.; creation and design of greeting cards, gift wrap, paper party goods, candles, balloons, stationery and giftware Bardstown, 413,500 Cutting, folding, finishing, and Kentucky packaging of greeting cards Corbin, 1,010,000 Printing of greeting cards, Kentucky gift wrapping and paper party goods and manufacture of other related products Danville, 1,374,000 2001 Distribution of everyday greeting Kentucky cards and related products Harrisburg, 417,000 2007 Warehousing for seasonal Arkansas greeting cards and related products Lafayette, 194,000 Manufacture of envelopes Tennessee for greeting cards and packaging of cards McCrory, 771,000 2005 Order filling and shipping of Arkansas everyday and seasonal products
6 7
Expiration Approximate Square Date of Feet Occupied Material Principal Location Owned Leased Leases Activity - ----------------- ------------- -------------- -------------- --------- Osceola, 2,800,800 Cutting, folding, finishing and Arkansas packaging of seasonal greeting cards and warehousing; distribution of seasonal products Ripley, 165,000 Seasonal card printing and Tennessee forms Philadelphia, 120,000 2017 Hand finishing of greeting cards Mississippi Shelbyville, 250,000 2002 Warehousing for Carlton Kentucky Cards Retail, Inc. and distribution for Learning Horizons, Inc. Forest City, 498,000 302,500 1999 Manufacture of the North Carolina and Corporation's display 2001 fixtures and other custom display fixtures by AG Industries, Inc. Greeneville, 1,410,000 Printing and packaging of Tennessee seasonal wrapping items (2 locations) and order filling and shipping for Plus Mark, Inc. Ft. Lauderdale / 108,000 2000 General offices of Magnivision, Miami and Inc.; manufacture, order filling Florida 2001 and shipping of non-prescription (2 locations) reading glasses Toronto, 1,084,500 General offices of Carlton Ontario, Cards (Canada) Limited; Canada manufacture and distribution (2 locations) of greeting cards and related products Clayton, 208,000 General offices of John Sands Victoria, (Australia) Ltd.; manufacture of Australia greeting cards and related products
7 8
Expiration Approximate Square Date of Feet Occupied Material Principal Location Owned Leased Leases Activity - ----------------- ------------- -------------- -------------- --------- Auckland, 80,000 General offices of John New Zealand Sands (New Zealand) Ltd: manufacture of greeting cards and related products Dewsbury, 361,000 87,000 2001 General offices of England and Carlton Cards (UK) Limited; (5 locations) 2014 manufacture of greeting cards and related products Corby, 85,000 Distribution of greeting England cards and related products for Carlton Cards (UK) Limited Mexico City, 166,000 General offices of Carlton Mexico Mexico, S.A. de C.V. and manufacture of greeting cards and related products Paris, 93,000 2000 General offices of Carlton France Cards (France) SNC; distribution of greeting cards and related products Roodepoort, 110,000 2000 General offices of South Africa thru S.A. Greetings Corporation; 2002 manufacture and distribution of greeting cards and related products London, England 42,000 2000 General offices of (3 locations) and Camden Graphics; 2011 publishing and distribution of greeting cards Croydon, England (8 locations) 42,000 104,000 2001 General offices of Hanson thru White; manufacturer and 2011 distributor of greeting cards and related products
8 9 Item 3. Legal Proceedings BEC GROUP, INC. V. AMERICAN GREETINGS CORPORATION, MAGNIVISION, INC. AND ERWIN WEISS, District Court of Dallas County, Texas, 160th Judicial District, Case No. 97-00761-H This matter was previously reported in Form 10-K for the fiscal year ended February 28, 1998. In February 1999, the parties agreed to a settlement on terms not material to the Corporation. CUSTOM EXPRESSIONS ROYALTY INC., ET AL V. AMERICAN GREETINGS CORPORATION, U.S. District Court, Northern District of North Carolina, Case No. 3:97CV356-H This matter was previously reported in Form 10-K for the fiscal year ended February 28, 1998 and in Form 10-Q for the quarter ended August 31, 1998. In May 1999, the parties agreed to a settlement on terms not material to the Corporation. Item 4. Submission of Matters to Vote of Security Holders None 9 10 Executive Officers of the Registrant - ------------------------------------ The following is a list of the Corporation's Executive Officers, their ages as of May 1, 1999, their positions and offices, and number of years in executive office:
Years as Name Age Executive Officer Current Position and Office - ---- --- ----------------- --------------------------- Irving I. Stone 90 49 Founder-Chairman and Chairman of the Executive Committee Morry Weiss 59 27 Chairman and Chief Executive Officer Edward Fruchtenbaum 51 13 President and Chief Operating Officer Michael B. Birkholm 47 1 Senior Vice President Mary Ann Corrigan-Davis 45 2 Senior Vice President Jon Groetzinger, Jr. 50 11 Senior Vice President, General Counsel and Secretary John M. Klipfell 49 16 Senior Vice President William R. Mason 54 17 Senior Vice President William S. Meyer 52 11 Senior Vice President, Chief Financial Officer Patricia A. Papesh 51 4 Senior Vice President Erwin Weiss 50 9 Senior Vice President Jeffrey M. Weiss 35 1 Senior Vice President George A. Wenz 54 1 Senior Vice President Thomas T. Zinn, Sr. 50 1 Senior Vice President Dale A. Cable 51 7 Vice President, Treasurer Patricia L. Ripple 43 3 Vice President, Corporate Controller
Mr. Irving I. Stone is the father-in-law of Morry Weiss. Morry Weiss and Erwin Weiss are brothers. Jeffrey M. Weiss is the son of Morry Weiss. The Board of Directors annually elects all Executive Officers; however, Executive Officers are subject to removal, with or without cause, at any time. All of the Executive Officers listed above have served in the capacity shown or similar capacities with the Corporation (or major subsidiary) over the past five years, with the following exceptions. 10 11 Michael B. Birkholm was Plant Manager at Osceola, Arkansas from September 1992 until June 1994; and Vice President, Manufacturing from June 1994 until becoming Senior Vice President in March 1998. Mary Ann Corrigan-Davis was President of Carlton Cards Retail, Inc. from December 1992 until January 1996, and Group Managing Director of the John Sands Group from January 1996 until becoming Senior Vice President in May 1997. Patricia A. Papesh was Vice President, Creative of the U.S. Greeting Card Division from December 1992 until becoming Senior Vice President in April 1995. Patricia L. Ripple was Director, Tax and Financial Reporting of the Corporation from November 1991 until April 1993; and Executive Director, Tax and Financial Reporting of the Corporation from April 1993 until becoming Vice President and Corporate Controller in September 1996. Jeffrey M. Weiss was Vice President, Materials Management of the Corporation's U.S. Greeting Card Division from October 1996 until May 1997; and Vice President, Product Management of the Corporation's U.S. Greeting Card Division from May 1997 until becoming Senior Vice President in January 1998. George A. Wenz was Vice President, National Accounts from October 1984 until becoming Senior Vice President in June 1997. Thomas T. Zinn, Sr. was a Principal with Ernst & Young LLP before joining the Corporation January 1995 as Vice President, Information Services. He became Senior Vice President in March 1998. 11 12 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters (a) Market Information - ---------------------- The Corporation's Class A Common stock was listed on the NASDAQ National Market System through February 10, 1998. Effective February 11, 1998, the Corporation's Class A Common stock is listed on the New York Stock Exchange under the symbol AM. The high and low stock prices, as reported in the respective exchange's listing, for the years ended February 28, 1999 and 1998:
1999 1998 ----------------------------------- ------------------------------------ High Low High Low --------------- -------------- ------------- --------------- 1st Quarter.................. $ 49-7/16 $ 44-7/8 $ 34-1/2 $ 29-1/4 2nd Quarter................. 53-3/4 36-5/8 37-1/4 33-1/8 3rd Quarter.................. 44 35 38-3/4 34 4th Quarter.................. 44-5/16 22 45-7/8 35-3/8
The ratio of the Corporation's share price to earnings per share was 9.3 at February 28, 1999 and 17.7 at February 28, 1998. National City Bank, Cleveland, Ohio, is the Corporation's registrar and transfer agent. There is no public market for the Class B Common Shares of the Corporation. Pursuant to the Corporation's Amended Articles of Incorporation, a holder of Class B Common Shares may not transfer such Class B Common Shares (except to permitted transferees, a group that generally includes members of the holder's extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation's Class A Common Shares. If the Corporation does not purchase such Class B Common Shares, the holder must convert such shares, on a share for share basis, into Class A Common Shares prior to any transfer. (b) Shareholders - ---------------- At May 1, 1999, there were approximately 28,775 holders of Class A Common Shares and 225 holders of Class B Common Shares of record and individual participants in security position listings. (c) Cash Dividends - ------------------
Dividends per share declared in: 1999 1998 - -------------------------------- ----------- ---------- 1st Quarter (paid June 10, 1998 and 1997) $ .18 $ .17 2nd Quarter (paid September 10, 1998 and 1997) .19 .18 3rd Quarter (paid December 10, 1998 and 1997) .19 .18 4th Quarter (paid March 10, 1999 and 1998) .19 .18 (to be paid June 10, 1999) .19 - ----------- ---------- $ .94 $ .71
12 13 Item 6. Selected Financial Data Years ended February 28 or 29 Thousands of dollars except per share amounts
Summary of Operations - --------------------- 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Net sales ................................ $ 2,205,706 $ 2,198,765 $ 2,161,089 $ 2,003,038 $ 1,868,927 Gross profit ............................. 1,448,626 1,408,077 1,355,965 1,241,032 1,192,842 Non-recurring charge(gain) ............... 13,925 (22,125) -- 52,061 -- Interest expense ......................... 29,326 22,992 30,749 24,290 16,871 Net income ............................... 180,222 190,084 167,095 115,135 148,792 Earnings per share ....................... 2.56 2.58 2.23 1.54 2.00 Earnings per share - assuming dilution ... 2.53 2.55 2.22 1.53 1.98 Cash dividends per share ................. .94** .71 .67 .62 .55 Fiscal year end market price per share ... 23.69 45.63 31.00 27.38 29.38 Average number of shares outstanding ..... 70,345,980 73,708,100 74,818,960 74,528,809 74,305,346 Financial Position - ------------------ Accounts receivable ...................... $ 390,740 $ 373,594 $ 375,324 $ 353,671 $ 324,329 Inventories .............................. 251,289 271,205 303,611 335,074 279,270 Working capital .......................... 728,144 506,029 562,148 516,346 531,199 Total assets ............................. 2,419,328 2,161,464 2,135,120 2,005,832 1,761,751 Property, plant and equipment additions .. 60,950 67,898 92,895 91,590 97,290 Long-term debt ........................... 463,246 148,800 219,639 231,073 74,480 Shareholders' equity ..................... 1,346,611 1,345,217 1,361,655 1,235,022 1,159,541 Shareholders' equity per share ........... 19.49 18.90 18.16 16.53 15.61 Net return on average shareholders' equity 13.4% 14.0% 12.9% 9.6% 13.4% Return on net sales before income taxes .. 12.8% 13.3% 11.8% 8.7% 12.2%
** See Part II, Item 5(c) for detailed table. 13 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW Initiatives embedded within the Corporation's long-term strategic plan increased both operating earnings and cash flow available for acquisitions and financing in 1999. As part of these initiatives, in the first quarter of this year, the Corporation strengthened its position in the United Kingdom social expression product market through the acquisition of two greeting card companies: Camden Graphics Group in March 1998 and Hanson White Ltd., in May 1998. The Corporation also continued to review its existing portfolio of businesses and, as a result, discontinued the kiosk business during the fourth quarter of 1999 to focus its electronic marketing efforts on the internet and software products. In addition, a restructuring program designed to reduce costs and increase efficiency was initiated this year. The Corporation continued to generate strong cash flow and, as a result, the Board of Directors in 1999 approved another share repurchase program of up to 4.0 million shares of Class A common stock of which 2.9 million shares were repurchased at fiscal year-end. CONSOLIDATED RESULTS OF OPERATIONS REVENUE Net sales of $2,205.7 million reflects a moderate increase of 0.3% over 1998. While the Corporation achieved its 93rd consecutive year of revenue growth, reduced seasonal shipments, foreign exchange rate movements and the divestiture of two businesses in 1998 negatively impacted net sales growth. Net sales would have increased 1.3% excluding the impact of weakened foreign currencies. The net sales increase of 1.7% in 1998 over 1997 was also adversely affected by the subsidiary divestitures, a de-emphasis on sales of lower margin seasonal gift accessories and weakening of certain foreign currencies against the United States dollar. The net sales increase in 1998 normalized for these factors was approximately 5.5%. Net sales of everyday cards continued to increase and were up 4.0% in 1999 after increasing 5.8% in 1998. While everyday card sales were again strong in the United States, increased UK market share fueled the 1999 increase. Due to both improvements in the existing UK business and the acquisition of Camden Graphics and Hanson White, net everyday card sales in that country increased $39.1 million. The increase in 1998 resulted from the sales growth in both the United States and in most foreign card markets. During the third quarter of 1999, the Corporation reduced its seasonal product shipments to improve both sell-through and gross margins. As a result, net seasonal card sales decreased 3.5% or $16.2 million after decreasing 1% in 1998. In addition, seasonal promotional gift wrap sales were also reduced by $13.1 million as part of the margin improvement effort. The decrease in 1998 reflected the Corporation's initiatives to improve sell-through of seasonal card sales which included both targeted promotions and reduced shipments. Total unit sales of all greeting cards increased 4% in 1999 compared to an increase of 1% in 1998. Excluding acquisitions, total unit sales would have decreased 1% from 1998. Sales of non-card products, such as non-prescription reading glasses, non-promotional gift wrap, party goods and supplemental education products continued their strong performance in 1999. Net sales of these products increased 4.3% in 1999 after increasing 4.6% in 1998. 14 15 The contribution of each major product category as a percent of net sales for the past three years (due to the divestiture, excludes picture frames and hair accessories from all three years) is:
1999 1998 1997 ------------- ----------- ----------- Everyday Greeting Cards 48% 47% 46% Seasonal Greeting Cards 20% 22% 23% Gift Wrapping and Wrap Accessories 14% 14% 14% All Other Products 18% 17% 17%
The All Other Products classification includes giftware, ornaments, non-prescription reading glasses, educational products, party goods, candles, stationery, calendars, balloons, stickers and custom display fixtures. EXPENSES AND PROFIT MARGINS Pre-tax margin, excluding non-recurring items, significantly improved in 1999 to 13.4% compared to 12.3% in 1998 and 11.8% in 1997. The improvement in both years was driven by gross margin improvement. Material, labor and other production costs were 34.3% of net sales down from 36.0% in 1998 and 37.3% in 1997. This 170 basis point improvement in 1999 was gained by both reducing shipments of low margin seasonal cards, promotional giftwrap and other accessories and by lowering the manufacturing costs of the remaining seasonal products. The improvement in 1998 from 1997 reflects an improved product mix as well as the divestiture of the low margin picture frame and hair accessory businesses which provided 70 basis points of the improvement. Selling, distribution and marketing expenses increased slightly to 40.5% of net sales, compared to 39.9% in 1998 and 38.9% in 1997. A new national advertising campaign was launched in 1999 which increased selling costs by $8.4 million. Additionally, in-store merchandiser costs were up $5.7 million due primarily to store remodelings resulting from retailer consolidations. While competitive costs were well managed in 1999 and remained flat to last year, these costs are expected to continue to increase in the future. Deferred costs and the Corporation's method of accounting for them are described in Note G to the Consolidated Financial Statements. The increase in 1998 compared to 1997 was primarily due to increased competitive expense resulting from higher amortization of deferred costs. Administrative and general expenses decreased $5.3 million in 1999 after remaining relatively flat in 1998 from 1997. 1999 expenses were down primarily as a result of reduced costs of corporate owned life insurance. Other expense decreased to $1.3 million from $4.5 million in 1998 due to a gain on the sale of an equity investment. The increased expense in 1998 from 1997 is the result of $6.7 million of initial year 2000 costs. 15 16 Interest expense increased $6.3 million in 1999. The Corporation's common stock repurchase program and acquisitions in the United Kingdom required additional borrowings, although increased cash flow provided the majority of the funding. Slightly higher interest rates also impacted interest expense in 1999 as the Corporation shifted from short-term borrowings to long-term debt. In 1998, interest expense decreased $7.8 million from 1997 due to lower borrowing requirements as a result of strong cash flow provided by operating and investing activities. The 1999 effective tax rate was 36.0% compared to 35.0% in 1998 and 34.3% in 1997. While the rate for all three years reflected tax benefits of the corporate-owned life insurance, the benefits in all years were reduced due to the phase out of the Federal income tax deduction for interest on loans associated with these policies. The deduction for this interest expense was entirely eliminated as of January 1, 1999. See Note N to the Consolidated Financial Statements for details of the differences between the Federal statutory rate and the effective tax rate. NON-RECURRING ITEMS During the third quarter of 1999, the Corporation implemented action to optimize the Corporation's cost structure and provide for operational streamlining initiatives. Those actions eliminated fixed costs from the business and allowed the Corporation to reallocate resources from its poor performing kiosk business into more profitable strategies. Major elements of the restructuring included the elimination of approximately 300 management, salaried and clerical positions; write-off of fixed assets and other costs associated with the Corporation's kiosk business; closure of five field sales branch offices; and consolidation of minor business facilities. As a result, the Corporation recorded a restructure charge of $13.9 million ($8.3 million net of tax or $0.12 earnings per share) during the third quarter of 1999, which consisted of approximately $8.6 million of personnel-related charges; $4.6 million of exit costs associated with discontinuing the kiosk business; $0.4 million of costs associated with carrying vacated office space until lease expiration or sublease; and approximately $0.3 million of other restructure costs. The Corporation expects the plans associated with these costs to be substantially completed during the first half of Fiscal 2000 with most of the costs associated with the workforce reduction being incurred and paid in 1999. Employees were terminated from all areas of the domestic operations of the Corporation, including manufacturing, sales, and administrative areas. The total number of employees terminated was 228, along with elimination of an additional 70 unfilled positions. Details of the restructure charge are as follows:
(Thousands of dollars) ------------------------------------------------------------------ Termination Kiosk Other Benefits Exit Costs Costs Total ------------- -------------- ----------- ------------ Expense accrued ............ $ 8,644 $ 4,618 $ 663 $13,925 Cash expenditures .......... (5,019) (5,019) Non-cash charges ........... (3,362) (3,362) ------- ------- ------- ------- Balance at February 28, 1999 $ 3,625 $ 1,256 $ 663 $ 5,544 ======= ======= ======= =======
16 17 Included in accounts payable and accrued liabilities at February 28, 1999 is $5.5 million related to severance and other exit costs for those actions that have not yet been completed as of the end of 1999. The Corporation believes the remaining accrued restructure liability is adequate for its remaining cash and non-cash obligations. While these initiatives are expected to result in annualized pre-tax savings of approximately $12 to $15 million when completed, future incremental earnings may not be impacted at the full amount due to management's commitment to invest in competitive business strategies, new markets and growth opportunities. In 1998 the Corporation divested the net assets of Acme Frame Products, Inc., a manufacturer and distributor of picture frames and Wilhold, Inc., a manufacturer and distributor of hair accessories. As a result of the transaction, the Corporation recorded a non-recurring gain of $22.1 million ($13.2 million net of tax, or earnings per share of $0.18). NET INCOME AND EARNINGS PER SHARE Excluding non-recurring items, net income increased 6.6% to $188.6 million or $2.68 per share compared to net income of $176.9 million or $2.40 per share in 1998 and net income of $167.1 million or $2.23 per share in 1997. Assuming dilution, earnings per share excluding non-recurring items were $2.65, $2.37, and $2.22 in 1999, 1998 and 1997, respectively. SEGMENT INFORMATION The Corporation has adopted Statement of Financial Accounting Standards No.131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information", effective December 31, 1998. SFAS 131 requires disclosure of segment information on the basis of measurement that is used internally for evaluating segment performance and allocating resources to the Corporation's operations. Accordingly, segment information for 1998 and 1997 has been restated to conform to the requirements of SFAS 131. See Note M to the Consolidated Financial Statements for further discussions of business segment information. The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. The Social Expression Products segment primarily designs, manufactures and sells greeting cards and other products through various channels of distribution with mass retailers as the primary channel. As permitted under SFAS 131, certain operating divisions have been aggregated into one reportable segment. These operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. SOCIAL EXPRESSION PRODUCTS SEGMENT Net sales in 1999 increased 3.6% due primarily to sales growth in the United Kingdom from both improvement in the existing business and the favorable impact of the two greeting card acquisitions. The net sales growth in 1998 reflects the increased sales in the United States card market as well as the United Kingdom. Segment greeting card unit sales increased 5% in 1999 however, unit sales are flat to 1998 excluding the impact of acquisitions. 17 18 Segment earnings, net of intersegment items, increased 7.2% in 1999 due primarily to a more favorable product mix reflecting a reduction of less profitable seasonal shipments. Increased everyday sales in the United Kingdom as well as the two U.K. acquisitions also favorably impacted segment profitability in 1999. Segment earnings remained flat in 1998 compared to 1997 as an increase in the United Kingdom card market was offset by weaker retail environments in Canada and Mexico. YEAR 2000 The Year 2000 issue is the result of information technology ("IT") system programs being written using two digits rather than four digits to define the application year. Any of the Corporation's IT systems that have date-sensitive software may be unable to interpret appropriately the calendar Year 2000 and thus could cause the disruption of normal business activities. The Corporation uses IT systems in various aspects of its business, including manufacturing, distribution, product development, and many administrative functions, and much of this software needs to be modified or replaced. The Corporation is currently in the process of working toward Year 2000 compliance so that all of its material business processes and components will properly handle dates prior to, during and after the Year 2000. The Corporation has prioritized its IT systems into three categories: critical, necessary or other. Failure of a "critical" system would result in a serious disruption of revenue and would critically impact competitive advantages. Failure of a "necessary" system would result in serious processing delays and a significant reduction in productivity. The Corporation believes its critical applications are Year 2000 compliant. The Corporation also believes its necessary systems will be Year 2000 compliant by the end of the second quarter of calendar 1999. The remainder of the Corporation's systems should be remediated by the end of the third quarter of calendar 1999. However, given the number of systems in the Year 2000 portfolio, slippage in the schedule could occur but is highly unlikely. The Corporation's non-IT systems include embedded technology such as microcontrollers included in production equipment, environmental control equipment and timeclocks. These non-IT systems are continuing to be assessed, and plans continue to be updated. Remediation actions have begun. The Corporation is also in the process of ensuring the continuity and stability of its normal business functions by identifying and assessing potential Year 2000 compliance risks associated with its external business relationships, including those with vendors, customers, financial institutions and employee benefit providers. This process is currently completing its assessment phase with potential risks being identified and contingency plans being developed. Contingency plans will be needed in the event any of the Corporation's critical or necessary systems are not Year 2000 compliant when required. The Corporation does not currently anticipate such a situation and expects to complete the contingency planning phase during the third quarter of calendar 1999. The Corporation's current estimate of total cost to achieve Year 2000 compliance in both its IT and non-IT systems is approximately $35 million for modifications to existing software, software replacement, computing hardware and embedded systems. Through February 28, 1999, $23 million has been cumulatively expended on Year 2000 compliance. 18 19 In addition, the Corporation has developed a program to provide independent validation of its Year 2000 compliance efforts. This program includes engaging independent consultants for audits of its completed coding corrections and for providing guidance and suggestions for the remediation efforts. The Corporation believes, but cannot warrant, that with timely modifications to its existing software and conversion to new software, by both the Corporation and its significant business partners, the Year 2000 compliance issue should not have a material impact on the Corporation's operations. Specific factors which might cause a material adverse effect include the availability and cost of trained personnel and the ability to recruit and retain them, as well as the ability to locate all system coding requiring correction. Based upon information available at this time, the Corporation believes that the cost of modifications, replacements and related testing will not have a material impact on the Corporation's liquidity or results of operations. Year 2000 expenditures are being funded through operations. LIQUIDITY AND CAPITAL RESOURCES Cash flow before acquisitions, divestitures and financing increased again in 1999. Cash flow provided by operating activities for 1999 increased $16.1 million after increasing $41.3 million in 1998. The improvement in 1999 reflects an increase in net income, net of non-recurring items, and to continuing initiatives to manage working capital. The improvement achieved in 1998 primarily reflects lower cash payments related to net deferred costs. Trade accounts receivable, net of the effect of acquisitions and divestitures, used $10.5 million of cash in 1999 compared to $20.6 million in 1998. The cash use in 1999 reflects an increase in extended payment terms granted to customers. The receivable performance in 1998 resulted from strong fourth quarter sales of everyday cards and accessories. As a percent of net sales, accounts receivable were 17.7% in 1999, 17.0% in 1998 and 17.4% in 1997. Inventories as a percent of material, labor and other production costs decreased again and were 33.2% in 1999, compared to 34.3% in 1998 and 37.7% in 1997. The improvements in 1999 and 1998 reflect the Corporation's focus to reduce production lead times and therefore inventory levels. These improvements were driven by the Social Expression Products segment, where inventories declined $23.0 million, excluding the UK acquisitions, in 1999 after decreasing $16.3 million in 1998 from 1997 levels. Payments under agreements with certain retailers (net of related amortization) increased $50.5 million after decreasing $79.0 million in 1998. The payments, which were made in connection with both new and existing agreements, reflect the fluctuations resulting from various contract payment and renewal dates. However, the deferred costs which result from the payments are less volatile as they are amortized over the effective period of the agreement. Total commitments under the agreements are capitalized as deferred costs when the agreements are consummated, and any future payment commitments are recorded as liabilities at that time. Future payment commitments under existing agreements at the end of 1999 were $195.5 million with $81.7 million due within the next year. See Note G to the Consolidated Financial Statements for further discussion of deferred costs related to certain customer agreements. 19 20 Investing activities reflect the $53.0 million cash portion of the acquisition of two greeting card companies in the United Kingdom. In 1998, investing activities include $82.0 million proceeds from the divestiture of the net assets of Acme Frame Products, Inc. and Wilhold, Inc. Capital expenditures decreased $6.9 million in 1999 compared to a $25.0 million decrease in 1998. Expenditures in 1999 were principally for asset replacement, cost reduction, system and productivity improvements. The decrease in 1998 was due to higher levels of expenditures in 1997 for the automation of distribution systems which was substantially completed in 1997. Capital expenditures are expected to be approximately $70 million in 2000. Investing activities other than capital expenditures and acquisitions and divestitures provided $31.2 million more cash in 1999 compared to providing $10.0 million more cash in 1998 from 1997. The increase in 1999 reflects cash distributions received from the Corporation's investment in corporate owned life insurance and proceeds from the sale of the Artistic Greetings stock. The increase in 1998 is due to reduced premium payments compared to 1997 of corporate owned life insurance premiums. In May 1998, the Corporation filed a Form S-3 Registration Statement with the Securities and Exchange Commission for a shelf registration to issue up to $600 million of debt securities. Under the registration, the Corporation in July 1998 completed the sale of $300 million of 30-year notes with a 6.10% coupon rate. The majority of the proceeds were used to retire commercial paper and other short-term debt, with the remainder used for other general corporate purposes and short-term investments. In August 1998, the Corporation entered into a new multi-currency credit facility to provide liquidity and working capital financing for the Corporation and its subsidiaries in the United States, Canada, the United Kingdom, Australia, New Zealand and France. The aggregate availability under this facility is approximately $715 million. A portion of the facility matures on August 7, 2003. The balance of the facility matures on August 6, 1999. This portion of the facility is annually renewable for an additional 364-day period and is convertible to a term loan with a maturity of August 7, 2003. In June 1997, the Corporation's Board of Directors authorized the repurchase of up to 4.5 million shares of Class A common stock. The entire 4.5 million shares were repurchased during 1998 at an average price of $37.49 per share or $168.7 million. In March 1998, the Corporation announced that its Board of Directors authorized an additional repurchase of up to 4 million shares of Class A stock. During 1999, 2.9 million shares were repurchased under this program at an average price of $42.73 per share or $124.2 million. The Corporation on February 24, 1999 again announced its intention to repurchase an additional 5 million shares of Class A stock. The Corporation utilized a portion of the proceeds from the sales of the $300 million of debt securities to effectively shift much of its previously short-term debt to long-term. The remaining portion of the proceeds were used to fund various other activities including the Corporation's share repurchase programs. The increase in use of cash in 1998 reflects the approved repurchase of Class A common stock. Debt as a percent of total capitalization in 1999 increased to 26.3% compared to 20.6% in both 1998 and 1997. 20 21 The Corporation's operating cash flow and existing credit facilities are expected to meet currently anticipated funding requirements. The seasonal nature of the business results in peak working capital requirements which are financed through short term borrowings. See Note H to the Consolidated Financial Statements for further discussion of the Corporation's credit facilities. MARKET RISK The Corporation's market risk is impacted from changes in interest rates and foreign currency exchange rates. The Corporation manages interest rate exposure through a mix of fixed and floating rate debt. Interest rate exposure was reduced in 1999 from the sale of $300 million, 6.1% coupon rate, 30-year senior notes, the proceeds of which reduced commercial paper and other short-term debt. To date, risks associated with interest rate movements have not been significant and are not expected to be so in the near term. Approximately 17% of the Corporation's 1999 revenues were generated from operations outside the United States. Operations in Australasia, Canada, France, Mexico, South Africa, and the United Kingdom, are denominated in currencies other than U.S. dollars. Each of these operations conducts substantially all of its business in its local currency and are not subject to material operational risks associated with fluctuations in exchange rates. While intercompany balances with the parent company are denominated in U.S. dollars, the Corporation's multi-currency credit facility provides the foreign operations the ability to satisfy these balances and reduce exchange risk. Additionally, the Corporation's net income was not materially impacted by the translation of the foreign operations' currencies into U.S. dollars. Exposure to exchange rate fluctuations historically have not been significant however, no assurance can be given that future results will not be adversely affected by significant changes in foreign currency exchange rates. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No.133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133) which the Corporation is required to adopt March 1, 2000. The Corporation is currently assessing the effect of adopting SFAS 133 but does not anticipate a material impact on the results of operations due to the Corporation's minimal use of derivatives. FACTORS THAT MAY AFFECT FUTURE RESULTS On February 24, 1999, the Corporation announced an initiative to further strengthen its position as the productivity leader in the greeting card industry. This initiative should result in more productive greeting card departments in retail outlets by lowering retailer inventories to support increased greeting card sales. The Corporation's investment in technology improvements allows for shorter production lead times and a more efficient retail distribution system. The Corporation's ability to more quickly offer fresher, more innovative cards to the marketplace is key to this strategy. Primarily as a result of this initiative, the Corporation believes Fiscal 2000 revenues will be reduced by approximately $100 million with full year 2000 earnings per share declining to approximately $2.00 to $2.10, excluding non-recurring items. However, management remains committed to long-term growth in both revenue and earnings per share derived from the benefits of product innovation, cost structure optimization, and improvements in manufacturing efficiencies. 21 22 During the third quarter of 1999, the Corporation announced plans to enhance profitability by targeting removal of $20 to $30 million from the cost structure of the Corporation. As noted under Non-recurring Items, the Corporation initiated the first phase of this restructure by recording a pretax charge of $13.9 million primarily related to its domestic operations. The Corporation will continue to conduct an evaluation of its international manufacturing and distribution capabilities, focusing on additional cost savings and expects to record an additional restructure charge during fiscal 2000 as part of this initiative. The Corporation has maintained a strong customer base in a wide variety of channels of distribution through its investment in deferred costs related to agreements with certain retailers and other competitive arrangements. The agreements have lessened the impact to the Corporation from loss of business due to the retailer consolidations which continued in 1999. These agreements have been a strategic element of the Corporation's growth and the financial condition of the retail customers is continually evaluated and monitored to reduce risk. The Corporation has included in the Annual Report certain information other than historical facts that may constitute "forward-looking" information. Actual results may differ materially from those projected in the "forward-looking" statements, including but not limited to the risks discussed above, as well as retail bankruptcies, a weak retail environment and competitive terms of sale offered to customers to expand or maintain business. Other risks, which are not all-inclusive, include costs associated with correcting the Year 2000 issues, as well as economic conditions in the various markets served by the Corporation's operations. 22 23 Item 7A. Quantitative and Qualitative Disclosures About Market Risk DERIVATIVE FINANCIAL INSTRUMENTS - The Corporation does not hold or issue derivative financial instruments for trading purposes. As of February 28, 1999, the Corporation's subsidiary in Australia held a derivative financial instrument to manage its exposure to fluctuations in interest rates, which is not material to the Corporation. See Note H to the Consolidated Financial Statements for a further discussion of the instrument. INTEREST RATE EXPOSURE - Based on the Corporation's overall interest rate exposure as of and during the year ended February 28, 1999, a hypothetical 10% movement in interest rates would not materially affect the Corporation's results of operations. FOREIGN CURRENCY EXPOSURE - The Corporation's international operations expose it to translation risk when the local currency financial statements are translated into U.S. dollars. As currency exchange rates fluctuate, translation of the statements of income of international subsidiaries into U.S. dollars could affect comparability of results between years. The earnings of the Corporation were not materially affected by exchange rate fluctuations for the years ended February 28, 1999, 1998 or 1997. At February 28, 1999, a hypothetical 10% movement in foreign exchange rates would not have a material effect on the Corporation's results of operations. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", for a discussion of the Corporation's exposure to foreign currency translation risk. 23 24 Item 8. Financial Statements and Supplementary Data CONSOLIDATED STATEMENT OF INCOME Years ended February 28, 1999, 1998 and 1997 Thousands of dollars except per share amounts
1999 1998 1997 ------------ ------------ ------------ Net sales $ 2,205,706 $ 2,198,765 $ 2,161,089 Costs and expenses: Material, labor and other production costs 757,080 790,688 805,124 Selling, distribution and marketing 894,323 876,822 839,916 Administrative and general 228,183 233,457 234,838 Non-recurring items 13,925 (22,125) -- Interest 29,326 22,992 30,749 Other expense (income) 1,272 4,494 (3,868) ------------ ------------ ------------ 1,924,109 1,906,328 1,906,759 ------------ ------------ ------------ Income before income taxes 281,597 292,437 254,330 Income taxes 101,375 102,353 87,235 ------------ ------------ ------------ Net income $ 180,222 $ 190,084 $ 167,095 ============ ============ ============ Earnings per share $ 2.56 $ 2.58 $ 2.23 ============ ============ ============ Earnings per share - assuming dilution $ 2.53 $ 2.55 $ 2.22 ============ ============ ============ Average number of shares outstanding 70,345,980 73,708,100 74,818,960
See notes to consolidated financial statements. 24 25 CONSOLIDATED STATEMENT OF FINANCIAL POSITION February 28, 1999 and 1998 Thousands of dollars
ASSETS 1999 1998 ---------- ---------- CURRENT ASSETS Cash and cash equivalents $ 144,555 $ 47,623 Trade accounts receivable, less allowances for sales returns of $132,103 ($135,584 in 1998) and for doubtful accounts of $15,583 ($15,661 in 1998) 390,740 373,594 Inventories 251,289 271,205 Deferred income taxes 133,092 120,507 Prepaid expenses and other 226,142 210,316 ---------- ---------- Total current assets 1,145,818 1,023,245 GOODWILL 135,516 84,741 OTHER ASSETS 703,188 605,846 PROPERTY, PLANT AND EQUIPMENT - NET 434,806 447,632 ---------- ---------- $2,419,328 $2,161,464 ========== ==========
25 26 CONSOLIDATED STATEMENT OF FINANCIAL POSITION - CONTINUED February 28, 1999 and 1998 Thousands of dollars
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 ------------ ------------ CURRENT LIABILITIES Debt due within one year $ 17,777 $ 199,640 Accounts payable and accrued liabilities 175,366 145,554 Accrued compensation and benefits 89,284 84,997 Dividends payable 26,337 12,813 Income taxes 27,165 22,536 Other current liabilities 81,745 51,676 ------------ ------------ Total current liabilities 417,674 517,216 LONG-TERM DEBT 463,246 148,800 OTHER LIABILITIES 142,045 107,509 DEFERRED INCOME TAXES 49,752 42,722 SHAREHOLDERS' EQUITY Common shares - par value $1: Class A - 71,717,174 shares issued less 7,283,846 Treasury shares in 1999 and 71,321,420 shares issued less 4,417,399 Treasury shares in 1998 64,433 66,904 Class B - 6,066,096 shares issued less 1,405,711 Treasury shares in 1999 and 6,066,096 shares issued less 1,787,665 Treasury shares in 1998 4,660 4,278 Capital in excess of par value 304,086 290,820 Treasury stock (320,492) (200,380) Accumulated other comprehensive loss (23,565) (23,437) Retained earnings 1,317,489 1,207,032 ------------ ------------ Total shareholders' equity 1,346,611 1,345,217 ------------ ------------ $ 2,419,328 $ 2,161,464 ============ ============
See notes to consolidated financial statements. 26 27 CONSOLIDATED STATEMENT OF CASH FLOWS Years ended February 28, 1999, 1998 and 1997 Thousands of dollars
1999 1998 1997 ---------- ---------- ---------- OPERATING ACTIVITIES: Net income $ 180,222 $ 190,084 $ 167,095 Adjustments to reconcile to net cash provided by operating activities: Non-recurring items 5,544 (22,125) -- Depreciation 67,049 65,926 64,566 Deferred income taxes (8,940) (20,186) 294 Changes in operating assets and liabilities, net of effects from divestiture and acquisition: Increase in trade accounts receivable (10,450) (20,567) (25,389) Decrease in inventories 17,809 5,915 32,371 Increase in other current assets (3,271) (4,232) (2,050) Increase in deferred costs - net (65,588) (15,043) (93,961) Increase in accounts payable and other liabilities 24,211 10,402 5,877 Other - net 4,682 5,018 5,100 ---------- ---------- ---------- Cash Provided by Operating Activities 211,268 195,192 153,903 INVESTING ACTIVITIES: Business (acquisition) divestiture (52,957) 82,000 -- Property, plant and equipment additions (60,950) (67,898) (92,895) Proceeds from sale of fixed assets 2,522 2,148 2,579 Investment in corporate-owned life insurance 18,413 (6,358) (8,454) Other 8,040 2,057 (6,283) ---------- ---------- ---------- Cash (Used) Provided by Investing Activities (84,932) 11,949 (105,053) FINANCING ACTIVITIES: Increase in long-term debt 317,096 9,430 8,451 Reduction of long-term debt (22,669) (6,988) (12,232) (Decrease) increase in short-term debt (158,657) 8,049 4,869 Sale of stock under benefit plans 18,981 16,915 6,997 Purchase of treasury shares (131,745) (170,015) (1,863) Dividends to shareholders (52,410) (51,959) (50,152) ---------- ---------- ---------- Cash Used by Financing Activities (29,404) (194,568) (43,930) ---------- ---------- ---------- INCREASE IN CASH AND EQUIVALENTS 96,932 12,573 4,920 Cash and Equivalents at Beginning of Year 47,623 35,050 30,130 ---------- ---------- ---------- Cash and Equivalents at End of Year $ 144,555 $ 47,623 $ 35,050 ========== ========== ==========
See notes to consolidated financial statements. 27 28 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Years ended February 28, 1999, 1998 and 1997 Thousands of dollars except per share amounts
Common Shares Capital in Shares Held ------------- Excess of Treasury In Trust Class A Class B Par Value Stock ---------------------- ---------- ----------- ------------ BALANCE MARCH 1, 1996 $70,148 $4,560 $265,387 $ (32,835) $ - Net income Other comprehensive income: Foreign currency translation adjustment Comprehensive income Cash dividends - $0.67 per share Exchange of shares 131 (131) Sale of shares under benefit plans, including tax benefits 323 44 6,872 587 Purchase of treasury shares (8) (85) (2,609) Sale of treasury shares 3 7 ----------- -------- ---------- ----------- ------------ BALANCE FEBRUARY 28, 1997 70,594 4,388 272,262 (34,850) - Net income Other comprehensive income: Foreign currency translation adjustment Comprehensive income Cash dividends - $0.71 per share Exchange of shares 107 (107) Sale of shares under benefit plans, including tax benefits 713 33 18,386 438 Purchase of treasury shares (4,510) (45) (166,105) Sale of treasury shares 9 172 137 --------- --------- ---------- ----------- ------------ BALANCE FEBRUARY 28, 1998 66,904 4,278 290,820 (200,380) - Net income Other comprehensive income: Foreign currency translation adjustment Unrealized gain on available-for-sale securities (net of tax) Comprehensive income Issuance of shares to trust (20,480) Cash dividends - $0.94 per share Exchange of shares 40 (40) Sale of shares under benefit plans, including tax benefits 395 574 13,033 8,403 Purchase of treasury shares (2,906) (162) (128,677) Sale of treasury shares 10 233 162 --------- --------- ---------- ----------- ------------ BALANCE FEBRUARY 28, 1999 $64,433 $4,660 $304,086 $(320,492) $(20,480) ========= ========= ========== =========== ============
Accumulated Deferred Other Compensation Comprehensive Retained Plans Income (Loss) Earnings Total -------------- ---------------- ------------ ------------ BALANCE MARCH 1, 1996 $ - $(24,202) $ 951,964 $1,235,022 Net income 167,095 167,095 Other comprehensive income: Foreign currency translation adjustment 4,556 4,556 ------------ Comprehensive income 171,651 Cash dividends - $0.67 per share (50,152) (50,152) Exchange of shares Sale of shares under benefit plans, including tax benefits 7,826 Purchase of treasury shares (2,702) Sale of treasury shares 10 -------------- ---------------- ------------ ------------ BALANCE FEBRUARY 28, 1997 - (19,646) 1,068,907 1,361,655 Net income 190,084 190,084 Other comprehensive income: Foreign currency translation adjustment (3,791) (3,791) ------------ Comprehensive income 186,293 Cash dividends - $0.71 per share (51,959) (51,959) Exchange of shares Sale of shares under benefit plans, including tax benefits 19,570 Purchase of treasury shares (170,660) Sale of treasury shares 318 -------------- ---------------- ------------ ------------ BALANCE FEBRUARY 28, 1998 - (23,437) 1,207,032 1,345,217 Net income 180,222 180,222 Other comprehensive income: Foreign currency translation adjustment (6,819) (6,819) Unrealized gain on available-for-sale securities (net of tax) 6,691 6,691 ------------ Comprehensive income 180,094 Issuance of shares to trust 20,480 - Cash dividends - $0.94 per share (65,935) (65,935) Exchange of shares Sale of shares under benefit plans, including tax benefits (3,830) 18,575 Purchase of treasury shares (131,745) Sale of treasury shares 405 -------------- ---------------- ------------ ------------ BALANCE FEBRUARY 28, 1999 $20,480 $(23,565) $1,317,489 $1,346,611 ============== ================ ============ ============
See notes to consolidated financial statements. 28 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended February 28, 1999, 1998 and 1997 Thousands of dollars except per share amounts NOTE A - SIGNIFICANT ACCOUNTING POLICIES Consolidation: The consolidated financial statements include the accounts of the Corporation and its subsidiaries. All significant intercompany accounts and transactions are eliminated. Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform with the 1999 presentation. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents: The Corporation considers all highly liquid instruments purchased with a maturity of less than three months to be cash equivalents. Financial Instruments: The carrying value of the Corporation's financial instruments approximate their fair market values. Concentration of Credit Risks: The Corporation sells primarily to customers in the retail trade, including those in the mass merchandiser, drug store, supermarket and other channels of distribution. These customers are located throughout the United States, Canada, the United Kingdom, Australia, New Zealand, France, Mexico and South Africa. Sales to the Corporation's five largest customers accounted for approximately 32% of net sales in 1999. The Corporation conducts business based on periodic evaluations of its customers' financial condition and generally does not require collateral. While the competitiveness of the retail industry presents an inherent uncertainty, the Corporation does not believe a significant risk of loss from a concentration of credit exists. Inventories: Finished products, work in process and raw material inventories are carried at the lower of cost or market. The last-in, first-out (LIFO) cost method is principally used for the majority of the domestic inventories. The foreign subsidiaries principally use the first-in, first-out method. Display material and factory supplies are carried at average cost. Investment in Life Insurance: The Corporation's investment in corporate-owned life insurance policies is recorded in other assets net of policy loans. The net life insurance expense, including interest expense, is included in administrative and general expenses in the Consolidated Statement of Income. The related interest expense, which approximates amounts paid, was $54,670, $59,642 and $67,788 in 1999, 1998 and 1997, respectively. 29 30 Goodwill: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired and is amortized on a straight-line basis over a period of 40 years for goodwill associated with the social expression product segment and 15 years for goodwill associated with all other businesses. Accumulated amortization of goodwill at February 28, 1999 and 1998 was $20,851 and $14,407, respectively. Goodwill is reviewed annually for impairment in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" (SFAS No. 121). Property and Depreciation: Property, plant and equipment are carried at cost. Depreciation and amortization of buildings, equipment and fixtures is computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 25 to 40 years and equipment and fixtures over 3 to 20 years. Property, plant and equipment are reviewed annually for impairment in accordance with SFAS No. 121. Revenue Recognition: Sales and related costs are recorded by the Corporation upon shipment of products to non-related retailers and upon the sale of products at Corporation-owned retail locations. Seasonal cards are sold with the right of return on unsold merchandise. The Corporation provides for estimated returns of seasonal cards when those products are shipped to non-related retailers. Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $67,369, $61,062 and $58,794 in 1999, 1998 and 1997, respectively. Other Expense (Income): Other expense (income) consists primarily of costs to convert the Corporation's computer systems to be Year 2000 compliant, amortization of goodwill, foreign exchange gains and losses, gains and losses on asset disposals, and royalty and interest income. Income Taxes: Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Stock-Based Compensation: The Corporation has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock options. Because the exercise price of the Corporation's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". 30 31 Accounting Standards Changes: In 1999, the Corporation adopted the following Statements of Financial Accounting Standards ("SFAS"): - - SFAS No. 130, "Reporting Comprehensive Income", which requires the components of comprehensive income to be disclosed in the financial statements. - - SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which requires disclosures of certain information about the Corporation's operating segments on a basis consistent with the way in which the Corporation is managed and operated. - - SFAS No. 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits", which revises disclosures about pensions and other postretirement benefits and requires presentation of information about such plans in a standardized format. Adoption of these new standards required that the Corporation reclassify prior years' information and make certain new disclosures in the notes to the consolidated statements. New Pronouncements: In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued. This standard, which establishes new accounting and reporting standards for derivative financial instruments, must be adopted no later than 2001. The Corporation is currently analyzing the effect of this standard and does not expect it to have a material effect on the Corporation's consolidated financial position, results of operations or cash flows. 31 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE B - NON-RECURRING ITEMS During the quarter ended November 30, 1998, the Corporation recorded a restructuring charge of $13,925 ($8,342 net of tax, or earnings per share of $0.12). The primary components of this charge were employee severance and termination benefit costs associated with a headcount reduction of approximately 300 management, salaried and clerical positions. The balance of the charge is comprised of costs associated with exiting the Corporation's kiosk business and lease exit costs due to the closure of certain sales offices. At February 28, 1999, $5,544 was included in accounts payable and accrued liabilities, representing the portion of the restructuring charge not yet expended. On August 12, 1997, the Corporation divested the net assets of two subsidiaries, Acme Frame Products, Inc., a manufacturer and distributor of picture frames, and Wilhold, Inc., a manufacturer and distributor of hair accessories. As a result of the transaction, the Corporation recorded a one-time pre-tax gain of $22,125 ($13,192 net of tax, or earnings per share of $0.18). NOTE C - EARNINGS PER SHARE The following table sets forth the computation of earnings per share and earnings per share - assuming dilution:
1999 1998 1997 -------- -------- -------- Numerator: Net income, earnings per share and earnings per share - assuming dilution $180,222 $190,084 $167,095 ======== ======== ======== Denominator (thousands): Denominator for earnings per share - weighted average shares outstanding 70,346 73,708 74,819 Effect of dilutive securities - stock options 758 838 507 -------- -------- -------- Denominator for earnings per share - assuming dilution - adjusted weighted average shares outstanding 71,104 74,546 75,326 ======== ======== ======== Earnings per share $ 2.56 $ 2.58 $ 2.23 ======== ======== ======== Earnings per share - assuming dilution $ 2.53 $ 2.55 $ 2.22 ======== ======== ========
32 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE D - COMPREHENSIVE INCOME In 1999, the Corporation adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Corporation's net income or shareholders' equity. SFAS No. 130 requires other comprehensive income to include foreign currency translation adjustments and unrealized gains on available-for-sale securities, which prior to adoption were reported separately in shareholders' equity. Accumulated other comprehensive income (loss) consists of the following components:
Foreign Currency Unrealized Gains Accumulated Translation on Other Adjustments Available-For-Sale Comprehensive Securities Income (Loss) ----------------- ----------------------- --------------------- Balance at March 1, 1996 $(24,202) $(24,202) Other comprehensive income 4,556 4,556 ----------------- --------------------- Balance at February 28, 1997 (19,646) (19,646) Other comprehensive loss (3,791) (3,791) ----------------- --------------------- Balance at February 28, 1998 (23,437) (23,437) Other comprehensive income (loss) (6,819) $6,691 (128) ----------------- ----------------------- --------------------- Balance at February 28, 1999 $(30,256) $6,691 $(23,565) ================= ======================= =====================
33 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE E - INVENTORIES
1999 1998 ----------------- --------------- Raw material $ 37,745 $ 42,641 Work in process 25,523 37,204 Finished products 229,220 240,845 ----------------- --------------- 292,488 320,690 Less LIFO reserve 89,207 90,130 ----------------- --------------- 203,281 230,560 Display material and factory supplies 48,008 40,645 ----------------- --------------- $ 251,289 $ 271,205 ================= ===============
NOTE F - PROPERTY, PLANT AND EQUIPMENT
1999 1998 ----------------- --------------- Land $ 11,288 $ 11,910 Buildings 281,726 279,395 Equipment and fixtures 665,609 647,438 ----------------- --------------- 958,623 938,743 Less accumulated depreciation 523,817 491,111 ----------------- --------------- $ 434,806 $ 447,632 ================= ===============
34 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE G - DEFERRED COSTS Deferred costs relating to agreements with certain customers are charged to operations on a straight-line basis over the effective period of each agreement, generally three to six years. Deferred costs estimated to be charged to operations during the next year are classified with prepaid expenses and other. Total commitments under the agreements are capitalized as deferred costs and future payment commitments, if any, are recorded as liabilities when the agreements are consummated. At February 28, 1999 and 1998 deferred costs and future payment commitments are included in the following financial statement captions:
1999 1998 ----------------- --------------- Prepaid expenses and other $ 192,619 $ 179,818 Other assets 595,136 481,236 Other current liabilities (81,745) (51,676) Other liabilities (113,799) (81,080) ----------------- --------------- $ 592,211 $ 528,298 ================= ===============
35 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE H - LONG AND SHORT-TERM DEBT On May 20, 1998, the Corporation filed a Form S-3 Registration Statement with the Securities and Exchange Commission for a shelf registration to issue up to $600,000 of debt securities. Under the registration, the Corporation on July 27, 1998 completed the sale of $300,000 of 30-year senior notes with a 6.10% coupon rate. The majority of the proceeds were used to retire commercial paper and other short-term debt, with the remainder used for other general corporate purposes and short-term investments. On August 7, 1998, the Corporation entered into a new multi-currency credit facility to provide liquidity and working capital financing for the Corporation and its subsidiaries in the United States, Canada, the United Kingdom, Australia, New Zealand and France. The aggregate availability under this facility is approximately $715,000 of which approximately $546,000 is available at February 28, 1999. The United States and one-half of the Canadian portions of the facilities, totaling $499,740, mature on August 6, 1999. The balance of the facility matures on August 7, 2003. The United States and Canadian portions of the facility are annually renewable for additional 364-day periods and are convertible to term loans with a maturity of August 7, 2003. A facility fee is due on the aggregate amount of the facility and can vary with the Corporation's debt rating. At February 28, 1999, the facility fee is 0.075% for the non-364 day portion of the facility and 0.065% for the 364-day portion. The borrowings of the Corporation in Canada consist solely of commercial paper. At February 28, 1999, commercial paper borrowings were $81,824, of which $66,320 is classified as long-term. The commercial paper borrowings are supported by the multi-currency credit facility described above. The Corporation's subsidiaries in Mexico and South Africa have credit agreements permitting borrowings of up to $2,088. At February 28, 1999, $1,250 is outstanding under these foreign revolving credit facilities. All of the Corporation's revolving credit and term loan agreements provide for various borrowing alternatives in their respective currencies with interest rates generally ranging from 5.0% to 9.0% for amounts borrowed as of February 28, 1999. At February 28, 1999 and 1998, debt due within one year consists of the following:
1999 1998 ------------------- ------------------ Current maturities of long-term debt $ 968 $ 695 Foreign revolving credit facilities 1,250 46,505 ------------------- ------------------ Aggregate current maturities 2,218 47,200 Commercial paper 15,504 148,855 Other short-term debt 55 3,585 ------------------- ------------------ $ 17,777 $ 199,640 =================== ==================
36 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE H - LONG AND SHORT-TERM DEBT (CONTINUED) At February 28, 1999 and 1998, long-term debt consists of the following:
1999 1998 ---------------- ---------------- Revolving credit, commercial paper and term loan agreements $ 154,674 $ 193,224 Notes payable 310,145 - Other 645 2,776 ---------------- ---------------- 465,464 196,000 Less current maturities 2,218 47,200 ---------------- ---------------- $ 463,246 $ 148,800 ================ ================
Aggregate maturities of long-term debt are as follows: 2000 $ 2,218 2001 1,221 2002 11,723 2003 33 2004 153,424 Thereafter 296,845 ------------------ $ 465,464 ==================
At February 28, 1999 the Corporation had credit arrangements to support the issuance of letters of credit in the amount of $99,181 with $21,450 of open credits outstanding. Interest paid on short-term and long-term debt was $27,831 in 1999, $22,735 in 1998 and $29,914 in 1997. The weighted average interest rate on short-term borrowings outstanding was 5.1% and 5.8% as of February 28, 1999 and 1998, respectively. 37 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE H - LONG AND SHORT-TERM DEBT (CONTINUED) As of February 28, 1999, the Corporation's subsidiary in Australia has an interest rate swap agreement for notional borrowings of $30,950 under which the Corporation pays a fixed rate and receives a floating rate. The pay rate and receive rate under this agreement are 5.1% and 4.8%, respectively. This agreement matures October 3, 1999. The floating rate under the agreement is based on the three-month Australian Bank Bill Rate. Net payments or receipts under the agreement are recognized as an adjustment to interest expense. The agreement was entered into with a major financial institution, and the Corporation anticipates that the financial institution will satisfy its obligations under the agreement. The Corporation guarantees payment of the subsidiary's obligations under the swap agreement. No collateral is held in relation to the agreement. NOTE I - RETIREMENT PLANS The Corporation has a non-contributory profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. Contributions to the profit-sharing plan were $22,687, $23,850 and $22,990 for 1999, 1998 and 1997, respectively. The Corporation matches a portion of 401(k) employee contributions contingent upon meeting specified annual operating results goals. The Corporation's matching contributions were $4,622, $2,802 and $2,698 for 1999, 1998 and 1997, respectively. The Corporation also has several defined benefit and defined contribution pension plans covering certain employees in foreign countries. The cost of these plans was not material in any of the years presented. In the aggregate, the actuarially computed plan benefit obligation approximates the fair value of the plan assets. 38 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE J - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who are age 65 or over at retirement with 15 or more years of service and who were hired on or before December 31, 1991. In addition, for retirements on or after January 2, 1992 the retiree must have been continuously enrolled for health care for a minimum of five years or since January 2, 1992. The plan is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The Corporation maintains a trust for the payment of retiree health care benefits. This trust is funded at the discretion of management.
1999 1998 --------------- ---------------- Change in benefit obligation: Benefit obligation at beginning of year $ 63,677 $ 51,327 Service cost 1,817 1,711 Interest cost 4,702 4,282 Actuarial losses 9,183 10,951 Benefit payments (4,103) (4,594) --------------- ---------------- Benefit obligation at end of year 75,276 63,677 --------------- ---------------- Change in plan assets: Fair value of plan assets at beginning of year 39,760 32,358 Actual return on plan assets 3,072 5,093 Contributions 5,985 6,903 Benefit payments (4,103) (4,594) --------------- ---------------- Fair value of plan assets at year end 44,714 39,760 --------------- ---------------- Funded status at February 28 (30,562) (23,917) Unrecognized loss 21,774 13,314 ---------------- ---------------- Accrued benefit cost recognized in the consolidated statement of financial position $ (8,788) $(10,603) ================ ================
39 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE J - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
1999 1998 ---------------- --------------- Components of net periodic benefit cost: Service cost $1,817 $1,711 Interest cost 4,702 4,282 Expected return on plan assets (3,064) (2,508) Amortization of actuarial loss 716 598 ---------------- --------------- Net periodic benefit cost $4,171 $4,083 ================ =============== Weighted average assumptions as of February 28: Discount rate 6.75% 7.25% Expected long-term return on plan assets 8.00% 8.00% Health care cost trend rate 5.00% 5.00% Effect of a 1% increase in health care cost trend rate on: Service cost plus interest cost $ 1,295 Accumulated postretirement benefit obligation 13,447 Effect of a 1% decrease in health care cost trend rate on: Service cost plus interest cost $ (1,015) Accumulated postretirement benefit obligation (10,726)
40 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE K - LONG-TERM LEASES The Corporation is committed under noncancelable operating leases for commercial properties (certain of which have been subleased) and equipment, terms of which are generally less than 25 years. Rental expense under operating leases for the years ended February 28, 1999, 1998 and 1997 follows:
1999 1998 1997 --------------- -------------- -------------- Gross rentals $ 58,616 $ 57,320 $ 59,228 Less sublease rentals 4,470 4,985 7,423 --------------- -------------- -------------- Net rental expense $ 54,146 $ 52,335 $ 51,805 =============== ============== ==============
At February 28, 1999, future minimum rental payments for noncancelable operating leases, net of aggregate future minimum noncancelable sublease rentals, follow: Gross Rentals: 2000 $ 46,746 2001 41,449 2002 35,278 2003 28,563 2004 22,941 Later years 57,187 ---------------- 232,164 Sublease rentals (15,202) ---------------- Net rentals $ 216,962 ================
41 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE L - COMMON SHARES AND STOCK OPTIONS At February 28, 1999 and 1998, common shares authorized consisted of:
Class A Class B ------------------- ---------------- 1999 187,600,000 15,832,968 1998 93,800,000 7,916,484
Class A shares have one vote per share and Class B shares have ten votes per share. There is no public market for the Class B common shares of the Corporation. Pursuant to the Corporation's Amended Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder's extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation's Class A common shares. If the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. Under the Corporation's Stock Option Plans, options to purchase Class A and Class B shares are granted to directors, officers and other key employees at the then-current market price. In general, subject to continuing employment, options become exercisable commencing one year after date of grant in four annual installments and expire over a period of not more than ten years from the date of grant. The options granted to non-employee directors become exercisable in six installments over five years. The Corporation has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Corporation's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123 and has been determined as if the Corporation had accounted for its employee stock options issued subsequent to February 28, 1995 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model. 42 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE L - COMMON SHARES AND STOCK OPTIONS (CONTINUED) The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Corporation's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The pro forma information for stock options indicates decreases in net income of $3,248 in 1999, $4,931 in 1998 and $2,347 in 1997. The pro forma information and related assumptions under the Black-Scholes method follow:
1999 1998 1997 -------------- --------------- --------------- Net income $ 176,974 $ 185,153 $ 164,748 Earnings per share $ 2.52 $ 2.51 $ 2.20 Earnings per share - assuming dilution $ 2.49 $ 2.48 $ 2.19 Assumptions: Risk-free interest rate 5.4% 6.1% 6.4% Dividend yield 1.6% 2.0% 2.4% Expected stock volatility 0.27 0.26 0.25 Expected life in years: Grant date to exercise date 5.6 5.6 4.6 Vest date to exercise date 2.4 2.3 2.1
43 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE L - COMMON SHARES AND STOCK OPTIONS (CONTINUED) Stock option transactions and prices are summarized as follow:
Number of Options Weighted-Average Exercise Price Per Share ------------------------------------ ---------------------------------------------------- Class A Class B Class A Class B ---------------- ---------------- ------------------------- ---------------------- Options outstanding February 29, 1996 1,466,997 740,090 $ 20.29 $ 11.01 Granted 891,595 215,922 27.29 27.32 Exercised (317,409) (43,500) 18.10 19.31 Cancelled (84,800) - 27.13 - ---------------- ---------------- Options outstanding February 28, 1997 1,956,383 912,512 $ 23.57 $ 14.42 Granted 1,453,677 470,000 30.45 29.50 Exercised (616,675) (33,500) 21.14 19.85 Cancelled (182,250) - 28.96 - ---------------- ---------------- Options outstanding February 28, 1998 2,611,135 1,349,012 $ 27.58 $ 19.54 Granted 189,850 596 45.73 48.06 Exercised (395,754) (573,422) 25.54 9.07 Cancelled (127,200) (7,000) 30.25 26.13 ---------------- ---------------- Options outstanding February 28, 1999 2,278,031 769,186 $ 29.18 $ 27.30 ================ ================ Options exercisable at February 28: 1999 1,235,331 490,936 $ 26.23 $ 26.23 1998 1,077,035 902,262 24.42 14.84 1997 1,169,083 689,762 20.90 12.79
The weighted average remaining contractual life of the options outstanding as of February 28, 1999 is 6.9 years. 44 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE L - COMMON SHARES AND STOCK OPTIONS (CONTINUED) Range of exercise prices for options outstanding:
Outstanding Exercisable ----------------------------------- --------------------------------- Weighted- Weighted- Weighted- Average Average Average Remaining Exercise Optioned Exercise Optioned Exercise Contractual Life Price Ranges Shares Price Shares Price (Years) - ------------------------- --------------- --------------- -------------- --------------- ------------------ $11.44 - 26.00 493,000 $19.79 481,800 $19.67 3.2 26.13 - 27.25 703,792 27.17 521,142 27.16 6.9 27.50 - 29.38 74,187 28.43 51,337 28.42 6.2 29.50 - 30.00 1,376,142 29.50 605,042 29.50 7.9 30.13 - 51.63 400,096 39.70 66,946 34.99 8.7 --------------- -------------- 3,047,217 1,726,267 =============== ==============
45 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE M - BUSINESS SEGMENT INFORMATION The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. The Social Expression Products segment primarily designs, manufactures and sells greeting cards and other products through various channels of distribution with mass retailers as the primary channel. As permitted under Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," certain operating divisions have been aggregated into one reportable segment. These operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. The Corporation's non-reportable operating segments include the design, manufacture and sale of promotional Christmas product, non-prescription reading glasses, educational materials and display fixtures; personalized and e-mail greeting cards; and the sale of both the Corporation's products and other products through retail stores. The Corporation evaluates segment performance based on earnings before foreign currency exchange gains or losses, interest income, interest expense and income taxes. Centrally incurred and managed costs and non-recurring items are not allocated back to the operating segments. The accounting policies of the reportable segments are the same as those described in Note A - Significant Accounting Policies, except those that are related to LIFO or applicable to only corporate items. Intersegment sales are recorded at wholesale prices. Intersegment sales and profits are eliminated in consolidation. All inventories resulting from intersegment sales are carried at cost. The reporting and evaluation of segment assets include net accounts receivable, inventory on a "first-in, first-out" basis, display materials and factory supplies, prepaid expenses, other assets (including net deferred costs), and net property, plant and equipment. Segment results are reported and evaluated at consistent exchange rates between years to eliminate the impact of foreign currency fluctuations. An exchange rate adjustment is included in the reconciliation of the segment results to the consolidated results; this adjustment represents the impact on the segment results of the difference between the exchange rates used for segment reporting and evaluation and the actual exchange rates for the periods presented. 46 47
OPERATING SEGMENT INFORMATION Net Sales Earnings ------------------------------------------- --------------------------------------- 1999 1998 1997 1999 1998 1997 ------------- ----------- ----------- ----------- ----------- ---------- Social Expressions Products $1,854,106 $1,786,756 $1,737,883 $450,512 $418,078 $410,915 Intersegment items (83,004) (77,836) (69,534) (58,409) (52,172) (45,653) ------------- ----------- ----------- ----------- ----------- ---------- Net 1,771,102 1,708,920 1,668,349 392,103 365,906 365,262 Non-reportable segments 454,796 487,884 481,157 41,679 30,486 16,838 Non-recurring items - - - (13,925) 22,125 - Exchange rate adjustment (20,192) 1,961 11,583 (1,619) (16) 402 Unallocated items - net - - - (136,641) (126,064) (128,172) ------------- ----------- ----------- ----------- ----------- ---------- Consolidated $2,205,706 $2,198,765 $2,161,089 $281,597 $292,437 $254,330 ============= =========== =========== =========== =========== ========== Assets Depreciation ---------------------------------------------- ------------------------------------- 1999 1998 1997 1999 1998 1997 ------------ ------------ ------------- --------- --------- ---------- Social Expressions Products $1,698,251 $1,545,732 $1,522,981 $43,254 $40,143 $39,688 Non-reportable segments 277,592 295,440 349,604 24,337 25,662 24,426 Unallocated and intersegment 474,345 327,175 247,645 (99) (58) 68 items Exchange rate adjustment (30,860) (6,883) 14,890 (443) 179 384 ------------ ------------ ------------- --------- --------- ---------- Consolidated $2,419,328 $2,161,464 $2,135,120 $67,049 $65,926 $64,566 ============ ============ ============= ========= ========= ========== Capital Expenditures ------------------------------------ 1999 1998 1997 --------- --------- ---------- Social Expressions Products $43,907 $45,984 $72,398 Non-reportable segments 17,553 22,064 19,880 Unallocated and intersegment - - - items Exchange rate adjustment (510) (150) 617 --------- --------- ---------- Consolidated $60,950 $67,898 $92,895 ========= ========= ========== OTHER INFORMATION 1999 1998 1997 ------------ ------------ ----------- Product Information Everyday greeting cards $1,051,374 $1,010,857 $ 955,430 Seasonal greeting cards 450,611 466,761 471,321 Gift wrapping and wrap 301,517 309,763 305,917 accessories All other 402,204 411,384 428,421 ------------ ------------ ----------- Consolidated Net Sales $2,205,706 $2,198,765 $2,161,089 ============ ============ =========== GEOGRAPHIC INFORMATION Net Sales Fixed Assets - Net ---------------------------------------------- ----------------------------------------- 1999 1998 1997 1999 1998 1997 ------------ ------------ ------------- ---------- ------------ ----------- United States $1,819,857 $1,864,368 $1,831,834 $363,802 $371,733 $378,054 Foreign 385,849 334,397 329,255 71,004 75,899 84,733 ------------ ------------ ------------- ---------- ------------ ----------- Consolidated $2,205,706 $2,198,765 $2,161,089 $434,806 $447,632 $462,787 ============ ============ ============= ========== ============ ===========
47 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE N - INCOME TAXES Income (loss) before income taxes:
1999 1998 1997 --------- --------- --------- United States $ 300,411 $ 298,817 $ 264,077 Foreign (18,814) (6,380) (9,747) --------- --------- --------- $ 281,597 $ 292,437 $ 254,330 ========= ========= ========= Income taxes have been provided as follows: 1999 1998 1997 --------- --------- --------- Current: Federal $ 111,736 $ 107,135 $ 71,582 Foreign (18,423) (6,873) 936 State and local 16,977 21,318 14,400 --------- --------- --------- 110,290 121,580 86,918 Deferred (principally federal) (8,915) (19,227) 317 --------- --------- --------- $ 101,375 $ 102,353 $ 87,235 ========= ========= =========
Significant components of the Corporation's deferred tax assets and liabilities at February 28, 1999 and 1998 are as follows:
1999 1998 --------- --------- Deferred tax assets: Sales returns $ 36,924 $ 39,152 Other 133,131 121,464 --------- --------- 170,055 160,616 Valuation allowance (10,819) (13,362) --------- --------- Total deferred tax assets 159,236 147,254 Deferred tax liabilities: Depreciation 47,440 44,694 Other 28,457 24,775 --------- --------- Total deferred tax liabilities 75,897 69,469 --------- --------- Net deferred tax assets $ 83,339 $ 77,785 ========= =========
The decrease in the valuation allowance was due to decreases in net operating loss carryforwards in the United Kingdom. 48 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE N - INCOME TAXES (CONTINUED) The statutory federal income tax rate and the effective income tax rate are reconciled as follows:
1999 1998 1997 ------------- -------------- -------------- Statutory rate 35.0% 35.0% 35.0% State and local income taxes, net of federal tax benefit 3.7 4.0 3.9 Subsidiaries' losses without tax benefit 0.1 0.7 1.0 Corporate-owned life insurance investments (2.9) (3.4) (4.3) Other 0.1 (1.3) (1.3) ------------- -------------- -------------- Effective tax rate 36.0% 35.0% 34.3% ============= ============== ==============
Income taxes paid were $102,363 in 1999, $101,261 in 1998 and $99,391 in 1997. Deferred taxes have not been provided on approximately $30,386 of undistributed earnings of foreign subsidiaries since substantially all of these earnings are necessary to meet their business requirements. It is not practicable to calculate the deferred taxes associated with these earnings, however, foreign tax credits would be available to reduce federal income taxes in the event of distribution. At February 28, 1999, the Corporation had approximately $74,934 of foreign operating loss carryforwards, of which $23,885 have no expiration dates and $51,049 have expiration dates ranging from 2000 through 2009. The Internal Revenue Service has examined the Corporation's federal income tax returns for the fiscal years ended 1993 through 1995 and, as part of its Coordinated Issues Program, has made inquiries related to the Corporation's corporate-owned life insurance programs. Although no adjustments to taxable income have been made, the Corporation plans to fully contest any assessments relative to corporate-owned life insurance. An examination of fiscal years 1996 and 1997 was initiated in early March 1999. 49 50 QUARTERLY RESULTS OF OPERATIONS - ------------------------------- (Unaudited) Thousands of dollars except per share amounts The following is a summary of the unaudited quarterly results of operations for the years ended February 28, 1999 and 1998.
Quarter Ended -------------------------------------------------------------------- May 31 August 31 November 30 February 28 ---------- ---------- ----------- ------------ Fiscal 1999 Net sales $ 487,908 $ 479,733 $ 638,363 $ 599,702 Gross profit 328,189 309,246 412,032 399,159 Non-recurring charge - - 13,925 - Net income 33,831 13,925 74,561 57,905 Earnings per share .47 .20 1.06 .83 Earnings per share - assuming dilution .47 .20 1.04 .82 Fiscal 1998 Net sales $ 475,059 $ 484,742 $ 639,655 $ 599,309 Gross profit 313,585 296,806 397,324 400,362 Non-recurring gain - 22,125 - - Net income 30,259 26,097 79,038 54,690 Earnings per share .40 .35 1.07 .76 Earnings per share - assuming dilution .40 .35 1.05 .75
50 51 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders American Greetings Corporation We have audited the accompanying consolidated statement of financial position of American Greetings Corporation as of February 28, 1999 and 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended February 28, 1999. Our audits also included the finanical statement schedule listed in the Index at Item 14(a)3. These financial statements and schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Greetings Corporation at February 28,1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 28, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Ernst & Young LLP Cleveland, Ohio March 25, 1999 51 52 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no disagreements with the Corporation's independent auditors on accounting or financial disclosure matters within the three year period ended February 28, 1999, or in any period subsequent to such date. PART III The Corporation hereby incorporates by reference the information called for by Part III of Form 10-K from the Corporation's Notice of Annual Meeting of Shareholders to be held June 25, 1999, and related Proxy Statement filed with the Securities and Exchange Commission on May 17, 1999. (Next item is Part IV) 52 53 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements -------------------- Included in Part II of this report: Consolidated Statement of Income - Years ended February 28, 1999, 1998 and 1997 Consolidated Statement of Financial Position - February 28, 1999 and 1998 Consolidated Statement of Cash Flows - Years ended February 28, 1999, 1998 and 1997 Consolidated Statement of Shareholders' Equity - Years ended February 28, 1999, 1998 and 1997 Notes to Consolidated Financial Statements - Years ended February 28, 1999, 1998 and 1997 Quarterly Results of Operations (Unaudited) Report of Ernst & Young LLP, Independent Auditors 2. Exhibits required by Item 601 of Regulation S-K: (3) Articles of Incorporation and By-laws (i) Amended Articles of Incorporation of the Registrant (ii) Amended Regulations of the Registrant (4) Instruments Defining the Rights of Security Holders, including indentures (i) Trust Indenture, dated as of July 27, 1998, by and between the Corporation and NBD Bank, as Trustee, relating to 6.10% Notes due August 1, 2028 53 54 PART IV - Continued (ii) Credit Agreement dated as of August 7, 1998 by and among American Greetings Corporation (U.S. borrower), Carlton Cards (France) S.N.C. (French borrower), Carlton Cards Limited, UK Greetings Limited, Hanson White Group Limited, Camden Graphics Limited (UK borrowers), Carlton Cards Limited (Canadian borrower), John Sands (Australia) Ltd., John Sands (N.Z.) Ltd., John Sands Holding Corporation (Australian borrowers), Borrowers, and NationsBank National Association, National City Bank, Bank of America, National Trust and Savings Association, Bank of America Canada, Lenders, and the Lenders Party Hereto From Time to Time (10) Material Contracts (i) (A) (i) Officers' contracts * (ii) Employment Agreement with Edward Fruchtenbaum, dated January 1, 1998 * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1998, and is incorporated herein by reference. (ii) (A) (i) Shareholders Agreement dated November 19, 1984 * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (ii) Executive Bonus Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (iii) Executive Incentive Compensation Plan (as Amended and Restated as at March 6, 1989)* This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (iv) Executive Deferred Compensation Plan * 54 55 PART IV - Continued (v) 1982 Incentive Stock Option Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 2-84911) dated July 1, 1983, and is incorporated herein by reference. (vi) 1985 Incentive Stock Option Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 33-975) dated November 7, 1985, and is incorporated herein by reference. (vii) Supplemental Executive Retirement Plan * (viii) 1987 Class B Stock Option Plan This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 33-16180) dated July 31, 1987, and is incorporated herein by reference. (ix) Stock Option Agreement with Morry Weiss dated January 25,1988* This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (x) Loan Agreement with Edward Fruchtenbaum dated March 1,1990 * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (xi) 1992 Stock Option Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 33-58582) dated February 22,1993, and is incorporated herein by reference. (xii) CEO/COO Compensation Plans * 55 56 PART IV - Continued This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the Fiscal Year ended February 28,1995, and is incorporated herein by reference. (xiii) 1995 Director Stock Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 33-61037) dated July 14, 1995, and is incorporated herein by reference. (xiv) 1996 Employee Stock Option Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form S-8 Registration Statement (Registration No. 33-08123) dated July 15, 1996, and is incorporated herein by reference. (xv) 1997 Equity and Performance Incentive Plan * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1997, and is incorporated herein by reference. (iii) (A) (i) Agreement to defer stock option gains with Morry Weiss dated December 15, 1997 * This Exhibit has been previously filed as an Exhibit to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1998, and is incorporated herein by reference. (21) Subsidiaries of the Registrant (23) Consent of Independent Auditors (27) Financial Data Schedule Executive Compensation Plans and Arrangements The Corporation's executive compensation plans and arrangements are listed under Exhibit 10 hereof and marked by an asterisk (*). (b) Reports on Form 8-K None 56 57 PART IV - Continued (c) Exhibits listed in Item 14(a) 3. are included herein or incorporated herein by reference. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted below. 3. Financial Statement Schedules ----------------------------- Included in Part IV of the report: Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 57 58 PART IV - Continued SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. AMERICAN GREETINGS CORPORATION ------------------------------ (Registrant) Date: May 27, 1999 By: /s/ Jon Groetzinger, Jr. -------------- --------------------------- Jon Groetzinger, Jr. Secretary 58 59 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Irving I. Stone Founder - Chairman; ) - -------------------------------------------- Chairman of the ) Irving I. Stone Executive Committee; ) Director ) ) /s/ Morry Weiss Chairman of the Board; ) - -------------------------------------------- Chief Executive Officer; ) Morry Weiss Director ) ) /s/ Edward Fruchtenbaum President; ) - -------------------------------------------- Chief Operating Officer; ) Edward Fruchtenbaum Director ) ) /s/ Scott S. Cowen Director ) May 27, 1999 - -------------------------------------------- Scott S. Cowen ) ) /s/ Herbert H. Jacobs Director ) - -------------------------------------------- Herbert H. Jacobs ) ) /s/ Albert B. Ratner Director ) - -------------------------------------------- Albert B. Ratner ) ) /s/ Harry H. Stone Director ) - -------------------------------------------- Harry H. Stone ) ) /s/ Harriet Mouchly-Weiss Director ) - -------------------------------------------- Harriet Mouchly-Weiss ) ) /s/ James C. Spira Director ) - -------------------------------------------- James C. Spira ) ) /s/ William S. Meyer Senior Vice President; ) - -------------------------------------------- Chief Financial Officer ) William S. Meyer (principal financial officer) ) ) /s/ Patricia L. Ripple Vice President; ) - -------------------------------------------- Corporate Controller ) Patricia L. Ripple (principal accounting officer) )
59 60 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AMERICAN GREETINGS CORPORATION AND SUBSIDIARIES (000)
- ------------------------------------------------------------------------------------------------------------------------------ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------------------ ADDITIONS ------------------------------------- Balance (1) (2) Balance at Beginning Charged to Costs Charged to Other at End Description of Period and Expenses Accounts-Describe Deductions-Describe of Period - ------------------------------------------------------------------------------------------------------------------------------ Year ended February 28, 1999: Deduction from asset account: Allowance for doubtful accounts $ 15,661 $ 8,472 $ 91 (A) $ 8,641 (B) $ 15,583 ========== ================== ============== ============== ========== Allowance for sales returns $ 135,584 $ 342.267 $ 308 (A) $ 346,056 (C) $ 132,103 ========== ================== ============== ============== ========== Allowance for other assets $ 16,400 $ 0 $ 0 $ 0 $ 16,400 ========== ================== ============== ============== ========== Year ended February 28, 1998: Deduction from asset account: Allowance for doubtful accounts $ 15,264 $ 11,585 $ (1,119) (A) $ 10,069 (B) $ 15,661 ========== ================== ============== ============== ========== Allowance for sales returns $ 121,856 $ 337,320 $ (1,040) (A) $ 322,552 (C) $ 135,584 ========== ================== ============== ============== ========== Allowance for other assets $ 16,400 $ 0 $ 0 $ 0 $ 16,400 ========== ================== ============== ============== ========== Year ended February 28, 1997: Deduction from asset account: Allowance for doubtful accounts $ 16,214 $ 8,210 $ 113 (A) $ 9,273 (B) $ 15,264 ========== ================== ============== ============== ========== Allowance for sales returns $ 141,412 $ 306,755 $ 164 (A) $ 326,475 (C) $ 121,856 ========== ================== ============== ============== ========== Allowance for other assets $ 16,400 $ 0 $ 0 $ 0 $ 16,400 ========== ================== ============== ============== ==========
Note A: Includes translation adjustment on foreign subsidiary balances; business unit acquisitions for the year ended February 28, 1999 of $841 allowance for doubtful accounts and $1,816 allowance for sales returns; business unit disposals for the year ended February 28, 1998 of $1,064 allowance for doubtful accounts and $392 allowance for sales returns; and other minor reclasses and adjustments. Note B: Accounts charged off, less recoveries. Note C: Sales returns charged to the allowance account for actual returns for the year. S - 1 EX-3.I 2 EXHIBIT 3(I) 1 Exhibit 3(i) CERTIFICATE OF ADOPTION OF AMENDED ARTICLES OF INCORPORATION OF AMERICAN GREETINGS CORPORATION Morry Weiss, President, and Allan J. Goodfellow, Secretary, of American Greetings Corporation, an Ohio corporation with its principal office located at Cleveland, Ohio, do hereby certify that pursuant to O.R.C. Section 1701.72(B) the Executive Committee of the Board of Directors of said Corporation at a meeting held on June 12, 1987 did adopt the following resolution to adopt amended articles to consolidate all prior filings in force at that time: RESOLVED, that the following Amended Articles of Incorporation of the Corporation are hereby adopted to consolidate all prior filings that are currently in force: AMENDED ARTICLES OF INCORPORATION FIRST: The name of the Corporation shall be AMERICAN GREETINGS CORPORATION. SECOND: Said Corporation is to be located in the City of Cleveland, County of Cuyahoga and State of Ohio, and its principal business there transacted. THIRD: The purposes for which and for any of which said Corporation is formed are as follows: 2 2 (1) To manufacture, publish, print, cut, design, license, patent, copyright, buy and sell, both at wholesale and retail, and otherwise deal in greeting cards, post cards, envelopes, gift wrappings, tags, seals, greeting card bags, display cabinets and accessories, all kinds and forms of stationery and other printed or lithographed material and any and all other products of every nature and description. (2) To acquire, own, hold, use, lease, mortgage, pledge, exchange and dispose of property of all kinds, wherever situated, including shares of stock, bonds, debentures, notes, scrip, securities, interests in real estate, evidences of indebtedness, contracts and obligations of any corporation, association, firm or individual. (3) To enter into, promote or conduct any kind of business, contract or undertaking and for such purpose to acquire, take over and dispose of any or all of the assets of any corporation, association, firm or individual, to assume their rights and liabilities, guarantee or become surety for the performance of their obligations, and participate in any way in their affairs. (4) To possess and exercise without restriction as fully as a natural person might do all of the powers and authorities conferred upon or permitted to corporations under the laws of the State of Ohio; and to do any and all 3 3 things incidental to the accomplishment of the purposes hereinbefore set forth or incidental to the protection and benefit of the Corporation. FOURTH: The authorized number of shares of the Corporation shall consist of 50,258,242 shares which shall be classified as follows: 46,900,000 Class A Common Shares, par value $1 per share, and 3,958,242 Class H Common Shares, par value $1 per share. DIVISION A EXPRESS TERMS OF THE CLASS A COMMON SHARES (1) Each Class A Common Share shall be entitled to one vote upon all matters presented to shareholders. Any proposal to amend these Amended Articles of Incorporation to increase the authorized number of Class A Common Shares or the authorized number of Class B Common Shares shall require for its adoption the affirmative vote of the holders of at least two-thirds of the then outstanding Class A Common Shares, voting as a class. (2) The holders of Class A Common Shares shall have no preemptive rights to purchase or have offered to them for purchase any stock of any class of the Corporation. DIVISION B EXPRESS TERMS OF THE CLASS B COMMON SHARES (1) Each Class B Common Share shall be entitled to ten Votes upon all matters presented to shareholders. Any proposal to amend these Amended Articles of Incorporation to increase 4 4 the authorized number of Class A Common Shares or the authorized number of Class B Common Shares shall require for its adoption the affirmative vote of the holders of at least two-thirds of the then outstanding Class B Common Shares, voting as a class. (2)(a) Subject to and upon compliance with the provisions of this Article Fourth, the Class B Common Shares shall be convertible at the option of the holders thereof into Class A Common Shares on the basis of one Class A Common Share for each Class B Common Share so converted. (b) Prior to exercising the conversion privilege in respect of any Class B Common Shares, the holder thereof shall first offer to sell all, but not less than all, of such Class B Common Shares to the Corporation for cash at the last publicly reported sale price for Class A Common Shares on the last day for which sales are publicly reported before such offer is received by the Corporation. Such offer shall be made by a written communication addressed to the Secretary of the Corporation at its principal executive office and shall be deemed made to the Corporation when delivered to such Secretary or any other officer of the Corporation. The Corporation may accept such offer by giving notice of acceptance at any time before 5 o'clock P.M., Cleveland local time, on the business day immediately following the date of receipt of such offer by the Corporation. Such notice of acceptance shall be given by a written communication personally delivered to such holder of 5 5 Class B Shares or mailed to such holder at his address as it appears on the records of the Corporation or personally delivered or mailed to such representative of such holder or at such other address as may have been specified in such offer. Such notice of acceptance shall be deemed received when so delivered or mailed by the Corporation, but only if the Corporation shall have made all reasonable effort to give simultaneous notice to such holder or his designated representative by telephone or other reasonably available means of communication if (and then in the manner and to the place) requested in such offer. Payment for Class B Common Shares so to be purchased by the Corporation shall be made, against delivery of the Certificates therefor to the Corporation, not later than the fifth business day following receipt of such offer. (c) If the Class B Common Shares covered by an offer duly made and received pursuant to subparagraph (b) above are not so accepted for purchase by the Corporation, the holder thereof shall be free for a period of 30 days (such period to begin upon the earlier of: (i) receipt of a notice from the Corporation indicating that the Corporation has rejected such offer; or (ii) the lapse of the period during which the Corporation may give notice of its acceptance of such offer) to exercise the conversion privilege in respect thereof by delivering to any Transfer Agent of the Class B Common Shares (i) the certificate for the Class B Common Shares to be 6 6 converted, (ii) written notice that the holder elects to convert such shares and stating the name or names (with address) in which the certificate for the Class A Common Shares is to be issued and (iii) either a copy of notice given by the Corporation to such holder rejecting such offer or an affidavit executed by such holder to the effect that such offer was duly made and that no response thereto has been received after the passage of 10 business days from the date such offer was made (or the passage of such shorter period of time as should have been reasonable in the circumstances (but in no event less than two business days) to ensure receipt by such holder or his designated representative of any simultaneous telephonic or other notice requested by such holder as contemplated by such subparagraph). Conversion shall be deemed to have been effected on the date when such delivery is made, and such date is referred to herein as the "conversion date." On the conversion date or as promptly thereafter as practicable the Corporation shall issue and deliver to the holder of the Class B Common Shares surrendered for conversion, or on his written order, a certificate for the number of full Class A Common Shares issuable upon the conversion of such Class B Common Shares. The person in whose name the stock certificate is to be issued shall be deemed to have become a holder of Class A Common Shares of record on the conversion date. The Corporation hereby reserves and shall at all times reserve and keep available, out of its authorized and unissued Class A 7 7 Common Shares, for the purpose of effecting the conversion of the Class B Common Shares, such number of its duly authorized Class A Common Shares as shall from time to time be sufficient to effect the conversion of all outstanding Class B Common Shares. Class B Common Shares which are converted into Class A Common Shares as provided in this Article Fourth shall not be reissued. (3)(a) Class B Common Shares may be transferred, either by sale, assignment, gift, bequest, appointment or otherwise, only to the Corporation or to a Permitted Transferee of the holder of such Class B Common Shares (herein referred to as a "Class B Holder") or upon conversion into Class A Common Shares in accordance with paragraph (2) of this Division B, except that Class B Common Shares may be issued or transferred by the Corporation to any person. (b) For purposes of this paragraph (3), the term "Permitted Transferee" shall have the following meaning: (i) in the case of a Class B Holder who is a natural person holding record and beneficial ownership of the Class B Common Shares in question, "Permitted Transferee" means: (A) a grandparent of such Class B Holder, (B) a lineal descendant of a grandparent of such Class B Holder, (C) a spouse of a lineal descendant of a grandparent of such Class B Holder, (D) a lineal descendant of any spouse of a lineal descendant of a grandparent of such Class B Holder or the spouse of 8 8 any such spouse's lineal descendant, (E) a gratuitous transferee that is an organization contributions to which are deductible for federal income, estate or gift tax purposes (any such gratuitous transferee being herein referred to as a "Charitable Organization"), (F) the trustee of a trust (including, without limitation, a voting trust) for the exclusive benefit of one or more of the foregoing if such trustee is effectively prohibited from transferring shares of Class B Common Stock to persons other than Permitted Transferees referred to in this clause (i) and (G) any natural person with respect to whom such Class B Holder would be a Permitted Transferee if such person desired to transfer Class B Common Shares to such Class B Holder; (ii) in the case of a Class B Holder holding the Class B Common Shares in question as trustee pursuant to a trust other than a trust described in clause (iii) below, "Permitted Transferee" means (A) the person who established such trust and (b) a Permitted Transferee of such person determined pursuant to clause (i) above; (iii) in the case of a Class B Holder holding the Class B Common Shares in question as trustee pursuant to a trust which was irrevocable on the date the provisions of this paragraph (3) first became effective, "Permitted Transferee" means any person to whom or for whose benefit 9 9 principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise; (iv) in the case of a Class B Holder holding record (but not beneficial) ownership of the Class B Common Shares in question as nominee for the person who was the beneficial owner thereof on the date the provisions of this paragraph (3) first-became effective, "Permitted Transferee" means such beneficial owner and any Permitted Transferee of such beneficial owner determined pursuant to clause (i), (ii), (iii), (v), (vi), (vii), (viii) or (ix) hereof, as the case may be; (v) in the case of a Class B Holder which is a partnership holding record and beneficial ownership of the shares of Class B Common Stock in question on the date the provisions of this paragraph (3) first became effective, "Permitted Transferee" means any partner of such partnership; (vi) in the case of a Class B Holder which is a corporation (other than a Charitable Organization described in subclause (E) of clause (i) above) holding record and beneficial ownership of the shares of Class B Common Stock in question on the date the provisions of this paragraph (3) first became effective, "Permitted Transferee" means any stockholder of such corporation receiving shares of 10 10 Class B Common Stock through a dividend or redemption or through a distribution made upon liquidation of such corporation; (vii) in the case of a Charitable Organization, "Permitted Transferee" means the person who donated the Class B Common Shares in question thereto and any Permitted Transferee of such person pursuant to clause (i) above; (viii) in the case of the Corporation's Employees' Retirement Profit Sharing Plan or any plan approved by the Board of Directors of the Corporation that is similar to such plan, "Permitted Transferee" means (A) any participant or former participant therein, (B) any Permitted Transferee of such participant or former participant pursuant to clause (i) above and (C) the agent acting under the Corporation's Dividend Reinvestment Plan; (ix) in the case of any agent acting under the Corporation's Dividend Reinvestment Plan, "Permitted Transferee" means (A) any participant or former participant therein and (B) any Permitted Transferee of such participant or former participant pursuant to clause (i) above; and (x) in the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, and provided such deceased, bankrupt or insolvent Class B Holder, as the case may be, held record and beneficial ownership of the 11 11 shares of Class B Common Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (v) or (vi) above, as the case may be. (c) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Holder's shares of Class B Common Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this paragraph (3). In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock may only be transferred to a Permitted Transferee of the pledgor or converted into Class A Common Shares (after compliance with the provisions of subparagraph (2) (b) of this Article Fourth), as the pledgee may elect. (d) For purposes of this paragraph (3): (i) the relationship of any person that is derived by or through legal adoption prior to age 18 shall be considered a natural one; (ii) the term "spouse" shall include a widow or widower; (iii) each grandparent of any joint owner of particular Class B Common Shares shall be considered a grandparent of all joint owners of such shares; 12 12 (iv) a minor for whom Class B Common Shares are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares; (v) in applying the term "exclusive benefit," a contingent trust interest having at the time of transfer an actuarial value (under actuarial tables then used for federal gift tax purposes for gifts between private individuals) of not more than five percent of the value of the assets of the trust shall be ignored; and (vi) unless otherwise specified, the term "person" means both natural persons and legal entities. (e) Any purported transfer of Class B Common Shares not permitted by this paragraph (3) shall be void and of no effect and the purported transferee shall have no rights as a shareholder of the Corporation and no other rights against or with respect to the Corporation. The Corporation may, as a condition to the transfer or the registration of transfer of Class B Common Shares to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. (f) The Corporation shall conspicuously note on the certificates representing Class B Common Shares the restrictions on transfer and registration of transfer imposed by this paragraph (3). 13 13 (4) The holders of Class B Common Shares, upon the sale for cash of authorized but unissued Class B Common Shares, have the right to purchase such shares in proportion to their respective holdings of Class B Common Shares, at the price prescribed in paragraph (1) of Division C hereof during such reasonable time and on such reasonable terms as may be fixed by the Board of Directors. Such terms may include provision for the purchase of Class B Common Shares offered to holders who do not timely exercise such right by the other holders of Class B Common Shares. The holders of Class B Common Shares shall have no other preemptive rights to purchase or have offered to them for purchase any stock of any class of the Corporation. DIVISION C ADDITIONAL EXPRESS TERMS OF THE CLASS A COMMON SHARES AND CLASS B COMMON SHARES (1) Subject to and upon compliance with the provisions of this Article Fourth, authorized but unissued Class B Common Shares may be issued only simultaneously with the issuance of Class A Common Shares for cash at the same cash price (without deduction for any commissions payable or discounts allowed) per share; provided, however, that the number of Class B Common Shares so issued shall not exceed the product of the number of Class A Common Shares being so issued times the ratio of the number of Class B Common Shares issued and outstanding at the record date fixed for determining the holders of Class B Common Shares who have the right as provided in paragraph (4) of 14 14 Division B hereof to purchase such Class B Common Shares being issued, to the number of Class A Common Shares issued and outstanding at such date. (2) No change of Outstanding Class A Common Shares or of Class B Common Shares so as to effect a share dividend thereon or a split or combination thereof shall be made unless a corresponding change is made with respect to the shares of the other class. (3) Except as above provided in this Article Fourth, each Class A Common Share and each Class B Common Share shall be identical and have similar rights, privileges, qualifications, limitations and restrictions. FIFTH: The purposes for which this Corporation is formed may be substantially changed by amendment thereto adopted by the affirmative vote of the shareholders entitled to exercise two-thirds of the voting power of the Corporation. SIXTH: The Corporation may purchase, from time to time and to the extent of the surplus of the aggregate of its assets over the aggregate of its liabilities plus stated capital, shares of any class of stock issued by it. Such purchases may be made either in the open market or at private or public sale, and in such manner and amounts, from such holder or holders of outstanding stock of the Corporation and at such prices as the Board of Directors of the Corporation shall from time to time determine, and the Board of Directors is hereby empowered to 15 15 authorize such purchases from time to time without any vote of the holders of any class of shares now or hereafter authorized and outstanding at the time of any such purchase. SEVENTH: No contract or other transaction between this Corporation and any other corporation, at least a majority of the stock of which having voting power is owned or controlled by the Corporation or which owns or controls at least a majority of the stock having voting power of the Corporation, shall in any case be void or voidable because of the fact that Directors of this Corporation are Directors of such other corporation, nor shall any such Director be deemed interested in such contract or other transaction under any of the provisions of this Article Seventh, nor shall any such Director be liable to account because of such interest nor need any such interest be disclosed. No contract or other transaction entered into by the Corporation shall be affected by the fact that any Director of the Corporation is in any way interested in, or connected with, any party to such contract or transaction, or himself is a party to such contract or transaction, provided that such contract or transaction shall be approved by a majority of the Directors present at the meeting of the Board or of the Committee authorizing or confirming such contract or transaction, which majority shall consist of Directors not so interested or connected. Any contract, transaction or act of the Corporation or of the Board of Directors or of any 16 16 Committee, which shall be ratified by a majority of a quorum of the shareholders at any annual meeting, or at any special meeting called for that purpose, shall be as valid and as binding as though ratified by every shareholder of the Corporation. EIGHTH: Any and every statute of the State of Ohio hereafter enacted whereby the rights, powers or privileges of corporations or of the shareholders of corporations organized under the laws of the State of Ohio are increased or diminished or in any way affected, or whereby effect is given to the action taken by any number, less than all, of the shareholders of any such corporation, shall apply to the Corporation and shall be binding not only upon the Corporation but upon every shareholder of the Corporation to the same extent as if such statutes had been in force at the date of filing these Amended Articles of Incorporation of the Corporation in the office of the Secretary of State of Ohio. NINTH: These Amended Articles supersede and take the place of the heretofore existing Articles of the Corporation. IN WITNESS WHEREOF, the above-named officers, acting for and on behalf of the Corporation, have subscribed their names this 12th day of June, 1987. /s/ Morry Weiss ------------------------------------ Morry Weiss, President /s/ Allan J. Goodfellow, Secretary ------------------------------------ Allan J. Goodfellow 17 Exhibit 3(i) SECRETARY OF STATE CHARTER NUMBER: 1866778 PROCESSING STATEMENT ROLL AND FRAME: H195-0996 /91 CORPORATION: DOCUMENT NUMBER CODE FEE --------------- ---- --- 91082901101 AND 2582755 AMERICAN GREETINGS CORPORATION INC NO FEE 021632 RETURN TO: AMERICAN GREETINGS ATTN: J.K.ROOSA 10500 AMERICAN RD. CLEVELAND, OH 44144 0175 18 ------------------------------ ------------------------------ THE STATE OF OHIO BOB TAFT Secretary of State 186778 - CERTIFICATE - It is hereby certified that the Secretary of State of Ohio has custody of the Records of Incorporation and Miscellaneous Filings; that said records show the filing and recording of: AMD INC ------------------------------------------------------- of: - ----------------------------------------------------------------------------- AMERICAN GREETINGS CORPORATION Recorded on Roll H195 at Frame 0998 of the Records of Incorporation and United States of America Miscellaneous Filings. State of Ohio Office of the Secretary of State [SEAL OF SECRETARY] Witness my hand and the seal of the Secretary of State at Columbus, Ohio, this 29TH day of AUG, A.D. 1991. /s/ Bob Taft Bob Taft Secretary of State 19 [SEAL] Prescribed by ------------------------- BOB TAFT, Secretary of State Charter No. 186778 30 East Broad Street, 14th Floor ------------- Columbus, Ohio 43266-0418 Approved RB Form SH-AMD (January 1991) ----------------- Date 8/29/91 -------------------- Fee 25,827.55 ------------------------- CERTIFICATE OF AMENDMENT BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF American Greetings Corporation - -------------------------------------------------------------------------------- (Name of Corporation) Henry Lowenthal , who is: - ------------------------- [ ] Chairman of the Board [ ] President [X] Vice President (check one) and Jon Groetzinger, Jr. , who is: [X] Secretary [ ] Assistant Secretary (Check - ------------------------- one) of the above named Ohio corporation for profit do hereby certify that: (check the appropriate box and complete the appropriate statements) [X] a meeting, of the shareholders was duly called for the purpose of adopting this amendment and held on July 29, 1991 at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise ** % of the voting power of the corporation. [ ] in a writing signed by all of the shareholders who would be entitled to notice of a meeting held for that purpose, the following resolution to amend the articles was adopted: FOURTH: The authorized number of shares of the Corporation shall consist of 50,258,242 shares which shall be classified as follows: 46,900,000 Class A Common Shares, par value $1 per shares, and 3,958,242 Class B Common Shares, par value $1 per share. IN WITNESS WHEREOF, the above named officers, acting for and on the behalf of the corporation, have hereto subscribed their names this 27th day of August 1991. ** Class A Common Shares 67.0% By: /s/ Henry Lowenthal Class B Common Shares 73.7% ------------------------------------ (Vice President) By: /s/ Jon Groetzinger, Jr. ----------------------------------- (Secretary) NOTE: Ohio law does not permit one officer to sign in two capacities, Two separate signatures are required, even if this necessitates the election of a second officer before the filing can be made. 20 JAMES ROOSA CORPORATE COUNSEL [AMERICAN GREETINGS LOGO] - -------------------------------------------------------------------------------- 10500 AMERICAN ROAD CLEVELAND. CHIC 44144 216 / 252-7300 Bob Taft, Secretary of State August 27, 1991 30 East Broad Street, 14th Floor Columbus, Ohio 43266-0418 Re: Certificate of Amendment -- American Greetings Corporation ---------------------------------------------------------- To Whom it may concern: Please find enclosed for filing on behalf of American Greetings Corporation the following items: 1) Form SH-AMD -- Certificate of Amendment (manually signed); 2) Filing Fee in the amount of $27,327.50 payable to "Secretary of State"; 3) Duplicates of this letter and Form SH-AMD. Upon receipt of these materials, please date-stamp the enclosed duplicates and return them to me in the self-addressed, stamped envelope enclosed for your convenience. Sincerely, /s/ James K. Roosa James K. Roosa Corporate Counsel cc: Jon Groetzinger, Jr. JKR: nas Enclosure 21 3/29/91 RECEIPT NO. 910829011 PAGE: 1 BATCH NO: 002324 BOB TAFT SECRETARY OF STATE REFUND 1,499.95 ************** RECEIPT ************** CHECK ISSUED: AMERICAN GREETINGS CORPORATION TOTAL $27,327.50 BY: 10500 AMERICAN RD ------------------------- CLEVELAND, OH 44144 ------------------------- AMERICAN GREETINGS CORPORATION 22 AMERICAN GREETINGS CORPORATION REPORT OF INSPECTORS OF ELECTION -------------------------------- July 29, 1991 Cleveland, Ohio We, the undersigned, duly appointed Inspectors of Election at a special meeting of shareholders of American Greetings Corporation held at 10500 American Road, Cleveland, Ohio, on the above date at 2:30 p.m., do hereby report that we have examined all the proxies at said meeting; that we canvassed the shareholders present in person at said meeting; that we checked the said proxies and the names of the shareholders present in person with the list of shareholders of record at the close of business on June 14, 1991, and that we conducted all voting at said meeting. Based on the foregoing, the undersigned further report as follows : 1. That there were outstanding and entitled to vote at said meeting 33,619,900 Class A Common Shares of the Company having one vote per share, and 2,032,900 Class B Common Shares of the Company having ten votes per share. 2. That there were present in person or by proxy holders of record, as of the close of business on June 14, 1991, of the following Class A Common Shares and Class B Common Shares entitled to vote at the meeting:
Percentage Total Of Total Votes Outstanding ----- ----------- Class A Common Shares 29,175,001 x 1 = 29,175,001 86.8% Class B Common Shares 1,504,844 x 10 = 15,048,440 74.0% ---------- ----- Total 44,223,441 82.0%
-1- 23 3. That a quorum was present. 4. That Albert B. Ratner, Harry H. Stone and Abraham Zaleznik were elected Directors of the Company, having received the number of votes set opposite their respective names as follows:
Number of Number of Nominee Shares Votes ------- --------- ---------- Albert B. Ratner Class A Common Shares 28,771,476 x 1 = 28,771,476 Class B Common Shares 1,500,642 x 10 = 15,006,420 ---------- Total 43,777,896 Harry H. Stone Class A Common Shares 28,654,049 x 1 = 28,654,049 Class B Common Shares 1,500,642 x 10 = 15,006,420 ---------- Total 43,660,469 Abraham Zaleznik Class A Common Shares 28,765,543 x 1 = 28,765,543 Class B Common Shares 1,500,642 x 10 = 15,006,420 ---------- Total 43,771,963
5. That the proposal amending Article Fourth of the Articles of the Company to increase the authorized number of Class A and Class B Common Shares passed having received the number of shares as follows :
FOR --- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 22,538,049 x 1 = 22,538,049 67.0% Class B Common 1,497,410 x 10 = 14,974,100 73.7% ---------- ----- Total 37,512,149 69.5%
-2- 24
AGAINST ------- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 5,292,714 x 1 = 5,292,714 15.7% Class B Common 5,011 x 10 = 50,110 0.0% Total 5,342,824 9.9% ABSTAIN ------- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 1,388,961 x 1 = 1,388,961 4.1% Class B Common 2,423 x 10 = 24,230 0.0% Total 1,413,191 2.6%
6. That the proposal amending Article Fourth to waive certain requirements with respect to a specified issuance of Class B Shares and adoption of an amended and restated 1987 Class B Stock Option Plan having received the vote of the following number of shares failed to receive the necessary two-thirds of each separate voting' class :
FOR --- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 18,045,031 x 1 = 18,045,031 53.7% Class B Common 1,480,619 x 10 = 14,806,190 72.8% ---------- ----- Total 32,851,221 60.9% AGAINST ------- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 9,696,925 x 1 = 9,696,925 28.8% Class B Common 18,100 x 10 = 181,000 .9% ---------- ----- Total 9,877,925 18.3%
-3- 25
ABSTAIN ------- Percentage Number of Number of of Shares Votes Outstanding ------ ----- ----------- Class A Common 1,437,943 x 1 = 1,437,943 4.3% Class B Common 6,125 x 10 = 61,250 .3% --------- ---- Total 1,499,193 2.8%
7. The following Class A Common Shares and Class B Common Shares were voted in favor of the resolution to adjourn the meeting: Class A Common Shares 28,648,616 x 1 = 28,648,616 Class B Common Shares 1,500,642 x 10 = 15,006,420 ---------- Total 43,655,036
CERTIFIED AT CLEVELAND, OHIO, THIS 5TH DAY OF AUGUST, 1991. /s/ Paul Ozan ----------------------------------- /s/ John Wszelaki ----------------------------------- /s/ Larry Potta ----------------------------------- -4- 26 JAMES ROOSA ASSISTANT GENERAL COUNSEL CORPORATE [AMERICAN GREETINGS LOGO] - -------------------------------------------------------------------------------- 10500 AMERICAN ROAD CLEVELAND, OHIO 44144-2398 216/252-7300 EXT. 1158 FAX 216/252-6741 July 6, 1993 Via Overnight Mail - ------------------ Mr. Bob Taft Secretary of State 30 East Broad Street, 14th Floor Columbus, Ohio 43266A0418 Re: Certificate of Amendment -- American Greetings Corporation ------------------------------------ To whom it may concern: Please find enclosed for filing on behalf of American Greetings Corporation the following items: (1) Form SH-AMD -- Certificate of Amendment (manually signed); (2) Filing Fee in the amount of $127,180.61 payable to "Secretary of State"; (3) Duplicates of this letter and Form SH-AMD. Upon receipt of these materials, please date-stamp the enclosed duplicates and return them to me in the self-addressed, stamped envelope enclosed for your convenience. JKR: lab Enclosures cc: Jon Groetzinger, Jr., Esq. 27 [SEAL] --------------------------- Prescribed by Charter No. - BOB TAFT, Secretary of State -------------- 30 East Broad Street, 14th Floor Approved A Columbus, Ohio 43266-0418 ---------------- Form SH-AMD (January 1991) Date ----------------------- Fee CERTIFICATE OF AMENDMENT BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF American Greetings Corporation - -------------------------------------------------------------------------------- (Name of Corporation) Henry Lowenthal , who is: - ------------------------- [ ] Chairman of the Board [ ] President [X] Senior Vice President (check one) and Jon Groetzinger, Jr. , who is: [X] Secretary Assistant Secretary (Check one) - ------------------------- of the above named Ohio corporation for profit do hereby certify that: (check the appropriate box and complete the appropriate statements) [X] a meeting, of the shareholders was duly called for the purpose of adopting this amendment and held on June 25, 1993 at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise *84.6% of the voting power of the corporation. in a writing signed by all of the shareholders who would be entitled to notice of a meeting held for that purpose, the following resolution to amend the articles was adopted: FOURTH: The authorized number of shares of the Corporation shall consist of 101,716,484 shares which shall be classified as follows: 93,800,000 Class A Common Shares, par value $1 per share, and 7,916,484 Class B Common Shares, par value $1 per share. IN WITNESS WHEREOF, the above named officers, acting for and on the behalf of the corporation, have hereto subscribed their names this 6th day of July, 1993. * Class A Common Shares 78.7%(1 vote) Class B Common Shares 93.8%(10 votes) (2/3 of each class required by Articles) By /s/ Henry Lowenthal ------------------------------- (Vice President) By /s/ Jon Groetzinger, Jr. ------------------------------- (Secretary) NOTE: Ohio law does not permit one officer to sign in two capacities. Two separate signatures are required, even if this necessitates the election of a second officer before the filing can be made. 28 Return To: PHYLLIS ALDEN ONE AMERICAN RD CLEVELAND, OH 44144-2398 - ---------------------------cut along the dotted line---------------------------- -------------------------------------------- -------------------------------------------- The State of Ohio Certificate Secretary of State - Bob Taft 186778 It is hereby certified that the Secretary of State of Ohio has custody of the business records for AMERICAN GREETINGS CORPORATION and that said business records show the filing and recording of: Document(s) Document No(s): ----------- --------------- DOMESTIC/AMENDMENT TO ARTICLES 199820100735 ----------------------- United States of America Witness my hand and the seal of the Secretary State of Ohio of State at Columbus, Ohio, This 13th day of Office of the Secretary of State July, A.D. 1998 [SEAL] /s/ Bob Taft Bob Taft Secretary of State 29 CERTIFICATE OF ADOPTION OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION OF AMERICAN GREETINGS CORPORATION Morry Weiss, Chairman of the Board, Edward Fruchtenbaum, President, and Jon Groetzinger, Jr., Secretary of American Greetings Corporation, an Ohio corporation, do hereby certify that, pursuant to Section 1701.71(A), Ohio General Corporation Law, the shareholders of said Corporation, at the Annual Meeting of Shareholders held on June 26,1998, did adopt the following resolution to replace Article Fourth of the Amended Articles of Incorporation: RESOLVED, that Article Fourth of the Amended Articles of Incorporation shall be replaced by the following new Article Fourth: "FOURTH. The authorized number of shares of the Corporation shall consist of 203,432,968 which shall be classified as follows: 187,600,000 Class A Common Shares, par value $1 per share, and 15,832,968 Class B Common Shares, par value $1 per share." IN WITNESS WHEREOF, the above-named officers, acting for and on behalf of the Corporation, have subscribed their names this 7th day of July, 1998. /s/ Morry Weiss ------------------------------------- Morry Weiss, Chairman of the Board /s/ Edward Fruchtenbaum ------------------------------------- Edward Fruchtenbaum, President /s/ Jon Groetzinger, Jr. ------------------------------------- Jon Groetzinger, Jr., Secretary EX-3.II 3 EXHIBIT 3(II) 1 Exhibit 3(ii) REGULATIONS ----------- OF AMERICAN GREETINGS CORPORATION ------------------------------ ARTICLE I. SHAREHOLDERS' MEETINGS - ---------------------- Section 1. Annual Meeting -------------- The annual meeting of shareholders shall be held at 2:30 o'clock p.m. E.D.T. on the fourth Friday in June in each year, if not a legal holiday, and if a legal holiday, then on the next day not a Saturday, Sunday or legal holiday, for the purpose of electing Directors and considering reports to be laid before said meeting. Upon due notice there may also be considered and acted upon at an annual meeting any matter which could properly be considered and acted upon at a special meeting, in which case and for which purpose the annual meeting shall also be considered as, and shall be, a special meeting. In the event the annual meeting is not held or if Directors are not elected thereat, a special meeting may be called and held for that purpose. Section 2. Special Meetings ---------------- Special meetings of shareholders may be called by the Chairman of the Board, President or by a Vice President, or by a majority of the members of the Board of Directors acting with or without a meeting, or by the person or persons who hold of record not less than twenty-five percent of all the shares outstanding and entitled to be voted on any proposal to be submitted at said meeting. Upon request in writing by registered mail or delivered in person to the President or Secretary by any person or persons entitled to call a meeting of shareholders, it shall be the duty of such officer forthwith to cause to be given, to the shareholders entitled to notice of such meeting, notice of a meeting to be held not less than ten nor more than sixty days after the receipt of such request, as such officer shall fix. If such notice shall not be given within twenty days after the delivery or mailing of such request, the person or persons requesting the meeting may fix the time of the meeting and give, or cause to be given, notice in the manner hereinafter provided. Section 3. Place of Meetings ----------------- Any meeting of shareholders may be held either at the principal office of the Corporation or at such other place 2 within or without the State of Ohio as may be designated in the notice of said meeting. Section 4. Notice of Meetings ------------------ Not more than forty-five days nor less than five days before the date fixed for a meeting of shareholders, whether annual or special, written notice of the time, place and purposes of such meeting shall be given by the President or by a Vice President or by the Secretary or by an Assistant Secretary (or in case of their refusal, by the person or persons entitled to call the meeting under the provisions of these Regulations). Such notice shall be served upon or mailed to each shareholder entitled to notice of or to vote at such meeting. If such notice is mailed, it shall be directed, postage prepaid, to the shareholders at their respective addresses as they appear upon the records of the Corporation, and notice shall be deemed to have been given on the day so mailed. If any meeting is adjourned to another time or place, no notice as to such adjourned meeting need be given other than by announcement at the meeting at which such adjournment is taken. No business shall be transacted at any such adjourned meeting except as might have been lawfully transacted at the meeting at which such adjournment was taken. Section 5. Shareholders Entitled to Notice and to Vote ------------------------------------------- If a record date shall not be fixed or the books of the Corporation shall not be closed against transfers of shares pursuant to statutory authority, the record date for the determination of shareholders entitled to notice of or to vote at any meeting of shareholders shall be the close of business on the fifteenth day prior to the date of the meeting and only shareholders of record at such record date shall be entitled to notice of and to vote at such meeting. Such record date shall continue to be the record date for all adjournments of such meeting, unless a new record date shall be fixed and notice thereof and of the date of the adjourned meeting be given to all shareholders entitled to notice in accordance with the new record date so fixed. Section 6. Inspectors of Election List of Shareholders ------------------------------------------- Inspectors of Election may be appointed to act at any meeting of shareholders in accordance with statute. At any meeting of shareholders a list of shareholders, alphabetically arranged, showing the number and classes of shares held by each on the record date applicable to such meeting shall be produced on the request of any shareholder. 3 Section 7. Quorum ------ To constitute a quorum at any meeting of shareholders, there shall be present in person or by proxy shareholders of record entitled to exercise not less than twenty-five percent of the voting power of the Corporation in respect of any one of the purposes for which the meeting is called. The shareholders present in person or by proxy, whether or not a quorum be present, may adjourn the meeting from time to time without notice other than by announcement at the meeting. Section 8. Voting ------ In all cases, except where otherwise by statute or the Articles or the Regulations provided, a majority of the votes cast shall control. Cumulative voting in the election of Directors shall be permitted as provided by statute. Section 9. Report to Shareholders ---------------------- At the annual meeting, or any other meeting held in lieu thereof at which Directors are to be elected, the officers of the Corporation shall lay before the shareholders a financial statement as required by statute. Section 10. Action without a Meeting ------------------------ Any action which may be taken at a meeting of shareholders may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to notice of a meeting for such purposes. ARTICLE II. BOARD OF DIRECTORS Section 1. Number, Term of Office and Election ----------------------------------- Upon adoption of this Article II, Section 1. by the shareholders at the annual meeting of shareholders in 1989, the Board of Directors shall consist of twelve (12) Directors; provided, however, that the number of Directors may be fixed or changed by the shareholders entitled to exercise a majority of the voting power of the shares represented at a meeting called to elect Directors and entitled to vote at such election. The Board of Directors shall be divided into three classes consisting of not less than three Directors each. At the annual meeting of shareholders in 1989, four Directors shall be elected 4 for a term of three years, four Directors shall be elected for a term of two years, and four Directors shall be elected for a term of one year. Thereafter, at each annual meeting of shareholders, or special meeting of shareholders if called for the purpose of electing Directors, the Board of Directors shall propose to the shareholders the number of Directors to be elected for a three-year term to succeed the Directors of the class whose term shall expire in that year. In case of any increase in the number of Directors of any class, whether upon the expiration of the term of office of the Directors of a particular class or during such term, any additional Directors elected to such class shall hold office for a term which shall coincide with the term of such class. In case the shareholders at any meeting for the election of Directors shall fail to fix the number of Directors to be elected, the number elected shall be not less than three and shall be deemed to be the number of Directors fixed. Each Director shall hold office until the expiration of the term of office for the class to which such Director is elected, subject, however, to provisions of statute as to the creation of vacancies and removal. At any meeting of shareholders at which Directors are to be elected, only persons nominated as candidates shall be eligible for election. The provisions of Article V, Section 6. relative to amending these Regulations, notwithstanding, this Article II, Section 1. may only be amended by the affirmative vote or written consent of the shareholders of record entitled to exercise two-thirds of the voting power of the Corporation on such proposal. Section 2. Meetings -------- Regular meetings of the Board of Directors shall be held immediately after the annual meeting of shareholders and at such other times and places as may be fixed by the Board of Directors, and such meetings may be held without further notice. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President or by a Vice President or by the Secretary of the Corporation, or by not less than one-third of the Directors. Notice of the time and place of such meeting shall be served upon or telephoned to each Director at least twenty-four hours, or mailed or telegraphed to each Director at his address as shown by the books of the Corporation at least forty-eight hours, prior to the time of the meeting. Section 3. Quorum ------ A majority of the number of Directors then in office (but in no event more than five) shall be necessary to constitute a quorum for the transaction of business, but if at 5 any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall attend. Section 4. Committees ---------- The Board of Directors may from time to time appoint certain of its members to act as a committee or committees in the intervals between meetings of the Board and may delegate to such committee or committees powers to be exercised under the control and direction of the Board. In particular, the Board of Directors may create from its membership and define the powers and duties of an Executive Committee of not less than three members. Except to the extent that its powers are limited by the Board, the Executive Committee during the intervals between meetings of the Board shall possess and may exercise under the control and direction of the Board all of the powers of the Board of Directors in the management and control of the business of the Corporation, regardless of whether such powers are specifically conferred by these Regulations. All action taken by the Executive Committee shall be reported to the Board of Directors at its first meeting thereafter. Unless otherwise provided by the Board of Directors, a majority of the members of any committee appointed by the Board of Directors pursuant to this Section shall constitute a quorum at any meeting thereof and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. Action may be taken by any such committee without a meeting by a writing signed by all its members. Any such committee shall prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors, and shall keep a written record of all action taken by it. ARTICLE III. OFFICERS - -------- Section 1. Officers -------- The Corporation may have a Chairman of the Board of Directors and shall have a President (both of whom shall be members of the Board of Directors), a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. The Corporation may also have one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as the Board may deem necessary, all of whom shall be elected by the 6 Board of Directors or chosen by an officer or officers designated by it. Section 2. Authority and Duties of Officers -------------------------------- The officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices or as may be specified from time to time by the Board of Directors, regardless of whether such authority and duties are customarily incident to such office. Section 3. Compensation ------------ The Board of Directors shall fix the compensation of the Chairman of the Board and of the President and shall fix or authorize the President or a committee appointed by the Board to fix the compensation of any or all other officers. The Board of Directors may allow compensation to members of any committee and may vote compensation to any Director for attendance at meetings or for any special services. ARTICLE IV. INDEMNIFICATION AND INSURANCE - ----------------------------- Section 1. Indemnification --------------- The Corporation shall indemnify, to the full extent then permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, trustee, officer, employee or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise; provided, however, that the Corporation shall indemnify any such agent of the Corporation (as opposed to any Director, officer or employee of the Corporation) to an extent greater than that required by law only if and to the extent that the Directors may, in their discretion, so determine. The indemnification provided hereby shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any law, the articles of incorporation or any agreement, vote of shareholders or of disinterested Directors or otherwise, both as to action in official capacities and as to action in another capacity while he is a Director, officer, employee or agent, and shall continue as to a person who has ceased to be a Director, trustee, officer, employee or agent and shall inure to 7 the benefit of heirs, executors and administrators of such a person. Section 2. Insurance --------- The Corporation may, to the full extent then permitted by law and authorized by the Directors, purchase and maintain insurance on behalf of any persons described in the preceding paragraph against any liability asserted against and incurred by any such person in any capacity, or rising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such liability. ARTICLE V. MISCELLANEOUS - ------------- Section 1. Transfer and Registration of Certificates ----------------------------------------- The Board of Directors shall have authority to make such rules and regulations as it deems expedient concerning the issuance, transfer and registration of certificates for shares and the shares represented thereby and may appoint transfer agents and registrars thereof. Section 2. Substituted Certificates ------------------------ Any person claiming a certificate for shares to have been lost, stolen or destroyed shall make an affidavit or affirmation of that fact, shall give the Corporation and its registrar or registrars and its transfer agent or agents a bond of indemnity satisfactory to the Board of Directors or to the Executive Committee or to the President or a Vice President and the Secretary or the Treasurer, and, if required by the Board or the Executive Committee or such officers, shall advertise the same in such manner as may be required, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed. Section 3. Voting upon Shares Held by the Corporation ------------------------------------------ Unless otherwise ordered by the Board of Directors, the President in person or by proxy or proxies appointed by him shall have full power and authority on behalf of the Corporation to vote, act and consent with respect to any shares issued by other corporations which the Corporation may own. 8 Section 4. Corporate Seal -------------- The seal of the Corporation shall be circular in form with the name of the Corporation stamped around the margin and the words "Corporate Seal" stamped across the center. Section 5. Articles to Govern ------------------ In case any provision of these Regulations shall be inconsistent with the Articles of Incorporation, the Articles of Incorporation shall govern. Section 6. Amendments ---------- These Regulations may be amended by the affirmative vote or the written consent of the shareholders of record entitled to exercise a majority of the voting power on such proposal, provided, however, that if an amendment is adopted by written consent without a meeting of the shareholders, it shall be the duty of the Secretary to enter the amendment in the records of the Corporation and to mail a copy of such amendment to each shareholder of record who would be entitled to vote thereon and did not participate in the adoption thereof. 9 AMENDMENT TO ARTICLE I, SECTION 7 OF THE CODE OF REGULATIONS OF AMERICAN GREETINGS CORPORATION Article I, Section 7 of the Code of Regulations is hereby amended to read as follows: Except as provided below, to constitute a quorum at any meeting of shareholders, there shall be present in person or by proxy shareholders of record entitled to exercise not less than twenty-five percent of the voting power of the corporation in respect of any one of the purposes for which the meeting is called. Where shareholder approval is a prerequisite to the listing of any additional or new securities of the Corporation, the total vote cast on such a proposal must represent over fifty percent in interest of all securities entitled to vote on the proposal. EX-4.I 4 EXHIBIT 4(I) 1 Exhibit 4(i) ================================================================================ AMERICAN GREETINGS CORPORATION TO NBD BANK Trustee -------------- INDENTURE Dated as of July 27, 1998 -------------- ================================================================================ 2 .............................................................. CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939: TRUST INDENTURE ACT SECTION INDENTURE SECTION Section 310(a)(1) ........................................... 609 (a)(2) ........................................... 609 (a)(3) ........................................... Not Applicable (a)(4) ........................................... Not Applicable (b) ........................................... 608 610 Section 311(a) ........................................... 613 (b) ........................................... 613 Section 312(a) ........................................... 701 702 (b) ........................................... 702 (c) ........................................... 702 Section 313(a) ........................................... 703 (b) ........................................... 703 (c) ........................................... 703 (d) ........................................... 703 Section 314(a) ........................................... 704 (a)(4) ........................................... 101 1004 (b) ........................................... Not Applicable (c)(1) ........................................... 102 (c)(2) ........................................... 102 (c)(3) ........................................... Not Applicable (d) ........................................... Not Applicable (e) ........................................... 102 Section 315(a) ........................................... 601 (b) ........................................... 602 (c) ........................................... 601 (d) ........................................... 601 (e) ........................................... 514 Section 316(a) ........................................... 101 (a)(1)(A) ........................................... 502 512 (a)(1)(B) ........................................... 513 (a)(2) ........................................... Not Applicable (b) ........................................... 508 (c) ........................................... 104 Section 317(a)(1) ........................................... 503 (a)(2) ........................................... 504 (b) ........................................... 1003 Section 318(a) ........................................... 107 - ------------------- NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS ---------- PAGE ---- PARTIES................................................................... 1 RECITALS OF THE COMPANY................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions: Act......................................................... 2 Affiliate; control.......................................... 2 Authenticating Agent........................................ 2 Board of Directors.......................................... 2 Board Resolution............................................ 2 Business Day................................................ 2 Commission.................................................. 2 Company..................................................... 2 Company Request; Company Order.............................. 2 Consolidated Net Tangible Assets............................ 3 Corporate Trust Office...................................... 3 corporation................................................. 3 Covenant Defeasance......................................... 3 Defaulted Interest.......................................... 3 Defeasance.................................................. 3 Depositary.................................................. 3 Event of Default............................................ 3 Exchange Act................................................ 3 Expiration Date............................................. 3 Funded Debt................................................. 3 Global Security............................................. 4 Holder...................................................... 4 Indebtedness................................................ 4 Indenture................................................... 4 interest.................................................... 4 Interest Payment Date....................................... 4 Investment Company Act...................................... 4 Investments................................................. 4 Maturity.................................................... 5 - -------------- NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 4 PAGE ---- Mortgage.................................................... 5 Notice of Default........................................... 5 Officers' Certificate....................................... 5 Opinion of Counsel.......................................... 5 Original Issue Discount Security............................ 5 Outstanding................................................. 5 Paying Agent................................................ 6 Person...................................................... 6 Place of Payment............................................ 6 Predecessor Security........................................ 6 Redemption Date............................................. 7 Redemption Price............................................ 7 Regular Record Date......................................... 7 Repayment Date.............................................. 7 Repayment Price............................................. 7 Restricted Subsidiary....................................... 7 Sale and Leaseback Transaction.............................. 7 Secured Debt................................................ 7 Securities.................................................. 7 Securities Act.............................................. 7 Security Register and Security Registrar.................... 7 Special Record Date......................................... 7 Stated Maturity............................................. 7 Subsidiary.................................................. 8 Trust Indenture Act......................................... 8 Trustee..................................................... 8 U.S. Government Obligation.................................. 8 Unrestricted Subsidiary..................................... 8 Vice President.............................................. 8 Wholly-owned Restricted Subsidiary.......................... 8 SECTION 102. Compliance Certificates and Opinions........................ 9 SECTION 103. Form of Documents Delivered to Trustee...................... 9 SECTION 104. Acts of Holders; Record Dates............................... 10 SECTION 105. Notices, Etc., to Trustee and Company....................... 12 SECTION 106. Notice to Holders; Waiver................................... 12 SECTION 107. Conflict with Trust Indenture Act........................... 13 SECTION 108. Effect of Headings and Table of Contents.................... 13 SECTION 109. Successors and Assigns...................................... 13 SECTION 110. Separability Clause......................................... 13 SECTION 111. Benefits of Indenture....................................... 13 SECTION 112. Governing Law............................................... 13 SECTION 113. Legal Holidays.............................................. 13 -ii- 5 PAGE ---- ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally............................................. 14 SECTION 202. Form of Face of Security.................................... 14 SECTION 203. Form of Reverse of Security................................. 16 SECTION 204. Form of Legend for Global Securities........................ 20 SECTION 205. Form of Trustee's Certificate of Authentication............. 21 ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series........................ 21 SECTION 302. Denominations............................................... 24 SECTION 303. Execution, Authentication, Delivery and Dating.............. 24 SECTION 304. Temporary Securities........................................ 25 SECTION 305. Registration, Registration of Transfer and Exchange......... 26 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities............ 27 SECTION 307. Payment of Interest; Interest Rights Preserved.............. 28 SECTION 308. Persons Deemed Owners....................................... 29 SECTION 309. Cancellation................................................ 30 SECTION 310. Computation of Interest..................................... 30 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture..................... 30 SECTION 402. Application of Trust Money.................................. 31 ARTICLE FIVE REMEDIES SECTION 501. Events of Default........................................... 31 SECTION 502. Acceleration of Maturity; Rescission and Annulment.......... 33 -iii- 6 PAGE ---- SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.................................... 34 SECTION 504. Trustee May File Proofs of Claim............................ 35 SECTION 505. Trustee May Enforce Claims Without Possession of Securities............................................. 35 SECTION 506. Application of Money Collected.............................. 35 SECTION 507. Limitation on Suits......................................... 36 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest...................................... 37 SECTION 509. Restoration of Rights and Remedies.......................... 37 SECTION 510. Rights and Remedies Cumulative.............................. 37 SECTION 511. Delay or Omission Not Waiver................................ 37 SECTION 512. Control by Holders.......................................... 38 SECTION 513. Waiver of Past Defaults..................................... 38 SECTION 514. Undertaking for Costs....................................... 38 SECTION 515. Waiver of Usury, Stay or Extension Laws..................... 39 ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities......................... 39 SECTION 602. Notice of Defaults.......................................... 39 SECTION 603. Certain Rights of Trustee................................... 40 SECTION 604. Not Responsible for Recitals or Issuance of Securities...... 41 SECTION 605. May Hold Securities......................................... 41 SECTION 606. Money Held in Trust......................................... 41 SECTION 607. Compensation and Reimbursement.............................. 41 SECTION 608. Conflicting Interests....................................... 42 SECTION 609. Corporate Trustee Required; Eligibility..................... 42 SECTION 610. Resignation and Removal; Appointment of Successor........... 42 SECTION 611. Acceptance of Appointment by Successor...................... 44 SECTION 612. Merger, Conversion, Consolidation or Succession to Business............................................... 45 SECTION 613. Preferential Collection of Claims Against Company........... 45 SECTION 614. Appointment of Authenticating Agent......................... 45 -iv- 7 PAGE ---- ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders................................................ 47 SECTION 702. Preservation of Information; Communications to Holders................................................ 47 SECTION 703. Reports by Trustee.......................................... 47 SECTION 704. Reports by Company.......................................... 48 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms............................................. 48 SECTION 802. Successor Substituted....................................... 49 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders.......... 49 SECTION 902. Supplemental Indentures with Consent of Holders............. 50 SECTION 903. Execution of Supplemental Indentures........................ 51 SECTION 904. Effect of Supplemental Indentures........................... 52 SECTION 905. Conformity with Trust Indenture Act......................... 52 SECTION 906. Reference in Securities to Supplemental Indentures.......... 52 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest.................. 52 SECTION 1002. Maintenance of Office or Agency............................. 52 SECTION 1003. Money for Securities Payments to Be Held in Trust........... 53 SECTION 1004. Statement by Officers as to Default; Notice of Certain Events............................................ 54 SECTION 1005. Existence................................................... 54 -v- 8 PAGE ---- SECTION 1006. Maintenance of Properties................................... 54 SECTION 1007. Payment of Taxes and Other Claims........................... 55 SECTION 1008. Limitation on Secured Debt.................................. 55 SECTION 1009. Limitation on Sales and Leasebacks.......................... 56 SECTION 1010. Limitation on Unsecured Funded Debt of Restricted Subsidiaries.............................................. 57 SECTION 1011. Waiver of Certain Covenants................................. 58 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article..................................... 58 SECTION 1102. Election to Redeem; Notice to Trustee........................ 58 SECTION 1103. Selection by Trustee of Securities to Be Redeemed............ 59 SECTION 1104. Notice of Redemption......................................... 59 SECTION 1105. Deposit of Redemption Price.................................. 60 SECTION 1106. Securities Payable on Redemption Date........................ 60 SECTION 1107. Securities Redeemed in Part.................................. 61 ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article..................................... 61 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities........ 61 SECTION 1203. Redemption of Securities for Sinking Fund.................... 62 ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance................................................. 62 SECTION 1302. Defeasance and Discharge..................................... 62 SECTION 1303. Covenant Defeasance.......................................... 63 SECTION 1304. Conditions to Defeasance or Covenant Defeasance.............. 63 SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions.................... 65 SECTION 1306. Reinstatement................................................ 66 -vi- 9 PAGE ---- ARTICLE FOURTEEN REPAYMENT OF SECURITIES AT OPTION OF HOLDERS SECTION 1401. Applicability of Article..................................... 66 SECTION 1402. Notice of Repayment Date..................................... 66 SECTION 1403. Deposit of Repayment Price................................... 67 SECTION 1404. Securities Payable on Repayment Date......................... 67 SECTION 1405. Securities Repaid in Part.................................... 67 TESTIMONIUM................................................................ 69 SIGNATURES AND SEALS....................................................... 69 ACKNOWLEDGMENTS............................................................ 70 -vii- 10 INDENTURE, dated as of July 27, 1998, between American Greetings Corporation, a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company"), having its principal office at One American Road, Cleveland, Ohio, 44144, and NBD Bank, a corporation duly organized and existing under the laws of Michigan, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of this instrument; 11 (4) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other sub-division. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. -2- 12 "Consolidated Net Tangible Assets" means (a) the total amount of assets (less applicable reserves and other properly deductible items) which under generally accepted accounting principles would be included on a consolidated balance sheet of the Company and its Restricted Subsidiaries after deducting therefrom (i) all current liabilities (excluding therefrom any portion which is extendible or renewable at the option of the obligor on such liability to a time more than 12 months after the time of the computation of the amount thereof), and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, which in each case under generally accepted accounting principles would be included on such consolidated balance sheet, less (b) the amount which would be so included on such consolidated balance sheet for Investments (less applicable reserves) in Unrestricted Subsidiaries. "Corporate Trust Office" means the principal office of the Trustee at: 11th Floor 611 Woodward Avenue, Detroit, MI 48226 Mail Suite 8110 at which at any particular time its corporate trust business shall be administered. "corporation" means a corporation, association, company, joint-stock company or business trust. "Covenant Defeasance" has the meaning specified in Section 1303. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1302. "Depositary" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 104. "Funded Debt" means (i) all Indebtedness which by its terms matures more than 12 months after the time of the computation of the amount thereof or which is extendible or renewable at the option of the obligor on such Indebtedness to a time more than 12 months after the time of the computation of the amount thereof, (ii) all guarantees, direct or indirect, of any such Indebtedness or of dividends, other than any guarantee in connection with the sale or discount by the Company or any Restricted Subsidiary of accounts receivable, trade acceptances and other paper arising in the ordinary course of business, and (iii) in the case of any Subsidiary, all Preferred Stock of such Subsidiary, taken at the greater of its voluntary or involuntary liquidation price at the time of any calculation hereunder, but exclusive of accrued dividends, if any; provided, however, that in determining the amount -3- 13 of Funded Debt of the Company or any Subsidiary there shall not be included any amount in respect of obligations under leases, or guarantees of obligations under leases, whether or not such obligations or guarantees are shown on a balance sheet as liability items. The Company or any Restricted Subsidiary shall be deemed to have assumed Funded Debt secured by any Mortgage upon any of its property or assets whether or not it has actually done so. "Global Security" means a Security that evidences all or part of the Securities of any series and bears the legend set forth in Section 204 (or such legend as may be specified as contemplated by Section 301 for such Securities). "Holder" means a Person in whose name a Security is registered in the Security Register. "Indebtedness" means (i) all items of indebtedness or liability (except capital and retained earnings) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which Indebtedness is to be determined, (ii) obligations constituting Indebtedness under the preceding clause (i) secured by any Mortgage existing on property owned subject to such Mortgage, whether or not the obligations secured thereby shall have been assumed, and (iii) guarantees, endorsements (other than for purposes of collection) and other contingent obligations in respect of, or to purchase or otherwise acquire, obligations of others constituting Indebtedness under the preceding clause (i) or (ii); provided, however, that any obligations or guarantees of obligations in respect of lease rentals, whether or not such obligations or guarantees of obligations would be included as liabilities on a consolidated balance sheet of the Company and its Restricted Subsidiaries, shall not be included in Indebtedness. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Investment Company Act" means the Investment Company Act of 1940 and any statute successor thereto, in each case as amended from time to time. "Investments" mean and include all investments, whether by acquisition of stock or Indebtedness, or by loan, advance, transfer of property, capital contribution or otherwise, -4- 14 made by the Company or by any Restricted Subsidiary, and shall include all guarantees, direct or indirect, by the Company or any Restricted Subsidiary of any Indebtedness of an Unrestricted Subsidiary which by its terms matures 12 months or less from the time of computation of the amount thereof to the extent not included as a liability or liability item on the consolidated balance sheet of the Company and its Restricted Subsidiaries, but shall not include accounts receivable of the Company or of any Restricted Subsidiary arising from the sale of merchandise in the ordinary course of business. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Mortgage" means and includes any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or similar encumbrance. "Notice of Default" means a written notice of the kind specified in Section 501(4) or 501(5). "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; -5- 15 (3) Securities as to which Defeasance has been effected pursuant to Section 1302; and (4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder as of any date, (A) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date pursuant to Section 502, (B) if, as of such date, the principal amount payable at the Stated Maturity of a Security is not determinable, the principal amount of such Security which shall be deemed to be Outstanding shall be the amount as specified or determined as contemplated by Section 301, (C) the principal amount of a Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner provided as contemplated by Section 301, of the principal amount of such Security (or, in the case of a Security described in Clause (A) or (B) above, of the amount determined as provided in such Clause), and (D) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under -6- 16 Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Repayment Date", when used with respect to any Security of any series to be repaid, means the date, if any, fixed for such repayment pursuant to Section 301. "Repayment Price", when used with respect to any Security of any series to be repaid, means the price, if any, at which is it to be repaid pursuant to Section 301. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale and Leaseback Transaction" has the meaning specified in Section 1009. "Secured Debt" means Indebtedness, if such Indebtedness is secured by a Mortgage upon any assets of the Company or a Restricted Subsidiary, including in such assets, without limitation, shares of stock or Indebtedness of any Subsidiary owned by the Company or a Restricted Subsidiary. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. -7- 17 "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "U.S. Government Obligation" has the meaning specified in Section 1304. "Unrestricted Subsidiary" means, unless otherwise designated a Restricted Subsidiary by a Board Resolution, (i) any Subsidiary substantially all of the physical properties of which are located, or substantially all of the business of which is carried on, outside the United States of America ("United States of America" shall not include the territories or possessions thereof), (ii) any Subsidiary the primary business of which consists of financing operations in connection with leasing and conditional sales transactions on behalf of the Company and its Subsidiaries, and/or purchasing accounts receivable and/or making loans secured by accounts receivable or inventory, or which is otherwise primarily engaged in the business of a finance company, and (iii) any Subsidiary, the primary business of which consists of owning or leasing real estate. Any designation of an Unrestricted Subsidiary as a Restricted Subsidiary by a Board Resolution may be terminated thereafter by a Board Resolution if, but only if, immediately thereafter the Company could create additional Secured Debt in accordance with Section 1008 without equally and ratably securing the Notes. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary all the outstanding Funded Debt and capital stock of which, other than directors' qualifying shares, are owned by the Company or its other Wholly-owned Restricted Subsidiaries. -8- 18 SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include, (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. -9- 19 Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders; Record Dates. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. The ownership of Securities shall be proved by the Security Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record -10- 20 date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 502, (iii) any request to institute proceedings referred to in Section 507(2) or (iv) any direction referred to in Section 512, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. With respect to any record date set pursuant to this Section, the party hereto which sets such record dates may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 106, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change -11- 21 the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: J. Michael Banas, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. -12- 22 SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the law of the State of New York. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of any Security -13- 23 which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Face of Security. [INSERT APPROPRIATE TAX LEGENDS] .......................................................... .......................................................................... No. ......... $ ........ American Greetings Corporation, a corporation duly organized and existing under the laws of Ohio (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ..........................................., or registered assigns, the principal sum of -14- 24 ...................................... Dollars on .............................. [if the Security is to bear interest prior to Maturity, insert -- , and to pay interest thereon from ............. or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ............ and ............ in each year, commencing ............, at the rate of ....% per annum, until the principal hereof is paid or made available for payment [if applicable, insert -- , provided that any principal and premium, and any such installment of interest, which is overdue shall bear interest at the rate of ...% per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the ....... or ....... (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture]. [If the Security is not to bear interest prior to Maturity, insert -- The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption, upon repayment at the option of the Holder or at Stated Maturity and in such case the overdue principal and any overdue premium shall bear interest at the rate of ....% per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment. Interest on any overdue principal or premium shall be payable on demand. Any such interest on overdue principal or premium which is not paid on demand shall bear interest at the rate of ......% per annum (to the extent that the payment of such interest on interest shall be legally enforceable), from the date of such demand until the amount so demanded is paid or made available for payment. Interest on any overdue interest shall be payable on demand.] Payment of the principal of (and premium, if any) and [if applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in ............, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [if applicable, insert -- ; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. [Insert description of the right, if any, of Holders to elect repayment.] -15- 25 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: American Greetings Corporation By............................................. Attest: ......................................... SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of ............... (herein called the "Indenture", which term shall have the meaning assigned to it in such instrument), between the Company and ..................., as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [if applicable, insert -- , limited in aggregate principal amount to $...........]. [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, [if applicable, insert -- (1) on ........... in any year commencing with the year ...... and ending with the year ...... through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [if applicable, insert -- on or after .........., 19..], as a whole or in part, -16- 26 at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [if applicable, insert -- on or before ..............., ...%, and if redeemed] during the 12-month period beginning ............. of the years indicated, Redemption Redemption Year Price Year Price - ---- ---------- ---- ---------- and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption [if applicable, insert -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on ............ in any year commencing with the year .... and ending with the year .... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [if applicable, insert -- on or after ............], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ............ of the years indicated, Redemption Price For Redemption Redemption Price For Through Operation Redemption Otherwise of the Than Through Operation Year Sinking Fund of the Sinking Fund - ---- ----------------- ---------------------- and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such -17- 27 Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert -- Notwithstanding the foregoing, the Company may not, prior to ............., redeem any Securities of this series as contemplated by [if applicable, insert -- Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than .....% per annum.] [If applicable, insert -- The sinking fund for this series provides for the redemption on ............ in each year beginning with the year ....... and ending with the year ...... of [if applicable, insert -- not less than $.......... ("mandatory sinking fund") and not more than] $......... aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [if applicable, insert -- mandatory] sinking fund payments may be credited against subsequent [if applicable, insert -- mandatory] sinking fund payments otherwise required to be made [if applicable, insert -- , in the inverse order in which they become due].] [If the Security is subject to redemption of any kind, insert -- In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture. [If applicable, insert provisions detailing provisions with respect to repayment at the option of the Holders and the issuance of Securities in lieu of Securities redeemed or repaid at the option of Holders. [If applicable, insert - -- The Indenture contains provisions for defeasance at any time of [the entire indebtedness of this Security][or] [certain restrictive covenants and Events of Default with respect to this Security][, in each case] upon compliance with certain conditions set forth in the Indenture.] [If the Security is not an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.] [If the Security is an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal, premium and interest (in each case to -18- 28 the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and premium and interest, if any, on the Securities of this series shall terminate.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66 2/3% in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. -19- 29 The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. [If applicable, insert form of option to elect repayment.] SECTION 204. Form of Legend for Global Securities. Unless otherwise specified as contemplated by Section 301 for the Securities evidenced thereby, every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. -20- 30 SECTION 205. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. NBD BANK, As Trustee By......................................... Authorized Officer ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 303, set forth, or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or 1405 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of any Securities of the series is payable; -21- 31 (5) the rate or rates at which any Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any such interest payable on any Interest Payment Date; (6) the place or places where the principal of and any premium and interest on any Securities of the series shall be payable; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which any Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Securities shall be evidenced; (8) the obligation, if any, of the Company to redeem or purchase any Securities of the series pursuant to any sinking fund or analogous provisions or at the option of the Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which any Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be repaid, in whole or in part, at the option of the Holders; (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Securities of the series shall be issuable; (11) if the amount of principal of or any premium or interest on any Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined; (12) if other than the currency of the United States of America, the currency, currencies or currency units in which the principal of or any premium or interest on any Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for any purpose, including for purposes of the definition of "Outstanding" in Section 101; (13) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or the Holder thereof, in one or more currencies or currency units other than that or those in which such Securities are stated to be payable, the currency, currencies or currency units in which the principal of or any premium or interest on such Securities as to which such election is made shall be payable, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined); -22- 32 (14) if other than the entire principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (15) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined); (16) if applicable, that the Securities of the series, in whole or any specified part, shall be defeasible pursuant to Section 1302 or Section 1303 or both such Sections and, if other than by a Board Resolution, the manner in which any election by the Company to defease such Securities shall be evidenced; (17) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositaries for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 204 and any circumstances in addition to or in lieu of those set forth in Clause (2) of the last paragraph of Section 305 in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof; (18) any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 502; (19) any addition to or change in the covenants set forth in Article Ten which applies to Securities of the series; and (20) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary -23- 33 or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. SECTION 302. Denominations. The Securities of each series shall be issuable only in registered form without coupons and only in such denominations as shall be specified as contemplated by Section 301. In the absence of any such specified denomination with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (1) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (2) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; and (3) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion -24- 34 of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for -25- 35 that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of a series at the office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. -26- 36 If the Securities of any series (or of any series and specified tenor) are to be redeemed in part, the Company shall not be required (A) to issue, register the transfer of or exchange any Securities of that series (or of that series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Securities selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global Securities: (1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (2) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered under the Exchange Act, (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security or (C) there shall exist such circumstances, if any, in addition to or in lieu of the foregoing as have been specified for this purpose as contemplated by Section 301. (3) Subject to Clause (2) above, any exchange of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct. (4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Section, Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. -27- 37 If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The -28- 38 Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder of Securities of such series in the manner set forth in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. -29- 39 SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or -30- 40 (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose money in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and -31- 41 whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of or any premium on any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness in excess of $20,000,000 for money borrowed by the Company or under any mortgage, indenture or instrument (including this Indenture) under which there may be issued or by which there may be secured or evidenced any indebtedness in excess of $20,000,000 for money borrowed by the Company, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default and requiring the Company to cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or -32- 42 liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(6) or 501(7)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of all the Securities of that series (or, if any Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms thereof) to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in Section 501(6) or 501 (7) with respect to Securities of any series at the time Outstanding occurs, the principal amount of all the Securities of that series (or, if any Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms thereof) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a major- -33- 43 ity in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. -34- 44 If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of -35- 45 such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. -36- 46 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. -37- 47 SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of or any premium or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. -38- 48 SECTION 515. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. -39- 49 SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. -40- 50 SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. -41- 51 SECTION 608. Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one series. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be one (and only one) Trustee hereunder with respect to the Securities of each series, which may be Trustee hereunder for Securities of one or more other series. Each Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee with respect to the Securities of any series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. -42- 52 If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. -43- 53 SECTION 611. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. -44- 54 No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to -45- 55 be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 106 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. NBD BANK, As Trustee By....................................., As Authenticating Agent By...................................... Authorized Officer -46- 56 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (1) semi-annually, not later than the 15th day after each Regular Record Date for each series of Securities at the time Outstanding, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of each series as of the preceding Regular Record Date as the case may be, and (2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. Reports by Trustee. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. -47- 57 A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; -48- 58 (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or -49- 59 (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (A) shall neither (i) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of any such Security with respect to such provision or (B) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities pursuant to the requirements of Section 1008 or other wise; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611; or (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this Clause (9) shall not adversely affect the interests of the Holders of Securities of any series in any material respect. SECTION 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than 662/3% in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, -50- 60 (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security or any other Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date or in the case of repayment at the option of a Holder, on or after the Repayment Date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1011, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Out standing Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1011, or the deletion of this proviso, in accordance with the requirements of Sections 611 and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. -51- 61 SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. SECTION 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, -52- 62 notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (2) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. -53- 63 Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Statement by Officers as to Default; Notice of Certain Events. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. The Company will deliver to the Trustee within five days after the occurrence thereof notice of any acceleration which with the giving of notice and the lapse of time would be an Event of Default within the meaning of Section 501(5). SECTION 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1006. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all -54- 64 necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1008. Limitation on Secured Debt. The Company covenants and agrees that it will not itself, and will not permit any Restricted Subsidiary to, issue, assume, guarantee or incur any Secured Debt, without effectively providing that the Securities of any series (together with, if the Company shall so determine, any other Indebtedness of the Company or such Restricted Subsidiary then existing or thereafter created ranking equally with the Securities, including guaranty of Indebtedness of others) shall be secured equally and ratably with (or prior to) such Secured Debt, so long as such Secured Debt shall be so secured, except that this Section 1008 shall not apply to Secured Debt Secured by: (1) Mortgages on property of any corporation existing at the time such corporation becomes a Subsidiary; (2) Mortgages on property existing at the time of acquisition thereof or to secure the payment of all or any part of the purchase price thereof or to secure any indebtedness incurred prior to, at the time of or within 120 days after the acquisition of such property for the purpose of financing all or any part of the purchase price thereof; (3) Mortgages on property in favor of the United States of America or any state thereof, or any other country, or any political subdivision of any of the foregoing, to secure payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Mortgages; -55- 65 (4) Mortgages which secure Indebtedness owing to the Company or to a Wholly-owned Restricted Subsidiary by a Subsidiary; (5) Mortgages incurred or assumed in connection with the issuance of revenue bonds the interest on which is exempt from Federal income tax pursuant to Section 103(b) of the Internal Revenue Code of 1986, as amended (or any successor provision thereof); or (6) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Mortgage referred to in the foregoing clauses (1) to (5), inclusive, or of any indebtedness secured thereby; provided that such extension, renewal or replacement Mortgage shall be limited to all or any part of the same property that secured the Mortgage extended, renewed or replaced (plus improvements on such property). Notwithstanding the foregoing provisions of this Section 1008, the Company and any one or more Restricted Subsidiary may, without equally and ratably securing the Securities of any series, issue, assume, guarantee or incur Secured Debt which would otherwise be subject to the foregoing restrictions if, after giving effect to the Secured Debt to be issued, assumed, guaranteed or incurred, the sum of (a) the aggregate amount of all such Secured Debt of the Company and its Restricted Subsidiaries (not including Secured Debt permitted under clauses (1) through (6) above) in existence at such time, (b) the aggregate value of the Sale and Leaseback Transactions (as defined in Section 1009) in existence at such time (not including Sale and Leaseback Transactions permitted under clauses (2) through (4) of Section 1009) and (c) the aggregate amount of all unsecured Funded Debt of Restricted Subsidiaries (not including any unsecured Funded Debt permitted under clauses (2) and (3) of Section 1010) in existence at such time, does not exceed 5% of the Company's Consolidated Net Tangible Assets. SECTION 1009. Limitation on Sales and Leasebacks. The Company will not itself, and will not permit any Restricted Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor, or to which any such lender or investor is a party, providing for the leasing to the Company or a Restricted Subsidiary of any real property (except a lease for a temporary period not to exceed three years by the end of which it is intended that the use of such real property by the lessee will be discontinued) which has been or is to be sold or transferred by the Company or such Restricted Subsidiary more than 120 days after the date of acquisition thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such real property (herein referred to as a "Sale and Leaseback Transaction"), except that this Section 1009 shall not apply if: (1) the Company or such Restricted Subsidiary could create Secured Debt in accordance with Section 1008 in an amount equal to the value of such Sale and Leaseback Transaction, without equally and ratably securing the Securities of any series; -56- 66 (2) the Company (and in any such case the Company covenants that it will) within 120 days after the Sale and Leaseback Transaction, regardless of whether such Sale and Leaseback Transaction may have been made by the Company or by a Restricted Subsidiary, applies an amount equal to the greater of (i) the net proceeds of the sale of the real property leased pursuant to such Sale and Leaseback Transaction and (ii) the fair value of the real property so leased at the time of entering into such Sale and Leaseback Transaction (as determined by the Board of Directors) to the retirement (other than by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision) of Funded Debt of the Company, provided that the amount to be applied to the retirement of Funded Debt of the Company shall be reduced by the principal amount of any Securities delivered within 120 days after such sale to the Trustee for retirement and cancellation; (3) such Sale and Leaseback Transaction was effected in connection with the issuance of revenue bonds the interest on which is exempt from Federal income tax pursuant to Section 103(b) of the Internal Revenue Code of 1986, as amended (or any successor provision thereof); or (4) the net proceeds of the sale of the real property leased pursuant to such Sale and Leaseback Transaction are applied to the purchase of properties, facilities or equipment to be used for general operating purposes. For purposes of this Section 1009 and Section 1008, the term "value" shall mean, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the real property leased pursuant to such Sale and Leaseback Transaction and (ii) the fair value of the real property so leased at the time of entering into such Sale and Leaseback Transaction (as determined by the Board of Directors), divided first by the number of full years in the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease. SECTION 1010. Limitation on Unsecured Funded Debt of Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary to, directly or indirectly, issue, assume, guarantee or incur any unsecured Funded Debt, except that this Section 1010 shall not apply if: (1) the Company or such Restricted Subsidiary could create Secured Debt in accordance with Section 1008 in an amount equal to such unsecured Funded Debt, without equally and ratably securing the Securities of any series; (2) such unsecured Funded Debt is owed to the Company or any Wholly-owned Restricted Subsidiary; (3) such unsecured Funded Debt existed at the time such Restricted Subsidiary first became a Restricted Subsidiary; -57- 67 (4) such unsecured Funded Debt was unsecured Funded Debt of any corporation existing at the time of merger or consolidation with a Restricted Subsidiary; or (5) such unsecured Funded Debt was incurred for the purpose of renewing or refunding unsecured Funded Debt permitted in the foregoing clauses (3) and (4). SECTION 1011. Waiver of Certain Covenants. Except as otherwise specified as contemplated by Section 301 for Securities of such series, the Company may, with respect to the Securities of any series, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 301(19), 901(2) or 901(7) for the benefit of the Holders of such series or in any of Sections 1008 to 1010, inclusive, if before the time for such compliance the Holders of at least 662/3% in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for such Securities) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities. In case of any redemption at the election of the Company of less than all the Securities of any series (including any such redemption affecting only a single Security), the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such -58- 68 Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, -59- 69 (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series consisting of more than a single Security are to be redeemed, the identification (and, in the case of partial redemption of any such Securities, the principal amounts) of the particular Securities to be redeemed and, if less than all the Outstanding Securities of any series consisting of a single Security are to be redeemed, the principal amount of the particular Security to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where each such Security is to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. SECTION 1105. Deposit of Redemption Price. On or prior to the Repayment Date (and if on, then before 10:00 a.m. (New York City time)), the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient (in immediately available funds if payment is made on the Repayment Date) to pay the Repayment Price of and (unless the Repayment Date shall be an Interest Payment Date) accrued interest, if any, on all of the Securities of such series which are to be repaid on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. -60- 70 If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of any series except as otherwise specified as contemplated by Section 301 for such Securities. The minimum amount of any sinking fund payment provided for by the terms of any Securities is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of such Securities is herein referred to as an "optional sinking fund payment". If provided for by the terms of any Securities, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities as provided for by the terms of such Securities. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to any Securities of such series required to be made pursuant to the terms of such Securities as and to the extent provided for by the terms of such Securities; -61- 71 provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the Redemption Price, as specified in the Securities so to be redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 30 days prior to each sinking fund payment date for any Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days prior to each such sinking fund payment date, the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may elect, at its option at any time, to have Section 1302 or Section 1303 applied to any Securities or any series of Securities, as the case may be, designated pursuant to Section 301 as being defeasible pursuant to such Section 1302 or 1303, in accordance with any applicable requirements provided pursuant to Section 301 and upon compliance with the conditions set forth below in this Article. Any such election shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities. SECTION 1302. Defeasance and Discharge. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, the Company shall be deemed to have been discharged from its obligations with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 1304 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented -62- 72 by such Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1304 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article. Subject to compliance with this Article, the Company may exercise its option (if any) to have this Section applied to any Securities notwithstanding the prior exercise of its option (if any) to have Section 1303 applied to such Securities. SECTION 1303. Covenant Defeasance. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, (1) the Company shall be released from its obligations under Section 801(3), Sections 1006 through 1010, inclusive, and any covenants provided pursuant to Section 301(19), 901(2) or 901(7) for the benefit of the Holders of such Securities, and (2) the occurrence of any event specified in Sections 501(4) (with respect to any of Section 801(3), Sections 1006 through 1010, inclusive, and any such covenants provided pursuant to Section 301(19), 901(2) or 901(7)), 501(5) and 501(8) shall be deemed not to be or result in an Event of Default, in each case with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 1304 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that, with respect to such Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1304. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to the application of Section 1302 or Section 1303 to any Securities or any series of Securities, as the case may be: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee which satisfies the requirements contemplated by Section 609 and agrees to comply with the provisions of this Article applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefits of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their -63- 73 terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on such Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and such Securities. As used herein, "U.S. Government Obligation" means (x) any security which is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation which is specified in Clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the event of an election to have Section 1302 apply to any Securities or any series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this instrument, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (3) In the event of an election to have Section 1303 apply to any Securities or any series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (4) The Company shall have delivered to the Trustee an Officer's Certificate to the effect that neither such Securities nor any other Securities of the same series, if then listed on any securities exchange, will be delisted as a result of such deposit. -64- 74 (5) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit or, with regard to any such event specified in Sections 501(6) and (7), at any time on or prior to the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th day). (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act). (7) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (8) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act unless such trust shall be registered under such Act or exempt from registration thereunder. (9) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 1306, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 1304 in respect of any Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any such Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. -65- 75 Government Obligations held by it as provided in Section 1304 with respect to any Securities which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect the Defeasance or Covenant Defeasance, as the case may be, with respect to such Securities. SECTION 1306. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Section 1302 or 1303 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1305 with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust. ARTICLE FOURTEEN REPAYMENT OF SECURITIES AT OPTION OF HOLDERS SECTION 1401. Applicability of Article. Securities of any series which are repayable before their Stated Maturity at the option of the Holders shall be repayable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1402. Notice of Repayment Date. Notice of any Repayment Date with respect to Securities of any series shall be given by the Company not less than 45 nor more than 60 days prior to such Repayment Date to each Holder of Securities of such series in accordance with Section 106. The notice as to the Repayment Date shall state: (1) the Repayment Date; (2) the Repayment Price; -66- 76 (3) the place or places where such Securities are to be surrendered for payment of the Repayment Price and the date by which Securities must be so surrendered in order to be repaid; and (4) that exercise of the option to elect repayment is irrevocable. SECTION 1403. Deposit of Repayment Price. On or prior to the Repayment Date (and if on, then before 10:00 a.m. (New York City time)), the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient (in immediately available funds if payment is made on the Repayment Date) to pay the Repayment Price of and (unless the Repayment Date shall be an Interest Payment Date) accrued interest, if any, on all of the Securities of such series which are to be repaid on that date. SECTION 1404. Securities Payable on Repayment Date. The form of option to elect repayment having been delivered as specified in the form of Security for such series as provided in Section 203, the Securities of such series so to be repaid shall, on the Repayment Date, become due and payable at the Repayment Price applicable thereto and from and after such date (unless the Company shall default in the payment of the Repayment Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for repayment in accordance with said notice, such Security shall be paid by the Company at the Repayment Price together with accrued interest to the Repayment Date; provided, however, that installments of interest whose Stated Maturity is on or prior to such Repayment Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security shall not be paid upon surrender thereof for repayment, the principal (and premium, if any) shall, until paid, bear interest from the Repayment Date at the rate prescribed therefor in such Security. SECTION 1405. Securities Repaid in Part. Any Security which by its terms may be repaid in part at the option of the Holder and which is to be repaid only in part shall be surrendered at any office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination as requested by -67- 77 such Holder, in aggregate principal amount equal to and in exchange for the unrepaid portion of the principal of the Security so surrendered. ______________________________ -68- 78 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. American Greetings Corporation By /s/ Dale A. Cable ------------------------------------------ DALE A. CABLE Attest: /s/ Michael P. Burns - ----------------------------- MICHAEL P. BURNS NBD Bank By ------------------------------------------ Attest: - ----------------------------- -69- 79 STATE OF OHIO ) ) ss.: COUNTY OF CUYAHOGA ) On the 27th day of July, 1998, before me personally came Dale A. Cable, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of American Greetings Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. /s/ Ruth A. Bemer --------------------------------- Ruth A. Bemer Notary Public - State of Ohio My Commission Expires December 26, 2000 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the .... day of ..........., 1998, before me personally came ..........................., to me known, who, being by me duly sworn, did depose and say that he is .................... of ............................., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. --------------------------------- -70- 80 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. American Greetings Corporation By ------------------------------------------ Attest: - ----------------------------- NBD Bank By /s/ Nan L. Packard ------------------------------------------- NAN L. PACKARD Attest: /s/ Christopher Pulley - ----------------------------- CHRISTOPHER PULLEY -71- 81 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the .... day of ..........., 1998, before me personally came ..........................., by me duly sworn, did depose and say that he is .................... of ............................., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority; --------------------------------- STATE OF MICHIGAN ) ) ss.: COUNTY OF WAYNE ) On the 27th day of July, 1998, before me personally came Nan L. Packard, to me known, by me duly sworn, did depose and say that she is vice president of NBD Bank, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that she signed her name thereto by like authority; /s/ Amy J. Brehler --------------------------------- Amy J. Brehler Notary Public - Wayne County, MI My commission expires 8-24-2000 -72- EX-4.II 5 EXHIBIT 4(II) 1 Exhibit 4(ii) CREDIT AGREEMENT by and among AMERICAN GREETINGS CORPORATION, as US Facility Borrower, CARLTON CARDS (FRANCE) S.N.C., CARLTON CARDS LIMITED, UK GREETINGS LIMITED, HANSON WHITE GROUP LIMITED and CAMDEN GRAPHICS LIMITED, as UK Facility Borrowers, CARLTON CARDS LIMITED, as Canadian Facility Borrower, JOHN SANDS (AUSTRALIA) LTD., JOHN SANDS (N.Z.) LTD. and JOHN SANDS HOLDING CORPORATION, as Australian Facility Borrowers, NATIONSBANK, NATIONAL ASSOCIATION, as Global Agent, Documentation Agent, UK Facility Agent and as Lender, NATIONAL CITY BANK, as Co-Agent, US Facility Agent and as Lender, BANK OF AMERICA NATIONAL TRUST and SAVINGS ASSOCIATION, as Co-Agent and Australian Facility Agent, BANK OF AMERICA CANADA, as Canadian Facility Agent and as Lender and THE LENDERS PARTY HERETO FROM TIME TO TIME August 7, 1998 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Terms 1.01 Definitions...........................................................................................4 1.02 Rules of Interpretation..............................................................................42 ARTICLE II The US Facility 2.01 Advances.............................................................................................43 2.02 Payment of Interest..................................................................................45 2.03 Payment of Principal.................................................................................45 2.04 Manner of Payment....................................................................................46 2.05 US Facility Notes....................................................................................46 2.06 Pro Rata Payments....................................................................................46 2.07 Reductions...........................................................................................47 2.08 Conversions and Elections of Subsequent Interest Periods.............................................47 2.09 Facility Fee.........................................................................................48 2.10 Deficiency Advances..................................................................................48 2.11 Use of Proceeds......................................................................................48 2.12 US Facility Extension................................................................................49 2.13 US Term Loan Option..................................................................................49 2.14 Participations.......................................................................................50 ARTICLE III The UK Facility 3.01 Advances.............................................................................................51 3.02 Payment of Interest..................................................................................54 3.03 Payment of Principal.................................................................................54 3.04 Manner of Payment....................................................................................54 3.05 Evidence of Indebtedness.............................................................................55 3.06 Pro Rata Payments....................................................................................56 3.07 Reductions...........................................................................................56 3.08 Conversions and Elections of Subsequent Interest Periods.............................................56 3.09 Facility Fee.........................................................................................57 3.10 Deficiency Advances..................................................................................57 3.11 Use of Proceeds......................................................................................57
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Page ---- 3.12 One Loan.............................................................................................58 3.13 Participations.......................................................................................58 ARTICLE IV The Canadian Facility 4.01 Advances.............................................................................................60 4.02 Payment of Interest..................................................................................62 4.03 Payment of Principal.................................................................................63 4.04 Manner of Payment....................................................................................64 4.05 Evidence of Indebtedness.............................................................................65 4.06 Pro Rata Payments....................................................................................65 4.07 Reductions...........................................................................................65 4.08 Conversions and Elections of Subsequent Interest Periods.............................................66 4.09 Facility Fee.........................................................................................66 4.10 Deficiency Advances..................................................................................67 4.11 Use of Proceeds......................................................................................67 4.12 Canadian Facility Extension..........................................................................67 4.13 Canadian Term Loan Option............................................................................68 4.14 Participations.......................................................................................69 4.15 Maximum Rate of Return...............................................................................69 ARTICLE V The Australian Facility 5.01 Advances.............................................................................................70 5.02 Payment of Interest..................................................................................73 5.03 Payment of Principal.................................................................................73 5.04 Manner of Payment....................................................................................73 5.05 Evidence of Indebtedness.............................................................................74 5.06 Pro Rata Payments....................................................................................74 5.07 Reductions...........................................................................................75 5.08 Conversions and Elections of Subsequent Interest Periods.............................................75 5.09 Facility Fee.........................................................................................76 5.10 Deficiency Advances..................................................................................76 5.11 Use of Proceeds......................................................................................77 5.12 One Loan.............................................................................................77 5.13 Participations.......................................................................................78
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Page ---- ARTICLE VI Changes in Circumstances 6.01 Increased Cost and Reduced Return....................................................................79 6.02. Limitation on Types of Loans.........................................................................80 6.03. Illegality...........................................................................................81 6.04. Treatment of Affected Loans..........................................................................81 6.05. Compensation.........................................................................................82 6.06 Taxes................................................................................................82 6.07 Replacement Lender...................................................................................85 6.08 Funding..............................................................................................85 6.09 Economic and Monetary Union in the European Community................................................85 ARTICLE VII Conditions to Making Loans 7.01 Conditions of Initial Advance........................................................................87 7.02 Conditions of Loans..................................................................................89 ARTICLE VIII Representations and Warranties 8.01 Representations and Warranties as to Borrowers and Subsidiaries......................................91 8.02 Representations and Warranties of the Company........................................................92 ARTICLE IX Affirmative Covenants 9.01 Financial Reports, Etc...............................................................................97 9.02 Maintain Properties..................................................................................98 9.03 Existence, Qualification, Etc........................................................................98 9.04 Regulations and Taxes................................................................................98 9.05 Insurance............................................................................................98 9.06 True Books...........................................................................................98 9.07 Right of Inspection..................................................................................99 9.08 Observe all Laws.....................................................................................99 9.09 Covenants Extending to Subsidiaries..................................................................99 9.10 Officer's Knowledge of Default.......................................................................99 9.11 Suits or Other Proceedings...........................................................................99
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Page ---- 9.12 Environmental Compliance.............................................................................99 9.13 Further Assurances..................................................................................100 9.14 Continued Operations................................................................................100 9.15 Use of Proceeds.....................................................................................100 9.16 Year 2000 Compliance................................................................................100 ARTICLE X Negative Covenants 10.01 Consolidated Funded Indebtedness to Consolidated Total Capitalization...............................102 10.02 Consolidated EBIT to Consolidated Interest Expense. ...............................................102 10.03 Liens...............................................................................................102 10.04 Transfer of Assets..................................................................................103 10.05 Merger or Consolidation.............................................................................103 10.06 Transactions with Affiliates........................................................................104 10.07 ERISA...............................................................................................104 10.08 Acquisitions........................................................................................105 10.09 Negative Pledge.....................................................................................105 10.10 Dissolution, Etc....................................................................................105 10.11 Restrictive Agreements..............................................................................105 ARTICLE XI Events of Default and Acceleration 11.01 Events of Default...................................................................................106 11.02 Global Agent to Act.................................................................................108 11.03 Cumulative Rights...................................................................................109 11.04 No Waiver...........................................................................................109 11.05 Allocation of Proceeds..............................................................................109 11.06 Judgment Currency...................................................................................110 11.07 Funding and Payment of Participations; Conversion to US Dollars.....................................110 ARTICLE XII The Agents 12.01 Appointment, Powers, and Immunities.................................................................113 12.02 Reliance by Agents..................................................................................113 12.03 Defaults............................................................................................114 12.04 Rights as Lender....................................................................................114 12.05 Indemnification.....................................................................................115
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Page ---- 12.06 Non-Reliance on Agents and Other Lenders............................................................115 12.07 Resignation of an Agent.............................................................................115 12.08 Fees................................................................................................116 ARTICLE XIII Miscellaneous 13.01 Assignments and Participations......................................................................117 13.02 Notices.............................................................................................119 13.03 Right of Set-off; Adjustments.......................................................................121 13.04 Survival............................................................................................121 13.05 Expenses............................................................................................122 13.06 Amendments and Waivers..............................................................................122 13.07 Counterparts........................................................................................123 13.08 Termination.........................................................................................123 13.09 Usury Savings Clause................................................................................123 13.10 Indemnification; Limitation of Liability............................................................124 13.11 Agreement Controls..................................................................................125 13.12 Severability........................................................................................125 13.13 Entire Agreement....................................................................................125 13.14 Governing Law; Waiver of Jury Trial.................................................................126 EXHIBIT A Lenders' Commitments and Applicable Commitment Percentages...........................................A-1 EXHIBIT B Form of Assignment and Acceptance....................................................................B-1 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative...................................C-1 EXHIBIT D-1 Borrowing Notice (U.S. Facility Loans)...........................................................D-1-1 EXHIBIT D-2 Borrowing Notice (UK Facility Loans).............................................................D-2-1 EXHIBIT D-3 Borrowing Notice (Canadian Facility Loans).......................................................D-3-1 EXHIBIT D-4 Borrowing Notice (Australian Facility Loans).....................................................D-4-1 EXHIBIT E Form of Guaranty Agreement...........................................................................E-1 EXHIBIT F Form of US Facility Note.............................................................................F-1 EXHIBIT G Form of Opinion of Counsel for Borrowers and Guarantor...............................................G-1 EXHIBIT H Form of Compliance Certificate.......................................................................H-1 SCHEDULE 1.01 Authorized Representatives.....................................................................Sch-1 SCHEDULE 8.02(a) Subsidiaries and Stockholders...............................................................Sch-3 SCHEDULE 8.02(f) Litigation..................................................................................Sch-4 SCHEDULE 10.03 Existing Liens................................................................................Sch-5 SCHEDULE 10.06 Transactions with Affiliates..................................................................Sch-6
v 7 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of August 7, 1998 (the "Agreement"), is made by and among: AMERICAN GREETINGS CORPORATION, a corporation duly organized and existing under the laws of the State of Ohio (the "Company" and the "US Facility Borrower"); and CARLTON CARDS (FRANCE) S.N.C., a societe en nom collectif organized under the laws of France, registered with the Registry of Commerce and of Companies of La Courneuve under Number RCS B 387 702 954 ("Carlton France"); and CARLTON CARDS LIMITED (Registered No. 61412), UK GREETINGS LIMITED (Registered No. 3480710), HANSON WHITE GROUP LIMITED (Registered No. 3220599) and CAMDEN GRAPHICS LIMITED (Registered No. 1001272), each a corporation duly organized and existing under the laws of England and Wales (collectively, the AUK Subsidiaries" and, together with Carlton France, the AUK Facility Borrowers"); and CARLTON CARDS LIMITED, a corporation duly organized and existing under the laws of Ontario, Canada (the "Canadian Facility Borrower"); and JOHN SANDS (AUSTRALIA) LTD., JOHN SANDS HOLDING CORP. and JOHN SANDS (N.Z.) LTD., each a corporation duly organized and existing under the laws of Delaware and doing business in Australia (collectively, the "Australian Facility Borrowers"; the US Facility Borrower, the UK Facility Borrowers, the Canadian Facility Borrower and the Australian Facility Borrowers are sometimes referred to collectively as the "Borrowers" or individually as a "Borrower"); and NATIONSBANK, NATIONAL ASSOCIATION, BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, NATIONAL CITY BANK, NBD BANK, KEYBANK NATIONAL ASSOCIATION, ROYAL BANK OF CANADA, MELLON BANK, N.A., and PNC BANK, N.A., the initial lenders under the US Facility, and each other lender which may hereafter execute and deliver an instrument of assignment with respect to the US Facility under this Agreement pursuant to Section 13.01 (hereinafter such lenders may be referred to individually as a "US Facility Lender" or collectively as the "US Facility Lenders"); and BANK OF AMERICA CANADA, FIRST CHICAGO NBD BANK, CANADA, ROYAL BANK OF CANADA and MELLON BANK CANADA, the initial lenders under the Canadian Facility, and each other lender which may hereafter execute and deliver an instrument of assignment with respect to the Canadian Facility under this Agreement pursuant to Section 13.01 (hereinafter such lenders may be referred to individually as a "Canadian Facility Lender" or collectively as the "Canadian Facility Lenders"); and NATIONSBANK, NATIONAL ASSOCIATION, NATIONAL CITY BANK, PNC BANK, N.A. and KEYBANK NATIONAL ASSOCIATION, the initial lenders under the UK Facility, and each other lender which may hereafter execute and deliver an instrument of assignment with respect 8 to the UK Facility under this Agreement pursuant to Section 13.01 (hereinafter such lenders may be referred to individually as a "UK Facility Lender" or collectively as the "UK Facility Lenders"); and BA AUSTRALIA LIMITED, THE FIRST NATIONAL BANK OF CHICAGO, and ROYAL BANK OF CANADA, the initial Lenders under the Australian Facility, and each other lender which may hereafter execute and deliver an instrument of assignment with respect to the Australian Facility under this Agreement pursuant to Section 13.01 (hereinafter such lenders may be referred to individually as an "Australian Facility Lender" or collectively as the "Australian Facility Lenders"; the US Facility Lenders, the Canadian Facility Lenders, the UK Facility Lenders and the Australian Facility Lenders are sometimes referred to collectively as the "Lenders" or individually as a "Lender"); and NATIONAL CITY BANK, in its capacity as agent for the US Facility Lenders (the "US Facility Agent"); NATIONSBANK, NATIONAL ASSOCIATION, in its capacity as agent for the UK Facility Lenders (the "UK Facility Agent"); BANK OF AMERICA CANADA, a bank chartered under the laws of Canada ("BACAN"), in its capacity as agent for the Canadian Facility Lenders (the "Canadian Facility Agent"); BANK OF AMERICA NATIONAL TRUST and SAVINGS ASSOCIATION, in its capacity as agent for the Australian Facility Lenders (the "Australian Facility Agent"; the US Facility Agent, the UK Facility Agent, the Canadian Facility Agent and the Australian Facility Agent are sometimes referred to collectively as the "Facility Agents" or individually as a "Facility Agent"); and NATIONSBANK, NATIONAL ASSOCIATION, in its capacity as global administrative agent for each of the Lenders (the "Global Agent" and together with the Facility Agents, the "Agents"). W I T N E S S E T H: WHEREAS, the US Facility Borrower and certain US Facility Lenders (the "Existing US Lenders") are parties to a Credit Agreement dated as of June 10, 1994 (the "Existing US Agreement") pursuant to which the Existing US Lenders have made available to the US Facility Borrower a revolving credit facility of up to US $650,000,000 (the facility described above together with any other facilities under the Existing US Agreement are referred to collectively as the "Prior US Facility"); and WHEREAS, the US Facility Borrower and Carlton Cards Limited (together, the "Existing Canadian Borrowers") and certain Canadian Facility Lenders and other lenders (the "Existing Canadian Lenders") are parties to a Credit Agreement dated as of January 15, 1996 (the "Existing Canadian Agreement") pursuant to which the Existing Canadian Lenders have made available to the Existing Canadian Borrowers a revolving credit facility of up to CAN $100,000,000 (the facility 2 9 described above together with any other facilities under the Existing Canadian Agreement are referred to as the "Prior Canadian Facility"); and WHEREAS, the US Facility Borrower and Carlton Cards Limited [UK] and NatWest Finance (Ireland) ("NWFI") are parties to (i) a Loan Agreement dated as of March 13, 1995 (the "Existing 1995 Irish Agreement"), pursuant to which NWFI has made available to Carlton Cards Limited [UK] a term loan facility of up to Stgpound,5,000,000, and (ii) a Loan Agreement dated as of July 13, 1993 (the "Existing 1993 Irish Agreement) pursuant to which NWFI has made available to Carlton Cards Limited [UK] a term loan facility of up to Stgpound,10,000,000 (the facilities described in (i) and (ii) above, together with any other facilities under the Existing 1995 Irish Agreement and the Existing 1993 Irish Agreement are referred to as the "Prior Irish Facility"); and WHEREAS, Carlton France, Carlton Cards Limited [UK], and The First National Bank of Chicago f/k/a NBD Bank, N.A. ("First Chicago") are parties to a Credit Agreement dated as of February 1, 1994, as amended on each of July 1, 1995, October 4, 1996, December 17, 1996, February 26, 1997, March 25, 1997 and July 25, 1997 (the "Existing French Agreement"), pursuant to which First Chicago has made available to Carlton France total facilities of up to FF140,000,000 consisting of a FF80,000,000 term loan facility and a FF40,000,000 revolving credit facility (the facilities described above together with any other facilities under the Existing French Agreement are referred to as the "Prior French Facility"); and WHEREAS, Carlton Cards Limited [UK] and Carlton (UK) Retail, Limited (together, the "Existing UK Borrowers") and First Chicago are parties to a certain Revolving Credit Facility Letter Agreement dated as of August 8, 1991, as amended on April 15, 1992, March 11, 1994 and April 11, 1995 (the "Existing UK Agreement"), pursuant to which First Chicago has made available to the Existing UK Borrowers a revolving credit facility of up to UK pound 17,000,000 (the facility described above together with any other facilities under the Existing UK Agreement are referred to as the "Prior UK Facility"); and WHEREAS, certain of the Australian Facility Borrowers (the "Existing Australian Borrowers") and certain Australian Facility Lenders and other lenders (the "Existing Australian Lenders") are parties to a Loan Facility Agreement dated as of April 30, 1996 (the "Existing Australian Agreement") pursuant to which the Existing Australian Lenders have made available to the Existing Australian Borrowers a revolving credit facility of up to US $100,000,000 (equivalent amount) (the facility described above together with any other facilities under the Existing Australian Agreement are referred to as the "Prior Australian Facility" and together with the Prior US Facility, the Prior Canadian Facility, the Prior Irish Facility, the Prior UK Facility and the Prior French Facility, the "Prior Facilities"); and WHEREAS, the Borrowers desire to replace the Prior Facilities with the facilities herein provided; and WHEREAS, (i) the US Facility Lenders are willing to make available to the US Facility Borrower a revolving credit facility of up to $450,000,000; (ii) the UK Facility Lenders are willing to make available to the UK Facility Borrowers a revolving credit facility of up to pound 55,000,000, 3 10 including a subfacility for the borrowing of French Francs; (iii) the Canadian Facility Lenders are willing to make available to the Canadian Facility Borrower a revolving credit facility of up to CAN $150,000,000; and (iv) the Australian Facility Lenders are willing to make available to the Australian Facility Borrowers a revolving credit facility of up to AUS $125,000,000, including a subfacility for the borrowing of New Zealand Dollars, in each case subject to the terms and conditions set forth herein; NOW, THEREFORE, the Borrowers, the Lenders, and the Agents hereby agree as follows: ARTICLE I Definitions and Terms 1.01 Definitions. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Advance" means a US Facility Advance, a UK Facility Advance, a Canadian Facility Advance or an Australian Facility Advance, as the case may be. "Affected Loans" shall have the meaning therefor set forth in Section 6.04. "Affected Type" shall have the meaning therefor set forth in Section 6.04. "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company; or (ii) which beneficially owns or holds 10% or more of any class of the outstanding Voting Stock of the Company; or (iii) 10% or more of any class of the outstanding Voting Stock (or in the case of a Person which is not a corporation, 10% or more of the equity or other ownership interest) of which is beneficially owned or held by the Company. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of Voting Stock, by contract or otherwise. "Aggregate Commitment" means, with respect to any Lender, its US Facility Commitment and, as applicable, the US Dollar Equivalent Amount of the sum of its UK Facility Commitment, its Canadian Facility Commitment and its Australian Facility Commitment. "Aggregate Credit Exposure" shall have the meaning therefor set forth in the definition of "Credit Exposure." "Aggregate Facility Credit Exposure" shall have the meaning therefor set forth in the definition of "Facility Credit Exposure." 4 11 "Applicable Base Rate" means (i) with respect to all matters involving the US Facility, the US Facility Base Rate, (ii) with respect to all matters involving the Canadian Facility, the Canadian Facility Base Rate, and (iii) with respect to all matters involving the Australian Facility, the Australian Facility Base Rate. "Applicable Base Rate Loan" means a Loan bearing interest at an Applicable Base Rate. "Applicable Borrowers" means (i) with respect to all matters involving the US Facility, the US Facility Borrower, (ii) with respect to all matters involving the UK Facility, the UK Facility Borrowers, (iii) with respect to all matters involving the Canadian Facility, the Canadian Facility Borrower, and (iv) with respect to all matters involving the Australian Facility, the Australian Facility Borrowers. "Applicable Commitment Percentage" means, for each Lender, with respect to the Obligations hereunder arising in connection with each separate Facility and the Total Facilities, a fraction (expressed as a percentage), the numerator of which shall be the amount of such Lender's Aggregate Commitment and the denominator of which shall be the Total Commitment, each as of the date of determination, which Applicable Commitment Percentage for each Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by reference; provided that the Applicable Commitment Percentages of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 13.01 hereof. "Applicable Currency" means (i) with respect to the US Facility, US Dollars, (ii) with respect to the UK Facility, British Pounds Sterling or, if the context requires, French Francs, (iii) with respect to the Canadian Facility, Canadian Dollars and (iv) with respect to the Australian Facility, Australian Dollars or, if the context requires, New Zealand Dollars. "Applicable Facility Agent" means (i) with respect to all matters involving the US Facility, the US Facility Agent, (ii) with respect to all matters involving the UK Facility, the UK Facility Agent, (iii) with respect to all matters involving the Canadian Facility, the Canadian Facility Agent and (iv) with respect to all matters involving the Australian Facility, the Australian Facility Agent. "Applicable Facility Commitment" means, with respect to any Lender and any Facility, the obligation of such Lender to incur Facility Credit Exposure as an Applicable Lender or Participant in such Facility, as applicable, up to an aggregate principal amount at any time outstanding equal to the product of such Lender's Applicable Commitment Percentage times the Applicable Total Facility Commitment, as the same may be increased or decreased from time to time pursuant to this Agreement. "Applicable Fronting Commitment" means, for any Lender, (i) with respect to the US Facility, such Lender's US Facility Fronting Commitment, if any, (ii) with respect to the UK Facility, such Lender's UK Facility Fronting Commitment, if any, (iii) with respect to the 5 12 Canadian Facility, such Lender's Canadian Facility Fronting Commitment, if any, and (iv) with respect to the Australian Facility, such Lender's Australian Facility Fronting Commitment, if any. "Applicable Fronting Percentage" means (i) for each US Facility Lender, with respect to the Obligations hereunder arising in connection with the US Facility, a fraction (expressed as a percentage), the numerator of which shall be the amount of its US Facility Fronting Commitment and the denominator of which shall be the Total US Facility Commitment, each as of the date of determination, which Applicable Fronting Percentage for each US Facility Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; (ii) for each UK Facility Lender, with respect to the Obligations hereunder arising in connection with the UK Facility, a fraction (expressed as a percentage), the numerator of which shall be the amount of its UK Facility Fronting Commitment and the denominator of which shall be the Total UK Facility Commitment, each as of the date of determination, which Applicable Fronting Percentage for each UK Facility Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; (iii) for each Canadian Facility Lender, with respect to the Obligations hereunder arising in connection with the Canadian Facility, a fraction (expressed as a percentage), the numerator of which shall be the amount of its Canadian Facility Fronting Commitment and the denominator of which shall be the Total Canadian Facility Commitment, each as of the date of determination, which Applicable Fronting Percentage for each Canadian Facility Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; and (iv) for each Australian Facility Lender, with respect to the Obligations hereunder arising in connection with the Australian Facility, a fraction (expressed as a percentage), the numerator of which shall be the amount of its Australian Facility Fronting Commitment and the denominator of which shall be the Total Australian Facility Commitment, each as of the date of determination, which Applicable Fronting Percentage for each Australian Facility Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; provided that the Applicable Fronting Percentages of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 13.01 hereof. "Applicable Lenders" means (i) with respect to all matters involving the US Facility, the US Facility Lenders, (ii) with respect to all matters involving the UK Facility, the UK Facility Lenders, (iii) with respect to all matters involving the Canadian Facility, the Canadian Facility Lenders, and (iv) with respect to all matters involving the Australian Facility, the Australian Facility Lenders. "Applicable Lending Office" means, for each Lender and for each Type and Applicable Currency of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type and Applicable Currency of Loan on the signature pages hereof or in an Assignment and Acceptance, or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Applicable Facility Agent and the Applicable Borrowers by written notice in accordance with the terms 6 13 hereof as the office by which its Loans of such Type and Applicable Currency are to be made and maintained. "Applicable Margin" means (i) for purposes of calculating the applicable interest rate for any Interest Period for each Offshore Rate Loan, and the applicable Facility Fee, under each of the UK Facility and the Australian Facility, and the applicable interest rate for any Interest Period for each Canadian Facility BA Rate Loan, and the applicable Facility Fee, under the Canadian Facility Full Maturity Tranche, that percent per annum set forth below, which shall be (A) determined as of the last day of each fiscal quarter of the Company (each, a "Determination Date") and (B) effective beginning on the first day next following the date of delivery of the certificate delivered to the Agents pursuant to Section 9.01(a) or 9.01(b) hereof (each, a "Compliance Certificate") as to such Determination Date (the "Compliance Date"), with respect to all such Offshore Rate Loans and Canadian Facility BA Rate Loans existing and the calculation of all such Facility Fees, on and after such Compliance Date, all based upon the computations and information set forth in the Compliance Certificate (subject to review and approval of such computations by the Agents) with respect to (x) the ratio of Consolidated Funded Indebtedness to Consolidated Total Capitalization as at such Determination Date and (y) the rating (the "Debt Rating") assigned to each class of long term senior secured indebtedness of the Company (the "Rated Debt") by either of S&P or Moody's as at such Determination Date (provided that if such determination shall result in a different Applicable Margin under (x) and (y) above, the lower Applicable Margin shall apply):
Applicable Applicable Margin for Company's Senior Unsecured Consolidated Margin Facility Level Indebtedness Rating Leverage Ratio for Loans Fees ----- ------------------- -------------- --------- ---- I Either A- or higher by S&P or less than or equal to .30 to 1.00 .150% .075% A3 or higher by Moody's II Either BBB+ or higher by S&P less than or equal to .40 to .205% .095% or Baa1 or higher by Moody's 1.00 and greater than .30 to 1.00 III Either BBB or higher by S&P or less than or equal to .45 to .275% .125% Baa2 or higher by Moody's 1.00 and greater than .40 to 1.00 IV Lower than BBB by S&P or lower greater than .45 to 1.00 .350% .150% than Baa2 by Moody's
; and (ii) for purposes of calculating the applicable interest rate for any Interest Period for each Eurodollar Rate Loan, and the applicable Facility Fee, under the US Facility, and the applicable interest rate for any Interest Period for each Canadian Facility BA Rate Loan, and the applicable Facility Fee, under the Canadian Facility Renewable Tranche, that percent per annum set forth below, which shall be (A) determined as of each Determination Date and (B) effective beginning on the first day next following the applicable Compliance Date, with respect to all such Eurodollar Rate Loans and Canadian Facility BA Rate Loans existing, and the calculation of all such Facility Fees, on and after such Compliance Date, all based upon the computations and information set forth in the Compliance Certificate (subject to review 7 14 and approval of such computations by the Agents) with respect to (x) the ratio of Consolidated Funded Indebtedness to Consolidated Total Capitalization as at such Determination Date and (y) the Debt Rating assigned to each class of Rated Debt by either of S&P or Moody's as at such Determination Date (provided that if such determination shall result in a different Applicable Margin under (x) and (y) above, the lower Applicable Margin shall apply):
Applicable Applicable Margin for Company's Senior Unsecured Consolidated Margin Facility Level Indebtedness Rating Leverage Ratio for Loans Fees ----- ------------------- -------------- --------- ---- I Either A- or higher by S&P or less than or equal to .30 to .160% .065% A3 or higher by Moody's 1.00 II Either BBB+ or higher by S&P or less than or equal to .40 to .215% .085% Baa1 or higher by Moody's 1.00 and greater than .30 to 1.00 III Either BBB or higher by S&P or less than or equal to .45 to .300% .100% Baa2 or higher by Moody's 1.00 and greater than .40 to 1.00 IV Lower than BBB by S&P and lower greater than .45 to 1.00 .375% .125% than Baa2 by Moody's
; provided, however, that if, in both (i) and (ii) above, the period to which the Compliance Certificate relates is the third fiscal quarter of any Fiscal Year of the Company, the Consolidated Leverage Ratio set forth in each table above shall be adjusted as set forth below at the applicable level: Consolidated Level Leverage Ratio ----- -------------- I less than or equal to .35 to 1.00 II less than or equal to .425 to 1.00 and greater than .35 to 1.00 III less than or equal to .475 to 1.00 and greater than .425 to 1.00 IV greater than .475 to 1.00 In the event that the Debt Ratings assigned by S&P and Moody's differ by one rating level, the Applicable Margin shall be determined by reference to the level in the charts above having the higher assigned Debt Rating without regard to the lower assigned Debt Rating. In the event that the Debt Ratings assigned by S&P and Moody's differ by more than one rating level, the Applicable Margin shall be determined by reference to the Debt Rating which is one rating level lower than the higher assigned Debt Rating without regard to the lower assigned Debt Rating. By way of illustration under (i) above and not limitation, if S&P assigns a rating of BBB+ (i.e., Level II) and Moody's assigns a rating of Baa2 (i.e., Level III), the Applicable Margin will be .205% (i.e., Level II); if S&P assigns a rating of A- (i.e., 8 15 Level I) and Moody's assigns a rating of Baa3 (i.e., Level IV), the Applicable Margin will be .205% (i.e., Level II). Notwithstanding any provision herein to the contrary, if the Company shall fail to deliver any Compliance Certificate within the applicable period set forth in Section 9.01(a) or (b), as the case may be, then the Applicable Margin in each Facility shall be the highest Applicable Margin for such Facility set forth above commencing on the date such Compliance Certificate was required to have been delivered until the date the appropriate Compliance Certificate is so delivered. From the Closing Date to the first Compliance Date, the Applicable Margin for Loans shall be .150% under (i) above and .160% under (ii) above, and the Applicable Margin for Facility Fees shall be .075% under (i) above and .065% under (ii) above. The Global Agent shall give each Facility Agent, within one (1) Business Day of receipt of any Compliance Certificate, telefacsimile notice, or telephonic notice (confirmed in writing), of the Applicable Margins in effect from such date. "Applicable Rate" means the applicable interest rate for any Fixed Rate Loan or Floating Rate Loan available in a specific Facility as selected by the Applicable Borrower or otherwise applicable hereunder. "Applicable Reference Rate" means (i) for any Eurodollar Rate Loan made under the US Facility for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the US Facility Agent to appear on Telerate Page 3750 or other appropriate Telerate Page (or any successor page) as the London interbank offered rate for deposits in the Applicable Currency at approximately 11:00 A.M. (London, England time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Applicable Reference Rate" shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the US Facility Agent to appear on Reuters Screen LIBO Page as the London interbank offered rate for deposits in the Applicable Currency at approximately 11:00 A.M. (London, England time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%); and (ii) for any Offshore Rate Loan made in British Pounds Sterling under the UK Facility for any Interest Period therefor, the rate per annum equal to the sum of (a) LIBOR plus (b) the UK Facility Mandatory Cost, in each case on the first day of such Interest Period for a term comparable to such Interest Period; and 9 16 (iii) for any Offshore Rate Loan made in French Francs under the UK Facility for any Interest Period therefor, the rate per annum equal to LIBOR as of two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; (iv) for any Offshore Rate Loan made in Australian Dollars under the Australian Facility for any Interest Period therefor, the rate per annum equal to the sum of (a) the Australian Bank Bill Swap Reference Rate plus (b) the additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) to the Australian Facility Lenders of complying with any reserve ratio requirement or analogous requirement of any central banking or financial regulatory authority imposed in respect of the funding or maintenance of the Australian Facility Commitments or the Australian Facility Loans; and (v) for any Offshore Rate Loan made in New Zealand Dollars under the Australian Facility for any Interest Period therefor, the rate per annum equal to the sum of (a) the New Zealand Bank Bill Reference Rate plus (b) the additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) to the Australian Facility Lenders of complying with any reserve ratio requirement or analogous requirement of any central banking or financial regulatory authority imposed in respect of the funding or maintenance of the Australian Facility Commitments or the Australian Facility Loans. "Applicable Reserve Requirement" means, at any time, for any Eurodollar Rate Loan the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental or emergency reserves) are required to be maintained with respect thereto under regulations issued from time to time by the Board or other applicable banking regulator by the member banks of the Federal Reserve System against, "Eurocurrency liabilities" (as such term is defined in Regulation D). Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Eurodollar Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. An Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. "Applicable Total Facility Commitment" means (i) with respect to the US Facility, the Total US Facility Commitment, (ii) with respect to the UK Facility, the Total UK Facility Commitment, (iii) with respect to the Canadian Facility, the Total Canadian Facility Commitment and (iv) with respect to the Australian Facility, the Total Australian Facility Commitment. 10 17 "Assignment and Acceptance" shall mean an Assignment and Acceptance substantially in the form of Exhibit B (with blanks appropriately filled in) delivered to the Global Agent and the Applicable Facility Agents in connection with an assignment of a Lender's interest in a specific Facility under this Agreement pursuant to Section 13.01. "Australian Bank Bill Swap Reference Rate" means (i) for any date of determination with respect to any Interest Period for an Offshore Rate Loan made in Australian Dollars under the Australian Facility, (a) the rate (expressed as a percentage yield per annum to maturity) determined by the Australian Facility Agent to be the rate (rounded upwards, if necessary, to the nearest 0.01%) quoted as the average bid rate on the Reuters Monitor System page "BBSY" at or about 10:00 A.M. (Sydney, Australia time) on the first day of such Interest Period for bank accepted bills having a term equal to (or no more than two (2) Business Days shorter or longer than) such Interest Period, or (b) if (x) for any reason there is no average bid rate displayed on the Reuters Monitor System screen BBSY page for bank accepted bills of that term or (y) the basis on which such rates are displayed on the Reuters Monitor System screen BBSY page is changed and in the opinion of Australian Facility Agent those rates cease to reflect the Australian Facility Lenders' cost of funding to the same extent as at the date of this Agreement, then the rate (expressed as a percentage yield per annum to maturity) determined by Australian Facility Agent to be the average of the bid rates quoted to Australian Facility Agent by three Australian banks selected by Australian Facility Agent at or about that time on that day for the purchase of bills accepted by such banks having a face value amount equal to the principal amount of such Australian Facility Loan and a term as described in clause (i)(a) of this definition; provided that such buying rates must be for bills of exchange which are accepted by an Australian bank selected by Australian Facility Agent and which have a term equivalent to the relevant Interest Period; or (ii) for any date of determination for purposes of determining the Australian Facility Base Rate for an Offshore Rate Loan made in Australian Dollars under the Australian Facility, or in the event the Australian Bank Bill Swap Reference Rate cannot be determined as described in clause (i) of this definition, the rate determined by Australian Facility Agent to be the arithmetic mean (rounded upwards to the nearest 1/16th of one percent) of the rates, as supplied to Australian Facility Agent at its request, quoted by the Australian Facility Lenders to leading banks in the Australian interbank market at or about 10:00 A.M. (Sydney, Australia time) on such date for the offering of overnight deposits in Australian Dollars. "Australian Dollar Equivalent Amount" means, with respect to a specified amount of New Zealand Dollars, the amount of Australian Dollars into which such amount of New Zealand Dollars would be converted, based on the applicable Spot Rate of Exchange. "Australian Dollar Fronting Commitment" means, with respect to each Australian Facility Lender, at any date of determination, the obligation of such Lender to make Loans in Australian Dollars to the Australian Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the Australian Facility times the Total Australian Dollar Commitment as of such date, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. 11 18 "Australian Dollar Outstandings" means, at any date of determination, that portion of the Australian Facility Outstandings representing the aggregate principal amount of all Australian Facility Loans outstanding in Australian Dollars. "Australian Dollars" or "AUS $" means the lawful currency of Australia. "Australian Facility" means the facility described in Article V hereof providing for Loans to the Australian Facility Borrowers by the Australian Facility Lenders in the aggregate principal amount of the Total Australian Facility Commitment. "Australian Facility Advance" means a borrowing under the Australian Facility consisting of the aggregate principal amount of an Australian Facility Base Rate Loan or Offshore Rate Loan, as the case may be. "Australian Facility Agent" shall have the meaning therefor set forth in the introduction hereto. "Australian Facility Base Rate" means, for any day, the rate per annum equal to the Australian Bank Bill Swap Reference Rate in effect on such day for one-day borrowings in Australian Dollars. "Australian Facility Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the Australian Facility Base Rate. "Australian Facility Borrowers" shall have the meaning therefor set forth in the introduction hereto. "Australian Facility Commitment" means, with respect to any Lender, such Lender's Applicable Facility Commitment for the Australian Facility. "Australian Facility Fronting Commitment" means, with respect to each Australian Facility Lender, the obligation of such Lender to make Loans to the Australian Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the Australian Facility times the Total Australian Facility Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement, and shall consist of such Lender's Australian Dollar Fronting Commitment plus its New Zealand Dollar Fronting Commitment. "Australian Facility Lenders" means those Lenders identified in the introduction hereto with respect to their making Australian Facility Loans on behalf of all the Lenders. "Australian Facility Loans" means Loans, both Australian Facility Base Rate Loans and Offshore Rate Loans, made by the Australian Facility Lenders pursuant to Section 5.01 hereof. 12 19 "Australian Facility Maximum Amount" means, with respect to each Australian Facility Borrower, 95% of the amount by which the fair value of its assets (determined at the lesser of fair valuation and present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including without limitation Contingent Obligations, as of the Closing Date; provided, however, that if the calculation of Australian Facility Maximum Amount in the manner provided above as of the date payment is required of such Australian Facility Borrower pursuant to Article V would result in a greater positive number, then the Australian Facility Maximum Amount shall be such greater positive number. "Australian Facility New Zealand Dollar Tranche" means the facility described in Article V hereof providing for Loans funded in New Zealand Dollars to the Australian Facility Borrowers by the Australian Facility Lenders in an aggregate principal amount not to exceed the Total New Zealand Dollar Commitment. "Australian Facility Outstandings" means, at any date of determination, the Australian Dollar Outstandings plus the New Zealand Dollar Outstandings. "Authorized Representative" means in the case of each of the Company and the US Facility Borrower, the UK Facility Borrowers, the Canadian Facility Borrower and the Australian Facility Borrowers, any of those persons listed as such on Schedule 1.01 attached hereto, or any other person expressly designated by the Board of Directors (or the appropriate committee thereof) of the Company as an Authorized Representative for purposes of this Agreement, as set forth from time to time in a certificate in the form attached hereto as Exhibit C. "BACAN" shall have the meaning therefor set forth in the introduction hereto. "Bank of America" means Bank of America National Trust & Savings Association, a national banking association. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). "Borrowing Notice" means the request of the Authorized Representative of a Borrower to obtain an Advance or to elect a subsequent Interest Period for or Convert a Loan or Loans of any Type hereunder, as the obtaining of such Advance, such election or Conversion of such Loan or Loans shall be otherwise permitted herein. Any Borrowing Notice shall be binding on and irrevocable by a Borrower and shall be in writing and signed by the Authorized Representative of such Borrower in the form attached hereto as Exhibit D-1 for US Facility Loans, Exhibit D-2 for UK Facility Loans, Exhibit D-3 for Canadian Facility Loans and Exhibit D-4 for Australian Facility Loans, as the case may be. "British Pounds Sterling" means the lawful currency of the United Kingdom of Great Britain and Northern Ireland and is subject to Section 6.09. 13 20 "British Pounds Sterling Fronting Commitment" means, with respect to each UK Facility Lender, at any date of determination, the obligation of such Lender to make Loans in British Pounds Sterling to the UK Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the UK Facility times the Total British Pounds Sterling Commitment as of such date, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "British Pounds Sterling Outstandings" means, at any date of determination, that portion of the UK Facility Outstandings representing the aggregate principal amount of all UK Facility Loans outstanding in British Pounds Sterling. "Business Day" means (i) with respect to all notices, determinations, fundings and payments in connection with US Facility Loans or not related to any particular Facility, or with respect to all notices, determinations, fundings and payments involving the Global Agent, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York or Ohio or is a day on which banking institutions located in either such state are authorized or required by law or other governmental action to close, (ii) with respect to all notices, determinations, fundings and payments in connection with UK Facility Loans, any day, excluding Saturday, Sunday and any day which is a legal holiday under the laws of England or is a day on which banking institutions located in England are authorized or required by law or other governmental action to close, which is a day on which dealings in the Applicable Currency are carried on; (iii) with respect to all notices, determinations, fundings and payments in connection with Canadian Facility Loans, any day, other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco and in Toronto, Canada are authorized or required by law to close; (iv) with respect to all notices, determinations, fundings and payments in connection with Australian Facility Loans, any day, excluding Saturday, Sunday and any day which is a legal holiday under the laws of the Province of New South Wales, Australia or is a day on which banking institutions located in such Province are authorized or required by law or other governmental action to close, which is a day on which dealings in the Applicable Currency are carried on and on which commercial banks are open for business in, and on which dealings in Australian Dollars are carried on in, Hong Kong; and (v) with respect to all notices, determinations, fundings and payments in connection with any Eurodollar Rate Loan or Offshore Rate Loan, any day that is a Business Day described above for the applicable Facility and that is also a day for trading by and between banks in the Applicable Currency in the applicable interbank Eurodollar Rate market or Offshore Rate market, as applicable. "Canadian Dollars" or "CAN $" means the lawful currency of Canada. "Canadian Facility" means the facility described in Article IV hereof providing for Loans to the Canadian Facility Borrower by the Canadian Facility Lenders in the aggregate principal amount of the Total Canadian Facility Commitment. 14 21 "Canadian Facility Advance" means a borrowing under the Canadian Facility Full Maturity Tranche or the Canadian Facility Renewable Tranche consisting of the aggregate principal amount of a Canadian Facility Base Rate Loan or Canadian Facility BA Rate Loan, as the case may be. "Canadian Facility Agent" shall have the meaning therefor set forth in the introduction hereto. "Canadian Facility BA Rate" means, for any Interest Period for a Canadian Facility BA Rate Loan, the rate of interest per annum (rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the market bid rate determined by the Canadian Facility Agent for banker's acceptances (with a tenor comparable to such Interest Period and in an amount comparable to the Canadian Facility BA Rate Loan of BACAN for such Interest Period) accepted by BACAN on the first day of such Interest Period. "Canadian Facility BA Rate Loan" means a Canadian Facility Loan for which the rate of interest is determined by reference to the Canadian Facility Fixed BA Rate. "Canadian Facility Base Rate" means, for any day, for Canadian Facility Loans made by Canadian Facilities Lenders, the higher of (i) 0.50% per annum above the average 30 day bankers' acceptance rate as quoted on Reuters Service Page CDOR determined at 10:00 A.M. (Toronto, Canada time) on such day and (ii) that annual rate of interest designated by BACAN as its "prime rate" and established and announced by BACAN from time to time at its offices in Toronto, Canada as the reference rate for demand loans in Canadian Dollars made in Canada (the "prime rate" and other rates referred to above are rates set by Bank of America and BACAN based upon various factors including Bank of America's and BACAN's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate). Any change in the reference rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Canadian Facility Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the Canadian Facility Base Rate. "Canadian Facility Borrower" shall have the meaning therefor set forth in the introduction hereto. "Canadian Facility Commitment" means, with respect to any Lender, such Lender's Applicable Facility Commitment for the Canadian Facility. "Canadian Facility Fixed BA Rate" means, for any Interest Period for any Canadian Facility BA Rate Loan, the rate of interest per annum equal to the sum of the BA Rate for such Loan plus the Applicable Margin. 15 22 "Canadian Facility Fronting Commitment" means, with respect to each Canadian Facility Lender, the sum of its Canadian Facility Renewable Tranche Fronting Commitment and its Canadian Facility Full Maturity Tranche Fronting Commitment. "Canadian Facility Full Maturity Tranche" means the facility described in Article IV hereof providing for Canadian Facility Loans to the Canadian Facility Borrower by the Canadian Facility Lenders from the Closing Date until the Total Facility Termination Date in the aggregate principal amount of the Canadian Facility Full Maturity Tranche Commitment. "Canadian Facility Full Maturity Tranche Commitment" means that portion of the Total Canadian Facility Commitment providing for Canadian Facility Loans to the Canadian Facility Borrower by the Canadian Facility Lenders in the aggregate principal amount equal to CAN $75,000,000. "Canadian Facility Full Maturity Tranche Outstandings" means, at any date of determination, that portion of the Canadian Facility Outstandings representing the aggregate principal amount of all Canadian Facility Loans outstanding under the Canadian Facility Full Maturity Tranche. "Canadian Facility Full Maturity Tranche Fronting Commitment" means, with respect to each Canadian Facility Lender, the obligation of such Lender to make or Continue Loans to the Canadian Facility Borrower on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Commitment for the Canadian Facility times the Canadian Facility Full Maturity Tranche Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "Canadian Facility Lenders" means those Lenders identified in the introduction hereto with respect to their making Canadian Facility Loans on behalf of all the Lenders. "Canadian Facility Loans" means Loans, both Canadian Facility Base Rate Loans and Canadian Facility BA Rate Loans, made by the Canadian Facility Lenders pursuant to Article IV hereof. "Canadian Facility Outstandings" means, at any date of determination, the aggregate principal amount of all Canadian Facility Loans then outstanding. "Canadian Facility Renewable Tranche" means the facility described in Article IV hereof providing for Canadian Facility Loans to the Canadian Facility Borrower by the Canadian Facility Lenders from the Closing Date until the Canadian Facility Renewable Tranche Termination Date in the aggregate principal amount of the Canadian Facility Renewable Tranche Commitment. "Canadian Facility Renewable Tranche Commitment" means that portion of the Total Canadian Facility Commitment providing for Canadian Facility Loans to the Canadian Facility 16 23 Borrower by the Canadian Facility Lenders in the aggregate principal amount equal to (i) as of the Closing Date, CAN $ 75,000,000, and (ii) as of any subsequent date of determination thereof, such amount set forth in (i) above as the same may be reduced from time to time pursuant to Section 4.12 hereof. "Canadian Facility Renewable Tranche Extension Date" means August 5, 1999 and each date thereafter to which the Canadian Facility Renewable Tranche Termination Date has been extended, if any, pursuant to Section 4.12 hereof, but in no event later than August 7, 2002. "Canadian Facility Renewable Tranche Fronting Commitment" means, with respect to each Canadian Facility Lender, the obligation of such Lender to make or Continue Loans to the Canadian Facility Borrower on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Commitment for the Canadian Facility times the Canadian Facility Renewable Tranche Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "Canadian Facility Renewable Tranche Outstandings" means, at any date of determination, that portion of the Canadian Facility Outstandings representing the aggregate principal amount of all Canadian Facility Loans outstanding under the Canadian Facility Renewable Tranche. "Canadian Facility Renewable Tranche Termination Date" means the earlier of (i) August 5, 1999, or such later date with respect to the Unutilized Canadian Facility Renewable Tranche Commitment as the Canadian Facility Borrower and the Lenders shall agree in writing pursuant to Section 4.12 hereof, or (ii) the Total Facility Termination Date. "Canadian Facility Term Loan" shall have the meaning therefor set forth in Section 4.13. "Canadian Facility Term Loan Facility" means the facility described in Section 4.13 hereof providing for the conversion of Canadian Facility Renewable Tranche Outstandings on each Canadian Facility Renewable Tranche Extension Date to Canadian Facility Term Loans. "Canadian Facility Term Loan Outstandings" means, at any date of determination, that portion of the Canadian Facility Outstandings representing the aggregate principal amount of all Canadian Facility Loans outstanding under the Canadian Term Loan Facility. "Canadian Overnight Rate" means the rate of interest per annum determined by the Canadian Facility Agent at its head office in Toronto, Canada from time to time at which overnight deposits in Canadian Dollars, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by the Canadian Facility Agent to major banks in the Canadian interbank market. The Canadian Overnight 17 24 Rate for any day which is not a Business Day shall be the Canadian Overnight Rate for the preceding Business Day. "Capital Leases" means all leases which have been or should be capitalized in accordance with Generally Accepted Accounting Principles as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Change of Control" means, at any time: (A) with respect to the Company: (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of Voting Stock of the Company (or securities convertible into or exchangeable for such Voting Stock) representing 20% or more of the combined voting power of all Voting Stock of the Company (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the Company; or (ii) during any period of up to 24 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 24-month period were directors of the Company shall cease for any reason (other than the death, disability or retirement) to constitute a majority of the board of directors of the Company; and (B) with respect to any Borrower other than the Company, such Borrower ceases for any reason to be a wholly-owned Subsidiary of the Company. "Closing Date" means the date as of which this Agreement is executed by the Borrowers, the Lenders and the Agents and on which the conditions set forth in Section 7.01 hereof have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. "Commitment" means, for any Lender, any of the Australian Facility Commitment, Canadian Facility Commitment, UK Facility Commitment and US Facility Commitment, as applicable. "Company" shall have the meaning therefor set forth in the introduction hereto. "Compliance Certificate" shall have the meaning therefor set forth in the definition of "Applicable Margin." 18 25 "Compliance Date" shall have the meaning therefor set forth in the definition of "Applicable Margin." "Consistent Basis" in reference to the application of Generally Accepted Accounting Principles means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Company referred to in Section 8.02(b)(i) hereof. "Consolidated EBIT" means, with respect to the Company and its Subsidiaries for the Four-Quarter Period ended on or immediately preceding the date of computation thereof, the sum of, without duplication, (i) Consolidated Net Income during such period, plus (ii) Consolidated Interest Expense during such period, (iii) plus taxes paid on income during such period, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated Funded Indebtedness" means all Indebtedness for Money Borrowed of the Company and its Subsidiaries, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated Interest Expense" means, with respect to any period of computation thereof, the gross interest expense of the Company and its Subsidiaries, including without limitation (i) the amortization of debt discounts, (ii) the amortization of all reserves and fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any liabilities incurred in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated Net Income" means, with respect to any period of computation thereof, the gross revenues of the Company and its Subsidiaries less all operating and non-operating expenses thereof including taxes on income, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; but excluding as income: (i) gains on the sale, conversion or other disposition of capital assets, (ii) gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Company or any Subsidiary, (iii) gains on the collection of proceeds of life insurance policies, (iv) any write-up of any asset, and (v) any other gain or credit of an extraordinary nature as determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated Shareholders' Equity" means, at any time as of which the amount thereof is to be determined, the sum of the following in respect of the Company and its Subsidiaries (determined on a consolidated basis and excluding intercompany items among the Company and its Subsidiaries and any upward adjustment after the Closing Date due to revaluation of assets): (i) the amount of issued and outstanding share capital, plus (ii) the amount of additional paid-in capital and retained income (or, in the case of a deficit, minus the amount of such deficit), plus (iii) the amount of any foreign currency translation 19 26 adjustment (if positive, or, if negative, minus the amount of such translation adjustment) minus (iv) the absolute value of any treasury stock, all determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated Total Capitalization" means the sum of Consolidated Shareholders' Equity and Consolidated Funded Indebtedness. "Contingent Obligation" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the consolidated financial statements (including footnotes) of such Person in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (4) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof. With respect to Contingent Obligations (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can reasonably be expected to become an actual or matured liability. "Continue", "Continuation", "Continuance" and "Continued" shall refer to the continuation pursuant to Sections 2.08, 3.08, 4.08 or 5.08 hereof of a Fixed Rate Loan from one Interest Period to the next Interest Period. 20 27 "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Sections 2.08, 3.08, 4.08 or 5.08 or Article VI of one Type of Loan into another Type of Loan. "Credit Exposure" means, with respect to any Lender, the aggregate principal amount of all outstanding Loans under the Total Facilities owing to such Lender, to the extent no other Lender has funded and paid for a Participation in such Loans, plus all Participations funded and paid for by such Lender in all other Loans under the Total Facilities, and "Aggregate Credit Exposure" means the sum of all Credit Exposures of all Lenders in the Total Facilities. "Debt Rating" shall have the meaning therefor set forth in the definition of "Applicable Margin." "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each Eurodollar Rate Loan, each Offshore Rate Loan and each Canadian Facility BA Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate, Offshore Rate or Canadian Facility Fixed BA Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above (A) in the case of US Facility Loans, Canadian Facility Loans or Australian Facility Loans, the Applicable Base Rate, and (B) in the case of UK Facility Loans, the Offshore Rate determined based on successive Interest Periods of one (1) month each; and (ii) with respect to each Applicable Base Rate Loan, at a rate of interest per annum which shall be two percent (2%) above the Applicable Base Rate. "Determination Date" shall have the meaning therefor set forth in the definition of "Applicable Margin." "Eligible Assignee" with respect to a specific Facility means (i) a Lender currently in such Facility; (ii) any other Lender, or an affiliate of any Lender, which, through its Applicable Lending Office, is capable of lending the Applicable Currency to the Applicable Borrowers without the imposition of any withholding or similar taxes; and (iii) any other Person which has and maintains an Investment Grade Rating and which, through its Applicable Lending Office, is capable of lending the Applicable Currency to the Applicable Borrowers without the imposition of any withholding or similar taxes and which is approved by the Applicable Facility Agent, the Global Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 13.01, the Company, such approval not to be unreasonably withheld or delayed by the Company, the Applicable Facility Agent or the Global Agent and such approval to be deemed given by the Company if no objection is received by the assigning Lender, the Applicable Facility Agent and the Global Agent from the Company within two (2) Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Company; provided, however, that neither the Company nor an affiliate of the Company shall qualify as an Eligible 21 28 Assignee; provided further, however, that the Company may withhold approval hereunder in its sole discretion if such assignment would give rise to the payment of any additional costs under Article VI. "Employee Benefit Plan" means (i) any employee benefit plan, including any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is maintained for employees of the Company, any of its ERISA Affiliates or any Subsidiary, (B) is assumed by the Company, any of its ERISA Affiliates or any Subsidiary, in connection with any acquisition of another Person or (C) has at any time been maintained for the employees of the Company, or any current or former ERISA Affiliate or any Subsidiary, or (ii) any plan, arrangement, understanding or scheme maintained by the Company or any Subsidiary that provides retirement, deferred compensation, employee or retiree medical or life insurance, severance benefits or any other benefit covering any employee or former employee and which is administered under any Foreign Benefit Law or regulated by any Governmental Authority other than the United States of America. "Environmental Laws" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal or applicable state, local or foreign statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to the Company, means any Person or trade or business which is a member of a group which is under common control with the Company, who, together with the Company, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Euro" shall have the meaning therefor set forth in Section 6.09. "Eurodollar Rate" means, for the Interest Period for any Eurodollar Rate Loan, the rate of interest per annum determined pursuant to the following formula: Eurodollar Applicable Reference Rate Applicable = ---------------------------------- + Rate 1 - Applicable Reserve Requirement Margin "Eurodollar Rate Loan" means a US Facility Loan for which the rate of interest is determined by reference to the Eurodollar Rate. 22 29 "Event of Default" means any of the occurrences set forth as such in Section 11.01 hereof and the expiration of any applicable notice or cure period. "Facility" means any of the US Facility, UK Facility, Canadian Facility and Australian Facility, as the context may require. "Facility Credit Exposure" means, with respect to any Lender and any Facility, the aggregate principal amount of all outstanding Loans under such Facility owing to such Lender, to the extent no other Lender has funded and paid for a Participation in such Loans, plus all Participations funded and paid for by such Lender in all other Loans under such Facility, and "Aggregate Facility Credit Exposure" means the sum of all Facility Credit Exposures of all Lenders in a specific Facility. "Facility Fee" means that fee set forth in Sections 2.09, 3.09, 4.09 and 5.09, respectively, payable in US Dollars for each separate Facility. "Facility Participation Amount" means, with respect to a Lender and a specific Facility, that amount of Participations of such Lender in such Facility as defined in Sections 2.14, 3.13, 4.14 and 5.13, respectively. "Facility Participation Payment Date" shall have the meaning therefor set forth in Section 11.07. "Federal Funds Effective Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Applicable Facility Agent (in its individual capacity) on such day on such transactions as determined by the Applicable Facility Agent. "Fiscal Year" means the 12 month period of the Company commencing on March 1 of each calendar year and ending on the last day of February of the immediately following calendar year. "Fixed Rate Loan" means any or all, as the context may require, of Eurodollar Rate Loans, Offshore Rate Loans and Canadian Facility BA Rate Loans. "Floating Rate Loan" means any one or more, as the context may require, of US Facility Base Rate Loans, Canadian Facility Base Rate Loans and Australian Facility Base Rate Loans. 23 30 "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning any pension, retirement, health care, death, disability or other employee benefit plan. "Four-Quarter Period" means a period of four full consecutive fiscal quarters of the Company and its Subsidiaries, taken together as one accounting period. "French Francs" means the official currency of the Republic of France and is subject to Section 6.09. "French Franc Equivalent Amount" means, with respect to a specified amount of British Pounds Sterling, the amount of French Francs into which such amount of British Pounds Sterling would be converted, based on the applicable Spot Rate of Exchange. "French Franc Fronting Commitment" means, with respect to each UK Facility Lender, the obligation of such Lender to make Loans in French Francs to the UK Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the UK Facility times the Total French Franc Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "French Franc Outstandings" means, at any date of determination, that portion of the UK Facility Outstandings representing the Sterling Equivalent Amount of the aggregate principal amount of all UK Facility Loans outstanding in French Francs under the UK Facility French Franc Tranche. "Funding Bank" means, with respect to the UK Facility, any banking institution located within France that is approved by the UK Facility Agent and is capable of making UK Facility Advances in French Francs to the UK Facility Borrowers. "Further Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges (including, without limitation, net income taxes and franchise taxes), and all liabilities with respect thereto, imposed by any jurisdiction on account of amounts payable or paid pursuant to Section 6.06. "GAAP" or "Generally Accepted Accounting Principles" means those generally accepted principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board or the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report, as such principles are from time to time supplemented and amended, subject to compliance at all times with Section 1.02 hereof. "Global Agent" shall have the meaning therefor set forth in the introduction hereto. 24 31 "Governmental Authority" means any federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Guarantor" means the Company in its capacity as a party to the Guaranty. "Guaranty" means the unconditional Guaranty Agreement in favor of the Lenders in substantially the form attached hereto as Exhibit E delivered to the Global Agent in accordance with Article VII hereof pursuant to which the Guarantor guarantees the payment and performance of all Obligations to the Lenders as more specifically set forth in such Guaranty. "Hazardous Material" means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law in effect on any date. "Hedging Obligations" means any and all obligations of the Company and its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements; and (b) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "Indebtedness" means, with respect to any Person, all Indebtedness for Money Borrowed of such Person, all indebtedness of such Person for the acquisition of property, including the deferred purchase price of such property, other than purchases of products and merchandise in the ordinary course of business so long as payment therefor is due within one year, indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed, all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business); all Contingent Obligations of such Person, including the undrawn face amount of, and unpaid reimbursement obligations in respect of, all letters of credit issued for the account of such Person, obligations occurring under acceptance facilities and Hedging Obligations; all Capital Leases of such Person, and other items which in accordance with Generally Accepted Accounting Principles are classified as liabilities on a balance sheet; provided that in no event shall the term Indebtedness include capital stock, surplus and retained earnings, minority interest in the common stock of Subsidiaries, lease obligations (other than pursuant to Capital Leases), reserves for deferred 25 32 income taxes and investment credits, other deferred credits and reserves, and deferred compensation obligations. "Indebtedness for Money Borrowed" means, for any Person, (i) all indebtedness, obligations and liabilities of such Person for money borrowed which are evidenced by bonds, debentures, notes or other similar instruments, and (ii) all Capital Leases which have been capitalized in accordance with Generally Accepted Accounting Principles; provided, however, the term "Indebtedness for Money Borrowed" shall specifically exclude payroll indebtedness and trade indebtedness incurred in the ordinary course of business (including trade indebtedness through financial intermediaries) provided such trade indebtedness has a maturity of less than one year. "Interest Period" for each Fixed Rate Loan means a period commencing on the date such Fixed Rate Loan is made, Continued or Converted and each subsequent period commencing on the last day of the immediately preceding Interest Period for such Fixed Rate Loan and ending, at the Applicable Borrower's option, for any Fixed Rate Loan, on the date one, two, three or six months thereafter as notified to the Applicable Facility Agent in compliance with the provisions of such Facility as set forth in Articles II, III, IV and V, respectively, by an Authorized Representative of such Borrower prior to the beginning of such Interest Period; provided, that, (i) if the Authorized Representative of such Borrower fails to notify the Applicable Facility Agent of the length of an Interest Period in compliance with the provisions of such Facility as set forth in Article II, Article III, Article IV or Article V, respectively, the Fixed Rate Loan for which such Interest Period was to be determined shall be deemed to be (A) in the case of a US Facility Loan, Canadian Facility Loan or Australian Facility Loan, an Applicable Base Rate Loan or (B) in the case of a UK Facility Loan, an Offshore Rate Loan with an Interest Period of one month, in each case as of the first day thereof; (ii) if an Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iii) there shall not be more than (A) ten (10) Interest Periods in effect on any day in respect of US Facility Loans, (B) ten (10) Interest Periods in effect on any day in respect of UK Facility Loans, (C) ten (10) Interest Periods in effect on any Canadian Facility Loans and (D) four (4) Interest Periods in effect on any day in respect of Australian Facility Loans; (iv) any Interest Period which 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 a calendar month; 26 33 (v) no Interest Period shall extend past the Total Facility Termination Date, the US Facility Revolving Credit Termination Date (for US Facility Loans under the US Facility Revolving Credit Facility) or the Canadian Facility Renewable Tranche Termination Date (for Canadian Facility Loans under the Canadian Facility Renewable Tranche). "Investment Grade Rating" means a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's. "Lenders" shall have the meaning therefor set forth in the introduction hereto. "LIBOR" means, for any date of determination with respect to any Interest Period for an Offshore Rate Loan made under the UK Facility, (i) the rate per annum (rounded upward, if necessary, to the nearest five decimal places) equal to the rate determined by the UK Facility Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750) for deposits (for delivery on the first day of such period) with a term equivalent to such period in the Applicable Currency, determined as of approximately 11:00 A.M. (London, England time) on such date of determination, or (ii) in the event the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded upward, if necessary, to the nearest five decimal places) equal to the rate determined by the UK Facility Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in the Applicable Currency, determined as of approximately 11:00 A.M. (London, England time) on such date of determination, or (iii) in the event the rates referenced in the preceding clauses (i) and (ii) are not available, the rate per annum equal to the offered quotation rate (rounded upward, if necessary, to the nearest five decimal places) to first class banks in the London interbank market by the UK Facility Agent for deposits (for delivery on the first day of the relevant period) in the Applicable Currency of amounts in Same Day Funds comparable to the principal amount of the UK Facility Loan of such UK Facility Agent for which LIBOR is then being determined with maturities comparable to such period as of approximately 11:00 A.M. (London, England time) on such date of determination. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. "Loan" or "Loans" means any of the Fixed Rate Loans or Floating Rate Loans, as the context may require. 27 34 "Loan Documents" means this Agreement, the Notes, the Guaranty and all other instruments and documents heretofore or hereafter executed or delivered to and in favor of any Lenders or any Agents in connection with the Loans made under this Agreement, as the same may be amended, modified or supplemented from time to time. "Loan Parties" means, collectively, each Borrower and the Guarantor. "Material Adverse Effect" means a material adverse effect on (i) the business, assets, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries on a consolidated basis or (ii) the ability of any of the Loan Parties to perform their obligations and pay all amounts due hereunder or (iii) the ability of any Agent or any Lender to enforce any of their rights or to collect any of the Outstandings then due and payable. "Moody's" means Moody's Investors Services, Inc. "Multiemployer Plan" means an employee pension benefit plan covered by Title IV of ERISA and in respect of which the Company or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA, which is also a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "National City Bank" means National City Bank, a national banking association. "NationsBank" means NationsBank, National Association, a national banking association. "New Zealand Bank Bill Reference Rate" means (i) for any date of determination with respect to any Interest Period for an Offshore Rate Loan made in New Zealand Dollars under the Australian Facility, (a) the rate (expressed as a percentage yield per annum to maturity) determined by the Australian Facility Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest 0.01%) of the bid rates on the page entitled "BKBM" (or such supplemental or other page of the Reuters Monitor System for displaying quotations of New Zealand Bank Bills) on the Reuters Monitor Money Rates Service at or about 10:00 A.M. (Sydney, Australia time) on the first day of such Interest Period for bank accepted bills having a term equal to (or no more than two (2) Business Days shorter or longer than) such Interest Period, or (b) if (x) for any reason there is no average bid rate displayed on the Reuters Monitor System screen page entitled BKBM for bank accepted bills of that term or (y) the basis on which such rates are displayed on the Reuters Monitor System screen page entitled BKBM is changed and in the opinion of Australian Facility Agent those rates cease to reflect the Australian Facility Lenders' cost of funding to the same extent as at the date of this Agreement, then the rate (expressed as a percentage yield per annum to maturity) determined by Australian Facility Agent to be the average of the bid rates quoted to Australian Facility Agent by three banks selected by Australian Facility Agent at or about that time on that day for the purchase of bills accepted by such banks having a face value amount equal to the principal amount of such Australian Facility Loan and a term as described in clause (i)(a) of 28 35 this definition; provided that such buying rates must be for bills of exchange which are accepted by a bank selected by Australian Facility Agent and which have a term equivalent to the relevant Interest Period; or (ii) for any date of determination for purposes of determining the Australian Facility Base Rate for an Offshore Rate Loan made in New Zealand Dollars under the Australian Facility, or in the event the New Zealand Bank Bill Reference Rate cannot be determined as described in clause (i) of this definition, the rate determined by Australian Facility Agent to be the arithmetic mean (rounded upwards to the nearest 1/16th of one percent) of the rates, as supplied to Australian Facility Agent at its request, quoted by the Australian Facility Lenders to leading banks in the New Zealand interbank market at or about 10:00 A.M. (Sydney, Australia time) on such date for the offering of overnight deposits in New Zealand Dollars. "New Zealand Dollar Equivalent Amount" means, with respect to a specified amount of Australian Dollars, the amount of New Zealand Dollars into which such amount of Australian Dollars would be converted, based on the applicable Spot Rate of Exchange. "New Zealand Dollar Fronting Commitment" means, with respect to each Australian Facility Lender, the obligation of such Lender to make Loans in New Zealand Dollars to the Australian Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of the Lender's Applicable Fronting Percentage for the Australian Facility times the Total New Zealand Dollar Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "New Zealand Dollar Outstandings" means, at any date of determination, that portion of the Australian Facility Outstandings representing the Australian Dollar Equivalent Amount of the aggregate principal amount of all Australian Facility Loans outstanding in New Zealand Dollars under the Australian Facility New Zealand Dollar Tranche. "New Zealand Dollars" or "NZ $" means the lawful currency of New Zealand. "Non-Australian Lender" shall have the meaning therefor set forth in Section 6.06(i). "Non-Canadian Lender" shall have the meaning therefor set forth in Section 6.06(h). "Notes" means, collectively, the US Facility Notes and any promissory notes that may be issued by an Applicable Borrower and delivered to an Applicable Lender in a Facility other than the US Facility at the request of such Lender. "Obligations" means the obligations, liabilities and Indebtedness of the Borrowers with respect to (i) the principal and interest on the Loans as evidenced by the Notes and on the records of the Applicable Facility Agents, (ii) all liabilities of any Borrower to any Lender or any affiliate of a Lender which arise under a Swap Agreement, and (iii) the payment and performance of all other fees, indemnities, expenses, obligations, liabilities and Indebtedness 29 36 of the Borrowers to the Lenders or the Agents, under this Agreement, under any one or more of the other Loan Documents or with respect to the Loans. "Offshore Currency" means any of British Pounds Sterling, French Francs, Canadian Dollars, Australian Dollars and New Zealand Dollars. "Offshore Rate" means, for the Interest Period for any Offshore Rate Loan, the rate of interest per annum determined pursuant to the following formula: Offshore Rate = Applicable Reference Rate + Applicable Margin "Offshore Rate Loan" means a UK Facility Loan or Australian Facility Loan for which the rate of interest is determined by reference to the Offshore Rate. "Operating Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement, limited partnership agreement or other applicable documents relating to the operation, governance or management of such entity. "Organizational Action" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, any corporate, organizational or partnership action (including any required shareholder, member or partner action), or other similar official action, as applicable, taken by such entity. "Organizational Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, articles of organization, certificate of limited partnership or other applicable organizational or charter documents relating to the creation of such entity. "Other Taxes" means any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Outstandings" means, collectively, the US Facility Outstandings, the UK Facility Outstandings, the Canadian Facility Outstandings and the Australian Facility Outstandings, and individually any of the foregoing as the context may require. "Participation" means, with respect to any Facility, the principal amount purchased and funded by each Lender in the Loans and Outstandings under such Facility pursuant to and in accordance with the terms of Sections 2.14, 3.13, 4.14, 5.13 and 11.07 and "Participate" and "Participant" shall have correlative meanings. 30 37 "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Company or any of its ERISA Affiliates or is assumed by the Company or any of its ERISA Affiliates in connection with any acquisition or (ii) has at any time been maintained for the employees of the Company or any current or former ERISA Affiliate. "Permitted Acquisition" means the acquisition by the Company or a Subsidiary of a controlling equity interest in or all or substantially all of the assets of any Person, which satisfies each of the following: (i) such Person is in the same or similar line or lines of business as that engaged in by the Company and its Subsidiaries; and (ii) no Default or Event of Default has occurred and is continuing at the time of, or is created or results from, such transaction. "Person" means an individual, limited liability company, partnership, corporation, trust, unincorporated organization, association, joint venture or other entity or a government or agency or political subdivision thereof. "Principal Office" means, as the context may require, (i) the principal office of the US Facility Agent located at 1900 East Ninth Street, Cleveland Ohio 44114, (ii) the principal office of the UK Facility Agent located at New Broad Street House, 35 New Broad Street, London EC2M 1NH England, (iii) the principal office of the Canadian Facility Agent located at Bank of America Canada, Toronto Corporate Services Office 5651, 200 Front Street West, 27th Floor, Toronto, Ontario M5V 312 Canada, Attn: Nelson Lam and (iv) the principal office of the Australian Facility Agent located at BA Asia Ltd., Devon House, 979 King's Road, 10th Floor, Quarry Bay, Hong Kong, Attn: Donny Lam, or such other office and address as any such Facility Agent may from time to time designate. "Prior Australian Facility" shall have the meaning therefor set forth in the introduction hereto. "Prior Canadian Facility" shall have the meaning therefor set forth in the introduction hereto. "Prior Facilities" shall have the meaning therefor set forth in the introduction hereto. "Prior French Facility" shall have the meaning therefor set forth in the introduction hereto. "Prior Irish Facility" shall have the meaning therefor set forth in the introduction hereto. 31 38 "Prior UK Facility" shall have the meaning therefor set forth in the introduction hereto. "Prior US Facility" shall have the meaning therefor set forth in the introduction hereto. "Rated Debt" shall have the meaning therefor set forth in the definition of "Applicable Margin." "Register" shall have the meaning therefor set forth in Section 13.01(b). "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "Regulatory Change" means any change effective after the Closing Date in United States federal or state laws or regulations (including Regulation D and capital adequacy regulations), English laws or regulations, Canadian federal or provincial laws or regulations, Australian federal or provincial laws or regulations, or other foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, which includes any of the Lenders, under any United States federal or state, English, Canadian federal or provincial, Australian federal or provincial or other foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy, whether or not having the force of law, whether or not failure to comply therewith would be unlawful and whether or not published or proposed prior to the Closing Date. "Required Fronting Lenders" shall have the meaning therefor set forth in Section 11.07(a). "Required Lenders" means, as of any date, (i) at all times other than following the occurrence and during the continuation of an Event of Default, (A) with respect to the Total Facilities, Lenders on such date, without distinction or preference as between any of the Facilities, having Aggregate Commitments under the Total Facilities aggregating more than 50% of the Total Commitment on such date, and (B) with respect to any specific Facility, Lenders on such date having an Applicable Facility Commitment aggregating more than 50% of the Applicable Total Facility Commitment on such date and (ii) at all times following the occurrence and during the continuation of an Event of Default, (A) with respect to the Total Facilities, Lenders on such date, without distinction or preference as between any of the Facilities, having Credit Exposures aggregating more than 50% of the Aggregate Credit Exposure on such date, and (B) with respect to any specific Facility, Lenders on such date having Facility Credit Exposures aggregating more than 50% of the Aggregate Facility Credit Exposure on such date. For purposes of determining the vote of the Required Lenders above, (i) Bank of America shall be deemed to have the Aggregate Commitment, Applicable Facility Commitments, Credit Exposure and Facility Credit Exposure of BACAN, BA Australia Limited and of each branch of Bank of America designated as a Lender hereunder, (ii) Mellon 32 39 Bank, N.A. shall be deemed to have the Aggregate Commitment, Applicable Facility Commitments, Credit Exposure and Facility Credit Exposure of Mellon Bank Canada and each branch of Mellon Bank, N.A. designated as a Lender hereunder, and (iii) NBD Bank shall be deemed to have the Aggregate Commitment, Applicable Facility Commitments, Credit Exposure and Facility Credit Exposure of First Chicago NBD Bank, Canada, The First National Bank of Chicago and each branch of NBD Bank designated as a Lender hereunder. "Restricted Lender" shall have the meaning therefor set forth in Section 6.07. "Same Day Funds" means (i) with respect to disbursements and payments in US Dollars, immediately available funds, and (ii) with respect to disbursements and payments in an Offshore Currency, same day or other funds as may be determined by the Applicable Facility Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in such Offshore Currency. "S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill Companies, Inc. "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including, without limitation, Contingent Obligations; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Spot Rate of Exchange" means (i) in determining the Sterling Equivalent Amount of a specified amount of French Francs as of any date under the UK Facility, the spot exchange rate determined by the UK Facility Agent in accordance with its usual procedures for the purchase by the UK Facility Agent of British Pounds Sterling with French Francs at approximately 11:00 A.M. (London, England time) on the Business Day that is three (3) Business Days prior to such date; (ii) in determining the Australian Dollar Equivalent Amount of a specified amount of New Zealand Dollars as of any date under the Australian Facility, the rate quoted by the Australian Facility Agent in accordance with its customary procedures as the spot rate for the purchase by such Australian Facility Agent of Australian Dollars with New Zealand Dollars at approximately 11:00 A.M. (Sydney, Australia time), on such date as of which the foreign computation is made, for delivery two (2) Business Days later; (iii) in determining the French Franc Equivalent Amount of a specified amount of British Pounds Sterling as of any date under the UK Facility, the spot exchange rate determined by the UK Facility 33 40 Agent in accordance with its usual procedures for the purchase by the UK Facility Agent of French Francs with British Pounds Sterling at approximately 11:00 A.M. (London, England time) on the Business Day that is three (3) Business Days prior to such date; (iv) in determining the New Zealand Dollar Equivalent Amount of a specified amount of Australian Dollars as of any date under the Australian Facility, the rate quoted by the Australian Facility Agent in accordance with its customary procedures as the spot rate for the purchase by such Australian Facility Agent of New Zealand Dollars with Australian Dollars at approximately 11:00 A.M. (Sydney, Australia time), on such date as of which the foreign computation is made, for delivery two (2) Business Days later; and (v) in determining the US Dollar Equivalent Amount of a specified amount of any Applicable Currency as of any date, the spot rate of exchange determined by the Global Agent in accordance with its usual procedures for the purchase by the Global Agent of US Dollars with such Applicable Currency at approximately 11:00 A.M. (Charlotte, North Carolina time) on the Business Day that is two (2) Business Days prior to such date. "Sterling Equivalent Amount" means, with respect to a specified amount of French Francs, the amount of British Pounds Sterling into which such amount of French Francs would be converted, based on the applicable Spot Rate of Exchange. "Subsidiary" means any Person in which more than 50% of its outstanding voting stock or rights or more than 50% of all equity interest is owned directly or indirectly by the Company. "Substitute Base Rate Loans" shall have the meaning therefor set forth in Section 6.04. "Swap Agreement" means one or more agreements with respect to Indebtedness evidenced by the Notes or Obligations under any Facility between one or more Borrowers and one or more Lenders, on terms mutually acceptable to such Borrower or Borrowers and such Lender or Lenders, which agreements create Hedging Obligations. "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Lender and each Agent, respectively, taxes imposed on or measured by its net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or such Agent, as the case may be, is organized or maintains a lending office. "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Company 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 was deemed such under Section 4062(e) of ERISA; or (iii) 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 (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any 34 41 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 (vi) the partial or complete withdrawal of the Company or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any event or condition with respect to any Employee Benefit Plan which is regulated by any Foreign Benefit Law that results in such Employee Benefit Plan's termination or the revocation of the Employee Benefit Plan's authority to operate under the applicable Foreign Benefit Law. "Total Australian Dollar Commitment" means, as of any date of determination thereof, an amount equal to the Total Australian Facility Commitment (as the same may be reduced from time to time pursuant to this Agreement) less the New Zealand Dollar Outstandings as of such date. "Total Australian Facility Commitment" means an amount equal to AUS $125,000,000 inclusive of the Total New Zealand Dollar Commitment, each as reduced from time to time in accordance with Section 5.07. "Total British Pounds Sterling Commitment" means, as of any date of determination thereof, an amount equal to the Total UK Facility Commitment (as the same may be reduced from time to time pursuant to this Agreement) less the French Franc Outstandings as of such date. "Total Canadian Facility Commitment" means an amount equal to CAN $150,000,000, as reduced from time to time in accordance with Section 4.07, Section 4.12 or Section 4.13. "Total Commitment" means, at any time of determination, the Total US Facility Commitment, plus the aggregate US Dollar Equivalent Amount of each of the Total UK Facility Commitment, the Total Canadian Facility Commitment and the Total Australian Facility Commitment. "Total Facilities" means, in the aggregate, all of the US Facility, the UK Facility, the Canadian Facility and the Australian Facility. "Total Facility Termination Date" means the earliest to occur of (i) August 7, 2003, or (ii) the date of termination of the Lenders' obligations pursuant to Section 11.01 upon the occurrence of an Event of Default, or (iii) such date as the Borrowers may voluntarily permanently terminate all the Total Facilities by payment in full of all Obligations. 35 42 "Total French Franc Commitment" means, at any date of determination, an amount equal to the French Franc Equivalent Amount of pound 22,000,000 (as reduced from time to time in accordance with Section 3.07) as at such date. "Total New Zealand Dollar Commitment" means, at any date of determination, an amount equal to the New Zealand Dollar Equivalent Amount of AUS $12,500,000 (as reduced from time to time in accordance with Section 5.07) as at such date. "Total UK Facility Commitment" means an amount equal to pound 55,000,000 inclusive of the Total French Franc Commitment, each as reduced from time to time in accordance with Section 3.07. "Total US Facility Commitment" means an amount equal to US $450,000,000, as reduced from time to time in accordance with Section 2.07, Section 2.12 or Section 2.13. "Total US Facility Revolving Credit Commitment" means, as of any date of determination thereof, an amount equal to the Total US Facility Commitment (as the same may be reduced from time to time pursuant to this Agreement) less the amount of US Facility Term Loan Outstandings as of such date. "Type" means any type of Loan (i.e., an Applicable Base Rate Loan, Eurodollar Rate Loan, Offshore Rate Loan, Canadian Facility BA Rate Loan or, for purposes of Article VI only, a UK Facility Alternative Rate Loan)). "UK Facility" means the facility described in Article III hereof providing for Loans to the UK Facility Borrowers by the UK Facility Lenders in the aggregate principal amount of the Total UK Facility Commitment. "UK Facility Advance" means a borrowing under the UK Facility consisting of the aggregate principal amount of an Offshore Rate Loan. "UK Facility Agent" shall have the meaning therefor set forth in the introduction hereto. "UK Facility Alternative Rate" means such rate of interest per annum determined by the UK Facility Agent and the UK Facility Borrowers as an alternative basis (i) for determining the rates of interest from time to time applicable to Loans under the UK Facility and/or (ii) upon which Loans may be maintained under the UK Facility, in each case pursuant to Section 6.02 or Section 6.04, which rate of interest shall be determined within thirty (30) days of notification to the UK Facility Borrowers in accordance with the provisions of Section 6.02 or Section 6.04, as applicable. If no such alternative basis is agreed upon by the UK Facility Agent and the UK Facility Borrowers, each UK Facility Lender shall certify a reasonable alternative basis for maintaining Loans under the UK Facility that reflects such UK Facility Lender's cost of funds (a "substitute basis"), which substitute basis may (without limitation) include alternative Interest Periods, alternative currencies or alternative rates of 36 43 interest but shall include a margin above the cost of funds including the UK Facility Mandatory Cost, if any, to such UK Facility Lender and the Applicable Margin. "UK Facility Alternative Rate Loan" means a Loan for which the rate of interest is determined by reference to the UK Facility Alternative Rate, solely for purposes of Article VI. "UK Facility Borrowers" shall have the meaning therefor set forth in the introduction hereto. "UK Facility Commitment" means, with respect to any Lender, such Lender's Applicable Facility Commitment for the UK Facility. "UK Facility French Franc Tranche" means the facility described in Article III hereof providing for Loans funded in French Francs to the UK Facility Borrowers by the UK Facility Lenders in an aggregate principal amount not to exceed the Total French Franc Commitment. "UK Facility Fronting Commitment" means, with respect to each UK Facility Lender, the obligation of such Lender to make Loans to the UK Facility Borrowers on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the UK Facility times the Total UK Facility Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement, and shall consist of such Lender's British Pounds Sterling Fronting Commitment plus its French Franc Fronting Commitment. "UK Facility Lenders" means those Lenders identified in the introduction hereto with respect to their making UK Facility Loans on behalf of all the Lenders. "UK Facility Loans" means Offshore Rate Loans made by the UK Facility Lenders pursuant to Section 3.01 hereof. "UK Facility Mandatory Cost" means a rate per annum determined by the UK Reference Bank and notified thereby to the UK Facility Agent calculated in accordance with the following formula: BY + S(Y-Z) + (F x 0.01) UK Facility Mandatory Cost per annum = ------------------------ 100 - (B+S) where on the day of application of the formula: B = The percentage of the UK Reference Bank's Eligible Liabilities (in excess of any stated minimum) by reference to which the Bank of England and/or the Financial Services Authority requires the UK Reference Bank to hold on a non-interest bearing deposit account in accordance with its cash ratio requirements; 37 44 Y = The percentage rate per annum at which sterling deposits are offered by the UK Reference Bank to leading banks in the London interbank market at or about 11:00 A.M. (London, England time) on that day for the relevant period; F = The rate of charge payable by the UK Reference Bank to the Financial Services Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations (but where for this purpose the figure at paragraph 2.02b or 2.03b shall be deemed to be zero) and expressed in British Pounds Sterling per pound 1,000,000 of the Fee Base of the UK Reference Bank; S = The percentage of the UK Reference Bank's Eligible Liabilities which the Bank of England (or other relevant United Kingdom governmental authority or agency) requires the UK Reference Bank to place as a Special Deposit; and Z = The interest rate per annum payable by the Bank of England to the UK Reference Bank on Special Deposits. (a) For the purposes of this definition: (i) "Eligible Liabilities" and "Special Deposits" shall have the meanings given to them at the time of application of the above formula under or pursuant to the Bank of England Act 1998 or by the Bank of England (as appropriate); (ii) "Fee Base" has the meaning given to it in the Fees Regulations; (iii) "Fees Regulations" means: (A) prior to March 31, 1999 the Banking Supervision (Fees) Regulations 1998; and (B) on or after March 31, 1999, any regulations governing the payment of fees for banking supervision; (b) In the application of the above formula, B, Y, S, and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5 x 15 and not as 0.5% x 15%. A negative result obtained from subtracting Z from Y is to be treated as zero. (c) (i) The above formula is applied on the first day of each relevant period comprised in the relevant Interest Period. (ii) Each rate calculated in accordance with the above formula is, if necessary, rounded upward to four decimal places. 38 45 (d) The UK Facility Agent may, from time to time, after consultation with the Company and the Lenders, determine and notify to the Company and the Lenders any amendments or variations which are required to be made to the formula set out above in order to comply with any requirements from time to time imposed by any applicable regulatory authority in relation to UK Facility Advances denominated in British Pounds Sterling (including, without limitation, any requirements relating to British Pounds Sterling primary liquidity) and any such determination shall, in the absence of manifest error, be conclusive and binding on all the Borrowers, the Lenders, the Agents and the Company. "UK Facility Maximum Amount" means, with respect to each UK Facility Borrower, 95% of the amount by which the fair value of its assets (determined at the lesser of fair valuation and present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including without limitation Contingent Obligations, as of the Closing Date; provided, however, that if the calculation of UK Facility Maximum Amount in the manner provided above as of the date payment is required of such UK Facility Borrower pursuant to Article III would result in a greater positive number, then the UK Facility Maximum Amount shall be such greater positive number. "UK Facility Outstandings" means, at any date of determination, the British Pounds Sterling Outstandings plus the French Franc Outstandings. "UK Overnight Rate" means, for any day, the rate of interest per annum at which overnight deposits in the Applicable Currency, in an amount approximately equal to the amount with respect to which such date is being determined, would be offered for such day by the UK Facility Agents to major banks in the London or other applicable offshore interbank market. The UK Overnight Rate for any day which is not a Business Day shall be the UK Overnight Rate for the preceding Business Day. "UK Qualifying Lender" shall have the meaning therefor set forth in Section 6.06(g). "UK Reference Bank" means the UK Facility Lender that from time to time is the UK Facility Agent hereunder. "Unutilized Canadian Facility Renewable Tranche Commitment" means, at any date of determination, the difference of the Canadian Facility Renewable Tranche Commitment at such date less the Canadian Facility Renewable Tranche Outstandings at such date. "Unutilized Total US Facility Commitment" means, at any date of determination, the difference of the Total US Facility Commitment at such date less the US Facility Outstandings at such date. "US Dollar Equivalent Amount" means, with respect to a specified amount of any Applicable Currency, the amount of US Dollars into which such amount of such Applicable Currency would be converted, based on the applicable Spot Rate of Exchange. 39 46 "US Dollars" or "US $" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "US Facility" means the facility described in Article II hereof providing for Loans to the US Facility Borrower by the US Facility Lenders in the aggregate principal amount of the Total US Facility Commitment. "US Facility Advance" means a borrowing under the US Facility Revolving Credit Facility consisting of the aggregate principal amount of a US Facility Base Rate Loan or Eurodollar Rate Loan, as the case may be. "US Facility Agent" shall have the meaning therefor set forth in the introduction hereto. "US Facility Base Rate" means, for any day, the rate per annum equal to the higher of (i) the Federal Funds Effective Rate for such day plus one-half of one percent (.5%) and (ii) the US Prime Rate for such day. Any change in the US Facility Base Rate resulting from a change in the US Prime Rate or the Federal Funds Effective Rate shall become effective on the effective date of such change in the US Prime Rate or the Federal Funds Effective Rate. "US Facility Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the US Facility Base Rate. "US Facility Borrower" shall have the meaning therefor set forth in the introduction hereto. "US Facility Commitment" means, with respect to any Lender, such Lender's Applicable Facility Commitment for the US Facility. "US Facility Fronting Commitment" means, with respect to each US Facility Lender, the obligation of such Lender to make or continue Loans to the US Facility Borrower on behalf of all the Lenders up to an aggregate principal amount at any one time outstanding equal to the product of such Lender's Applicable Fronting Percentage for the US Facility times the Total US Facility Commitment, as such fronting commitment may be increased or decreased from time to time pursuant to this Agreement. "US Facility Lenders" means those Lenders identified in the introduction hereto with respect to their making US Facility Loans on behalf of all the Lenders. "US Facility Loans" means Loans, both US Facility Base Rate Loans and Eurodollar Rate Loans, made by the US Facility Lenders pursuant to Article II hereof. "US Facility Notes" means the promissory notes of the US Facility Borrower executed and delivered to the US Facility Lenders as provided in Section 2.04 hereof in substantially the form attached as Exhibit E, with appropriate insertions as to amounts, dates and names 40 47 of US Facility Lenders, which US Facility Notes shall be delivered to evidence the US Facility Loans provided for herein. "US Facility Outstandings" means, at any date of determination, the aggregate principal amount of all US Facility Loans then outstanding. "US Facility Revolving Credit Extension Date" means August 5, 1999 and each date thereafter, if any, to which the US Facility Revolving Credit Termination Date has been extended pursuant to Section 2.12 hereof, but in no event later than August 7, 2002. "US Facility Revolving Credit Facility" means that portion of the US Facility described in Section 2.01 hereof providing for US Facility Loans to the US Facility Borrower by the US Facility Lenders in the aggregate principal amount of the Total US Facility Revolving Credit Commitment. "US Facility Revolving Credit Outstandings" means, at any date of determination, that portion of the US Facility Outstandings representing the aggregate principal amount of all US Facility Loans outstanding under the US Facility Revolving Credit Facility. "US Facility Revolving Credit Termination Date" means the earlier of (i) August 5, 1999, or such later date with respect to the Unutilized Total US Facility Commitment as the US Facility Borrower and the Lenders shall agree in writing pursuant to Section 2.12 hereof, or (ii) the Total Facility Termination Date. "US Facility Term Loan" shall have the meaning therefor set forth in Section 2.13. "US Facility Term Loan Facility" means the facility described in Section 2.13 hereof providing for the conversion of US Facility Revolving Credit Outstandings on each US Facility Extension Date to US Facility Term Loans. "US Facility Term Loan Outstandings" means, at any date of determination, that portion of the US Facility Outstandings representing the aggregate principal amount of all US Facility Loans outstanding under the US Term Loan Facility. "US Prime Rate" means the per annum rate of interest established from time to time by the US Facility Agent as its prime rate, which rate may not be lowest rate charged by the US Facility Agent to its customers. "Voting Stock" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "Year 2000 Compliant" shall have the meaning therefor set forth in Section 8.02(n). 41 48 "Year 2000 Problem" shall have the meaning therefor set forth in Section 8.02(n). 1.02 Rules of Interpretation. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. (b) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (c) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (d) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require. (e) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (f) References to "including" means including without limiting the generality of any description preceding such term. (g) Any reference to an officer of any Borrower or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (h) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. (i) In the event that pursuant to Section 6.09 hereof any amount is borrowed and repaid in the Euro rather than any particular Applicable Currency, then references to such Applicable Currency and all definitions related to or derived from a reference to such Applicable Currency shall be deemed to be, or be related to or derived from, references to the Euro, in the sole discretion of the Applicable Facility Agent, shall be deemed modified to the extent necessary to effect the intent of this Agreement with respect to borrowings in such Applicable Currency. 42 49 ARTICLE II The US Facility 2.01 Advances (a) Commitment. Subject to the terms and conditions of this Agreement, each US Facility Lender severally agrees to make, on behalf of all the Lenders, US Facility Advances in US Dollars to the US Facility Borrower from time to time from the Closing Date until the US Facility Revolving Credit Termination Date, on a pro rata basis as to the total borrowing requested by the US Facility Borrower on any day determined by such US Facility Lender's Applicable Fronting Percentage for the US Facility, up to but not exceeding the US Facility Fronting Commitment of such US Facility Lender, and each Lender shall have a Participation in each such US Facility Advance pursuant to Section 2.14 equal in amount to its Applicable Commitment Percentage times such US Facility Advance; provided, however, that the US Facility Lenders will not be required and shall have no obligation to make any US Facility Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Lenders have accelerated the maturity of the Obligations as a result of an Event of Default; provided further, however, that immediately after giving effect to each such US Facility Advance, (x) the US Facility Outstandings shall not exceed the Total US Facility Commitment and (y) the US Facility Revolving Credit Outstandings shall not exceed the Total US Facility Revolving Credit Commitment. Within such limits, the US Facility Borrower may borrow, repay and reborrow US Facility Loans hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the US Facility Revolving Credit Termination Date; provided, however, that (A) no Eurodollar Rate Loan shall be made which has an Interest Period that extends beyond the US Facility Revolving Credit Termination Date and (B) each Eurodollar Rate Loan may be repaid only on the last day of the Interest Period with respect thereto, unless such prepayment is accompanied by the additional payment, if any, due under Section 6.05. The US Facility Borrower agrees that if at any time the US Facility Outstandings shall exceed the Total US Facility Commitment or the US Facility Revolving Credit Outstandings shall exceed the Total US Facility Revolving Credit Commitment, the US Facility Borrower shall immediately repay a principal amount of the outstanding US Facility Loans such that, as a result of such reduction, the Total US Facility Commitment shall equal or exceed the US Facility Outstandings and the Total US Facility Revolving Credit Commitment shall equal or exceed the US Facility Revolving Credit Outstandings. (b) Amounts, Advances and Rate Selection. (i) The principal amount outstanding on any US Facility Loan shall be recorded in the US Facility Agent's records in US Dollars, based on the amount of any US Facility Advance as reduced from time to time by the amount of any principal payments with respect to such US Facility Loan. In the event a US Facility Loan is Continued or Converted pursuant to Section 2.08, such election shall be treated as a US Facility Advance for purposes of this Section 2.01. There shall be no more than ten (10) Eurodollar Rate Loans outstanding at any one time under the US Facility. 43 50 (ii) Each US Facility Loan and each Continuation and Conversion under Section 2.08 shall be (A) in the case of Eurodollar Rate Loans, in an amount not less than US $10,000,000 and if greater in integral multiples of US $1,000,000, and (B) in the case of US Facility Base Rate Loans in an amount not less than US $5,000,000, and, if greater, an integral multiple of US $1,000,000. (iii) For each US Facility Advance an Authorized Representative shall give the US Facility Agent (A) at least three (3) Business Days' irrevocable telefacsimile notice prior to 10:00 A.M. (New York, New York time) of each Eurodollar Rate Loan representing a borrowing or Continuation or Conversion hereunder and (B) irrevocable telefacsimile notice of each US Facility Base Rate Loan representing a borrowing or Continuation or Conversion hereunder prior to 10:00 A.M. (New York, New York time) on the day of such proposed US Facility Base Rate Loan. Each such notice shall be in the form of a Borrowing Notice in the form attached hereto as Exhibit D-1, which shall be effective upon receipt by the US Facility Agent, and shall specify the Type of Loan, amount of the US Facility Advance to be made, the date of borrowing and the Interest Period (if a Eurodollar Rate Loan) to be used in the computation of interest. Neither the US Facility Agent nor any US Facility Lender shall incur any liability to the US Facility Borrower in acting upon any notice referred to above which the US Facility Agent believes in good faith to have been given by an Authorized Representative of the US Facility Borrower or for otherwise acting in good faith, and upon funding of US Facility Loans by any US Facility Lender in accordance with this Agreement pursuant to any such notice, the US Facility Borrower shall have effected US Facility Loans hereunder. A Borrowing Notice for a Eurodollar Rate Loan shall be irrevocable, and the US Facility Borrower shall be bound to make a borrowing in accordance therewith, unless such US Facility Borrower pays to the US Facility Lenders such amounts as may be due under Section 6.05 for failure of a borrowing of a Eurodollar Rate Loan to occur on the date specified therefor in the related Borrowing Notice. The duration of the initial Interest Period for each US Facility Loan shall be as specified in the initial Borrowing Notice. The US Facility Borrower shall have the option to elect the duration of any subsequent Interest Periods and to Continue or Convert the US Facility Loans in accordance with Section 2.08. If the US Facility Agent does not receive a notice of election of the duration of an Interest Period or of the Conversion of a Loan by the time prescribed hereby and by Section 2.08, the US Facility Borrower shall be deemed to have elected to Convert such Loan to or Continue such Loan as a US Facility Base Rate Loan until the US Facility Borrower notifies the US Facility Agent in accordance with Section 2.08. (iv) Notice of receipt of each Borrowing Notice in respect of US Facility Loans, together with the amount of each US Facility Lender's portion of an Advance requested thereunder and the applicable interest rate, shall be provided by the US Facility Agent to each US Facility Lender by telefacsimile with reasonable promptness, but (provided the US Facility Agent shall have received such notice by 10:00 A.M. (New York, New York time), not later than 12:00 noon (New York, New York time) on the same day as the US Facility Agent's receipt of such notice from the US Facility Borrower. 44 51 (v) Each US Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, not later than 12:00 noon (New York, New York time) on the date specified for such US Facility Advance, make the amount of the US Facility Advance or Advances to be made by it on such day available to the US Facility Borrower by depositing or transferring the proceeds thereof in US Dollars and in Same Day Funds to the US Facility Agent at its Principal Office. The amount so received by the US Facility Agent shall, subject to the terms of this Agreement, be made available to the US Facility Borrower by deposit of the proceeds to an account of such US Facility Borrower maintained at the Principal Office or otherwise as shall be directed in the applicable Borrowing Notice. 2.02 Payment of Interest. (a) The US Facility Borrower shall pay interest to the US Facility Agent for the account of each US Facility Lender on the outstanding and unpaid principal amount of each US Facility Loan made by such US Facility Lender for the period commencing on the date of such US Facility Loan until such Loan shall be paid, Continued or Converted, as the case may be, at the then applicable US Facility Base Rate for US Facility Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, such payments to be made in US Dollars; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each US Facility Loan shall be computed on the basis of a year of 360 days and calculated for the actual number of days elapsed. Interest on each US Facility Loan shall be paid (i) quarterly in arrears on the last Business Day of each fiscal quarter, commencing September 30, 1998, for each US Facility Base Rate Loan, (ii) on the last day of the applicable Interest Period for each Eurodollar Rate Loan and, if the Interest Period extends for more than three months, also at intervals of three months after the first day of the Interest Period and (iii) upon payment in full of the principal amount of each such Loan. Interest on amounts not paid when due shall be payable on demand. 2.03 Payment of Principal. Except as set forth in Section 2.13 with respect to US Facility Term Loans, the principal amount of each US Facility Loan shall be due and payable to the US Facility Agent for the benefit of each US Facility Lender in full on the US Facility Revolving Credit Termination Date. The principal amount of any US Facility Base Rate Loan may be prepaid in whole or in part at any time. The principal amount of any Eurodollar Rate Loan may be prepaid only at the end of the applicable Interest Period unless the US Facility Borrower shall pay to the US Facility Agent for the account of the US Facility Lenders the additional amount, if any, required under Section 6.05. All prepayments of US Facility Loans made by the US Facility Borrower shall be in the amount of (i) US $10,000,000, or (ii) such greater amount which is an integral multiple of US $1,000,000, or (iii) the amount equal to all US Facility Outstandings, or (iv) such other amount as necessary to comply with Section 2.01(a) or 2.07. 45 52 2.04 Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees in respect of US Facility Loans, and any other amount required to be paid to the US Facility Lenders with respect to the US Facility Loans, shall be made to the US Facility Agent at its Principal Office, for the account of each US Facility Lender's Applicable Lending Office. Each such payment shall be made in US Dollars and in Same Day Funds before 12:00 noon (New York, New York time) on the date such payment is due. The US Facility Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the US Facility Borrower with the US Facility Agent. The US Facility Borrower shall give the US Facility Agent prior telephonic notice of any payment of principal, such notice to be given by not later than 11:00 A.M. (New York, New York time), on the date of such payment. (b) The US Facility Agent shall deem any payment by or on behalf of the US Facility Borrower hereunder that is not made both (i) in US Dollars and in Same Day Funds and (ii) prior to 12:00 noon (New York, New York time) to be a non-conforming payment. Any such payment shall not be deemed to be received by the US Facility Agent until the later of (x) the time such funds become available funds and (y) the next Business Day. The US Facility Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the US Facility Lenders (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 11.01(a) and 11.01(b). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at Default Rate or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder or under the US Facility Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless otherwise provided under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension. 2.05 US Facility Notes. US Facility Loans made by each US Facility Lender shall be evidenced by the US Facility Note payable to the order of such Lender in the respective amount of its Applicable Fronting Percentage of the Total US Facility Commitment, which US Facility Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the US Facility Borrower. 2.06 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the US Facility Loans and the fees described in Section 2.09 hereof shall be made to the US Facility Agent for the account of the US Facility Lenders pro rata based on their Applicable Fronting Percentages for the US Facility, (b) all payments to be made by the US Facility Borrower for the account of each of the US Facility Lenders on account of principal, interest and fees shall be made without diminution, set-off, recoupment, counterclaim or, except as set forth in Section 6.06(a) hereof, deduction, and (c) the US Facility Agent will promptly distribute 46 53 payments received to the US Facility Lenders. Notwithstanding the foregoing, in the event any US Facility Lender shall not be able to make an Eurodollar Rate Loan under the circumstances provided in Section 6.01 or 6.03, interest shall be allocated to such US Facility Lender according to the interest rate payable to such US Facility Lender as set forth in Section 6.04. 2.07 Reductions. The US Facility Borrower shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days' written notice to the US Facility Agent, effective upon receipt, to reduce the Total US Facility Commitment. The US Facility Agent shall give each US Facility Lender, within one (1) Business Day, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of US $10,000,000 or such greater amount which is in an integral multiple of US $1,000,000, or the entire remaining Total US Facility Commitment, and shall permanently reduce the Total US Facility Commitment. No such reduction shall result in the payment of any Eurodollar Rate Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.05. Each such reduction of the Total US Facility Commitment shall be accompanied by payment of the principal amount of US Facility Loans to the extent that the US Facility Outstandings exceed the Total US Facility Commitment, or the US Facility Revolving Credit Outstandings exceed the Total US Facility Revolving Credit Commitment, after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. 2.08 Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article VI hereof, the US Facility Borrower may: (a) upon notice to the US Facility Agent on or before 10:00 A.M. (New York, New York time) on any Business Day, Convert all or a part of Eurodollar Rate Loans to US Facility Base Rate Loans under the US Facility on the last day of the Interest Period for such Eurodollar Rate Loans; and (b) provided that no Default or Event of Default shall have occurred and be continuing, upon three (3) Business Days' notice to the US Facility Agent on or before 10:00 A.M. (New York, New York time): (i) elect a subsequent Interest Period for all or a portion of Eurodollar Rate Loans under the US Facility to begin on the last day of the then current Interest Period for such Eurodollar Rate Loans; and (ii) Convert US Facility Base Rate Loans to Eurodollar Rate Loans under the US Facility on any Business Day. Notice of any such Continuations or Conversions shall be effected by receipt of an appropriate Borrowing Notice and shall specify the effective date of such Continuation or Conversion and the Interest Period to be applicable to the US Facility Loan as Continued or Converted. Each Continuation and Conversion pursuant to this Section 2.08 shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 2.01 and 47 54 2.03 and Article VI hereof. All such Continuations or Conversions of US Facility Loans shall be effected pro rata based on the Applicable Fronting Percentages of the US Facility Lenders for the US Facility. 2.09 Facility Fee. For the period beginning on the Closing Date and ending on the Total Facility Termination Date, the Company agrees to pay to each Lender at its office in the United States so designated thereby based on such Lender's Applicable Commitment Percentage, a Facility Fee equal to the Applicable Margin for Facility Fees times the Total US Facility Commitment. Such payments of Facility Fees provided for in this Section 2.09 shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December beginning September 30, 1998 to and on the Total Facility Termination Date. Notwithstanding the foregoing, so long as any US Facility Lender fails to make available any portion of its US Facility Fronting Commitment when properly requested by the US Facility Borrower, such Lender shall not be entitled to receive payment of its pro rata share of such Facility Fee until such Lender shall make available such portion. Such Facility Fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 2.10 Deficiency Advances. No US Facility Lender shall be responsible for any default of any other US Facility Lender in respect to such other US Facility Lender's obligation to make any US Facility Loan hereunder nor shall the US Facility Fronting Commitment of any US Facility Lender or the US Facility Commitment of any Lender be increased as a result of such default of any other US Facility Lender. Without limiting the generality of the foregoing, in the event any US Facility Lender shall fail to advance funds to the US Facility Borrower as herein provided, the US Facility Agent may in its discretion, but shall not be obligated to, make a US Facility Advance under the applicable US Facility Note in its favor as a US Facility Lender of all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other US Facility Lender would have been entitled had it made such advance under its US Facility Note; provided that, upon payment to the US Facility Agent from such other US Facility Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the US Facility Agent by the US Facility Borrower on each US Facility Loan comprising the deficiency advance, at the interest rate per annum for overnight borrowing by the US Facility Agent from the Federal Reserve Bank, then such payment shall be credited against the applicable US Facility Note of the US Facility Agent in full payment of such deficiency advance and the US Facility Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other US Facility Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by the US Facility Borrower thereon. 2.11 Use of Proceeds. The proceeds of the US Facility Loans made pursuant to the US Facility hereunder shall be used by the US Facility Borrower to repay and terminate the Prior US Facility, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of the Company and its Subsidiaries. 48 55 2.12 US Facility Extension. (a) With the unanimous consent of all Lenders under the Total Facilities, at each US Facility Revolving Credit Extension Date the US Facility Borrower can elect to extend the US Facility Revolving Credit Termination Date for an additional period of 364 days with respect to the Unutilized Total US Facility Commitment as at such US Facility Revolving Credit Extension Date; provided, however, that in no event shall the US Facility Revolving Credit Termination Date be extended beyond the Total Facility Termination Date. (b) The US Facility Borrower shall notify the Lenders of its request for such an extension by delivering to the US Facility Agent and the Global Agent notice of such request signed by an Authorized Representative not more than one hundred fifty (150) days nor less than ninety (90) days prior to the applicable US Facility Revolving Credit Extension Date. Notice of receipt of such request shall be provided by the US Facility Agent to the US Facility Lenders and to each other Facility Agent, who shall in turn provide notice of such request to the respective Lenders in each such Facility. The Global Agent shall notify the US Facility Borrower in writing within sixty (60) days of its receipt of such request for extension of the decision of the Lenders. Failure by any Lender to respond to a request for an extension shall constitute a refusal of such Lender to give its consent to such extension, and the US Facility Revolving Credit Termination Date shall not be extended. Failure by the Global Agent to give such notice to the US Facility Borrower as a result of not receiving the consent of all Lenders to such extension shall constitute refusal by the Lenders to extend the US Facility Revolving Credit Termination Date. (c) If on any US Facility Revolving Credit Extension Date the US Facility Borrower does not so elect to extend the US Facility Revolving Credit Termination Date then in effect, or if all Lenders under the Total Facilities do not unanimously consent to such extension, then as of such US Facility Revolving Credit Termination Date, (i) in addition to any reduction required under Section 2.13 hereof, the Total US Facility Commitment as at such date shall be permanently reduced by an amount equal to the Unutilized Total US Facility Commitment as at such date, (ii) the Total US Facility Revolving Credit Commitment shall be reduced to zero, and (iii) subject to the provisions of Section 2.13 hereof, all US Facility Outstandings shall be due and payable in full. 2.13 US Term Loan Option. (a) At each US Facility Revolving Credit Extension Date, the US Facility Borrower can elect to convert any or all US Facility Revolving Credit Outstandings as of such US Facility Revolving Credit Extension Date into a term loan on such date in the original principal amount equal to such US Facility Revolving Credit Outstandings. US Facility Loans so converted by the US Facility Borrower in accordance with this Section 2.13 shall be referred to as the "US Facility Term Loans." The US Facility Term Loans shall be repaid in equal quarterly installments on the last Business Day of each March, June, September and December commencing with the first such date after the most recent US Facility Revolving Credit Extension Date and continuing until and including a final payment on the Total Facility Termination Date. The US Facility Term Loans may be comprised of US Facility Base Rate Loans and Eurodollar Rate Loans as the US Facility Borrower may elect in accordance with the provisions of this Article II. The US Facility Term Loans shall bear 49 56 interest on the same terms as the US Facility Loans prior to the conversion to US Facility Term Loans until the Continuation or Conversion thereof pursuant to Section 2.08 hereof. Amounts repaid or prepaid on the US Facility Term Loans may not be reborrowed, and the Total US Facility Commitment shall be permanently reduced by any such amounts. (b) If on any US Facility Revolving Credit Extension Date the US Facility Borrower does not so elect to convert all or a portion of US Facility Revolving Credit Outstandings as of such date to US Facility Term Loans as described in (a) above, then on the US Facility Revolving Credit Termination Date then in effect, (i) all US Facility Revolving Credit Outstandings as of such date which are not so converted shall be due and payable in full on the US Facility Revolving Credit Termination Date then in effect, and (ii) in addition to any reduction required under Section 2.12 hereof, the Total US Facility Commitment as at such US Facility Revolving Credit Extension Date shall be permanently reduced by an amount equal to the US Facility Revolving Credit Outstandings as at such date which are not so converted. 2.14 Participations. On the Closing Date and each day thereafter until the Total Facility Termination Date, each Lender (including a US Facility Lender if necessary) will be deemed to have absolutely, irrevocably and unconditionally purchased from each US Facility Lender a Participation in US Facility Outstandings owing to such US Facility Lender in an amount such that, after such purchase, each Lender will have a Facility Credit Exposure under the US Facility equal in amount to its Applicable Commitment Percentage times the US Facility Outstandings (referred to as the "Facility Participation Amount" for such Lender in the US Facility). Each such Participation of each Lender in the US Facility shall be funded in accordance with Section 11.07. 50 57 ARTICLE III The UK Facility 3.01 Advances (a) Commitment. Subject to the terms and conditions of this Agreement, each UK Facility Lender severally agrees to make, on behalf of all the Lenders, UK Facility Advances in British Pounds Sterling or French Francs (as specified in a Borrowing Notice) to the UK Facility Borrower requesting such UK Facility Advance, as the case may be, as specified in such Borrowing Notice, from time to time from the Closing Date until the Total Facility Termination Date, on a pro rata basis as to the total borrowing requested by such UK Facility Borrower on any day determined by such UK Facility Lender's Applicable Fronting Percentage for UK Facility, up to but not exceeding (i) in the case of Advances in British Pounds Sterling, the British Pounds Sterling Fronting Commitment of such UK Facility Lender, and (ii) in the case of Advances in French Francs, the French Franc Fronting Commitment of such UK Facility Lender, and each Lender, shall have a Participation in each such UK Facility Advance pursuant to Section 3.13 equal in amount to its Applicable Commitment Percentage times such UK Facility Advance; provided, however, that the UK Facility Lenders will not be required and shall have no obligation to make any UK Facility Advance (A) so long as a Default or an Event of Default has occurred and is continuing or (B) if the Lenders have accelerated the maturity of the Obligations as a result of an Event of Default; provided further, however, that immediately after giving effect to each such UK Facility Advance, (x) the UK Facility Outstandings shall not exceed the Total UK Facility Commitment and (y) the French Franc Outstandings shall not exceed the Total French Franc Commitment. Within such limits, the UK Facility Borrowers may borrow, repay and reborrow UK Facility Loans hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the Total Facility Termination Date; provided, however, that the aggregate principal amount outstanding to any UK Facility Borrower shall not at any time exceed its UK Facility Maximum Amount; and provided further, however, that (i) no Offshore Rate Loan shall be made which has an Interest Period that extends beyond the Total Facility Termination Date and (ii) each Offshore Rate Loan may be repaid only on the last day of the Interest Period with respect thereto, unless such payment is accompanied by the additional payment, if any, due under Section 6.05. The UK Facility Borrowers agree that if at any time the UK Facility Outstandings shall exceed the Total UK Facility Commitment or the French Franc Outstandings shall exceed the Total French Franc Commitment, the UK Facility Borrowers shall immediately repay a principal amount of the outstanding UK Facility Loans such that, as a result of such reduction, the Total UK Facility Commitment shall equal or exceed the UK Facility Outstandings and the Total French Franc Commitment shall equal or exceed the French Franc Outstandings. (b) Amounts, Advances and Rate Selection. (i) The principal amount outstanding on any UK Facility Loan shall be recorded in the UK Facility Agent's records in British Pounds Sterling in the case of a UK Facility Advance of British Pounds Sterling and in French Francs in the case of a UK Facility Advance of French Francs, in each case based on the amount of any UK Facility Advance as reduced from time to time by the amount of any principal payments with respect to such UK Facility 51 58 Advance. In the case of a UK Facility Advance of French Francs, the UK Facility Agent shall also record the principal amount outstanding on any such UK Facility Loan in British Pounds Sterling, based on the Sterling Equivalent Amount of such UK Facility Advance determined based on the Spot Rate of Exchange as of the date of such Advance, as reduced from time to time by any principal payments with respect thereto. In the event a UK Facility Loan is Continued pursuant to Section 3.08, such election shall be treated as a UK Facility Advance in the Applicable Currency of the existing Loan for purposes of this Section 3.01, with the Sterling Equivalent Amount of the principal amount of any such Loan in French Francs determined based on the Spot Rate of Exchange as of the date of such Continuation. The UK Facility Agent shall adjust its books to reflect the new Sterling Equivalent Amount of such UK Facility Loan, and in the event that such adjustment would cause the UK Facility Outstandings to exceed the Total UK Facility Commitment, or the French Franc Outstandings to exceed the Total French Franc Commitment, the UK Facility Borrowers shall, immediately on the effective date of such Continuation, repay the portion of such Continued Loan (applying the new Spot Rate of Exchange) necessary to ensure that thereafter the Total UK Facility Commitment shall equal or exceed the UK Facility Outstandings and the Total French Franc Commitment shall equal or exceed the French Franc Outstandings. There shall be no more than ten (10) Offshore Loans outstanding at any one time under the UK Facility. (ii) Each UK Facility Loan and each Continuation and Conversion under Section 3.08 in British Pounds Sterling shall be in an amount not less than pound 3,000,000 and if greater in integral multiples of pound 1,000,000; each UK Facility Loan and each Continuation and Conversion under Section 3.08 in French Francs shall be in an amount not less than the French Franc Equivalent Amount of pound 1,000,000 and if greater in integral multiples of the French Franc Equivalent Amount of pound 500,000. (iii) For each UK Facility Advance an Authorized Representative shall give the UK Facility Agent at least (A) three (3) Business Days' irrevocable telefacsimile notice prior to 11:00 A.M. (London, England time) of each Offshore Rate Loan in French Francs representing a borrowing or Continuation or Conversion hereunder, and (B) two (2) Business Days' irrevocable telefacsimile notice prior to 11:00 A.M. (London, England time) of each Offshore Rate Loan in British Pounds Sterling representing a borrowing or Continuation or Conversion hereunder. Each such notice shall be in the form of a Borrowing Notice in the form attached hereto as Exhibit D-2, which shall be effective upon receipt by the UK Facility Agent, and shall specify the Type of Loan, whether the Loan is to be made in British Pounds Sterling or French Francs, the amount of the UK Facility Advance to be made, the date of borrowing and the Interest Period to be used in the computation of interest. Neither the UK Facility Agent nor any UK Facility Lender shall incur any liability to any UK Facility Borrower in acting upon any notice referred to above which the UK Facility Agent believes in good faith to have been given by an Authorized Representative of such UK Facility Borrower or for otherwise acting in good faith, and upon funding of UK Facility Loans by any UK Facility Lender in accordance with this Agreement pursuant to any such notice, such UK Facility Borrower shall have effected UK Facility Loans hereunder. A Borrowing Notice for an Offshore Rate Loan shall be irrevocable, and UK Facility Borrower giving such notice shall be bound to make a borrowing in accordance therewith, unless such UK Facility 52 59 Borrower pays to the UK Facility Lenders such amounts as may be due under Section 6.05 for failure of a borrowing of an Offshore Rate Loan to occur on the date specified therefor in a Borrowing Notice. The duration of the initial Interest Period for each UK Facility Loan shall be as specified in the initial Borrowing Notice. The UK Facility Borrowers shall have the option to elect the duration of subsequent Interest Periods and to Continue the UK Facility Loans in accordance with Section 3.08. If the UK Facility Agent does not receive a notice of election of duration of an Interest Period by the time prescribed hereby and by Section 3.08, the applicable UK Facility Borrower shall be deemed to have elected to Continue such Loan as an Offshore Rate Loan with a subsequent Interest Period of one month. (iv) Notice of receipt of each Borrowing Notice in respect of UK Facility Loans, together with the amount of each UK Facility Lender's portion of an Advance requested thereunder, shall be provided by the UK Facility Agent to each UK Facility Lender by telefacsimile with reasonable promptness, but not later than (A) with respect to UK Facility Advances in British Pounds Sterling, 4:00 P.M. (London, England time) on the day two (2) Business Days prior to the date of such UK Facility Advance as set forth in such Borrowing Notice and (B) with respect to UK Facility Advances in French Francs, 4:00 P.M. (London, England time) on the day three (3) Business Days prior to the date of such UK Facility Advance as set forth in such Borrowing Notice. Notice of the applicable interest rate for the requested UK Facility Advance shall be provided by the UK Facility Agent to each UK Facility Lender by telefacsimile with reasonable promptness, but not later than (C) with respect to UK Facility Advances in British Pounds Sterling, 2:00 P.M. (London, England time) on the date of the UK Facility Advance as set forth in such Borrowing Notice and (D) with respect to UK Facility Advances in French Francs, 2:00 P.M. (London, England time) on the day two (2) Business Days prior to the date of such UK Facility Advance as set forth in such Borrowing Notice. (v) In the case of UK Facility Advances in British Pounds Sterling, each UK Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, not later than 12:00 noon (London, England time) on the date specified for such UK Facility Advance, make the amount of the UK Facility Advance to be made by it on such day available to the applicable UK Facility Borrower by depositing or transferring the proceeds thereof in British Pounds Sterling and in Same Day Funds to the UK Facility Agent at its Principal Office. The amount so received by the UK Facility Agent shall, subject to the terms of this Agreement, be made available to the applicable UK Facility Borrower by deposit of the proceeds to an account of such UK Facility Borrower maintained at the Principal Office or otherwise as shall be directed in the applicable Borrowing Notice. (vi) In the case of UK Facility Advances in French Francs, each UK Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, not later than 9:00 A.M. (London, England time) on the date specified for such UK Facility Advance, make the amount of the UK Facility Advance to be made by it on such day available to the applicable UK Facility Borrower by depositing or transferring the proceeds thereof in French Francs and in Same Day Funds to the account of the UK Facility Agent at the Funding Bank. 53 60 The amount so received by the Funding Bank shall, subject to the terms of this Agreement and upon instruction from the UK Facility Agent to the Funding Bank on the same day but no later than 9:00 A.M. (London, England time), be made available to the applicable UK Facility Borrower by deposit of the amount of French Francs specified in the related Borrowing Notice to an account of such UK Facility Borrower maintained at the Funding Bank. 3.02 Payment of Interest. (a) The UK Facility Borrowers shall pay interest to the UK Facility Agent for the account of each UK Facility Lender on the outstanding and unpaid principal amount of each UK Facility Loan made by such UK Facility Lender for the period commencing on the date of such UK Facility Loan until such Loan shall be paid or Continued, as the case may be, at the then applicable Offshore Rate, such payments to be made (i) in British Pounds Sterling with respect to UK Facility Loans made in British Pounds Sterling, and (ii) in French Francs with respect to UK Facility Loans made in French Francs; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each UK Facility Loan shall be computed on the basis of a year of 365 days for Advances in British Pounds Sterling and 360 days for Advances in French Francs and calculated for the actual number of days elapsed. Interest on each UK Facility Loan shall be paid (i) on the last day of the applicable Interest Period for each such Offshore Rate Loan and, if the Interest Period extends for more than three months, also at intervals of three months after the first day of the Interest Period and (ii) upon payment in full of the principal of each such Loan. Interest on amounts not paid when due shall be payable on demand. 3.03 Payment of Principal. The principal amount of each UK Facility Loan shall be due and payable to the UK Facility Agent for the benefit of each UK Facility Lender in full on the Total Facility Termination Date. The principal amount of any Offshore Rate Loan may be prepaid only at the end of the applicable Interest Period unless the UK Facility Borrowers shall pay to the UK Facility Agent for the account of the UK Facility Lenders the additional amount, if any, required under Section 6.05 and, in the case of a prepayment of any Offshore Rate Loan in French Francs, the applicable UK Facility Borrower notifies the UK Facility Agent at least three (3) Business Days prior to such prepayment. All prepayments of UK Facility Loans made by the UK Facility Borrowers shall be in the Applicable Currency of the respective UK Facility Loan in the amount of (i) pound 1,000,000 (or the French Franc Equivalent Amount thereof if in French Francs) or (ii) such greater amount which is an integral multiple of pound 500,000 (or the French Franc Equivalent Amount thereof if in French Francs), or (iii) the amount equal to all UK Facility Outstandings, or (iv) such other amount as necessary to comply with Section 3.01(a) or 3.07. 3.04 Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees in respect of UK Facility Loans, and any other amount required to be paid to the UK Facility Lenders with respect to the UK Facility Loans, shall be made to the UK Facility Agent at its Principal Office, 54 61 for the account of each UK Facility Lender's Applicable Lending Office, to be recorded in British Pounds Sterling and, if applicable, French Francs, as set forth in Section 3.01(b). Each such payment shall be made in the Applicable Currency of the UK Facility Loan in Same Day Funds before 1:00 P.M. (London, England time) on the date such payment is due. The UK Facility Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the applicable UK Facility Borrower with the UK Facility Agent. The UK Facility Borrowers shall give the UK Facility Agent prior telephonic notice of any payment of principal, such notice to be given by (i) not later than 11:00 A.M. (London, England time) at least two (2) Business Days prior to the date of such payment in the case of payment of a UK Facility Loan in British Pounds Sterling and (ii) not later than 11:00 A.M. (London, England time) at least three (3) Business Days prior to the date of such payment in the case of payment of a UK Facility Loan in French Francs. (b) The UK Facility Agent shall deem any payment by or on behalf of the UK Facility Borrowers hereunder that is not made both (i) in British Pounds Sterling in the case of UK Facility Loans made in British Pounds Sterling or in French Francs in the case of UK Facility Loans made in French Francs and, in either case, in Same Day Funds and (ii) prior to 1:00 P.M. (London, England time) to be a non-conforming payment. Any such payment shall not be deemed to be received by the UK Facility Agent until the later of (x) the time such funds become available funds in the required Applicable Currency and (y) the next Business Day. The UK Facility Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the UK Facility Lenders (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 11.01(a) and 11.01(b). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at the Default Rate or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless otherwise provided under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension. 3.05 Evidence of Indebtedness. Each UK Facility Borrower hereby authorizes each UK Facility Lender and the UK Facility Agent to record, from time to time, in its records, the date and amount of each UK Facility Loan; the interest rates payable by the applicable UK Facility Borrower in respect of each UK Facility Loan and any Interest Period applicable thereto; the dates and amounts of all payments received by such UK Facility Lender on account of principal, interest and fees; and the amount of all the UK Facility Loans which remain payable by the UK Facility Borrowers to such UK Facility Lender. All amounts and other information so recorded shall be prima facie evidence thereof. The failure to record, or any error in recording, any such amount or other information shall not limit or impair the obligations of the UK Facility Borrowers hereunder or under any Loan Document. 55 62 3.06 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the UK Facility Loans and the fees described in Section 3.09 hereof shall be made to the UK Facility Agent for the account of the UK Facility Lenders pro rata based on their Applicable Fronting Percentages for the UK Facility, (b) all payments to be made by the UK Facility Borrowers for the account of each of the UK Facility Lenders on account of principal, interest and fees shall be made without diminution, set-off, recoupment, counterclaim or, except as set forth in Section 6.06(a), deduction, and (c) the UK Facility Agent will promptly distribute payments received to the UK Facility Lenders. Notwithstanding the foregoing, in the event any UK Facility Lender shall not be able to make an Eurodollar Rate Loan under the circumstances provided in Section 6.01 or 6.03, interest shall be allocated to such UK Facility Lender according to the interest rate payable to such UK Facility Lender as set forth in Section 6.04. 3.07 Reductions. The UK Facility Borrowers shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days' written notice to the UK Facility Agent, effective upon receipt, to reduce the Total UK Facility Commitment. The UK Facility Agent shall give each UK Facility Lender, within one (1) Business Day, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of pound 1,000,000 or such greater amount which is in an integral multiple of pound 500,000, or the entire remaining Total UK Facility Commitment, and shall permanently reduce the Total UK Facility Commitment. No such reduction shall result in the payment of any Offshore Rate Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.05. Each such reduction of the Total UK Facility Commitment shall be accompanied by payment of the principal amount of the UK Facility Loans to the extent that the UK Facility Outstandings exceed the Total UK Facility Commitment or the French Franc Outstandings exceed the Total French Franc Commitment, in each case after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. Any reduction of the Total UK Facility Commitment hereunder shall result, ipso facto, in a pro rata reduction of the Total French Franc Commitment so that, as reduced, the Sterling Equivalent Amount of the Total French Franc Commitment shall at all times remain equal to 40% of the Total UK Facility Commitment. 3.08 Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article VI hereof, and provided that no Default or Event of Default shall have occurred and be continuing, the UK Facility Borrowers may, upon three (3) Business Days' notice to the UK Facility Agent prior to 11:00 A.M. (London, England time) in the case of an Offshore Rate Loan in British Pounds Sterling and four (4) Business Days' notice to the UK Facility Agent prior to 11:00 A.M. (London, England time) in the case of an Offshore Rate Loan in French Francs, elect a subsequent Interest Period for all or a portion of Offshore Rate Loans under the UK Facility to begin on the last day of the then current Interest Period for such Offshore Rate Loans. Notice of any such Continuations shall be effected by receipt of an appropriate Borrowing Notice and shall specify the effective date of such Continuation and the Interest Period to be applicable to the UK Facility Loan as Continued. Each Continuation pursuant to this Section 3.08 shall be subject to the limitations on Offshore Rate Loans set forth in the definition of "Interest Period" herein and in Section 3.01 and 3.03 and Article VI hereof. All such Continuations of UK Facility Loans shall be 56 63 effected pro rata based on the Applicable Fronting Percentages of the UK Facility Lenders for the UK Facility and shall be in the same currency as the original such Loan. 3.09 Facility Fee. For the period beginning on the Closing Date and ending on the Total Facility Termination Date, the Company agrees to pay to each Lender at its office in the United States so designated thereby based on such Lender's Applicable Commitment Percentage, a Facility Fee equal to the Applicable Margin for Facility Fees times the Total UK Facility Commitment. Such payments of Facility Fees provided for in this Section 3.09 shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December beginning September 30, 1998 to and on the Total Facility Termination Date. Notwithstanding the foregoing, so long as any UK Facility Lender fails to make available any portion of its UK Facility Fronting Commitment when properly requested by a UK Facility Borrower, such Lender shall not be entitled to receive payment of its pro rata share of such Facility Fee until such Lender shall make available such portion. Such Facility Fee shall be calculated on the basis of a year of 365 days for the actual number of days elapsed. 3.10 Deficiency Advances. No UK Facility Lender shall be responsible for any default of any other UK Facility Lender in respect to such other UK Facility Lender's obligation to make any UK Facility Loan hereunder nor shall the UK Facility Fronting Commitment of any UK Facility Lender or the UK Facility Commitment of any Lender be increased as a result of such default of any other UK Facility Lender. Without limiting the generality of the foregoing, in the event any UK Facility Lender shall fail to advance funds to a UK Facility Borrower as herein provided, the UK Facility Agent may in its discretion, but shall not be obligated to, make a UK Facility Advance hereunder as a UK Facility Lender of all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other UK Facility Lender would have been entitled had it made such an advance; provided that, upon payment to the UK Facility Agent from such other UK Facility Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the UK Facility Agent by the applicable UK Facility Borrower on each UK Facility Loan comprising the deficiency advance, at the interest rate per annum equal to the UK Overnight Rate, then such payment shall be credited against the applicable UK Facility Outstanding owing to the UK Facility Agent in full payment of such deficiency advance and the applicable UK Facility Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other UK Facility Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by such UK Facility Borrower thereon. 3.11 Use of Proceeds. The proceeds of the UK Facility Loans made pursuant to the UK Facility hereunder shall be used by the UK Facility Borrowers to repay and terminate the Prior UK Facility, the Prior Irish Facility and the Prior French Facility, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of the UK Facility Borrowers. 57 64 3.12 One Loan. (a) Subject to subsection (c) below, all UK Facility Loans and UK Facility Advances by the UK Facility Lenders to any UK Facility Borrower shall constitute the joint and several general obligation of each of the UK Facility Borrowers. Each UK Facility Borrower shall be jointly and severally liable to the UK Facility Agent and the UK Facility Lenders for all Obligations hereunder in respect of the UK Facility, regardless of whether such Obligations arise as a result of UK Facility Advances to such Borrower, it being stipulated and agreed that UK Facility Advances hereunder to any UK Facility Borrower inure to the benefit of each of the UK Facility Borrowers, and that the UK Facility Lenders are relying on the joint and several liability of the UK Facility Borrowers in extending credit under the UK Facility. (b) Subject to subsection (c) below, each UK Facility Borrower guarantees to the UK Facility Lenders the payment in full of all of the Obligations of the other UK Facility Borrowers to the UK Facility Lenders in respect of UK Facility and further guarantees the due performance by each other UK Facility Borrower of its respective duties and covenants made in favor of the UK Facility Agent and the UK Facility Lenders hereunder. Each UK Facility Borrower agrees that the joint and several liability of the UK Facility Borrowers shall not be impaired or affected by any modification, supplement, extension or amendment of any contract or agreement to which the parties thereto may hereafter agree, nor by any modification, release or other alteration of any of the rights of the UK Facility Agent and the UK Facility Lenders with respect to any collateral, nor by any delay, extension of time, renewal, compromise or other indulgence granted by the UK Facility Agent and the UK Facility Lenders with respect to any of the Obligations, nor by any other agreements or arrangements whatever with any other UK Facility Borrower, any guarantor or any other Person, each UK Facility Borrower hereby waiving all notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consenting to be bound thereby as fully and effectually as if it had expressly agreed thereto in advance. The liability of each UK Facility Borrower hereunder is direct and unconditional as to all of the Obligations hereunder in respect of the UK Facility, and may be enforced without requiring the UK Facility Agent or the UK Facility Lenders first to resort to any other right, remedy or security; no UK Facility Borrower shall have any right of subrogation, reimbursement or indemnity whatsoever, nor any right of recourse to security for any of the Obligations in respect of the UK Facility, unless and until all of said Obligations have been paid in full. (c) Notwithstanding subsections (a) and (b) above, the joint and several liability of each UK Facility Borrower for, and its obligation to guarantee payment of all Obligations of, the other UK Facility Borrowers in respect of the UK Facility shall not at any time exceed its UK Facility Maximum Amount. 3.13 Participations. On the Closing Date and each day thereafter until the Total Facility Termination Date, each Lender (including a UK Facility Lender if necessary) will be deemed to have absolutely, irrevocably and unconditionally purchased from each UK Facility Lender a Participation in UK Facility Outstandings owing to such UK Facility Lender in an amount such that, after such purchase, each Lender will have a Facility Credit Exposure under the UK Facility equal in amount to its Applicable Commitment Percentage times the UK Facility Outstandings (referred to as the 58 65 "Facility Participation Amount" for such Lender in the UK Facility). Each such Participation of each Lender in the UK Facility shall be funded in accordance with Section 11.07. 59 66 ARTICLE IV The Canadian Facility 4.01 Advances. (a) Commitment. Subject to the terms and conditions of this Agreement, each Canadian Facility Lender severally agrees to make, on behalf of all the Lenders, Canadian Facility Advances in Canadian Dollars to the Canadian Facility Borrower from time to time from the Closing Date until (i) the Total Facility Termination Date in the case of the Canadian Facility Full Maturity Tranche and (ii) the Canadian Facility Renewable Tranche Termination Date in the case of the Canadian Facility Renewable Tranche, in each case on a pro rata basis as to the total borrowing requested by the Canadian Facility Borrower on any day determined by such Canadian Facility Lender's Applicable Fronting Percentage for the Canadian Facility, up to but not exceeding (A) in the case of Advances under the Canadian Facility Renewable Tranche, the Canadian Facility Renewable Tranche Fronting Commitment of such Canadian Facility Lender, and (B) in the case of Advances under the Canadian Facility Full Maturity Tranche, the Canadian Facility Full Maturity Tranche Fronting Commitment of such Canadian Facility Lender, and each Lender shall have a Participation in each such Canadian Facility Advance pursuant to Section 4.14 equal in amount to its Applicable Commitment Percentage times such Canadian Facility Advance; provided, however, that the Canadian Facility Lenders will not be required and shall have no obligation to make any Canadian Facility Advance (x) so long as a Default or an Event of Default has occurred and is continuing or (y) if the Lenders have accelerated the maturity of the Obligations as a result of an Event of Default; provided further, however, that immediately after giving effect to each such Canadian Facility Advance, (I) the Canadian Facility Outstandings shall not exceed the Total Canadian Facility Commitment, (II) the Canadian Facility Renewable Tranche Outstandings shall not exceed the Canadian Facility Renewable Tranche Commitment, and (III) the Canadian Facility Full Maturity Tranche Outstandings shall not exceed the Canadian Facility Full Maturity Tranche Commitment. Within such limits, the Canadian Facility Borrower may borrow, repay and reborrow Canadian Facility Loans hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, (i) the Total Facility Termination Date in the case of the Canadian Facility Full Maturity Tranche and (ii) the Canadian Facility Renewable Tranche Termination Date in the case of the Canadian Facility Renewable Tranche; provided, however, that (A) no Canadian Facility BA Rate Loan shall be made which has an Interest Period or maturity that extends beyond the Total Facility Termination Date, in the case of the Canadian Facility Full Maturity Tranche, or the Canadian Facility Renewable Tranche Termination Date, in the case of the Canadian Facility Renewable Tranche, and (B) each Canadian Facility BA Rate Loan may be repaid only on the last day of the Interest Period with respect thereto, unless such prepayment is accompanied by the additional payment, if any, due under Section 6.05. The Canadian Facility Borrower agrees that if at any time (x) the Canadian Facility Outstandings shall exceed the Total Canadian Facility Commitment, (y) the Canadian Facility Renewable Tranche Outstandings shall exceed the Canadian Facility Renewable Tranche Commitment, or (z) the Canadian Facility Full Maturity Tranche Outstandings shall exceed the Canadian Facility Full Maturity Tranche Commitment, then in any such case the Canadian Facility Borrower shall immediately repay a principal amount of the outstanding Canadian Facility Loans such that, as a result of such reduction, (I) the Total Canadian Facility Commitment shall equal or exceed the Canadian Facility Outstandings, 60 67 (II) the Canadian Facility Renewable Tranche Commitment shall equal or exceed the Canadian Facility Renewable Tranche Outstandings and (III) the Canadian Facility Full Maturity Tranche Commitment shall equal or exceed the Canadian Facility Full Maturity Tranche Outstandings. (b) Amounts, Advances and Rate Selection. (i) The principal amount outstanding on any Canadian Facility Loan shall be recorded in the Canadian Facility Agent's records in Canadian Dollars, based on the amount of any Canadian Facility Advance as reduced from time to time by the amount of any principal payments with respect to such Canadian Facility Loan. In the event a Canadian Facility Loan is Continued or Converted pursuant to Section 4.08, such election shall be treated as a Canadian Facility Advance for purposes of this Section 4.01. There shall be no more than ten (10) Canadian Facility BA Rate Loans outstanding at any one time under the Canadian Facility. (ii) Each Canadian Facility Loan and each Continuation and Conversion under Section 4.08 shall be in an amount not less than CAN $2,000,000 and, if greater, in integral multiples of CAN $100,000. (iii) For each Canadian Facility Advance, an Authorized Representative of the Canadian Facility Borrower shall give the Canadian Facility Agent (A) at least two (2) Business Days' irrevocable telefacsimile notice prior to 10:00 A.M. (Toronto, Canada time) of each Canadian Facility BA Rate Loan representing a borrowing or Continuation or Conversion hereunder and (B) at least two (2) Business Days' irrevocable telefacsimile notice prior to 10:00 A.M. (Toronto, Canada time) of each Canadian Facility Base Rate Loan representing a borrowing or Conversion hereunder. Each such notice shall be in the form of a Borrowing Notice in the form attached hereto as Exhibit D-3, which shall be effective upon receipt by the Canadian Facility Agent, and shall specify the Type of Canadian Facility Loan (Canadian Facility BA Rate or Canadian Facility Base Rate), the amount of the Canadian Facility Advance to be made, whether such advance is under the Canadian Facility Renewable Tranche or the Canadian Facility Full Maturity Tranche, the date of borrowing and the Interest Period (if a Canadian Facility BA Rate Loan) to be used in the computation of interest. Neither the Canadian Facility Agent nor any Canadian Facility Lender shall incur any liability to any Canadian Facility Borrower in acting upon any notice referred to above which the Canadian Facility Agent believes in good faith to have been given by an Authorized Representative of the Canadian Facility Borrower or for otherwise acting in good faith, and upon funding of Canadian Facility Loans by any Canadian Facility Lender in accordance with this Agreement pursuant to any such notice, such Canadian Facility Borrower shall have effected Canadian Facility Loans hereunder. A Borrowing Notice for a Canadian Facility BA Rate Loan shall be irrevocable, and the Canadian Facility Borrower shall be bound to make a borrowing in accordance therewith, unless such Canadian Facility Borrower pays to the Canadian Facility Lenders such amounts as may be due under Section 6.05 for failure of a borrowing of a Canadian Facility BA Rate Loan to occur on the date specified therefor in the related Borrowing Notice. The duration of the initial Interest Period for each Canadian Facility BA Rate Loan shall be as specified in the initial Borrowing Notice. The Canadian 61 68 Facility Borrower shall have the option to elect the duration of subsequent Interest Periods and to Continue or Convert the Loans in accordance with Section 4.08. If the Canadian Facility Agent does not receive a notice of election of the duration of an Interest Period or of the Conversion of a Loan by the time prescribed hereby and by Section 4.08, the Canadian Facility Borrower shall be deemed to have elected to Convert such Loan to or Continue such Loan as a Canadian Facility Base Rate Loan until the Canadian Facility Borrower notifies the Canadian Facility Agent in accordance with Section 4.08. (iv) Notice of receipt of each Borrowing Notice in respect of Canadian Facility Loans shall be provided by the Canadian Facility Agent to each Canadian Facility Lender by telefacsimile with reasonable promptness, but not later than 12:00 noon (Toronto, Canada time) on the same day as the Canadian Facility Agent's receipt of such notice from the Canadian Facility Borrower so long as receipt is prior to 10:00 A.M. (Toronto, Canada time). The Canadian Facility Agent shall determine the Canadian Facility Fixed BA Rate for a Canadian Facility BA Rate Loan at 10:00 A.M. (Toronto, Canada time) on the day of such proposed Canadian Facility Fixed BA Rate, and not later than 12:00 noon (Toronto, Canada time) on such date, the Canadian Facility Agent shall provide the Canadian Facility Borrower and each Canadian Facility Lender notice by telefacsimile transmission of the amount of the Canadian Facility Loan or Loans required to be made by each Canadian Facility Lender on such date, and the applicable Canadian Facility Fixed BA Rate. (v) Not later than 12:00 noon (Toronto, Canada time) on the date specified for each Canadian Facility Advance, each Canadian Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Canadian Facility Advance or Advances to be made by it on such day available to the Canadian Facility Borrower by depositing or transferring the proceeds thereof in Canadian Dollars and Same Day Funds to the Canadian Facility Agent at the Principal Office. The amount so received by the Canadian Facility Agent shall, subject to the terms of this Agreement, on the same day be made available to the Canadian Facility Borrower by delivery to the Canadian Facility Borrower's account with the Canadian Facility Agent. 4.02 Payment of Interest. (a) The Canadian Facility Borrower shall pay interest to the Canadian Facility Agent for the account of each Canadian Facility Lender on the outstanding and unpaid principal amount of each Canadian Facility Loan made by such Canadian Facility Lender for the period commencing on the date of such Canadian Facility Loan until such Loan shall be paid, Continued or Converted, as the case may be, at the then applicable Canadian Facility Base Rate for Canadian Facility Base Rate Loans or applicable Canadian Facility Fixed BA Rate for Canadian Facility BA Rate Loans, such payments to be made in Canadian Dollars; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. The Canadian Facility Agent's certificate as to each rate of interest payable hereunder shall be prima facie evidence of such rate. 62 69 (b) Computation of Interest. The Canadian Facility Borrower shall pay to the Canadian Facility Agent for the benefit of the Canadian Facility Lenders interest on each Canadian Facility Loan, which interest shall be calculated on the outstanding principal amount daily for the period: (i) in the case of a Canadian Facility Base Rate Loan, commencing on and including the day on which it is advanced and ending on, but excluding, the day on which it is repaid; or (ii) in the case of a Canadian Facility BA Rate Loan, commencing on and including the first day of the Interest Period relative to such Canadian Facility BA Rate Loan and ending on, but excluding, the last day of such Interest Period, at the rate of interest per annum equal to: (i) the Canadian Facility Base Rate for Canadian Facility Base Rate Loans, on the basis of a year of 365 days for the actual number of days elapsed; or (ii) the Canadian Facility Fixed BA Rate for Canadian Facility BA Rate Loans, on the basis of a year of 365 days for the actual number of days elapsed. For the purposes of this Agreement and calculation of interest on the basis of a year of 365 days, each rate of interest determined pursuant to such calculation expressed as an annual rate for the purposes of the Interest Act (Canada) is equivalent to such rate as so determined multiplied by the number of days in the calendar year in which the same is to be ascertained and divided by 365. The parties further agree that for the purposes of the Interest Act (Canada), (i) the principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement, and (ii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. (c) Accrual and Payment of Interest. Interest on each Canadian Facility Loan shall accrue from day to day but shall not compound and shall be payable: (i) in the case of a Canadian Facility Base Rate Loan or any other amount payable hereunder other than in respect of a Canadian Facility BA Rate Loan, monthly in arrears on the last Business Day of each month; or (ii) in the case of a Canadian Facility BA Rate Loan, on the last day of the applicable Interest Period for each Canadian Facility BA Rate Loan and, if the Interest Period extends for more than three months, at intervals of three months after the first day of the Interest Period and upon payment in full of the principal amount of each such Loan. 4.03 Payment of Principal. Except as set forth in Section 4.13 with respect to Canadian Facility Term Loans, (i) the principal amount of each Canadian Facility Loan advanced under the Canadian Facility Full Maturity Tranche shall be due and payable to the Canadian Facility Agent for the benefit of the Canadian Facility Lenders in full on the Total Facility Termination Date and (ii) the 63 70 principal amount of each Canadian Facility Loan advanced under the Canadian Facility Renewable Tranche shall be due and payable to the Canadian Facility Agent for the benefit of the Canadian Facility Lenders in full on the Canadian Facility Renewable Tranche Termination Date. The principal amount of any Canadian Facility Base Rate Loan may be prepaid in whole or in part at any time. The principal amount of any Canadian Facility BA Rate Loan may be prepaid only at the end of the applicable Interest Period unless the Canadian Facility Borrower shall pay to the Canadian Facility Agent for the account of the Canadian Facility Lenders the additional amount, if any, required under Section 6.05. All prepayments of Canadian Facility Loans made by the Canadian Facility Borrower shall be in the amount of (i) at least CAN $2,000,000 or (ii) the amount equal to all Canadian Facility Outstandings, or (iii) such other amount as necessary to comply with Section 4.01(a) or 4.07. 4.04 Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest in respect of Canadian Facility Loans, and any other amount required to be paid to the Canadian Facility Lenders with respect to the Canadian Facility Loans, shall be made in Canadian Dollars to the Canadian Facility Agent at its Principal Office, for the account of each Canadian Facility Lender's Applicable Lending Office. Each such payment shall be made in Same Day Funds before 12:00 noon (Toronto, Canada time) on the date such payment is due. The Canadian Facility Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Canadian Facility Borrower with the Canadian Facility Agent. The Canadian Facility Borrower shall give the Canadian Facility Agent prior telephonic notice of any payment of principal, such notice to be given by not later than 10:00 A.M. (Toronto, Canada time) one (1) Business Day prior to the date of such payment. (b) The Canadian Facility Agent shall deem any payment by or on behalf of the Canadian Facility Borrower hereunder that is not made both (i) in Canadian Dollars and in Same Day Funds and (ii) prior to 12:00 noon (Toronto, Canada time) to be a non-conforming payment. Any such payment shall not be deemed to be received by the Canadian Facility Agent until the later of (x) the time such funds become available funds and (y) the next Business Day. The Canadian Facility Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the Canadian Facility Lenders (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 11.01(a) and 11.01(b). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at the Default or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder or under the Canadian Facility Loans which bear interest at the Canadian Facility Base Rate becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day; provided that interest shall continue to accrue during the period of any such extension. 64 71 4.05 Evidence of Indebtedness. The Canadian Facility Borrower hereby authorizes each Canadian Facility Lender and the Canadian Facility Agent to record, from time to time, in its records, the date and amount of each Canadian Facility Loan; the interest rates payable by the Canadian Facility Borrower in respect of each Canadian Facility Loan and any Interest Period applicable thereto; the dates and amounts of all payments received by such Canadian Facility Lender on account of principal, interest and fees; and the amount of all the Canadian Facility Loans which remain payable by the Canadian Facility Borrower to such Canadian Facility Lender. All amounts and other information so recorded shall be prima facie evidence thereof. The failure to record, or any error in recording, any such amount or other information shall not limit or impair the obligations of the Canadian Facility Borrower hereunder or under any Loan Document. 4.06 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Canadian Facility Loans and the fees described in Section 4.09 hereof shall be made to the Canadian Facility Agent for the account of the Canadian Facility Lenders pro rata based on their Applicable Fronting Percentages for the Canadian Facility, (b) all payments to be made by the Canadian Facility Borrower for the account of each of the Canadian Facility Lenders on account of principal, interest and fees shall be made without diminution, set-off, recoupment, counterclaim or, except as set forth in Section 6.06(a), deduction, and (c) the Canadian Facility Agent in all other cases will promptly distribute payments received to the Canadian Facility Lenders. Notwithstanding the foregoing, in the event any Canadian Facility Lender shall not be able to make a Canadian Facility BA Rate Loan under the circumstances provided in Section 6.01 or 6.03, interest shall be allocated to such Canadian Facility Lender according to the interest rate payable to such Canadian Facility Lender as set forth in Section 6.04. 4.07 Reductions. The Canadian Facility Borrower shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days' written notice to the Canadian Facility Agent, effective upon receipt, to reduce the Total Canadian Facility Commitment. The Canadian Facility Agent shall give each Canadian Facility Lender, within one (1) Business Day, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of CAN $5,000,000 or such greater amount which is in an integral multiple of CAN $5,000,000 or the entire remaining Total Canadian Facility Commitment, shall permanently reduce the Total Canadian Facility Commitment and shall result in a pro rata reduction of both the Canadian Facility Full Maturity Tranche Commitment and the Canadian Facility Renewable Tranche Commitment, if such Canadian Facility Renewable Tranche Commitment remains outstanding at the time of such reduction. No such reduction shall result in the payment of any Canadian Facility BA Rate Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.05. Each reduction of the Total Canadian Facility Commitment shall be accompanied by payment of the Canadian Facility Loans to the extent that the (i) Canadian Facility Outstandings exceed the Total Canadian Facility Commitment, (ii) the Canadian Facility Renewable Tranche Outstandings exceed the Canadian Facility Renewable Tranche Commitment or (iii) the Canadian Facility Full Maturity Tranche Outstandings exceed the Canadian Facility Full Maturity Tranche Commitment, in each case after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. 65 72 4.08 Conversions and Elections of Subsequent Interest Periods. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in Article VI hereof, the Canadian Facility Borrower may request a Conversion or Continuation provided that: (a) the proceeds are used to retire the outstanding Canadian Facility Loan (the "Outstanding Loan"); (b) the Conversion or Continuance would otherwise be a permitted Canadian Facility Advance hereunder and the Canadian Facility Borrower complies with each provision hereof relative to the obtaining of a Canadian Facility Advance; (c) the aggregate principal amount of the Conversion or Continuance is not greater than the Outstanding Loan plus accrued interest in the case of Canadian Facility BA Rate Loans rounded up to the nearest CAN $100,000; and (d) each Conversion or Continuance is made contemporaneously with the retirement of the Outstanding Loan. Notice of any such Conversions or Continuation shall be effected by receipt of an appropriate Borrowing Notice and shall specify the effective date of such Conversion or Continuation and the Interest Period to be applicable to the Canadian Facility Loan as Continued or Converted and the Outstanding Loan to be retired. Each Continuation and Conversion pursuant to this Section 4.08 shall be subject to the limitations on Canadian Facility BA Rate Loans set forth in the definition of "Interest Period" herein and in Sections 4.01 and 4.03 and Article VI hereof. All such Continuations or Conversions of Canadian Facility Loans shall be effected pro rata based on the Applicable Fronting Percentages of the Canadian Facility Lenders for the Canadian Facility. 4.09 Facility Fee. For the period beginning on the Closing Date and ending on the Total Facility Termination Date in the case of the Canadian Facility Full Maturity Tranche, and on the Canadian Facility Renewable Tranche Termination Date in the case of the Canadian Facility Renewable Tranche, the Company agrees to pay to each Lender at its office in the United States so designated thereby based on such Lender's Applicable Commitment Percentage, (a) a Facility Fee equal to the Applicable Margin for Facility Fees with respect to the Canadian Facility Full Maturity Tranche times the Canadian Facility Full Maturity Tranche Commitment, and (b) a Facility Fee equal to the Applicable Margin for Facility Fees with respect to the Canadian Facility Renewable Tranche times the Canadian Facility Renewable Tranche Commitment. Such payments of Facility Fees provided for in this Section 4.09 shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year beginning September 30, 1998 to and on the Total Facility Termination Date in the case of the Canadian Facility Full Maturity Tranche and on the Canadian Facility Renewable Tranche Termination Date in the case of the Canadian Facility Renewable Tranche. Notwithstanding the foregoing, so long as any Canadian Facility Fronting Lender fails to make available any portion of its Canadian Facility Commitment when properly requested by the Canadian Facility Borrower, such Lender shall not be entitled to receive payment of its pro rata share of such Facility Fees until such Lender shall make available such portion. Such 66 73 Facility Fees shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 4.10 Deficiency Advances. No Canadian Facility Lender shall be responsible for any default of any other Canadian Facility Lender in respect to such other Canadian Facility Lender's obligation to make any Canadian Facility Loan hereunder nor shall the Canadian Facility Fronting Commitment of any Canadian Facility Lender or the Canadian Facility Commitment of any Lender be increased as a result of such default of any other Canadian Facility Lender. Without limiting the generality of the foregoing, in the event any Canadian Facility Lender shall fail to advance funds to the Canadian Facility Borrower as herein provided, the Canadian Facility Agent may in its discretion, but shall not be obligated to, make a Canadian Facility Advance hereunder as a Canadian Facility Lender of all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Canadian Facility Lender would have been entitled had it made such advance hereunder; provided that, upon payment to the Canadian Facility Agent from such other Canadian Facility Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Canadian Facility Agent by the Canadian Facility Borrower on each Canadian Facility Loan comprising the deficiency advance, at the interest rate per annum equal to the Canadian Overnight Rate, then such payment shall be credited against the applicable Canadian Facility Outstanding owing to the Canadian Facility Agent in full payment of such deficiency advance and the Canadian Facility Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other Canadian Facility Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by the Canadian Facility Borrower thereon. 4.11 Use of Proceeds. The proceeds of the Canadian Facility Loans made pursuant to the Canadian Facility hereunder shall be used by the Canadian Facility Borrower to repay and terminate the Prior Canadian Facility, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of the Canadian Facility Borrower. 4.12 Canadian Facility Extension. (a) With the unanimous consent of all Lenders under the Total Facilities, at each Canadian Facility Renewable Tranche Extension Date the Canadian Facility Borrower can elect to extend the Canadian Facility Renewable Tranche Termination Date for an additional period of 364 days with respect to the Unutilized Canadian Facility Renewable Tranche Commitment as at such Canadian Facility Renewable Tranche Extension Date; provided, however, that in no event shall the Canadian Facility Renewable Tranche Termination Date be extended beyond the Total Facility Termination Date. (b) The Canadian Facility Borrower shall notify the Lenders of its request for such an extension by delivering to the Canadian Facility Agent and the Global Agent notice of such request signed by an Authorized Representative not more than one hundred fifty (150) days nor less than ninety (90) days prior to the applicable Canadian Facility Renewable Tranche Extension Date. Notice of receipt of such request shall be provided by the Canadian Facility 67 74 Agent to the Canadian Facility Lenders and to each other Facility Agent, who shall in turn provide notice of such request to the respective Lenders in such Facility. The Global Agent shall notify the Canadian Facility Borrower in writing within sixty (60) days of its receipt of such request for extension of the decision of the Lenders. Failure by any Lender to respond to a request for an extension shall constitute a refusal of such Lender to give its consent to such extension, and the Canadian Facility Renewable Tranche Termination Date shall not be extended. Failure by the Global Agent to give such notice to the Canadian Facility Borrower as a result of not receiving the consent of all Lenders to such extension shall constitute refusal by the Lenders to extend the Canadian Facility Renewable Tranche Termination Date. (c) If on any Canadian Facility Renewable Tranche Extension Date the Canadian Facility Borrower does not so elect to extend the Canadian Facility Renewable Tranche Termination Date then in effect, or if all Lenders under the Total Facilities do not unanimously consent to such extension, then as of such Canadian Facility Renewable Tranche Termination Date, (i) in addition to any reduction required under Section 4.13 hereof, the Total Canadian Facility Commitment as at such date shall be permanently reduced by an amount equal to the Canadian Facility Unutilized Renewable Tranche Commitment as at such date, (ii) the Canadian Facility Renewable Tranche Commitment shall be reduced to zero, and (iii) subject to the provisions of Section 4.13 hereof, all Canadian Facility Renewable Tranche Outstandings shall be due and payable in full. 4.13 Canadian Term Loan Option. (a) At each Canadian Facility Renewable Tranche Extension Date, the Canadian Facility Borrower can elect to convert any or all Canadian Facility Renewable Tranche Outstandings as of such Canadian Facility Renewable Tranche Extension Date into a term loan on such date in the original principal amount equal to such Canadian Facility Renewable Tranche Outstandings. Canadian Facility Loans so converted by the Canadian Facility Borrower in accordance with this Section 4.13 shall be referred to as the "Canadian Facility Term Loans." The Canadian Facility Term Loans shall be repaid in equal quarterly installments on the last Business Day of each March, June, September and December commencing with the first such date after the most recent Canadian Facility Renewable Tranche Extension Date and continuing until and including a final payment on the Total Facility Termination Date. The Canadian Facility Term Loans may be comprised of Canadian Facility Base Rate Loans and Canadian Facility BA Rate Loans as the Canadian Facility Borrower may elect in accordance with the provisions of this Article IV. The Canadian Facility Term Loans shall bear interest on the same terms as the Canadian Facility Loans prior to the conversion to Canadian Facility Term Loans until the Continuation or Conversion thereof pursuant to Section 4.08 hereof. Amounts repaid or prepaid on the Canadian Facility Term Loans may not be reborrowed, and the Total Canadian Facility Commitment shall be permanently reduced by any such amounts. (b) If on any Canadian Facility Renewable Tranche Extension Date the Canadian Facility Borrower does not so elect to convert all or a portion of its Canadian Facility Renewable Tranche Outstandings as of such date to Canadian Facility Term Loans as described in (a) above, then on the Canadian Facility Renewable Tranche Termination Date then in effect, (i) all Canadian Facility Renewable Tranche Outstandings as of such date which are not so converted shall be due and payable in full, and (ii) in addition to any reduction required under Section 4.12 hereof, the Total Canadian 68 75 Facility Commitment as at such Canadian Facility Renewable Tranche Extension Date shall be permanently reduced by an amount equal to the Canadian Facility Renewable Tranche Outstandings as at such date which are not so converted. 4.14 Participations. On the Closing Date and each day thereafter until the Total Facility Termination Date, each Lender (including a Canadian Facility Lender if necessary) will be deemed to have absolutely, irrevocably and unconditionally purchased from each Canadian Facility Lender a Participation in Canadian Facility Outstandings owing to such Canadian Facility Lender in an amount such that, after such purchase, each Lender will have a Facility Credit Exposure under the Canadian Facility equal in amount to its Applicable Commitment Percentage times the Canadian Facility Outstandings (referred to as the "Facility Participation Amount" for such Lender in the Canadian Facility). Each such Participation of each Lender in the Canadian Facility shall be funded in accordance with Section 11.07. 4.15 Maximum Rate of Return. Notwithstanding any provision to the contrary contained in this Agreement, in no event shall the aggregate "interest" (as defined in Section 347 of the Criminal Code, Revised Statutes of Canada, 1985, C. 46 as the same may be amended, replaced or re-enacted from time to time) payable under this Agreement exceed the effective annual rate of interest on the "credit advanced" (as defined in that section) under this Agreement lawfully permitted under that section and, if any payment, collection or demand pursuant to this Agreement in respect of "interest" (as defined in that section) is determined to be contrary to the provisions of that section, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Canadian Facility Borrower and the Canadian Facility Lenders and the amount of such payment or collection shall be refunded to the Canadian Facility Borrower; for purposes of this Agreement the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term of the applicable credit advanced on the basis of annual compounding of the lawfully permitted rate of interest and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Facility Agent will be conclusive for the purposes of such determination. 69 76 ARTICLE V The Australian Facility 5.01 Advances (a) Commitment. Subject to the terms and conditions of this Agreement, each Australian Facility Lender severally agrees to make, on behalf of all the Lenders, Australian Facility Advances in Australian Dollars or New Zealand Dollars (as specified in a Borrowing Notice) to the Australian Facility Borrower requesting such Australian Facility Advance, as the case may be, as specified in such Borrowing Notice, from time to time from the Closing Date until the Total Facility Termination Date, on a pro rata basis as to the total borrowing requested by such Australian Facility Borrower on any day determined by such Australian Facility Lender's Applicable Fronting Percentage for the Australian Facility, up to but not exceeding (i) in the case of Advances in Australian Dollars, the Australian Dollar Fronting Commitment of such Australian Facility Lender, and (ii) in the case of Advances in New Zealand Dollars, the New Zealand Dollar Fronting Commitment of such Australian Facility Lender, and each Lender shall have a Participation in each such Australian Facility Advance pursuant to Section 5.13 equal in amount to its Applicable Commitment Percentage times such Australian Facility Advance; provided, however, that the Australian Facility Lenders will not be required and shall have no obligation to make any Australian Facility Advance (A) so long as a Default or an Event of Default has occurred and is continuing or (B) if the Lenders have accelerated the maturity of the Obligations as a result of an Event of Default; provided further, however, that immediately after giving effect to each such Australian Facility Advance, (x) the Australian Facility Outstandings shall not exceed the Total Australian Facility Commitment and (y) the New Zealand Dollar Outstandings shall not exceed the Total New Zealand Dollar Commitment. Within such limits, the Australian Facility Borrowers may borrow, repay and reborrow Australian Facility Loans hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the Total Facility Termination Date; provided, however, that the aggregate principal amount outstanding to any Australian Facility Borrower shall not at any time exceed its Australian Facility Maximum Amount; and provided further, however, that (i) no Offshore Rate Loan shall be made which has an Interest Period that extends beyond the Total Facility Termination Date and (ii) each Offshore Rate Loan may be repaid only on the last day of the Interest Period with respect thereto, unless such prepayment is accompanied by the additional payment, if any, due under Section 6.05. The Australian Facility Borrowers agree that if at any time the Australian Facility Outstandings shall exceed the Total Australian Facility Commitment or the New Zealand Dollar Outstandings shall exceed the Total New Zealand Dollar Commitment, the Australian Facility Borrowers shall immediately repay a principal amount of the outstanding Australian Facility Loans such that, as a result of such reduction, the Total Australian Facility Commitment shall equal or exceed the Australian Facility Outstandings and the Total New Zealand Dollar Commitment shall equal or exceed the New Zealand Dollar Outstandings. (b) Amounts, Advances and Rate Selection. (i) The principal amount outstanding on any Australian Facility Loan shall be recorded in the Australian Facility Agent's records in Australian Dollars in the case of an 70 77 Australian Facility Advance of Australian Dollars and in New Zealand Dollars in the case of an Australian Facility Advance of New Zealand Dollars, in each case based on the amount of any Australian Facility Advance as reduced from time to time by the amount of any principal payments with respect to such Australian Facility Advance. In the case of an Australian Facility Advance of New Zealand Dollars, the Australian Facility Agent shall also record the principal amount outstanding on any such Australian Facility Loan in Australian Dollars, based on the Australian Dollar Equivalent Amount of such Australia Facility Advance determined based on the Spot Rate of Exchange as of the date of such Advance, as reduced from time to time by any principal payments with respect thereto. In the event an Australian Facility Loan is Continued or Converted pursuant to Section 5.08, such election shall be treated as an Australian Facility Advance in the Applicable Currency of such Loan for purposes of this Section 5.01, with the Australian Dollar Equivalent Amount of the principal amount of any such Loan in New Zealand Dollars determined based on the Spot Rate of Exchange as of the date of such Continuation or Conversion. The Australian Facility Agent shall adjust its books to reflect the new Australian Dollar Equivalent Amount of such Australian Facility Loan, and in the event that such adjustment would cause the Australian Facility Outstandings to exceed the Total Australian Facility Commitment, or the New Zealand Dollar Outstandings to exceed the Total New Zealand Dollar Commitment, the Australian Facility Borrowers shall, immediately on the effective date of such Continuation or Conversion, repay the portion of such Continued or Converted Loan (applying the new Spot Rate of Exchange) necessary to ensure that thereafter the Total Australian Facility Commitment shall equal or exceed the Australian Facility Outstandings and the Total New Zealand Dollar Commitment shall equal or exceed the New Zealand Dollar Outstandings. There shall be no more than four (4) Offshore Facility Loans outstanding at any one time under the Australian Facility. (ii) Each Australian Facility Loan and each Continuation and Conversion under Section 5.08 shall be (A) in the case of Offshore Rate Loans, in an amount not less than AUS $5,000,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars), and, if greater, in integral multiples of AUS $500,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars), and (B) in the case of Australian Facility Base Rate Loans, in an amount not less than AUS $5,000,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars), and, if greater, in integral multiples of AUS $500,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars). (iii) For each Australian Facility Advance an Authorized Representative shall give the Australian Facility Agent at least (A) three (3) Business Days' irrevocable telefacsimile notice prior to 11:00 A.M. (Sydney, Australia time) of each Offshore Rate Loan representing a borrowing or Continuation or Conversion hereunder, and (B) three (3) Business Days' irrevocable telefacsimile notice prior to 11:00 A.M. (Sydney, Australia time) of each Australian Facility Base Rate Loan representing a borrowing or Continuation or Conversion hereunder. Each such notice shall be in the form of a Borrowing Notice in the form attached hereto as Exhibit D-4, which shall be effective upon receipt by the Australian Facility Agent, and shall specify the Type of Loan, whether the Loan is to be made in Australian Dollars or 71 78 New Zealand Dollars, the amount of the Australian Facility Advance to be made, the date of borrowing and the Interest Period (if an Offshore Rate Loan) to be used in the computation of interest. Neither the Australian Facility Agent nor any Australian Facility Lender shall incur any liability to any Australian Facility Borrower in acting upon any notice referred to above which the Australian Facility Agent believes in good faith to have been given by an Authorized Representative of such Australian Facility Borrower or for otherwise acting in good faith, and upon funding of Australian Facility Loans by any Australian Facility Lender in accordance with this Agreement pursuant to any such notice, such Australian Facility Borrower shall have effected Australian Facility Loans hereunder. A Borrowing Notice for an Offshore Rate Loan shall be irrevocable, and Australian Facility Borrower giving such notice shall be bound to make a borrowing in accordance therewith, unless such Australian Facility Borrower pays to the Australian Facility Lenders such amounts as may be due under Section 6.05 for failure of a borrowing of an Offshore Rate Loan to occur on the date specified therefor in a Borrowing Notice. The duration of the initial Interest Period for each Australian Facility Loan shall be as specified in the initial Borrowing Notice. The Australian Facility Borrowers shall have the option to elect the duration of subsequent Interest Periods and to Continue or Convert the Australian Facility Loans in accordance with Section 5.08. If the Australian Facility Agent does not receive a notice of election of duration of an Interest Period or of the Conversion of a Loan by the time prescribed hereby and by Section 5.08, the applicable Australian Facility Borrower shall be deemed to have elected to Convert such Loan to or Continue such Loan as an Australian Facility Base Rate Loan until such Australian Facility Borrower notifies the Australian Facility Agent in accordance with Section 5.08. (iv) Notice of receipt of each Borrowing Notice in respect of Australian Facility Loans, together with the amount of each Australian Facility Lender's portion of an Advance requested thereunder and the applicable interest rate, shall be provided by the Australian Facility Agent to each Australian Facility Lender by telefacsimile with reasonable promptness, but (provided the Australian Facility Agent shall have received such notice by 11:00 A.M. (Sydney, Australia time)) not later than 2:00 P.M. (Sydney, Australia time) on the same day as the Australian Facility Agent's receipt of such notice from the applicable Australian Facility Borrower. (v) Each Australian Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, not later than 12:00 noon (Sydney, Australia time) on the date specified for such Australian Facility Advance, make the amount of the Australian Facility Advance to be made by it on such day available to the applicable Australian Facility Borrower by depositing or transferring the proceeds thereof in Australian Dollars or New Zealand Dollars, as requested, and in Same Day Funds to the Australian Facility Agent at its Principal Office. The amount so received by the Australian Facility Agent shall, subject to the terms of this Agreement, be made available to the applicable Australian Facility Borrower by deposit of the proceeds to an account of such Australian Facility Borrower maintained at the Principal Office or otherwise as shall be directed in the applicable Borrowing Notice. 72 79 5.02 Payment of Interest. (a) The Australian Facility Borrowers shall pay interest to the Australian Facility Agent for the account of each Australian Facility Lender on the outstanding and unpaid principal amount of each Australian Facility Loan made by such Australian Facility Lender for the period commencing on the date of such Australian Facility Loan until such Loan shall be paid, Continued or Converted, as the case may be, at the then applicable Australian Facility Base Rate for Australian Facility Base Rate Loans or applicable Offshore Rate for Offshore Rate Loans, such payments to be made (i) in Australian Dollars with respect to Australian Facility Loans made in Australian Dollars, and (ii) in New Zealand Dollars with respect to Australian Facility Loans made in New Zealand Dollars; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each Australian Facility Loan shall be computed on the basis of a year of 365/366 days and calculated for the actual number of days elapsed. Interest on each Australian Facility Loan shall be paid (i) quarterly in arrears on the last Business Day of each fiscal quarter, commencing September 30, 1998, for each Australian Facility Base Rate Loan, (ii) on the last day of the applicable Interest Period for each Offshore Rate Loan and, if the Interest Period extends for more than three months, also at intervals of three months after the first day of the Interest Period and (iii) upon payment in full of the principal of each such Loan. Interest on amounts not paid when due shall be payable on demand. 5.03 Payment of Principal. The principal amount of each Australian Facility Loan shall be due and payable to the Australian Facility Agent for the benefit of each Australian Facility Lender in full on the Total Facility Termination Date. The principal amount of any Australian Facility Base Rate Loan may be prepaid in whole or in part at any time. The principal amount of any Offshore Rate Loan may be prepaid only at the end of the applicable Interest Period unless the Australian Facility Borrowers shall pay to the Australian Facility Agent for the account of the Australian Facility Lenders the additional amount, if any, required under Section 6.05. All prepayments of Australian Facility Loans made by the Australian Facility Borrowers shall be in the Applicable Currency of the respective Australian Facility Loan in the amount of (i) AUS $5,000,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars), or (ii) such greater amount which is an integral multiple of AUS $1,000,000 (or the New Zealand Dollar Equivalent Amount thereof if in New Zealand Dollars), or (iii) the amount equal to all Australian Facility Outstandings, or (iv) such other amount as necessary to comply with Section 5.01(a) or 5.07. 5.04 Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees in respect of Australian Facility Loans, and any other amount required to be paid to the Australian Facility Lenders with respect to the Australian Facility Loans, shall be made to the Australian Facility Agent at its Principal Office, for the account of each Australian Facility Lender's Applicable Lending Office, to be recorded in Australian Dollars and, if applicable, New Zealand Dollars, as set forth in Section 5.01(b). Each such payment shall be made in Applicable Currency of the Australian Facility Loan in Same Day Funds before 12:00 noon (Sydney, Australia time) on the date such payment is 73 80 due. The Australian Facility Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the applicable Australian Facility Borrower with the Australian Facility Agent. The Australian Facility Borrowers shall give the Australian Facility Agent prior telephonic notice of any payment of principal, such notice to be given by not later than 11:00 A.M. (Sydney, Australia time), at least three (3) Business Days prior to the date of such payment. (b) The Australian Facility Agent shall deem any payment by or on behalf of the Australian Facility Borrowers hereunder that is not made both (i) in Australian Dollars in the case of Australian Facility Loans made in Australian Dollars or in New Zealand Dollars in the case of Australian Facility Loans made in New Zealand Dollars and, in either case, in Same Day Funds and (ii) prior to 12:00 noon (Sydney, Australia time) to be a non-conforming payment. Any such payment shall not be deemed to be received by the Australian Facility Agent until the later of (x) the time such funds become available funds in the required Applicable Currency and (y) the next Business Day. The Australian Facility Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the Australian Facility Lenders (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 11.01(a) and 11.01(b). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at the Default Rate or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless otherwise provided under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension. 5.05 Evidence of Indebtedness. Each Australian Facility Borrower hereby authorizes each Australian Facility Lender and the Australian Facility Agent to record, from time to time, in its records, the date and amount of each Australian Facility Loan; the interest rates payable by the applicable Australian Facility Borrower in respect of each Australian Facility Loan and any Interest Period applicable thereto; the dates and amounts of all payments received by such Australian Facility Lender on account of principal, interest and fees; and the amount of all the Australian Facility Loans which remain payable by the Australian Facility Borrowers to such Australian Facility Lender. All amounts and other information so recorded shall be prima facie evidence thereof. The failure to record, or any error in recording, any such amount or other information shall not limit or impair the obligations of the Australian Facility Borrowers hereunder or under any Loan Document. 5.06 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Australian Facility Loans and the fees described in Section 5.09 hereof shall be made to the Australian Facility Agent for the account of the Australian Facility Lenders pro rata based on their Applicable Fronting Percentages for the Australian Facility, (b) all payments to be made by the Australian Facility Borrowers for the account of each of the 74 81 Australian Facility Lenders on account of principal, interest and fees shall be made without diminution, set-off, recoupment, counterclaim or, except as set forth in Section 6.06(a), deduction, and (c) the Australian Facility Agent will promptly distribute payments received to the Australian Facility Lenders. Notwithstanding the foregoing, in the event any Australian Facility Lender shall not be able to make an Offshore Rate Loan under the circumstances provided in Section 6.01 or 6.03, interest shall be allocated to such Australian Facility Lender according to the interest rate payable to such Australian Facility Lender as set forth in Section 6.04. 5.07 Reductions. The Australian Facility Borrowers shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days' written notice to the Australian Facility Agent, effective upon receipt, to reduce the Total Australian Facility Commitment. The Australian Facility Agent shall give each Australian Facility Lender, within two (2) Business Days, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of AUS $5,000,000 or such greater amount which is in an integral multiple of AUS $1,000,000, or the entire remaining Total Australian Facility Commitment, and shall permanently reduce the Total Australian Facility Commitment. No such reduction shall result in the payment of any Offshore Rate Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.05. Each such reduction of the Total Australian Facility Commitment shall be accompanied by payment of the principal amount of the Australian Facility Loans to the extent that the Australian Facility Outstandings exceed the Total Australian Facility Commitment or the New Zealand Dollar Outstandings exceed the Total New Zealand Dollar Commitment, in each case after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. Any reduction of the Total Australian Facility Commitment hereunder shall result, ipso facto, in a pro rata reduction of the Total New Zealand Dollar Commitment so that, as reduced, the Australian Dollar Equivalent Amount of the Total New Zealand Dollar Commitment shall at all times remain equal to 10% of the Total Australian Facility Commitment. 5.08 Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article VI hereof, the Australian Facility Borrowers may: (a) upon notice to the Australian Facility Agent on or before 11:00 A.M. (Sydney, Australia time) on any Business Day, Convert all or a part of Offshore Rate Loans to Australian Facility Base Rate Loans under the Australian Facility on the last day of the Interest Period for such Offshore Rate Loans; and (b) provided that no Default or Event of Default shall have occurred and be continuing, upon five (5) Business Days' notice to the Australian Facility Agent prior to 11:00 A.M. (Sydney, Australia time): (i) elect a subsequent Interest Period for all or a portion of Offshore Rate Loans under the Australian Facility to begin on the last day of the then current Interest Period for such Offshore Rate Loans; and 75 82 (ii) Convert Australian Facility Base Loans to Offshore Rate Loans under the Australian Facility on any Business Day. Notice of any such Continuations or Conversions shall be effected by receipt of an appropriate Borrowing Notice and shall specify the effective date of such Continuation or Conversion and the Interest Period to be applicable to the Australian Facility Loan as Continued or Converted. Each Continuation and Conversion pursuant to this Section 5.08 shall be subject to the limitations on Offshore Rate Loans set forth in the definition of "Interest Period" herein and in Section 5.01 and 5.03 and Article VI hereof. All such Continuations or Conversions of Australian Facility Loans shall be effected pro rata based on the Applicable Fronting Percentages of the Australian Facility Lenders for the Australian Facility and shall be in the same currency as the original such Loan. 5.09 Facility Fee. For the period beginning on the Closing Date and ending on the Total Facility Termination Date, the Company agrees to pay to each Lender at its office in the United States so designated thereby based on such Lender's Applicable Commitment Percentage, a Facility Fee equal to the Applicable Margin for Facility Fees times the Total Australian Facility Commitment. Such payments of Facility Fees provided for in this Section 5.09 shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December beginning September 30, 1998 to and on the Total Facility Termination Date. Notwithstanding the foregoing, so long as any Australian Facility Lender fails to make available any portion of its Australian Facility Fronting Commitment when properly requested by an Australian Facility Borrower, such Lender shall not be entitled to receive payment of its pro rata share of such Facility Fee until such Lender shall make available such portion. Such Facility Fee shall be calculated on the basis of a year of 365/366 days for the actual number of days elapsed. 5.10 Deficiency Advances. No Australian Facility Lender shall be responsible for any default of any other Australian Facility Lender in respect to such other Australian Facility Lender's obligation to make any Australian Facility Loan hereunder nor shall the Australian Facility Fronting Commitment of any Australian Facility Lender or the Australian Facility Commitment of any Lender be increased as a result of such default of any other Australian Facility Lender. Without limiting the generality of the foregoing, in the event any Australian Facility Lender shall fail to advance funds to an Australian Facility Borrower as herein provided, the Australian Facility Agent may in its discretion, but shall not be obligated to, make an Australian Facility Advance hereunder as an Australian Facility Lender of all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Australian Facility Lender would have been entitled had it made such advance; provided that, upon payment to the Australian Facility Agent from such other Australian Facility Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Australian Facility Agent by the applicable Australian Facility Borrower on each Australian Facility Loan comprising the deficiency advance, at the interest rate per annum equal to the customary rate set by the Australian Facility Agent for the correction of errors among banks in Australia for three (3) Business Days and thereafter at the Australian Facility Base Rate, then such payment shall be credited against the applicable Australian Facility Outstanding owing to the Australian Facility Agent in full payment of such deficiency advance and the applicable Australian 76 83 Facility Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other Australian Facility Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by such Australian Facility Borrower thereon. 5.11 Use of Proceeds. The proceeds of the Australian Facility Loans made pursuant to the Australian Facility hereunder shall be used by the Australian Facility Borrowers to repay and terminate the Prior Australian Facility, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of the Australian Facility Borrowers. 5.12 One Loan. (a) Subject to subsection (c) below, all Australian Facility Loans and Australian Facility Advances by the Australian Facility Lenders to any Australian Facility Borrower shall constitute the joint and several general obligation of each of the Australian Facility Borrowers. Each Australian Facility Borrower shall be jointly and severally liable to the Australian Facility Agent and the Australian Facility Lenders for all Obligations hereunder in respect of the Australian Facility, regardless of whether such Obligations arise as a result of Australian Facility Advances to such Borrower, it being stipulated and agreed that Australian Facility Advances hereunder to any Australian Facility Borrower inure to the benefit of each of the Australian Facility Borrowers, and that the Australian Facility Lenders are relying on the joint and several liability of the Australian Facility Borrowers in extending credit under the Australian Facility. (b) Subject to subsection (c) below, each Australian Facility Borrower guarantees to the Australian Facility Lenders the payment in full of all of the Obligations of the other Australian Facility Borrowers to the Australian Facility Lenders in respect of Australian Facility and further guarantees the due performance by each other Australian Facility Borrower of its respective duties and covenants made in favor of the Australian Facility Agent and the Australian Facility Lenders hereunder. Each Australian Facility Borrower agrees that the joint and several liability of the Australian Facility Borrowers shall not be impaired or affected by any modification, supplement, extension or amendment of any contract or agreement to which the parties thereto may hereafter agree, nor by any modification, release or other alteration of any of the rights of the Australian Facility Agent and the Australian Facility Lenders with respect to any collateral, nor by any delay, extension of time, renewal, compromise or other indulgence granted by the Australian Facility Agent and the Australian Facility Lenders with respect to any of the Obligations, nor by any other agreements or arrangements whatever with any other Australian Facility Borrower, any guarantor or any other Person, each Australian Facility Borrower hereby waiving all notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consenting to be bound thereby as fully and effectually as if it had expressly agreed thereto in advance. The liability of each Australian Facility Borrower hereunder is direct and unconditional as to all of the Obligations hereunder in respect of the Australian Facility, and may be enforced without requiring the Australian Facility Agent or the Australian Facility Lenders first to resort to any other right, remedy or security; no Australian Facility Borrower shall have any right of subrogation, reimbursement or indemnity whatsoever, nor any right of recourse to security for any of the Obligations in respect of the Australian Facility, unless and until all of said Obligations have been paid in full. 77 84 (c) Notwithstanding subsections (a) and (b) above, the joint and several liability of each Australian Facility Borrower for, and its obligation to guarantee payment of, all Obligations of the other Australian Facility Borrowers in respect of the Australian Facility shall not at any time exceed its Australian Facility Maximum Amount. 5.13 Participations. On the Closing Date and each day thereafter until the Total Facility Termination Date, each Lender (including an Australian Facility Lender if necessary) will be deemed to have absolutely, irrevocably and unconditionally purchased from each Australian Facility Lender a Participation in Australian Facility Outstandings owing to such Australian Facility Lender in an amount such that, after such purchase, each Lender will have a Facility Credit Exposure under the Australian Facility equal in amount to its Applicable Commitment Percentage times the Australian Facility Outstandings (referred to as the "Facility Participation Amount" for such Lender in the Australian Facility). Each such Participation of each Lender in the Australian Facility shall be funded in accordance with Section 11.07. 78 85 ARTICLE VI Changes in Circumstances 6.01 Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, 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 its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Fixed Rate Loans, any Note, or its obligation to make or to Participate in Fixed Rate Loans; or shall change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or any Note in respect of any Fixed Rate Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, compulsory loan, or similar requirement (other than the Applicable Reserve Requirement utilized in the determination of the Eurodollar Rate or the Offshore Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Applicable Facility Commitments or Applicable Fronting Commitments of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or the London or applicable offshore interbank market any other condition affecting this Agreement or any Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining or participating in any Fixed Rate Loan or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or any Note with respect to any Fixed Rate Loan, then each Borrower in the Facility or Facilities in which such Lender has made, or is obligated to make, such Fixed Rate Loans to which such increased costs relate shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by any Borrower under this Section 6.01(a), the applicable Borrower may, by notice to such Lender (with a copy to the Applicable Facility Agent and the Global Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of 79 86 Section 6.04 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand each Applicable Borrower in any Facility in which such Lender has made or is obligated to make Loans shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender shall promptly notify the Borrowers and the Agents of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 6.01 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 6.01 shall furnish to the Borrowers and the Agents a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 6.02. Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Fixed Rate Loan: (a) the Applicable Facility Agent in the Facility in which such Fixed Rate Loan is to be made or Continued or Converted determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate or Offshore Rate or Canadian Facility BA Rate, as the case may be, for such Interest Period; or (b) the Required Fronting Lenders in the Facility in which such Fixed Rate Loan is to be made or Continued or Converted determine (which determination shall be conclusive) and notify the Applicable Facility Agent and the Global Agent that (i) the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders in such Facility of funding Fixed Rate Loans for such Interest Period or (ii) that the Offshore Rate does not represent, in the case of the UK Facility Lenders, the effective cost to those Lenders for deposits in the Applicable Currency of comparable amounts for the applicable Interest Period or, in the case of the Australian Facility Lenders, the effective bid rate for bills of exchange of such tenor in Australian Dollars for such Lenders or (iii) that the Canadian Facility BA Rate does not 80 87 represent, in the case of the Canadian Facility Lenders, the effective cost to those Lenders for banker's acceptances of comparable amounts for the applicable Interest Period; then the Applicable Facility Agent shall give the Applicable Borrowers prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the Applicable Lenders in such Facility or Facilities shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the Applicable Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either repay such Loans or Convert such Loans into another Type of Loan in accordance with the terms of this Agreement. 6.03. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund any Fixed Rate Loans hereunder, then such Lender shall promptly notify the Applicable Borrowers in the Facility or Facilities in which such Lender has made or is obligated to make such Fixed Rate Loans and such Lender's obligation to make or Continue any Fixed Rate Loans and to Convert other Types of Loans into such Fixed Rate Loans shall be suspended until such time as such Lender may again make, maintain, and fund such Fixed Rate Loans (in which case the provisions of Section 6.04 shall be applicable). 6.04. Treatment of Affected Loans. If the obligation of any Lender to make a particular Type of Fixed Rate Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to Section 6.01 or 6.03 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into, in the case of the US Facility, the Canadian Facility or the Australian Facility, a Floating Rate Loan applicable to the Facility or Facilities in which the Affected Loans were made or, in the case of the UK Facility, a UK Facility Alternative Rate Loan (each referred to as "Substitute Base Rate Loans") on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 6.03 hereof, on such earlier date as such Lender may specify to the Applicable Borrower with a copy to the Applicable Facility Agent and the Global Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 6.01 or 6.03 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Substitute Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Substitute Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Substitute Base Rate Loans. 81 88 If such Lender gives notice to the Applicable Borrowers (with a copy to the Applicable Facility Agent and the Global Agent) that the circumstances specified in Section 6.01 or 6.03 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this Section 6.04 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Substitute Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Applicable Fronting Percentage applicable to the Facility or Facilities in which the Affected Loans were made. 6.05. Compensation. Upon the request of any Lender, each Applicable Borrower in any Facility in which such Lender has made or is obligated to make Loans shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Fixed Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 11.01) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Applicable Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Article VII to be satisfied) to borrow, Convert, Continue, or prepay a Fixed Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. 6.06 Taxes. (a) Any and all payments by any Borrower to any Lender or any Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, each Borrower shall pay all Other Taxes. (b) If any Borrower shall be required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable hereunder to any Lender or any Agent, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 6.06), such Lender or Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) such Borrower shall make such deductions and withholdings; 82 89 (iii) such Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) such Borrower shall also pay to such Lender or Applicable Facility Agent for the account of such Lender, at the time interest is paid, Further Taxes in the amount that the respective Lender specifies as necessary to preserve the after-tax yield the Lender would have received if such Taxes, Other Taxes or Further Taxes had not been imposed. (c) The Company and each Borrower jointly and severally agree to indemnify and hold harmless each Lender and each Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes in the amount that the respective Lender specifies as necessary to preserve the after-tax yield the Lender would have received if such Taxes, Other Taxes or Further Taxes had not been imposed, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the applicable Lender or Agent makes written demand therefor. (d) Within 30 days after the date of any payment by the applicable Borrower of Taxes, Other Taxes or Further Taxes, such Borrower shall furnish to each Applicable Lender or the Applicable Facility Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to such Lender or Agent. (e) If any Borrower is required to pay any amount to any Lender or Agent pursuant to subsection (b) or (c) of this Section 6.06, then such Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office so as to eliminate any such additional payment by such Borrower which may thereafter accrue, if such change in the sole judgment of such Lender is not otherwise disadvantageous to such Lender. (f) Each US Facility Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a US Facility Lender in the case of each other Lender, and from time to time thereafter if requested in writing by any US Facility Borrower or the US Facility Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Company and the US Facility Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Documents. 83 90 (g) Each UK Facility Lender (other than a Lender entitled to receive payments of interest in respect of each UK Facility Loan free of withholding or deduction for or on account of United Kingdom income tax under Section 349(3)(a) of the Income and Corporation Taxes Act 1988 of the United Kingdom (a "UK Qualifying Lender"); provided that this subsection (e) shall apply to a UK Qualifying Lender which loses such status, other than through a change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof after the Closing Date or effective date thereafter it becomes a Lender, from the date of such loss) shall deliver to the appropriate Person such application forms, certificates, documents or other evidence as may be required from time to time, properly completed and duly executed by such UK Facility Lender, to enable the UK Facility Borrowers to be able to pay interest on the UK Facility Loans of such UK Facility Lender without withholding or deduction for or on account of any United Kingdom income tax. (h) Each Canadian Facility Lender that is organized under the laws of any jurisdiction other than Canada or any political subdivision thereof (a "Non-Canadian Lender") agrees to deliver to the Canadian Facility Borrower and Canadian Facility Agent upon request such certificates, documents or other evidence as may be required from time to time, properly completed and duly executed by such Non-Canadian Lender, to establish the basis for any applicable exemption from or reduction of taxes with respect to any payments to such Non-Canadian Lender of principal, interest, fees, commissions or any other amount payable under this Agreement or the Canadian Facility Loans. (i) Each Australian Facility Lender that is organized under the laws of any jurisdiction other than Australia or any political subdivision thereof, (a "Non-Australian Lender") agrees to deliver to the Australian Facility Borrowers and Australian Facility Agent upon request such certificates, documents or other evidence as may be required from time to time, properly completed and duly executed by such Non-Australian Lender, to establish the basis for any applicable exemption from or reduction of taxes with respect to any payments to such Non-Australian Lender of principal, interest, fees, commissions or any other amount payable under this Agreement or the Australian Facility Loans, other than with respect to payments made on or in connection with Australian Facility Loans advanced in New Zealand Dollars. (j) For any period with respect to which a Lender has failed to provide the Company and the Applicable Facility Agent with the appropriate form pursuant to Section 6.06(f), (g), (h) or (i), as applicable (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 6.06(a), (b), or (c) with respect to Taxes imposed by the United States, United Kingdom, Canada or Australia, as applicable (specifically exempting from this Section 6.06(j), and thereby preserving each Lender's rights to indemnification hereunder with respect to, Taxes imposed by New Zealand); provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, each Applicable Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. 84 91 (k) Without prejudice to the survival of any other agreement of any Borrower hereunder, the agreements and obligations of each Borrower contained in this Section 6.06 shall survive the termination of the Commitments and the payment in full of the Obligations. 6.07 Replacement Lender. In the event any Lender seeks additional compensation pursuant to this Article VI or is restricted from making any Fixed Rate Loan under this Agreement (a "Restricted Lender"), so long as no Default or Event of Default shall have occurred and be continuing and the Company has obtained a commitment from another Lender or an Eligible Assignee to become a Lender for all purposes hereunder, the Company may cause such Restricted Lender to be replaced by, and to assign all its Loans, Applicable Facility Commitments, Applicable Fronting Commitments, Participations and other Obligations owing thereto pursuant to Section 13.01 to, such other Lender or an Eligible Assignee reasonably acceptable to the Applicable Facility Agent(s) and the Global Agent which is not similarly restricted and will not seek such additional compensation. Such Restricted Lender agrees to execute and to deliver to the Global Agent and to each Applicable Facility Agent of each Facility in which such Restricted Lender has made or was obligated to make Loans an Assignment and Acceptance with such replacement Lender as provided in Section 13.01 hereof upon payment at par of all principal, interest, fees and other amounts owing under this Agreement to such Restricted Lender. The Company shall pay to the Applicable Facility Agent the processing fee required by Section 13.01(a)(iv) in connection with such assignment. 6.08 Funding. In the event any Borrower elects to obtain any Loans as Fixed Rate Loans, or elects to Continue any Fixed Rate Loans or Convert any portion of the principal amount of any Floating Rate Loans to Fixed Rate Loans, each Lender may, if it so elects, fulfill its obligation to make or Continue any portion of the principal amount of any Loan as, or to Convert any portion of the principal amount of any Loan into, a Fixed Rate Loan in accordance with any election made by such Borrower by causing a foreign branch or affiliate of such Lender or an international banking facility created by such Lender to make such Fixed Rate Loan; provided, that in such event such Fixed Rate Loan shall be deemed to have been made by such Lender, and the obligation of the Borrower to repay such Fixed Rate Loan shall nevertheless be to such Lender and shall be deemed to be held by such Lender, to the extent of such Fixed Rate Loan, for the account of such foreign branch, affiliate or international banking facility. In addition, the Borrowers hereby consent and agree that, for purposes of any determination to be made for purposes of this Agreement (including Sections 6.01, 6.02, 6.03 and 6.04), it shall be conclusively assumed that each Lender elected to fund all Fixed Rate Loans by purchasing deposits in the Applicable Currency in its eurocurrency office's interbank eurocurrency market. 6.09 Economic and Monetary Union in the European Community. (a) If, as a result of the implementation of the European economic and monetary union ("EMU"), (i) any currency available for borrowing under this Agreement (a "national currency") ceases to be lawful currency of the state issuing the same and is replaced by a European single or common currency (the "Euro") or (ii) any national currency and the Euro are at the same time both recognized by the central bank or comparable governmental authority of the state issuing such currency as lawful currency of such state, then any amount borrowed hereunder by any party hereto in such national currency shall be payable in such national currency and any amount borrowed 85 92 hereunder in the Euro shall be payable in the Euro. After the European Central Bank and/or the comparable government authority ceases to recognize any national currency, then the amount so payable shall be determined by redenominating or converting such national currency into the Euro at the exchange rate officially fixed by the European Central Bank for the purpose of implementing the EMU. Prior to the occurrence of the event or events described in clause (i) or (ii) of the preceding sentence, each amount payable hereunder in any such national currency will, except as otherwise provided herein, continue to be payable only in that national currency. (b) The Applicable Borrowers shall from time to time, at the request of any Lender, pay to such Lender the amount of any losses, damages, liabilities, claims, reduction in yield, additional expense or increased cost incurred by, or of any reduction in any amount payable to or in the effective return on its capital to, or any decrease or delay in the payment of interest or other return foregone by, such Lender or any of its affiliates as a result of any political, tax, liquidity, currency exchange or market risk resulting from the introduction of, changeover to or operation of the Euro in any applicable nation or eurocurrency market. (c) In addition, this Agreement (including, without limitation, the definitions of Total French Franc Commitment, LIBOR, Offshore Rate and Applicable Reference Rate) will be amended to the extent determined by the Applicable Facility Agents (acting reasonably and in consultation with the Company) to be necessary to reflect such implementation of the EMU and change in currency and to put the Lenders and the Borrowers in the same position, so far as possible, that they would have been in if such implementation and change in currency had not occurred. Except as provided in the foregoing provisions of this Section 6.09 and the requirements of Section 13.10, no such implementation or change in currency nor any economic consequences resulting therefrom shall (i) give rise to any right to terminate prematurely, contest, cancel, rescind, alter, modify or renegotiate the provisions of this Agreement or (ii) discharge, excuse or otherwise affect the performance of any obligations of any Borrower under this Agreement, any Notes or other Loan Documents. 86 93 ARTICLE VII Conditions to Making Loans 7.01 Conditions of Initial Advance. The obligation of the Lenders to make the initial Advance is subject to the following conditions precedent: (a) The Global Agent shall have received, on the Closing Date in form and substance satisfactory to the Agents and the Lenders the following: (i) executed originals of each of this Agreement and the Notes and the other Loan Documents, together with all schedules and exhibits thereto in form and substance satisfactory to the Agents and the Lenders; (ii) favorable written opinion of counsel to the Company as US Facility Borrower and Guarantor, and special U.S. counsel to each other Borrower dated the Closing Date, addressed to the Agents and the Lenders and satisfactory to special counsel to the Global Agent, substantially in the form of Exhibit G attached hereto; (iii) resolutions of the board of directors (or of the appropriate committee thereof) of each of the Borrowers certified by its secretary or assistant secretary as of the Closing Date, appointing the initial Authorized Representatives and approving and adopting the Loan Documents to be executed by such Borrower, and authorizing the execution and delivery thereof; specimen signatures of officers of each Borrower executing the Loan Documents, certified by the Secretary or Assistant Secretary of such Borrower; (iv) the Organizational Documents of each of the Borrowers certified as of a recent date by the Secretary of State or comparable official of its jurisdiction of organization or, if no such certification is available, by the secretary or assistant secretary of such Borrower; (v) the Operating Documents of each of the Borrowers certified as of the Closing Date as true and correct by the secretary or assistant secretary of such Borrower; (vi) certificates issued as of a recent date by the Secretary of State or comparable official of the jurisdiction of the formation of each of the Borrowers as to the corporate good standing of such Borrower therein; (vii) notice(s) of appointment of the initial Authorized Representatives; (viii) all fees payable by the Borrowers on the Closing Date to the Agents and the Lenders; (ix) evidence satisfactory to the Global Agent of the repayment in full and termination of each of the Prior Facilities simultaneously with the making of the initial Advances hereunder, and the agreement to terminate any Liens on assets securing any 87 94 obligations under any of the Prior Facilities which termination shall be effected with reasonable promptness following the Closing Date; (x) financial statements of the Borrower and its Subsidiaries required to be delivered pursuant to Section 8.02(b)(i) hereof; (xi) a certificate of an Authorized Representative of the Company reasonably satisfactory to the Agents and the Lenders as to the matters set forth in Section 7.01(b)(ii) through (iv) and 7.01(c)(i); and (xii) such other documents, instruments, certificates and opinions as any Agent or any Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby; (b) Each of the following shall have occurred or be true: (i) The Global Agent shall have completed all due diligence with respect to the Company and its Subsidiaries in scope and determination satisfactory to the Global Agent in its sole discretion; (ii) There shall not be any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (a) purports to affect the transactions contemplated hereby, (b) would reasonably be expected to have a Material Adverse Effect or (c) would reasonably be expected to have a material adverse effect on the ability of the Loan Parties to perform their respective obligations hereunder or under the other Loan Documents; (iii) The Company and its Subsidiaries shall be in compliance with all existing financial and material contractual obligations before and immediately after giving effect to the financings and other transactions contemplated hereby; (iv) The Company and its Subsidiaries shall have received all government, shareholder and third-party approvals, consents and waivers, and shall have made or given all necessary filings and notices, as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any court or other Governmental Authority or arbitral authority, (B) any Organizational Document or Operating Agreements of the Company or any Subsidiary or (C) any agreement, document or instrument to which any of the Company or any Subsidiary is a party or by which any of them or their properties is bound, if such default, conflict or violation would reasonably be expected to result in a Material Adverse Effect; and all applicable waiting periods shall have expired without any action being taken or threatened in writing by any authority that could restrain, prevent or impose any material adverse conditions on the making of any Loan or other transactions contemplated hereby, and no law or regulation shall be applicable which would reasonably be expected to have a Material Adverse Effect; and 88 95 (c) In the good faith judgment of the Agents and the Lenders: (i) There shall not have occurred a material adverse change in the business, assets, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole since February 28, 1998 or in the facts or information regarding such entities most recently delivered to the Global Agent by the Company or any Borrower; (ii) There shall not have occurred and be continuing a material adverse change in the market for syndicated credit facilities similar in nature to the Facilities or a material disruption of, or a material adverse change in, financial, banking or capital market conditions, in each case as determined by the Global Agent in its reasonable discretion. 7.02 Conditions of Loans. The obligations of the Lenders to make any Advances on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Applicable Facility Agent under a specific Facility shall have received a Borrowing Notice if required hereby; (b) the representations and warranties of the Borrowers set forth in Article VII hereof and in each of the other Loan Documents shall be true and correct on and as of the date of such Advance, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in Section 8.02(b) shall be deemed to be those financial statements most recently delivered to the Agents and the Lenders pursuant to Section 9.01 hereof; (c) at the time of each such Advance, no Default or Event of Default shall have occurred and be continuing; (d) immediately after giving effect to a US Facility Advance, (i) the US Facility Outstandings shall not exceed the Total US Facility Commitment and (ii) the US Facility Revolving Credit Outstandings shall not exceed the US Facility Revolving Credit Facility; (e) immediately after giving effect to a Canadian Facility Advance, (i) the Canadian Facility Outstandings shall not exceed the Total Canadian Facility Commitment, (ii) the Canadian Facility Renewable Tranche Outstandings shall not exceed the Canadian Facility Renewable Tranche Commitment, and (iii) the Canadian Facility Full Maturity Tranche Outstandings shall not exceed the Canadian Facility Full Maturity Tranche Commitment; (f) immediately after giving effect to a UK Facility Advance, (i) the UK Facility Outstandings shall not exceed the Total UK Facility Commitment and the French Franc Outstandings shall not exceed the Total French Franc Commitment, and (ii) the aggregate amount borrowed by, and outstanding to, any UK Facility Borrower shall not exceed its UK Facility Maximum Amount; 89 96 (g) immediately after giving effect to an Australian Facility Advance, (i) the Australian Facility Outstandings shall not exceed the Total Australian Facility Commitment and the New Zealand Dollar Outstandings shall not exceed the Total New Zealand Dollar Commitment, and (ii) the aggregate amount borrowed by, and outstanding to, any Australian Facility Borrower shall not exceed its Australian Facility Maximum Amount. Each request for a borrowing, Continuation or Conversion of Loans shall constitute a representation and warranty by the Borrowers that the conditions set forth in clauses (b) and (c) above have been satisfied as of the date thereof and that as of the date of such Advance there has not been any material adverse change in the business, operations or financial condition of the Company and its Subsidiaries. 90 97 ARTICLE VIII Representations and Warranties 8.01 Representations and Warranties as to Borrowers and Subsidiaries. Each Borrower represents and warrants to and in favor of the Agents and each Lender with respect to itself and to its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans) that: (a) Organization and Authority. (i) each Borrower and each of its Subsidiaries is an entity duly organized and validly existing under the laws of the jurisdiction of its formation; (ii) each Borrower and each of its Subsidiaries (A) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted, and (B) is qualified to do business in every jurisdiction in which failure so to qualify would have a Material Adverse Effect; (iii) each Borrower has the requisite power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party, including without limitation, in the case of the Company, the Guaranty; and (iv) when executed and delivered, each of the Loan Documents to which such Borrower is a party will be valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity). (b) Loan Documents. The execution, delivery and performance by each Borrower of each of the Loan Documents to which it is a party: (i) have been duly authorized by all requisite Organizational Action (including any required shareholder approval) of such Borrower required for the lawful execution, delivery and performance thereof; (ii) do not violate any provisions of (A) applicable law, rule or regulation, (B) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral authority binding on such Borrower or its Subsidiaries or its or their properties, (C) the Organizational Documents or Operating Documents of such Borrower or its Subsidiaries or (D) any provisions of any indenture, agreement or other instrument to which such Borrower or any of its 91 98 Subsidiaries is a party, or by which the properties or assets of such Borrower or its Subsidiaries are bound; (iii) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time, or both, would constitute an event of default, under any contract, indenture, agreement or other instrument or document to which the Borrower or any of its Subsidiaries is a party or by which any of their properties are bound; and (iv) does not and will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Borrower or any of its Subsidiaries. (c) Solvency. Each Borrower and each of its Subsidiaries is Solvent after giving effect to the transactions contemplated by this Agreement and the other Loan Documents and assuming an Advance on the Closing Date equal to the Applicable Total Facility Commitment for the Facility in which such Borrower is an Applicable Borrower. 8.02 Representations and Warranties of the Company. The Company represents and warrants with respect to itself and its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans) that: (a) Subsidiaries and Stockholders. It has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 8.02(a) hereto and additional Subsidiaries acquired after the Closing Date as permitted under Section 10.08 hereof. The outstanding shares or other equity interests (including options, warrants and other rights to acquire any interest) of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and the Company and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in Schedule 8.02(a), free and clear of any Lien. (b) Financial Condition. (i) The Company has heretofore furnished to each Lender an audited unqualified consolidated balance sheet of the Company and its Subsidiaries as at February 28, 1998 and the notes thereto and the related consolidated statements of income, stockholders' equity and cash flow for the Fiscal Year then ended, all as examined and certified by Ernst & Young, LLP. Except as set forth therein, such financial statements (including the notes thereto) present fairly the financial condition of the Company and its Subsidiaries as of the end of such Fiscal Year and results of their operations and the changes in their stockholders' equity for the Fiscal Year then ended, all in conformity with Generally Accepted Accounting Principles applied on a Consistent Basis. Except as disclosed therein, neither the Company nor any Subsidiary has, as of the date hereof, any known and material direct liability; 92 99 (ii) since the later of (A) the date of the audited financial statements delivered pursuant to Section 8.02(b)(i) hereof or (B) the date of the audited financial statements most recently delivered pursuant to Section 9.01(a) hereof, the Company and its Subsidiaries have not suffered or endured any Material Adverse Effect; and (iii) except as set forth in (A) the audited financial statements delivered pursuant to Section 8.02(b)(i) hereof or (B) the audited financial statements most recently delivered pursuant to Section 9.01(a) hereof, the Company and its Subsidiaries have not incurred, other than in the ordinary course of business, any material Contingent Obligation or other liability, obligation or commitment, contingent or otherwise, which remain outstanding or unsatisfied. (c) Title to Properties. The Company and its Subsidiaries have good and marketable title to all their respective real and personal properties, subject to no transfer restrictions, or Liens of any kind, except for the transfer restrictions and Liens permitted under Section 10.03 hereof. (d) Taxes. The Company and its Subsidiaries have filed or caused to be filed all federal, state and local tax returns which are required to be filed by them and, except for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which satisfactory reserves reflected in the financial statements described in Section 8.02(b)(i) as required by Generally Accepted Accounting Principles have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by them, to the extent that such taxes have become due. (e) Other Agreements. Neither the Company nor any Subsidiary is (i) a party to or subject to any judgment, order, decree or any agreement or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect; or (ii) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Company or any Subsidiary is a party, which default, if not remedied within any applicable grace period, could reasonably be expected to result in a Material Adverse Effect. (f) Litigation. Except as set forth on Schedule 8.02(f) attached hereto, there is no action, suit, investigation or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the best knowledge of the Company, threatened by or against the Company or any Subsidiary or affecting the Company or any Subsidiary or any properties or rights of the Company or any Subsidiary, which, if determined adversely to the Company or such Subsidiary, could reasonably be expected to result in a Material Adverse Effect. 93 100 (g) Margin Stock. The proceeds of the borrowings made hereunder will be used by the Company and the other Borrowers only for the purposes set forth in Section 2.11, Section 3.11, Section 4.11 and Section 5.11 hereof. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock (as such term is defined in Regulation U, as amended (12 C.F.R. Part 221), of the Board) or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Company nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, or the Securities Act of 1933, or any state securities laws, in each case as in effect on the date hereof. (h) Intellectual Property. The Company and its Subsidiaries own or have the right to use, under valid license agreements or otherwise, all patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets, copyrights and know how necessary and material to the conduct of their businesses as now conducted, in all cases without known conflict with any patent, license, franchise, trademark, trade secret and confidential commercial or proprietary information, trade name, copyright, rights to trade secrets or other proprietary rights of any other Person. (i) No Untrue Statement. Neither (a) this Agreement or any other Loan Document or certificate or document executed and delivered by or on behalf of the Company or any other Borrower or any Subsidiary in accordance with or pursuant to any Loan Document nor (b) any statement, representation or warranty provided to the Agents in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading. (j) No Consents, Etc. Neither the respective businesses or properties of the Company or any Subsidiary nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of the Company or any Borrower or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by, this Agreement or the other Loan Documents, or if so, such consent, approval, authorization, filing, registration or qualification has been duly obtained or effected, as the case may be. 94 101 (k) ERISA. (i) The Company, each ERISA Affiliate and each Subsidiary is in compliance with all applicable provisions of ERISA, the Code and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired and except for failures to so comply that would not, in the aggregate, reasonably be expected to result in a Material Adverse Effect. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined, or the Company or such ERISA Affiliate or its Subsidiaries is in the process of obtaining a determination by the Internal Revenue Service, to be so qualified, each trust related to such Employee Benefit Plan has been determined to be exempt under Section 501(a) of the Code, and each Employee Benefit Plan subject to any Foreign Benefit Law has received the required approvals by any Governmental Authority regulating such Employee Benefit Plan, except for such qualifications, exemptions and approvals the absence of which could not reasonably be expected to result in a Material Adverse Effect. No material liability has been incurred by the Company or any ERISA Affiliate (including, without limitation, taxes, penalties, funding deficiencies and required contributions, installments or other payments) which remains unsatisfied with respect to any Employee Benefit Plan or any Multiemployer Plan. No Termination Event has occurred or is reasonably expected to occur with respect to any Employee Benefit Plan, and neither the Company nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan, which event or liability could reasonably be expected to result in a Material Adverse Effect; and (ii) To the best of the Company's knowledge, each Employee Benefit Plan subject to Title IV of ERISA or the funding of which is regulated by any Foreign Benefit Law, maintained by the Company, any ERISA Affiliate or any Subsidiary, has been administered in accordance with its terms and is in compliance in all material respects with all applicable requirements of ERISA and other applicable laws, regulations and rules and any applicable Foreign Benefit Law. (l) No Default. As of the date hereof, there does not exist any Default or Event of Default hereunder. (m) Hazardous Materials. The Company, each Borrower and each Subsidiary are in compliance with all applicable Environmental Laws, except for such noncompliance that could not reasonably be expected to result in a Material Adverse Effect, and have been issued and maintain all required federal, state and local permits, licenses, certificates and approvals pertaining to Hazardous Materials that are necessary to the conduct of their businesses, except for any such permits, licenses, certificates or approvals the absence of which could not reasonably be expected to result in a Material Adverse Effect. Neither the Company, any Borrower nor any Subsidiary has been notified of any pending or threatened action, suit, 95 102 proceeding or investigation, and neither the Company, any Borrower nor any Subsidiary is aware of any fact, which (A) calls into question, or could reasonably be expected to call into question, compliance by the Company, any Borrower or any Subsidiary with any Environmental Laws, except for such noncompliance that could not reasonably be expected to result in a Material Adverse Effect, or (B) seeks, or could reasonably be expected to form the basis of a meritorious proceeding to seek to suspend, revoke or terminate any license, permit, certification or approval necessary for the operation of the Company's or any Subsidiary's facility or the generation, handling, storage, treatment or disposal of any Hazardous Material that is necessary to the conduct of its business, except for any such license, permit, certification or approval the absence of which could not reasonably be expected to result in a Material Adverse Effect, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Company or any Subsidiary to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law, which such restrictions could reasonably be expected to have a Material Adverse Effect, or (iv) constitutes a reasonable basis to conclude that the Company or any Subsidiary is a potentially responsible party with regard to any release or threatened release of a Hazardous Material. (n) Year 2000 Compliance. The Company has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer hardware and software applications used by the Borrower or any of its Subsidiaries (or suppliers, vendors and customers) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and time line for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, the Company believes that all computer hardware and software applications (including those of its suppliers, vendors and customers) that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. 96 103 ARTICLE IX Affirmative Covenants Until the Total Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Company will and will cause each Subsidiary to: 9.01 Financial Reports, Etc. (a) As soon as practical and in any event within 95 days after the end of each Fiscal Year of the Company, deliver or cause to be delivered to the Agents and each Lender (i) consolidated balance sheets of the Company and its Subsidiaries as at the end of such Fiscal Year, and the notes thereto, and the related consolidated statements of income, stockholders' equity and cash flow and the respective notes thereto for such Fiscal Year, setting forth in each case comparative financial statements for the preceding Fiscal Year, all prepared in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis and containing, with respect to the consolidated financial statements, opinions of Ernst & Young, LLP, or such other independent certified public accountants selected by the Company and approved by the Required Lenders, which are unqualified as to the scope of the audit performed and as to the "going concern" status of the Company and its Subsidiaries and without any exception not acceptable to the Lenders; (ii) a copy of the Company's Form 10-K as filed with the Securities and Exchange Commission; and (iii) a certificate of an Authorized Representative demonstrating compliance with Sections 10.01 and 10.02 of this Agreement as of such Fiscal Year end, its Debt Ratings by S&P and Moody's as of such Fiscal Year end and the Outstandings under each Facility as of such Fiscal Year end, which certificate shall be in the form attached as Exhibit H; (b) as soon as practical and in any event within 50 days after the end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year) of the Company, deliver to the Agents and each Lender (i) consolidated balance sheets of the Company and its Subsidiaries as at the end of such fiscal quarter and the related consolidated statements of income, stockholders' equity and cash flow for such fiscal quarter and for the period from the beginning of the Fiscal Year through the end of such reporting period, prepared without notes and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Company and its Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in GAAP with respect to interim financials; (ii) a copy of the Company's Form 10-Q for such quarterly period as filed with the Securities and Exchange Commission; and (iii) a certificate of an Authorized Representative as of such fiscal quarter end similar to that required pursuant to Section 9.01(a)(iii); (c) promptly upon their becoming available to the Company, deliver to the Agents and each Lender a copy of (i) all regular or special reports or effective registration statements which the Company or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, and (ii) all reports, proxy statements, financial statements and 97 104 other information distributed by the Company to its stockholders, bondholders or the financial community in general; and (d) promptly, from time to time, deliver or cause to be delivered to the Agents or to each Lender such other information regarding the Company's and each Subsidiary's operations, business affairs and financial condition as any such Agent or Lender may reasonably request to the extent such statements exist. The Agents and the Lenders are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agents, to any Governmental Authority having jurisdiction over any of the Agents or the Lenders pursuant to any written request therefor or in the ordinary course of examination of loan files, or to any other Person who shall acquire or consider the acquisition of a participation interest in or assignment of any Loan permitted by this Agreement. 9.02 Maintain Properties. Maintain all properties necessary to its operations in good working order and condition, ordinary wear and tear excepted, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all trademarks, trade names, patents, copyrights, trade secrets, know-how and other intellectual property and proprietary information (or adequate licenses thereto), in each case as are necessary to conduct its business as currently conducted or as contemplated hereby, all in accordance with customary business practices. 9.03 Existence, Qualification, Etc. Except as otherwise expressly permitted under Section 10.05 hereof, do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, trade names, trademarks and permits and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary and in which the failure to maintain such license or qualification could reasonably be expected to result in a Material Adverse Effect. 9.04 Regulations and Taxes. Comply with or contest in good faith by appropriate proceedings diligently conducted all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, might become a Lien against any of its properties except liabilities being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves as required by GAAP have been established. 9.05 Insurance. Maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies of such types and in such amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. 9.06 True Books. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by Generally Accepted Accounting Principles with respect to doubtful accounts and 98 105 all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. 9.07 Right of Inspection. Permit any Person designated by any Lender or any Agent, at such Lender's or Agent's expense, to visit and inspect any of the properties, corporate books and financial reports of the Company and its Subsidiaries, and to discuss its affairs, finances and accounts with its principal officers and independent certified public accountants, all at such reasonable times, at reasonable intervals and with reasonable prior notice; provided, however, that following the occurrence and during the continuation of any Default or Event of Default, such visits or inspections shall be at the expense of the Company. 9.08 Observe all Laws. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of its business. 9.09 Covenants Extending to Subsidiaries. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Company in Sections 9.02 through 9.08, inclusive, Section 9.14 and Section 9.16. 9.10 Officer's Knowledge of Default. Upon any executive officer of the Company obtaining knowledge of the occurrence of any Default or Event of Default hereunder or under any other obligation of the Company or any Subsidiary to any Lender, or any event, development or occurrence which could reasonably be expected to result in a Material Adverse Effect, cause such executive officer or an Authorized Representative promptly to notify the Agents and each of the Lenders of the nature thereof, the period of existence thereof, and what action the Company or such Subsidiary proposes to take with respect thereto. 9.11 Suits or Other Proceedings. Upon any executive officer of the Company obtaining knowledge of any litigation, dispute or other proceedings being instituted or threatened against the Company or any Subsidiaries, or any attachment, levy, execution or other process being instituted against any assets of the Company or any Subsidiaries, making a claim or claims in an aggregate amount greater than $10,000,000 not otherwise covered by insurance, or could reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, cause such executive officer or an Authorized Representative promptly to deliver to the Agents and each of the Lenders written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. 9.12 Environmental Compliance. (a) If the Company or any Subsidiary shall receive in writing any letter, notice, complaint, order, directive, claim or citation alleging that the Company or any Subsidiary (i) has violated any Environmental Law, (ii) has released or is about to release any Hazardous Material other than in compliance with all Environmental Laws (or suffered or permitted such action by any other Person on or in respect of property owned or operated by the Company or any Subsidiary or any other Person handling, transporting, or disposing of any Hazardous 99 106 Material on behalf of the Company or any Subsidiary), or (iii) is liable for the costs of cleaning up, removing, remediating or responding to a release or threatened release of Hazardous Materials, which allegation in any of the foregoing instances, if true, could reasonably be expected to result in a Material Adverse Effect, the Company and any Subsidiary shall (a) provide prompt written notice thereof to the Agents describing in reasonable detail the nature of the matter and what action the Company or the applicable Subsidiary proposes to take with respect thereto, and (b) within the time period permitted by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability, unless and only during the period that the applicability of the Environmental Law, the fact of such violation or liability or the action required to remove or remedy such violation is being contested by the Company or the applicable Subsidiary by appropriate proceedings diligently conducted and all reserves with respect thereto as may be required under Generally Accepted Accounting Principles, if any, have been made, and no Lien in connection therewith shall have attached to any property of the Company or the applicable Subsidiary which shall have become enforceable against creditors of such Person. (b) Except for Hazardous Materials necessary for the routine maintenance of the properties owned or operated by the Company and its Subsidiaries or as brought on to such properties in the ordinary course of the Company's or any Subsidiary's business, which Hazardous Material shall be used in compliance in all material respects with all applicable Environmental Laws, the Company covenants that it shall, and shall cause each Subsidiary to, not permit any Hazardous Materials to be brought on to the real property owned or operated by the Company and its Subsidiaries, or if so brought or found located thereon, shall be immediately removed, with proper disposal, and all environmental cleanup requirements shall be diligently undertaken pursuant to all Environmental Laws unless the presence of such Hazardous Materials could not reasonably be expected to result in a Material Adverse Effect. 9.13 Further Assurances. At the Borrowers' cost and expense, upon request of any of the Agents, duly execute and deliver or cause to be duly executed and delivered, to the Agents such further instruments, documents and certificates, and do and cause to be done such further acts that may be reasonably necessary or advisable in the opinion of the Agents or any of them to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. 9.14 Continued Operations. Continue at all times to conduct its business and engage principally in the same line or lines of business substantially as heretofore conducted. 9.15 Use of Proceeds. Use the proceeds of the Loans solely for the purposes specified in Sections 2.11, 3.11, 4.11 and 5.11, as applicable. 9.16 Year 2000 Compliance. (a) At the reasonable request of any Agent or Lender, make available to such Agent or Lender the plan and time line referred to in Section 8.02(n)(ii), together with any updates or progress reports with respect thereto; and 100 107 (b) Notify the Agents and the Lenders in the event the Company discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 Compliant, except to the extent that such failure could not reasonably be expected to result in a Material Adverse Effect. 101 108 ARTICLE X Negative Covenants Until the Total Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Company will not, nor will it permit any Subsidiary to: 10.01 Consolidated Funded Indebtedness to Consolidated Total Capitalization. Permit the ratio of Consolidated Funded Indebtedness to Consolidated Total Capitalization to exceed 0.50 to 1.00 at any time. 10.02 Consolidated EBIT to Consolidated Interest Expense. Permit the ratio of Consolidated EBIT to Consolidated Interest Expense for the Four-Quarter Period immediately preceding the date of computation to be less than 3.00 to 1.00 at any time. 10.03 Liens. Incur, create or permit to exist any Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by the Company or any of its Subsidiaries, other than (a) Liens existing as of the date hereof, none of which were granted in connection with any of the Prior Facilities, and (i) as set forth in Schedule 10.03 attached hereto, (ii) as otherwise exist in France, South Africa and Mexico or (iii) which attach only to office or retail equipment; (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted, and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Generally Accepted Accounting Principles; (c) statutory or contractual Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted, and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Generally Accepted Accounting Principles; (d) Liens incurred or deposits made (i) in the ordinary course of business (including, without limitation, performance and surety bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or (ii) to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; 102 109 (e) easements (including reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments or title defects, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) affecting real property, which do not interfere materially with the ordinary conduct of the business of the Company or any Subsidiary and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to the Company or any Subsidiary; (f) purchase money Liens to secure Indebtedness for Money Borrowed incurred to purchase fixed assets, provided such Indebtedness represents not more than 100% of the purchase price of such assets as of the date of purchase thereof and no property other than the assets so purchased secures such Indebtedness; (g) Liens arising in connection with Capital Leases provided that no such Lien shall extend to or cover any property or assets other than assets subject to the Capital Leases; and (h) other Liens not otherwise permitted by paragraphs (a) through (g) of this Section 10.03 to secure Indebtedness for Money Borrowed in an aggregate principal amount outstanding that does not result in a Default under Section 10.01 or 10.02. 10.04 Transfer of Assets. Sell, lease, transfer or otherwise dispose of any assets of the Company or any Subsidiary other than: (a) dispositions of inventory in the ordinary course of business; (b) dispositions of assets or property that are (i) substantially worn, damaged, obsolete, (ii) in the judgment of the Company, no longer useful in its business or that of any Subsidiary or (iii) replaced within a reasonable period of time with assets, property of similar or better quality performing similar functions; and (c) transfers of assets necessary to give effect to merger or consolidation transactions permitted by Section 10.05. 10.05 Merger or Consolidation. (a) Consolidate with or merge into any other Person; or (b) permit any other Person to merge into it; provided, however, that any Person may merge into the Company or any other Borrower so long as no Default or Event of Default occurs or is created or results from such transaction; and provided further, that any Subsidiary which is not a Borrower may merge with and into any other entity if the survivor is or becomes a Subsidiary of the Company. 103 110 10.06 Transactions with Affiliates. Enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any service, with any Affiliate of the Company, except (a) that such Persons may render services to the Company or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b) that the Company or any Subsidiary may render services to such Person for compensation at the same rates generally charged by the Company or such Subsidiary, (c) in the case of either (a) or (b), in the ordinary course of business and pursuant to the reasonable requirements of the Company's (or any Subsidiary's) business and consistent with past practice of the Company and its Subsidiaries and upon fair and reasonable terms no less favorable to the Company (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate, and (d) that the Company or its Subsidiaries may continue those transactions described on Schedule 10.06 attached hereto. 10.07 ERISA. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in any material liability on the part of the Company, any ERISA Affiliate, or any Subsidiary to the PBGC or any Governmental Authority; or (b) permit the present value of all benefit liabilities under all Employee Benefit Plans to exceed materially the current value of the assets of such Employee Benefit Plans allocable to such benefit liabilities; or (c) permit any material accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; or (d) fail to make any contribution or payment to any Multiemployer Plan which the Company or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (e) engage, or permit the Company or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a material civil penalty pursuant to Section 502(I) of ERISA or a material tax pursuant to Section 4975 of the Code may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in material liability to the Company or any ERISA Affiliate or any Subsidiary or materially increase the obligation of the Company or any ERISA Affiliate or any Subsidiary to a Multiemployer Plan; or 104 111 (g) fail, or permit the Company or any ERISA Affiliate or any Subsidiary to fail, to establish, maintain and operate each Employee Benefit Plan in compliance with the provisions of ERISA, the Code, all applicable Foreign Benefit Laws and all other applicable laws and the regulations and interpretations thereof except for such failure that could not reasonably be expected to result in a Material Adverse Effect. 10.08 Acquisitions. Enter into any agreement, contract, binding commitment or other arrangement providing for, or otherwise effect, the acquisition of a controlling equity or other ownership interest in, or all or substantially all of the assets of, any Person, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any such acquisition, other than Permitted Acquisitions. 10.09 Negative Pledge. Enter into or cause, suffer or permit to exist any agreement with any Person other than the Agents and the Lenders pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of the Company or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 10.10 Dissolution, Etc. Wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, except in connection with a merger or consolidation permitted pursuant to Section 10.05 hereof. 10.11 Restrictive Agreements. Enter into or cause, suffer or permit to exist any agreement with any other Person which prohibits, limits or restricts the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrowers by way of dividends, advances, repayments of loans or advances, or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrowers. 105 112 ARTICLE XI Events of Default and Acceleration 11.01 Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, when and as the same shall be due and payable whether pursuant to any provision of Article II, Article III, Article IV or Article V hereof, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan or in the due and punctual payment of any other obligation or of any fees or other amounts payable to any of the Lenders or the Agents on the date on which the same shall be due and payable and such default shall continue for five (5) days following the date such payment is due; or (c) if default shall be made in the performance or observance of any covenant set forth in Sections 9.07, 9.10, 9.11, 9.14, 9.15 or 9.16 or Article X hereof; or (d) (i) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement (other than as described in clause (a), (b) or (c) above) and such default shall continue for thirty (30) or more days after the earlier of receipt of notice of such default by the Authorized Representative from any Agent or any Borrower becomes aware of such default, or (ii) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (including without limitation failure of the Guarantor to pay to the Lenders all of the Guarantors' Obligations in accordance with and as defined in, the Guaranty on the Business Day on which such payment has been demanded in accordance with the terms of the Guaranty) or in any instrument or document evidencing or creating any obligation, guaranty, Lien or security interest in favor of any Agent or any Lender or delivered to any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations (beyond any applicable grace period contained therein), or (iii) if any Loan Document ceases to be in full force and effect (other than by reason of any action by any Agent or any Lender), or (iv) if without the written consent of all the Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or by reason of any action by the Agents or any Lender); or 106 113 (e) if there shall occur (i) a default, which is not waived, in the payment of any principal, interest, premium or other amount with respect to any Indebtedness (other than the Loans and other Obligations) of the Company or any Subsidiary and the amount of such Indebtedness is not less than the US Dollar Equivalent Amount of US $20,000,000 in the aggregate outstanding, or (ii) any other event of default as specified in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, and in any such case set forth in clause (i) or (ii) above, such default or event of default shall continue for more than the period of grace, if any, therein specified, or such default or event of default shall permit (or, with the giving of notice or lapse of time or both, would permit) the holder of any such Indebtedness (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained herein or in any other Loan Document shall be false or misleading in any material respect when given; or (g) if the Company or any Subsidiary shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a custodian, receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking receivership, liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Company or any Subsidiary or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the Company or any Subsidiary seeking receivership, liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country or province thereof, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Company or any Subsidiary or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Company or any Subsidiary any proceeding or petition seeking receivership, liquidation, reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country or province thereof, which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Company or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or 107 114 (i) if (i) one or more judgments or orders for the payment of money where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in an aggregate amount in excess of the US Dollar Equivalent Amount of US $20,000,000 is rendered against the Company or any Subsidiary, or (ii) there is any attachment, injunction or execution against any of the Company's or any Subsidiary's properties for any amount in excess of the US Dollar Equivalent Amount of US $20,000,000 in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (j) if there shall occur any Change of Control; then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall then be continuing, (A) either or both of the following actions may be taken: (i) the Global Agent, with the consent of the Required Lenders with respect to the Total Facilities, may, and at the direction of the Required Lenders with respect to the Total Facilities, shall, declare any obligation of the Lenders to make further Loans terminated, whereupon the obligation of each Lender to make further Loans hereunder shall terminate immediately, and (ii) the Global Agent shall at the direction of the Required Lenders with respect to the Total Facilities, at their option, declare by notice to the Borrowers any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrowers to the Agents and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligations of the Lenders to make Loans hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Global Agent or the Required Lenders with respect to the Total Facilities or notice by the Global Agent or the Required Lenders with respect to the Total Facilities; provided further, however, that neither the Required Lenders with respect to a specific Facility nor the Applicable Facility Agent shall have any power or authority under this Section 11.01 separate or apart from that of the Required Lenders of the Total Facilities; and (B) The Agents and each of the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. 11.02 Global Agent to Act. In case any one or more Events of Default shall occur and be continuing, the Global Agent may, and at the direction of the Required Lenders with respect to the Total Facilities shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or 108 115 other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. 11.03 Cumulative Rights. No right or remedy herein conferred upon the Lenders or the Agents is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. 11.04 No Waiver. No course of dealing between the Borrowers and any Lender or any Agent or any failure or delay on the part of any Lender or any Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. 11.05 Allocation of Proceeds. If an Event of Default has occurred and not been waived, and the maturity of the Obligations has been accelerated pursuant to Article XI hereof, all payments received by the Agents hereunder in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrowers hereunder shall be applied by the Agents in the following order: (a) amounts due to the Lenders pursuant to Sections 2.09, 3.09, 4.09, 5.09 and 13.05 hereof, to be applied for the ratable benefit of the lenders without distinction or preference as among facilities; (b) amounts due to the Agents pursuant to Section 12.08 hereof, to be applied for the ratable benefit of the Agents; (c) payments of interest on Loans, to be applied for the ratable benefit of the Lenders, without distinction or preference as among Australian Facility Loans, Canadian Facility Loans, UK Facility Loans and US Facility Loans; (d) payments of principal on Loans, to be applied for the ratable benefit of the Lenders, without distinction or preference as among Australian Facility Loans, Canadian Facility Loans, UK Facility Loans and US Facility Loans; (e) amounts due to the Agents or the Lenders pursuant to Section 13.10, to be applied for the ratable benefit of the Agents and the Lenders; (f) payments of all other Obligations due under any of the Loan Documents, if any, to be applied for the ratable benefit of the Lenders and the Agents; and (g) any surplus remaining after application as provided for herein, to the Borrowers or as otherwise may be required by applicable law. 109 116 11.06 Judgment Currency. The Borrowers, the Agents and each Lender hereby agree that if, in the event that a judgment is given in relation to any sum due to any Agent or any Lender hereunder, such judgment is given in a currency (the "Judgment Currency") other than that in which such sum was originally denominated (the "Original Currency"), the Borrowers agree to indemnify such Agent or Lender, as the case may be, to the extent that the amount of the Original Currency which could have been purchased thereby in accordance with normal banking procedures on the Business Day following receipt of such sum is less than the sum which could have been so purchased thereby had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding the giving of such judgment, and if the amount so purchased exceeds the amount which could have been so purchased thereby had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding such judgment, such Agent or Lender agrees to remit such excess to the Borrowers. The agreements in this Section 11.06 shall survive payment of any such judgment. 11.07 Funding and Payment of Participations; Conversion to US Dollars. (a) At any time after the occurrence and during the continuance of an Event of Default, the Applicable Lenders having Applicable Fronting Commitments aggregating more than 50% of the Applicable Total Facility Commitment with respect to any specific Facility (the "Required Fronting Lenders") may, by written notice to the Applicable Facility Agent (with a copy to the Company and the Global Agent) not later than 11:00 A.M. (local time of the Principal Office of the Applicable Facility Agent) on the second Business Day preceding the proposed date of funding and payment by each Lender of all Participations purchased in such Facility as provided in Article II, Article III, Article IV, or Article V hereof (the "Facility Participation Payment Date"), request each Lender to fund and pay for its Participation in such Facility and deliver to the Applicable Facility Agent on the Facility Participation Payment Date an aggregate amount of the Applicable Currency equal to such Participation (or the British Pounds Sterling Equivalent Amount or Australian Dollar Equivalent Amount of such Participation, as applicable). At the option of such Required Fronting Lenders, and as set forth in such notice, (i) all outstanding Loans under such Facility immediately shall be converted into Loans denominated in US Dollars in an aggregate principal amount equal to the US Dollar Equivalent Amount of the aggregate principal amount of such Loans based on the Spot Rate of Exchange on such Facility Participation Payment Date, and (ii) each such Participation shall be funded in an aggregate amount of US Dollars equal to the US Dollar Equivalent Amount of such Participation. The Applicable Facility Agent will promptly provide written notice of any such request to the other Facility Agents, who shall promptly provide notice thereof to the Lenders in their respective Facilities. (b) On the applicable Facility Participation Payment Date, each Participant in the specific Facility shall deliver the amount of such Participant's Facility Participation Amount with respect to such Facility in the Applicable Currency and in Same Day Funds to the Applicable Facility Agent; provided, however, that no Participant shall be responsible for any default by any other Participant in such other Participant's obligation to pay such amount. Upon receipt of any such amounts from the Participants, the Applicable Facility Agent shall distribute such amounts in Same Day Funds to the Applicable Lenders in such amounts such that, after such distribution, each Applicable Lender and 110 117 each Participant in such Facility has a Facility Credit Exposure under such Facility, expressed as a percentage of the Aggregate Facility Credit Exposure under such Facility, equal to its Applicable Commitment Percentage. In order to evidence further such Participation (and without prejudice to the effectiveness of the Participation provisions set forth above), each Participant agrees to enter into a separate participation agreement at the request of any Applicable Lender in such Facility in form and substance reasonably satisfactory to such Lender. (c) In the event that any Participant fails to make available to the Applicable Facility Agent the amount of its Participation as provided herein, the Applicable Facility Agent shall be entitled to recover such amount on behalf of the Applicable Lenders on demand from such Participant together with interest at the customary rate set by such Applicable Facility Agent for the correction of errors among banks for three (3) Business Days and thereafter at a rate per annum equal to the Applicable Base Rate with respect to such Facility (or, with respect to the UK Facility, the Default Rate). A certificate of the Applicable Facility Agent submitted to any Lender with respect to amounts owing hereunder shall be conclusive in the absence of manifest error. (d) In the event that any Applicable Lender in a specific Facility receives a payment in respect of any Loan made under such Facility, whether directly from the Applicable Borrower or Borrowers or otherwise, in which Participants have purchased Participations, such Applicable Lender shall promptly distribute to the Applicable Facility Agent, for distribution to each such Participant that has paid all such amounts payable by it hereunder with respect to any Loan made under such Facility by such Applicable Lender, such Participant's Applicable Commitment Percentage of such payment. Any payment to any Participant pursuant to the preceding sentence shall be made in US Dollars or Applicable Currency (whichever currency was delivered for payment of such Participation) in Same Day Funds by such Applicable Facility Agent. If any payment received by any Applicable Lender in a specific Facility pursuant to the immediately preceding sentence with respect to any Loan made under such Facility by it shall be required to be returned by such Applicable Lender after such time as such Applicable Lender has distributed such payment to the Applicable Facility Agent, each Participant that has received a portion of such payment shall pay to such Applicable Lender an amount equal to its Applicable Commitment Percentage of such amount to be returned; provided, however, that no Participant shall be responsible for any default by any other Participant in that other Participant's obligation to pay such amount. (e) Anything contained herein to the contrary notwithstanding, each Participant's obligation to pay for its purchase of Participations pursuant to subsection (a) shall be absolute, irrevocable and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender or Participant may have against any Applicable Lender, the Applicable Facility Agent, any Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default or a Default; (iii) any adverse change in the condition (financial or otherwise) of any Borrower; (iv) any breach of this Agreement or any other Loan Document by any Borrower, the Guarantor or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 111 118 (f) Anything contained in this Agreement to the contrary notwithstanding, no amendment, modification, termination or waiver of any provision of this Agreement or of the other Loan Documents, and no consent to any departure by any Borrower therefrom, shall (i) modify, terminate or waive any provision of this Section 11.07 in any manner adverse to any Lender without the written concurrence of such Lender, or (ii) modify, terminate or waive any provision of this Section 11.07 in any manner adverse to any Participant without the written concurrence of such Participant. (g) In no event shall (i) the Participation of any Participant in any Loans pursuant to this Section 11.07 be construed as a loan or other extension of credit by such Participant to any Borrower, any Lender or any Facility Agent, (ii) this Agreement be construed to require any Participant to make any Loans or to otherwise extend any credit to any Borrower, any Lender or any Agent under this Agreement or under the other Loan Documents, or (iii) this Agreement be construed to require any Participant to fund or pay any amount in respect of its Participation in any Loan except as set forth herein. 112 119 ARTICLE XII The Agents 12.01 Appointment, Powers, and Immunities. Each Lender hereby irrevocably appoints and authorizes NationsBank to act as the Global Agent, National City Bank to act as the US Facility Agent, NationsBank to act as the UK Facility Agent, Bank of America Canada to act as the Canadian Facility Agent and Bank of America to act as the Australian Facility Agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Global Agent and the Applicable Facility Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Each Agent (which terms as used in this Article hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Borrower or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Borrower or the satisfaction of any condition or to inspect the property (including the books and records) of any Borrower or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. Each Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 12.02 Reliance by Agents. Each Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telefacsimile) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Borrower), independent accountants, and other experts selected by such 113 120 Agent. As to any matters not expressly provided for by this Agreement, none of the Agents shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders with respect to the Total Facilities, in the case of the Global Agent, or the Required Lenders with respect to a specific Facility or with respect to the Total Facilities, as the context may require, in the case of any Agent, and such instructions shall be binding on all of the Applicable Lenders; provided, however, no Agent shall be required to take any action that exposes it to personal liability or that is contrary to any Loan Document or applicable law or unless it shall first be indemnified to its satisfaction by the Applicable Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 12.03 Defaults. No Agent shall be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless it has received written notice from another Agent or a Lender or a Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default"; provided, that each Lender shall use its best reasonable efforts to deliver such notice to its Applicable Facility Agent upon its knowledge of any Default or Event of Default; provided further, that the failure to deliver such notice shall not result in any liability to any other Lender or Agent. In the event that any Facility Agent receives such a notice of the occurrence of a Default or Event of Default, such Facility Agent shall give prompt notice thereof to the Applicable Lenders in its specific Facility and the other Agents, including the Global Agent. In the event that the Global Agent receives such a notice of the occurrence of a Default or Event of Default, the Global Agent shall give prompt notice thereof to all Facility Agents. The Global Agent shall (subject to Section 12.02 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders with respect to the Total Facilities, provided that, unless and until the Global Agent shall have received such directions, the Global 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 interest of the Lenders. 12.04 Rights as Lender. With respect to its Applicable Facility Commitments and the Loans made by it, each of NationsBank (and any successor acting as Global Agent), National City Bank (and any successor acting as US Facility Agent), NationsBank (and any successor acting as UK Facility Agent), Bank of America Canada (and any successor acting as Canadian Facility Agent) and Bank of America (or any successor acting as Australian Facility Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Global Agent, US Facility Agent, UK Facility Agent, Canadian Facility Agent or Australian Facility Agent, as applicable, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include each of the Agents in its individual capacity. Each of NationsBank (and any successor acting as Global Agent), National City Bank (and any successor acting as US Facility Agent), NationsBank (and any successor acting as UK Facility Agent), Bank of America Canada (and any successor acting as Canadian Facility Agent) and Bank of America (or any successor acting as Australian Facility Agent) and their respective affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Borrower or any of its Subsidiaries or affiliates as if it were not acting as Global Agent, US Facility Agent, UK Facility Agent, Canadian Facility Agent or Australian Facility Agent, 114 121 as applicable, and each of NationsBank (and any successor acting as Global Agent), National City Bank (and any successor acting as US Facility Agent), NationsBank (and any successor acting as UK Facility Agent), Bank of America Canada (and any successor acting as Canadian Facility Agent) and Bank of America (and any successor acting as Australian Facility Agent) and their respective affiliates may accept fees and other consideration from any Borrower or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 12.05 Indemnification. The Lenders agree to indemnify the Agents (to the extent not reimbursed under Section 13.10 hereof, but without limiting the obligations of the Borrowers under such Section), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against any of the Agents (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by any of the Agents under any Loan Document; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agents promptly upon demand for its or their ratable share (based on their Applicable Commitment Percentages) of any costs or expenses payable by the Borrowers under Section 13.06, to the extent that the Agents are not promptly reimbursed for such costs and expenses by the Borrowers. The agreements contained in this Section shall survive payment in full of the Obligations, termination of each Commitment and the occurrence of the Total Facility Termination Date. 12.06 Non-Reliance on Agents and Other Lenders. Each Lender agrees that it has, independently and without reliance on any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrowers and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agents hereunder, the Agents shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Borrower or any of its Subsidiaries or affiliates that may come into the possession of any of the Agents or any of its affiliates. 12.07 Resignation of an Agent. Any of the Agents may resign at any time by giving notice thereof (a) with respect to the resignation of the Global Agent, to the Lenders, the Borrowers and the Facility Agents, and (b) with respect to the resignation of any Applicable Facility Agent, to the Applicable Lenders, the Applicable Borrowers, the Company and the Global Agent. Upon any such resignation of the Global Agent, the Required Lenders with respect to the Total Facilities shall have the right to appoint a successor Global Agent, which shall be a Lender under the Total Facilities at such time and which, so long as no Default or Event of Default exists, shall be acceptable to the Company, which acceptance shall not be unreasonably withheld or delayed. Upon any such 115 122 resignation of an Applicable Facility Agent, the Required Lenders with respect to the specific Facility shall have the right to appoint a successor Facility Agent for such Facility, which shall be a Lender under such Facility at such time and which, so long as no Default or Event of Default exists, shall be acceptable to the Company, which acceptance shall not be unreasonable withheld or delayed. If no successor Global Agent or Applicable Facility Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the retiring Global Agent or Applicable Facility Agent's giving of notice of resignation, then the resignation of the retiring Global Agent or Applicable Facility Agent as the case may be, shall nonetheless thereupon be effective and the Facility Agents, in the case of the Global Agent's resignation, or the Applicable Facility Lenders, in the case of an Applicable Facility Agent's resignation, shall perform all the obligations of the retiring Agent hereunder until such time, if any, as the Required Lenders shall appoint a successor Agent as provided for above. Upon the acceptance of any appointment as Global Agent or Applicable Facility Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Global Agent or Applicable Facility Agent, and the retiring Global Agent or Applicable Facility Agent shall be discharged from its duties and obligations hereunder. After any retiring Global Agent or Applicable Facility Agent's resignation hereunder as Global Agent or Applicable Facility Agent, the provisions of this Article XII 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 Global Agent or Applicable Facility Agent. 12.08 Fees. The Borrowers agree to pay to each of the Agents, for its individual account, an annual fee as from time to time agreed to by the Borrowers and the Global Agent or Applicable Facility Agent, as applicable, in writing. 116 123 ARTICLE XIII Miscellaneous 13.01 Assignments and Participations. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, its Applicable Facility Commitments, its Applicable Fronting Commitments and its Participations); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations in the US Facility, UK Facility, Canadian Facility or Australian Facility, respectively, under this Agreement, any such partial assignment shall be in an amount at least equal to US $5,000,000 of such Lender's US Facility Commitment, pound 3,000,000 of such Lender's UK Facility Commitment (if any), CAN $7,000,000 of such Lender's Canadian Facility Commitment (if any) and AUS $5,000,000 of such Lender's Australian Facility Commitment (if any); (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations (including Loans, Applicable Facility Commitments, Applicable Fronting Commitments and Participations) under this Agreement with respect to each Facility; (iv) the parties to such assignment shall execute and deliver to the Applicable Facility Agent and the Global Agent for their acceptance an Assignment and Acceptance in the form of Exhibit B hereto, together with any Note subject to such assignment and a processing fee of US $5,000 payable pro rata to the Global Agent and each Applicable Facility Agent; (v) each assignee must be a US Facility Lender and a Lender under at least one (1) additional Facility after giving effect to any assignment hereunder; and (vi) such assignee shall have an office located in the United States. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Applicable Facility Agent and the Applicable Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the appropriate jurisdiction for the Applicable Facilities, 117 124 it shall deliver to the Borrowers and the Applicable Facility Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 6.06. (b) Each Applicable Facility Agent shall maintain at its address referred to in Section 13.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Applicable Lenders and each Applicable Facility Commitment of, and principal amount of the Outstandings owing to, each such Applicable Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Applicable Borrowers, the Global Agent, the Applicable Facility Agent and the Applicable Lender may treat each Person whose name is recorded in the Register as a Lender hereunder under the Applicable Facility for all purposes of this Agreement. The Register shall be available for inspection by any Applicable Borrower or any Applicable Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Global Agent and the Applicable Facility Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, accept such Assignment and Acceptance and record the information contained therein in the Register, and the Applicable Facility Agent shall thereafter give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations to one or more Persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Applicable Facility Commitments, Applicable Fronting Commitments, Participations and Outstandings owing thereto); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Article VI and the right of set-off contained in Section 13.03, (iv) the Applicable Borrowers and Applicable Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (v) such Lender shall retain the sole right to enforce the obligations of the Applicable Borrowers relating to its Loans and its Notes and its Participations and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing or reducing the amount of principal of or the rate at which interest is payable or the amount of fees payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, releasing the Guarantor or any Borrower or providing for any assignment of their Obligations, or extending any Applicable Facility Commitment of such Lender), each of which may, if so agreed in writing, require the prior consent of any such participant in such Lender's Commitments and Participations and Outstandings owing thereto before such Lender approves any such amendment, modification or waiver. (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans, its Notes, its Obligations and its interest under the Loan Documents to any Federal Reserve Bank as collateral security pursuant to 118 125 Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning any Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) evaluating the assignment or participation and subject to the prior execution by such party of the form of confidentiality agreement required by the Company as of the Closing Date of all Lenders. (g) In the event that any Lender fails to maintain an Investment Grade Rating (a "Non-Rated Lender"), such Lender shall be replaced as soon as practicable by, and assign all its Loans, Applicable Facility Commitments, Applicable Fronting Commitments, Participations and other Obligations owing thereto pursuant to Section 13.01 to, a financial institution selected by the Company and willing to become a Lender for all purposes hereunder which is an Eligible Assignee. Such Non-Rated Lender agrees to execute and deliver to the Global Agent and to the Applicable Facility Agent of each Facility in which such Non-Rated Lender has made or was obligated to make Loans an Assignment and Acceptance with such replacement Lender upon payment at par by such replacement lender of all principal, interest, fees and other amounts owing under this Agreement to such Non-Rated Lender. The Non-Rated Lender shall pay to the Applicable Facility Agent the processing fee required by Section 13.01(a)(iv) in connection with such assignment. Upon acceptance of the Assignment and Acceptance and satisfaction of all other conditions in Section 13.01(a), (b), (c), such replacement lender shall become a Lender hereunder. (h) No Borrower may assign any rights, powers, duties or obligations under this Agreement or the other Loan Documents without the prior written consent of all the Lenders. 13.02 Notices. Any notice shall be presumed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of receipt at such address or telefacsimile number as may from time to time be specified by such party in written notice to the other parties hereto, or (iii) on the fifth Business Day after the date on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice thereunder: (a) if to any Borrower: c/o American Greetings Corporation One American Road Cleveland, Ohio 44144 Attention: Manager of Treasury Operations Telefacsimile: (216) 252-6791 Telephone: (216) 252-7300 119 126 with a copy to: American Greetings Corporation One American Road Cleveland, Ohio 44144 Attention: General Counsel Telefacsimile: (216) 252-6741 Telephone: (216) 252-7300 (b) if to the Authorized Representative: at the address set forth for receipt of notices in the notice of appointment thereof. (c) if to the Global Agent: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: (704) 386-8694 Telephone: (704) 386-8382 with a copy to: NationsBank, N.A. NationsBank Corporate Center 100 North Tryon Street NC1 007-08-04 Charlotte, North Carolina 28255-0065 Attention: Mr. Philip S. Durand Telefacsimile: (704) 388-0960 Telephone: (704) 386-4955 (d) if to the Agents: At the addresses set forth on the signature pages hereof. 120 127 (e) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance 13.03 Right of Set-off; Adjustments. (a) Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of any Applicable Borrower against any and all of the Obligations of such Borrower now or hereafter existing under this Agreement, any other Loan Document and the Note of such Borrower held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement, any other Loan Document or such Notes and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Applicable Borrower, the Global Agent and the Applicable Facility Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 13.03(a) are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. (b) Each Lender agrees that if it shall, through the exercise of a right of banker's lien, set-off, counterclaim or otherwise, obtain payment with respect to its Obligations (other than pursuant to Article VI) which results in its receiving more than its pro rata share of the aggregate payments with respect to all of the Obligations in a specific Facility, or with respect to all of the Obligations in the Total Facilities, after acceleration thereof pursuant to Section 11.01(A) (other than any payment expressly provided hereunder to be distributed on other than a pro rata basis and payments pursuant to Article VI), then (i) such Lender shall be deemed to have simultaneously purchased from the other Applicable Lenders or all Lenders, as the case may be, a share in their Obligations so that the amount of the Obligations held by each of the Applicable Lenders or all Lenders, as the case may be, shall be pro rata and (ii) such other adjustments shall be made from time to time as shall be equitable to ensure that the Lenders share such payments ratably; provided, however, that for purposes of this Section 13.03(b) the terms "pro rata" and "ratably" shall be determined with respect to the Applicable Commitment Percentage of each Lender after subtraction of amounts, if any, by which any such Lender has not funded its share of the outstanding Loans. If all or any portion of any such excess payment is thereafter recovered from the Lender which received the same, the purchase provided in this Section 13.03 (b) shall be rescinded to the extent of such recovery, without interest. The Borrowers expressly consent to the foregoing arrangements and agree that each Lender so purchasing a portion of the other Lenders' Obligations may exercise all rights of payment (including, without limitation, all rights of set-off, banker's lien or counterclaim) with respect to such portion as fully as if such Lender were the direct holder of such portion. 13.04 Survival. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the execution and delivery to the Lenders of this 121 128 Agreement and the Notes and shall continue in full force and effect so long as any Obligations remain outstanding or any Lender has any commitment hereunder or any Borrower has continuing obligations hereunder unless otherwise provided herein. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrowers which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lenders or any of them. 13.05 Expenses. Each Borrower jointly and severally agrees to pay on demand all reasonable costs and expenses of the Global Agent, the Canadian Facility Agent and the Australian Facility Agent in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this Agreement, the other Loan Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel (including the allocated cost of internal counsel) for the Global Agent and the allocated cost of internal counsel for the Canadian Facility Agent and the Australian Facility Agent with respect thereto and with respect to advising the Agents as to their rights and responsibilities under the Loan Documents. Each Borrower further agrees jointly and severally to pay on demand all costs and expenses of each Agent and each Lender, if any (including, without limitation, reasonable attorneys' fees and expenses), in connection with the enforcement or preservation of rights under this Agreement (whether through negotiations, legal proceedings, or otherwise), any other Loan Documents and any other documents to be delivered hereunder. The agreements contained in this Section shall survive payment in full of the Obligations, termination of each Commitment and the occurrence of the Total Facility Termination Date. 13.06 Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrowers and the Required Lenders with respect to the Total Facilities, and, if Article XII or the rights or duties of the Global Agent or any Applicable Facility Agent are affected thereby, by the Global Agent and/or the Applicable Facility Agent, as applicable; provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the US Facility Commitment, UK Facility Commitment, Canadian Facility Commitment or Australian Facility Commitment, or the US Facility Fronting Commitment, UK Facility Fronting Commitment, Canadian Facility Fronting Commitment or Australian Facility Fronting Commitment, as applicable, of any Lender or increase the Total US Facility Commitment, the Total UK Facility Commitment, the Total Canadian Facility Commitment or the Total Australian Facility Commitment; (ii) reduce the principal of or rate of interest on any Loan or any fees or other amounts payable hereunder; (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or the Total Facility Termination Date, the US Facility Revolving Credit Termination Date or the Canadian Facility Renewable Tranche Termination Date; (iv) change the percentage of the Applicable Facility Commitment or the Total Commitment, as applicable, or of the Aggregate Credit Exposure or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement; or (v) release or allow an assignment by any Borrower or the Guarantor; provided further, however, that the amendment or waiver of any of the following provisions of a specific Facility need only be signed by the Applicable Borrowers, the Applicable Facility Agent and the Required Lenders with respect 122 129 to such Facility: (x) delivery of Borrowing Notices with respect to any Advance, Continuation or Conversion under the specific Facility, (y) delivery of notice for any reduction in the Applicable Total Facility Commitment, and (z) minimum or integral amounts of Advances or Loans under the specific Facility. No notice to or demand on any Borrower in any case shall entitle such Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or any Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 13.07 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. 13.08 Termination. The termination of this Agreement shall not affect any rights of the Borrowers, the Lenders or the Agents or any obligation of any Borrower, the Lenders or any of the Agents, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Agents for the benefit of the Lenders hereunder and under the other Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until termination of each Commitment and all of the Obligations have been paid in full after the termination hereof (other than Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, which shall continue) or the Borrowers have furnished the Lenders and the Agents with an indemnification satisfactory to the Agents and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrowers shall be liable to, and shall indemnify and hold the Agents and such Lender harmless for, the amount of such payment surrendered until the Agents and such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. 13.09 Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection 123 130 therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate; the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Applicable Borrowers shall pay to the Applicable Facility Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrowers to confirm strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or received any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Applicable Borrowers. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. 13.10 Indemnification; Limitation of Liability. (a) The Company and each Borrower jointly and severally agrees to indemnify absolutely and unconditionally and hold harmless each Agent and each Lender and each of their affiliates and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses, including, without limitation, all claims, damages, losses, liabilities, costs and expenses described in Section 6.09 (the foregoing also to include, without limitation, reasonable attorneys' fees, settlement costs and disbursements) ("Indemnified Liabilities") that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such Indemnified Liability is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. If and to the extent the foregoing may be unenforceable for any reason, the Company and each Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each Indemnified Liability which is permissible under applicable law. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 13.10 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Company, any Borrower, 124 131 its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. (b) Without limiting the generality of Section 13.10(a) above, the Company and the Borrowers hereby jointly and severally agree to defend, indemnify and hold each Indemnified Party harmless from and against any and all Indemnified Liabilities (including, without limitation, assessment and cleanup costs and reasonable attorneys', consultants' and other experts' fees and disbursements, including those arising by reason of any of the aforesaid or an action against the Company or any Subsidiary under this indemnity) arising directly or indirectly from, out of or by reason of (a) the violation or alleged violation of any Environmental Law by the Company or any Subsidiary or with respect to any property owned, operated or leased by the Company or any Subsidiary or (b) the use, generation, handling, storage, transportation, treatment, emission, release, disclaim or disposal of any Hazardous Material by or in respect of the Company or any Subsidiary or on or with respect to property owned or leased or operated by the Company or any Subsidiary. (c) The Company and each Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries or Affiliates or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, the Company and each Borrower agrees not to assert any claim against any of the Agents, any Lender, any of their affiliates, or any of their respective directors, officers, employees, attorneys, agents, and advisers, on any theory of liability, for special, indirect, consequential, or punitive damages arising out of or otherwise relating to the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans. (d) Without prejudice to the survival of any other agreement of any Borrower hereunder, the agreements and obligations of the Company and each Borrower contained in this Section 13.10 shall survive the payment in full of the Obligations, termination of each Commitment and the occurrence of the Total Facility Termination Date. 13.11 Agreement Controls. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. 13.12 Severability. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. 13.13 Entire Agreement. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and 125 132 supersedes all previous proposal, negotiations, representations and other communications between or among the parties, both oral and written, with respect thereto. 13.14 Governing Law; Waiver of Jury Trial. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE LOAN DOCUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH BORROWER PROVIDED IN SECTION 13.02, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTION (a) OR (b) HEREOF SHALL PRECLUDE ANY AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE ANY BORROWER OR ANY BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, 126 133 OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH BORROWER, EACH AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. [Signature pages follow.] 127 134 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. AMERICAN GREETINGS CORPORATION By: /s/ WILLIAM S. MEYER --------------------------------------------- Name: William S. Meyer ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ CARLTON CARDS (FRANCE) S.N.C. By: /s/ G. M. FRYER --------------------------------------------- Name: Gerald M. Fryer ------------------------------------------- Title: Gerant ------------------------------------------- CARLTON CARDS LIMITED, a UK entity By: /s/ G. M. FRYER --------------------------------------------- Name: Gerald M. Fryer ------------------------------------------- Title: Finance Director ------------------------------------------ UK GREETINGS LIMITED By: /s/ MARY ANN CORRIGAN DAVIS --------------------------------------------- Name: Mary Ann Corrigan Davis ------------------------------------------- Title: Director ------------------------------------------ HANSON WHITE GROUP LIMITED By: /s/ MARY ANN CORRIGAN DAVIS --------------------------------------------- Name: Mary Ann Corrigan Davis ------------------------------------------- Title: Director ------------------------------------------ Signature Page 1 of 19 135 CAMDEN GRAPHICS LIMITED By: /s/ S. T. BANKS ----------------------------------- Name: Simon T. Banks --------------------------------- Title: Secretary and Finance Director --------------------------------- CARLTON CARDS LIMITED, a Canadian Company By: /s/ PHYLLIS ALDEN ----------------------------------- Name: Phyllis Alden --------------------------------- Title: Secretary --------------------------------- JOHN SANDS (AUSTRALIA) LTD. By: /s/ MARY ANN CORRIGAN DAVIS ----------------------------------- Name: Mary Ann Corrigan Davis --------------------------------- Title: Director and President --------------------------------- JOHN SANDS (N.Z.) LTD. By: /s/ MARY ANN CORRIGAN DAVIS ----------------------------------- Name: Mary Ann Corrigan Davis --------------------------------- Title: Director and President -------------------------------- JOHN SANDS HOLDING CORP. By: /s/ MARY ANN CORRIGAN DAVIS ----------------------------------- Name: Mary Ann Corrigan Davis --------------------------------- Title: Director and President --------------------------------- Signature Page 2 of 19 136 NATIONSBANK, NATIONAL ASSOCIATION, as Global Agent and as US Facility Lender By: /s/ PHILIP DURAND ----------------------------------- Name: Philip Durand --------------------------------- Title: Vice President --------------------------------- Lending Office: NationsBank, National Association Independence Center NC1-001-15-05, 15th Floor Charlotte, North Carolina 28255 Attention: Corporate Credit Services Telephone: (704) 386-8382 Telefacsimile: (704) 386-8694 Wire Transfer Instructions: NationsBank, National Association Charlotte, North Carolina 28255 ABA No.: 053000196 Reference: American Greetings Corporation Account No.: 13662122506 Attention: Corporate Credit Support Address for Other Notices: NationsBank, National Association NationsBank Corporate Center 100 North Tryon Street NC1-007-08-09 Charlotte, North Carolina 28255-0065 Attention: Mr. Philip S. Durand Telephone: (704) 386-4955 Telefacsimile: (704) 388-0960 Signature Page 3 of 19 137 NATIONSBANK, NATIONAL ASSOCIATION, as UK Facility Agent and as UK Facility Lender By: /s/ PHILIP S. DURAND ----------------------------------- Name: Philip S. Durand --------------------------------- Title: Vice President --------------------------------- Lending Office: Melanie Harries Loan Administration Department NationsBank N.A. New Broad Street House 35 New Broad Street London EC2M 1NH Tel: 0171 282 6833 Fax: 0171 282 6831 Telex: 883181 NCNB G Wire Transfer Instructions: With respect to British Pounds Sterling: direct by CHAPS to: NationsBank, N.A., London Sort Code: 40 51 15 a/c no: 00497056 Swift Address: NABKGB2X With respect to French Francs: Societe Generale 29 Boulevard Haussman, 75009 Paris Swift Address: SOGEFRPP For account: NationsBank N.A., London Swift Address: NABKGB2X a/c: 001 011 042 150 Address for Other Notices: NationsBank, National Association NationsBank Corporate Center 100 North Tryon Street NC1-007-08-09 Charlotte, North Carolina 28255-0065 Attention: Mr. Philip S. Durand Telephone: (704) 386-4955 Telefacsimile: (704) 388-0960 Signature Page 4 of 19 138 NATIONAL CITY BANK, as US Facility Agent and as Lender By: /s/ ROBERT E. LITTLE ----------------------------------- Name: Robert E. Little Title: Vice President and Senior Lending Officer Lending Office: National City Bank 1900 E. Ninth Street, Loc #2077 Cleveland, Ohio 44114 Attention: Connie B. Djukic, Money Desk Area Telephone: (216) 575-2578 Telefacsimile: (216) 575-2481 Wire Transfer Instructions for US Facility Agent: National City Bank Cleveland, Ohio ABA No.: 041000124 Account No.: 151804 Beneficiary: Commercial Loan Operations, Special Processing Reference: American Greetings Wire Transfer Instructions for UK Facility Agent: GBP: Lloyds Bank PLC Intl Banking Division PO Box 19 London SEI 2HA England, UK Swift code: LOYDGB2L Sort: 30-96-34 For Acct of: National City Bank, Cleveland /01080203 FRF: Credit Lyonnais International Division 19 Boulevard Des Italiens Paris, France 75022 Swift code: CRLYFRPP For Acct of: National City Bank, Cleveland /091000081522 Signature Page 5 of 19 139 Address for Other Notices: For US Facility: National City Bank 1900 E. Ninth Street, Loc #2104 Cleveland, Ohio 44114 Attention: Wendy Pollerine Telephone: (216) 575-2560 Telefacsimile: (216) 575-2481 For UK Facility: Fred Lingenfelder Telephone: (216) 575-2900 Telefacsimile: (216) 575-2411 Signature Page 6 of 19 140 BANK OF AMERICA CANADA, as Canadian Facility Agent and as Canadian Facility Lender By: /s/ RICHARD J. HALL ----------------------------------- Name: Richard J. Hall --------------------------------- Title: Vice President --------------------------------- Lending Office: Bank of America Canada Toronto Corporate Services Office 5651 200 Front Street West, 27th Floor Toronto, Ontario M5V 312 Canada Attention: Nelson Lam/Richard J. Hall Telephone: 416.349.5496/416.348.4008 Telefacsimile: 416.349.4282/416.349.4283 Wire Transfer Instructions: Wire payment of funds DIRECT through IIPS to: Bank of America Canada 200 Front Street West, Toronto, Ontario TRANSIT #: 241 SWIFT CODE: BOFACATT Reference: Carlton Cards Attention: Agency Administration Signature Page 7 of 19 141 BANK OF AMERICA, NATIONAL TRUST & SAVINGS ASSOCIATION, as U.S. Facility Lender By: /s/ PAUL HIGDON ----------------------------------- Name: Paul Higdon Title: Managing Director Lending Office: Bank of America National Trust & Savings Association Attention: Michael Gates 231 South LaSalle Chicago, Illinois 60697 Telephone: (312) 828-6207 Telefacsimile: (312) 974-9626 Wire Transfer Instructions: Bank of America National Trust & Savings Association B of A International ABA No.: 071000039 Reference: American Greetings Account No.: 4703421 Address for Other Notices: Bank of America National Trust & Savings Association Attention: Michael Gates 231 South LaSalle Chicago, Illinois 60697 Telephone: (312) 828-6207 Telefacsimile: (312) 974-9626 Signature Page 8 of 19 142 BANK OF AMERICA, NATIONAL TRUST and SAVINGS ASSOCIATION, as Australian Facility Agent By: /s/ GARY FLIEGER -------------------------------- Name: Gary Flieger Title: Vice President Address for borrowings, payments, conversions, continuations, fees and interest and other operational matters relating thereto: Bank of America NT & SA c/o BA Asia Ltd. Devon House 979 King's Road, 10th Floor Quarry Bay, Hong Kong Attention: Donny Lam Telephone: 852.2597.3428 Telefacsimile: 852.2597.3424 or 3425 Address for all other matters including voting, waivers, amendments, consents, financial statements, reporting requirements or requests, fronting assignments and other administrative/executive matters of a similar nature relating thereto: Bank of America NT & SA 1455 Market Street, 15th Floor San Francisco, CA 94103 Attention: Mr. Gary Flieger Telephone: (415) 436-3484 Telefacsimile: (415) 436-3425 E-mail: gary.flieger@bankamerica.com Wire Transfer Instructions: Payments in Australian Dollars Bank of America NT & SA, Sydney Branch for the account of BA Asia Limited Account No. 97202-012 Payments in New Zealand Dollars Bank of New Zealand - Wellington for the account of BA Asia Limited Account No. 260721-0000 Signature Page 9 of 19 143 BA AUSTRALIA LIMITED By: /s/ WARREN WHITLEY /s/ TONY DOWLING ---------------------------------------------- Name: Warren R. Whitley Tony Dowling -------------------------------------------- Title: Company Secretary Vice President and General Manager Operations --------------------------------------------------- BA Australia Ltd Lending Office: BA Australia Limited Level 63, MLC Centre 19-29 Martin Place Sydney, New South Wales 2000 Australia Attention: Evelyn Kirk Telephone: 612.9931.4237 Telefacsimile: 612.9221.1023 Wire Transfer Instructions: Payments in Australian Dollars Bank of America NT & SA, Sydney branch Account No.: 11191019 BSB No.: 232001 Deposits to be made through: any National Australia Bank Branch for further credit to Bank of America, NT & SA, Sydney Payments in New Zealand Dollars Account Name: Bank of America NT&SA, Sydney branch Bank: Bank of New Zealand, Wellington Account No.: 5201-30600 Signature Page 10 of 19 144 NBD BANK as US Facility Lender By: /s/ GLENN CURRIN ----------------------------------- Name: Glenn A. Currin Title: Vice President Lending Office: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attention: Glenn Currin Vice President Telephone: (313) 225-2637 Telefacsimile: (313) 225-1671 Wire Transfer Instructions: NBD Bank, Detroit ABA No.: 072000326 Reference: American Greetings Account No.: Commercial Loans; Acct. #212115 Address for Other Administrative Notices (Including Funding and Wires): NBD Bank Loan Service Associate 611 Woodward Avenue Detroit, Michigan 48226 Attention: Karen Graham Telephone: (313) 225-2579 Telefacsimile: (313) 225-1586 Signature Page 11 of 19 145 FIRST CHICAGO NBD BANK, CANADA, as Canadian Facility Lender By: /s/ GLENN CURRIN ----------------------------------- Name: Glenn A. Currin Title: Vice President Lending Office: First Chicago NBD Bank, Canada BCE Place, P.O. Box 613 161 Bay Street, Suite 4240 Toronto, Ontario M5J 2S1 Attention: Michael Tam Telephone: 416-365-5261 Telefacsimile: 416-363-7574 Wire Transfer Instructions: Royal Bank of Canada, Toronto Transit Routing #07172-003 For Credit To: First Chicago NBD Bank, Canada Account # 000-047-1 For further credit to: Carlton Cards Address for Other Administrative Notices: NBD Bank 161 Bay Street, Suite 4240 Toronto, Ontario, Canada M5J2S1 Attention: Lehong Zhang Telephone: (416) 365-8262 Telefacsimile: (416) 363-7574 Signature Page 12 of 19 146 THE FIRST NATIONAL BANK OF CHICAGO, as Australian Facility Lender By: /s/ GLENN CURRIN ----------------------------------- Name: Glenn A. Currin Title: Vice President Lending Office: The First National Bank of Chicago Level 19, 90 Collins Street Melbourne Victoria 3000 Australia Attention: Simon Milne Telephone: 61 3 9650 1388 Telefacsimile: 61 3 9650 2721 Wire Transfer Instructions: First Chicago, International NYC ABA No.: 026009797 Reference: For Credit to First Chicago in Australia, Adelaide Account No.: 404-1008 USN50 01 For further credit to: John Sands Address for Other Administrative Notices: Level 4, 70 Hindmarsh Square Adelaide S.A. 5000 Australia Attention: Josh Whitting Telephone: 61 8 8228 2222 Telefacsimile: 61 8 8228 2948 Signature Page 13 of 19 147 KEYBANK, NATIONAL ASSOCIATION By: /s/ RICHARD A. POHLE ----------------------------------- Name: Richard A. Pohle Title: Senior Vice President Lending Office: KeyBank National Association 127 Public Square Cleveland, OH 44114 Attention: Mark LoSchiavo Telephone: 216-689-0598 Telefacsimile: 216-689-4981 Wire Transfer Instructions: US$ KeyBank National Association ABA #041001039 ATTN: Commercial Loan Operations RE: American Greetings Corporation GBP: Royal Bank of Scotland Correspondent Banking Branch P.O. Box 450 5-10 Great Tower Street London ec3P 3HX England Sort Code 160034 Account No.: 12291629 Swift Address: RBOSGB2L Account Name: KEYBANK NATIONAL ASSOCIATION, CLEVELAND. OH FF: Banque Nationale De Paris S.A. Boulevard Des Italiens 16 76450 Paris Cedex 09 France Centre D'Operations Avec L'Etranger Bank Code: 30004 Branch Code: 00897 Account No.: 040033610 Swift Address: BNPAFRPP Account Name: KEYBANK NATIONAL ASSOCIATION, CLEVELAND, OH Signature Page 14 of 19 148 ROYAL BANK OF CANADA By: /s/ MOLLY DRENNAN ----------------------------------- Name: Molly Drennan Title: Senior Manager As US Facility Lender: Lending Office: Royal Bank of Canada One Liberty Plaza New York, NY 10006-1404 Attention: Danielle Gilles Telephone: (212) 428-6332 Telefacsimile: (212) 428-2372 Wire Transfer Instructions: Royal Bank of Canada via Chase Manhattan Bank New York, NY ABA No.: 0210-0002-1 Reference: Loan/Interest/Fee Payment for American Greetings Account No.: 920-1-033363 As Australian Facility Lender: Lending Office: Royal Bank of Canada 167 Mac Quarie Street Sydney NWS 2000 AUSTRALIA Attention: Manager Loans Administration Telephone: 612/9233 5500 Telefacsimile: 612/9221 2261 Wire Transfer Instructions: Royal Bank of Canada Sydney ABA No.: BSB-935-001 Reference: Swift - ROYCAU2S Account No.: Royal Bank of Canada Signature Page 15 of 19 149 Address for Other Notices: Royal Bank of Canada 167 Mac Quarie Street Sydney NSW 2000 AUSTRALIA Attention: Head of Corporate Banking Telephone: 612/9233 5500 Telefacsimile: 612/9221 2261 As Canadian Facility Lender: Lending Office: Royal Bank of Canada 180 Wellington St. W. Toronto, Ontario Attention: Adam Ahmed Telephone: (416) 974-5302 Telefacsimile: (416) 974-8119 Wire Transfer Instruction: Royal Bank of Canada ABA No.: N/A Reference: EMCO Account No.: 0002-102-683-0 Signature Page 16 of 19 150 MELLON BANK, N.A., as US Facility Lender By: /s/ MARK F. JOHNSTON ----------------------------------- Name: Mark F. Johnston Title: A. Vice President Lending Office: One Mellon Bank Center Suite 4525 Pittsburgh, PA 15258 Attention: Mark F. Johnston Telephone: (412) 236-2793 Telefacsimile: (412) 236-1914 Wire Transfer Instructions: Mellon Bank, N.A. Pittsburgh, PA 15259 ABA No.: 043-000-261 Reference: American Greetings Account No.: 990-873-800 Address for Other Notices: Mellon Bank, N.A. Three Mellon Bank Center Pittsburgh, PA 15259 Attention: Jodi Stewart Telephone: (412) 236-4817 Telefacsimile: (412) 209-6129 Signature Page 17 of 19 151 MELLON BANK CANADA, as Canadian Facility Lender By: /s/ ED Mc GRATH ----------------------------------- Name: Ed McGrath Title: Vice President Lending Office: Mellon Bank Canada 77 King Street West, Suite 3200 Toronto, Ontario M5K 1K2 Attention: Lisa Daley Telephone: (416) 860-2436 Telefacsimile: (416) 860-2439 Wire Transfer Instructions: Canadian Imperial Bank of Commerce ABA No.: CIBCCATT Reference: Carlton Cards Retail Account No.: 65-03810 For Credit: Mellon Bank Canada, Toronto (MELNCATT) Address for Other Notices: N/A Signature Page 18 of 19 152 PNC BANK, N.A. By: /s/ MARC T. KENNEDY ----------------------------------- Name: Marc T. Kennedy Title: Vice President For US Facility: Lending Office: 249 Fifth Avenue One PNC Plaza - 2nd Floor Pittsburgh, PA 15222-2707 Attention: Marc T. Kennedy Telephone: (412) 768-4323 Telefacsimile: (412) 762-6484 Wire Transfer Instructions: PNC Bank, N.A. Commercial Loan Operations ABA No.: 043-000-096 Reference: American Greetings Account No.: 196-030-890 Address for Other Notices for Operational Matters (Wires, Payments and Draw Requests): PNC Bank, N.A. 620 Liberty Avenue Two PNC Plaza - 3rd Floor Pittsburgh, PA 15222-2707 Attention: Sally Hunter Telephone: (412) 768-3807 Telefacsimile: (412) 768-4586 For UK Facility: Lending Office: PNC Bank, N.A. UK Facility Administrative Contact: Anyone in FX Department Telephone: 412-762-4951 Telefacsimile: 412-762-4307 Wire Transfer Instructions: For British Pound Sterling: Royal Bank of Scotland, PLC Swift address: RBOSGB2L City: London N1 8XL Country: England Acct No.: 122-522-16 PNC Bank For French Francs: Societe Generale Swift address: SOGEFRPP City: 75009 Paris Country: France Acct No.: 001014438780 Signature Page 19 of 19 153 EXHIBIT LIST EXHIBIT A Lenders' Commitments and Applicable Commitment Percentages EXHIBIT B Form of Assignment and Acceptance EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative EXHIBIT D-1 Borrowing Notice (U.S. Facility Loans) EXHIBIT D-2 Borrowing Notice (UK Facility Loans) EXHIBIT D-3 Borrowing Notice (Canadian Facility Loans) EXHIBIT D-4 Borrowing Notice (Australian Facility Loans) EXHIBIT E Form of Guaranty Agreement EXHIBIT F Form of U.S. Facility Note EXHIBIT G Form of Opinion of Counsel for Borrowers and Guarantor EXHIBIT H Form of compliance Certificate SCHEDULE 1.01 Authorized Representatives SCHEDULE 8.02(a) Subsidiaries and Stockholders SCHEDULE 8.02(f) Litigation SCHEDULE 10.03 Existing Liens SCHEDULE 10.06 Transactions with Affiliates EX-10.I.A.I 6 EXHIBIT 10(I)(A)(I) 1 Exhibit (10)(i)(A)(i) EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT made at Cleveland, Ohio, this ______ day of ____________, 19____ , by and between AMERICAN GREETINGS CORPORATION, an Ohio corporation (herein called the "Corporation") and ______________________________ (herein called "Employee"). In consideration of the covenants hereinafter set forth, the parties hereto mutually agree as follows: 1. Subject to the provisions hereof, the Corporation shall employ Employee as on officer of the Corporation, either elected by the Board of Directors or appointed by the Executive Committee, or as an officer of a subsidiary company with such duties and responsibilities as may be assigned to him from time to time by the Board of Directors or the Executive Committee of the Board of Directors of the Corporation and Employee shall devote his full business time and attention and give his best efforts to the business affairs of the Corporation and/or of such of its subsidiaries as the Board of Directors or the Executive Committee of the Board of Directors of the Corporation may from time to time determine. Employee recognizes that in serving as an officer of the Corporation or as an officer of a subsidiary he serves in such capacity solely at the pleasure of the Board of Directors or the Executive Committee of the Board of Directors of the Corporation and that his employment in such capacity or in any other capacity may be terminated at any time by the Board of Directors or the Executive Committee of the Corporation. 2. The Corporation or a subsidiary shall, during the term of this Employment Agreement, pay to Employee as 2 minimum compensation for his services a base salary at a rate to be fixed by the Board of Directors or the Executive Committee or the Chairman of the Executive Committee, which rate shall not be less than $______________________ per year, plus such additional compensation as the Board of Directors or the Chairman of the Executive Committee or the Executive Committee of the Board of Directors of the Corporation may from time to time determine. 3. Employee covenants and agrees that in consideration of his employment as an officer of the Corporation or as an officer of a subsidiary he shall not for a period of twelve months after leaving the employ of the Corporation or a subsidiary, regardless of the reason for such leaving, enter into the employment, directly or indirectly or in a consulting or free lance capacity, of any person, firm or corporation in the United States or Canada, which at such date of leaving the employ of the Corporation or a subsidiary shall be manufacturing or selling products that are substantially similar in nature to the products being then manufactured or sold by the Corporation or the subsidiary. 4. In the event that the employment of Employee under this Employment Agreement is terminated by the Corporation or a subsidiary, the Corporation covenants and agrees that it shall pay or cause to be paid to Employee a continuing salary at a rate which shall be the highest base salary rate paid Employee during the preceding six-month period for a period of time equivalent to one-half month for each year of employment by the Corporation or a subsidiary of the Employee, but in no event to be less than a period of -2- 3 three months nor greater than a period of twelve months. The provisions of this paragraph shall not be applicable if the Employee is terminated because of a gross violation of his obligations to the Corporation. 5. In the event that Employee shall cease to be employed as an officer of the Corporation or a subsidiary but shall continue in the employ of the Corporation or a subsidiary, then this Employment Agreement shall terminate twelve months after the date that Employee ceases to be employed as an officer of the Corporation or a subsidiary. 6. I agree that during the period of my employment and thereafter, I will keep confidential and will not disclose any information, records, documents or trade secrets of the corporation acquired by me during my employment, and except as required by my employment, will not remove from the Corporation's premises any record or other document relating to the business of the Corporation; or make copies thereof; it being recognized by me that such information is the property of the Corporation. 7. This Agreement shall be applied and interpreted under the laws of the State of Ohio. AMERICAN GREETINGS CORPORATION By /s/ Morry Weiss ---------------------------------- ---------------------------------- Employee -3- 4 OFFICERS Jon Groetzinger, Jr. William R. Mason Erwin Weiss EX-10.II.A.IV 7 EXHIBIT 10(III)(A)(IV) 1 Exhibit 10(ii)(A)(iv) Deferred Compensation --------------------- Any Executive and non-Executive officer elected by the Board of Directors ("Board") above the Executive Director level may, prior to the start of a fiscal year, enter into a deferred compensation agreement with the company whereby a stated portion of the officer's salary and/or bonus for the fiscal year starting on the following March 1 will be deferred. The amount so deferred will be credited with interest calculated on an annual average rate as actually paid by the corporation to its creditors upon its short-term borrowings and for such a period of time that the corporation does not have short-term borrowings, the rate shall be the actual average rate of interest earned by the corporation upon its short-term investments. The amount deferred is to be paid in five (5) or more equal installments upon the retirement, death or other termination of employment of the officer. In the event that any portion of the deferred compensation shall be held by any taxing authority to constitute current income for tax purposes, then the officer shall have the right to have such deferred compensation paid to him at such time as he may direct. EX-10.II.A.VII 8 EXHIBIT 10(II)(A)(VII) 1 Exhibit 10(ii)(A)(vii) TABLE OF CONTENTS ----------------- ARTICLE I INTRODUCTION ARTICLE II DEFINITIONS ARTICLE III PLAN PARTICIPATION ARTICLE IV ELIGIBILITY FOR PLAN BENEFIT ARTICLE V AMOUNT OF PLAN BENEFIT ARTICLE VI DEATH BENEFIT ARTICLE VII ADMINISTRATION, FUNDING AND PLAN MODIFICATION ARTICLE VIII GENERAL CONDITIONS AMENDMENT I AMENDMENT II 2 ARTICLE I --------- INTRODUCTION ------------ 1.1 NAME OF PLAN. This Plan shall be known as the American Greetings Corporation Supplemental Executive Retirement Plan. 1.2 PURPOSE. The purpose of this Plan is to provide certain designated Executives with retirement benefits in excess of those provided under any other Company-sponsored plan, including the Pension Plan and the Profit Sharing Plan. 1.3 AMENDMENT TO PRIOR PLAN. This Plan constitutes a complete amendment to, full restatement of and continuation of the American Greetings Corporation Supplemental Executive Compensation Plan effective as of August 1, 1981. This amendment, restatement and continuation is made effective as of March 1, 1986. 1.4 EFFECT OF AMENDMENT. The amendment and restatement of this Plan shall have no adverse effect upon the benefits being paid to any Executive who was covered by the Plan as it existed immediately prior to March 1, 1986 (including the benefits payable to a Beneficiary of such former Executive); however, except as may be specifically provided for herein, no such benefit shall be increased solely by reason of this amendment and restatement of the Plan. I-1 3 ARTICLE II ---------- DEFINITIONS ----------- The following words and phrases when used in the Plan shall have the following meanings, unless a different meaning is plainly required by the context. 2.1 ACCRUED BENEFIT shall have the meaning set forth in Section 5.1. 2.2 ASSUMED BONUS PERCENTAGE shall mean, for any Fiscal Year, the "assumed bonus award percentage" to which the Executive is entitled under the Executive Bonus Plan based on his job classification assuming a one hundred percent (100%) bonus award (using the schedule as set forth by the Board of Directors for the various levels of job classifications) is payable for said Fiscal Year. 2.3 BENEFICIARY shall mean any person or persons designated by the Executive under the Executive Life Insurance Plan to receive benefits under that plan in the event of his death; unless, the Executive specifically designates that another person or persons shall be the "beneficiary" entitled to receive benefits under this Plan in the event of his death. If no "beneficiary" is designated or there is no "beneficiary" surviving at the time of the Executive's death, "beneficiary" shall mean the Executive's estate. II-1 4 2.4 BOARD OF DIRECTORS shall mean the "board of directors" of the Company or a person or persons designated to act specifically on matters relevant to this Plan as provided in a resolution of the "board of directors". 2.5 COMPANY shall mean American Greetings Corporation, an Ohio corporation and any successor thereto, and shall also include for the purpose of this Plan any member of the "controlled group" as said term is defined in the Profit Sharing Plan. 2.6 COMPENSATION shall mean, as to any calendar year preceding the calendar year in which the Executive reaches his Normal Retirement Date, his total earned base annual pay. In the event said Executive becomes disabled and is eligible for and receiving benefits under the Long Term Disability Plan, his participation in the Plan shall be deemed to continue and, therefore, his "Compensation" shall be assumed to continue in the same amount it was as of the calendar year preceding the date he became disabled. 2.7 EFFECTIVE DATE shall mean March 1, 1986. 2.8 EXECUTIVE shall mean any member of the management of the Company, designated as such by the Board of Directors. II-2 5 2.9 EXECUTIVE LIFE INSURANCE PLAN shall mean the American Greetings Corporation Executive Life Insurance Plan, which is a plan maintained by the Company to provide life insurance benefits to its Executives. 2.10 FINAL AVERAGE COMPENSATION shall mean an amount, expressed in dollars and cents, derived by summing (a) the average of the Executive's two (2) calendar years of Compensation which will afford the highest average, and (b) which is the product derived from multiplying (i) the average of the Executive's two (2) calendar years of Compensation which will afford the highest average by (ii) the average of the Executive's two (2) Fiscal Year Assumed Bonus Percentages which will afford the highest average (or, if only one (1) Assumed Bonus Percentage is ever applicable as to a given Executive, said Assumed Bonus Percentage shall be deemed to be the highest average). 2.11 FISCAL YEAR shall mean the period which begins on March 1 of each year and ends on the last day of February of the next succeeding year. 2.12 LONG TERM DISABILITY PLAN shall mean the American Greetings Corporation Long Term Disability Plan, which is a welfare plan maintained by the Company to provide longer-term disability benefits to its employees. II-3 6 2.13 PARTICIPANT shall mean any Executive who is or becomes eligible to participate in this Plan in accordance with the provisions of Sections 3.1 or 3.2. 2.14 PENSION PLAN shall mean American Greetings Corporation Employees' Retirement Income Guarantee Plan, as amended from time to time. 2.15 PENSION PLAN BENEFIT shall mean the accrued, nonforfeitable monthly benefit (if any) to which an Executive is entitled under the Pension Plan. 2.16 PENSION PLAN BENEFIT OFFSET shall mean the portion of a Participant's Pension Plan Benefit (calculated on a straight life annuity basis and expressed in dollars and cents) to which he, in the event of his death, or his Beneficiary is entitled as of the actual date said benefit commences. 2.17 PLAN shall mean the American Greetings Corporation Supplemental Executive Retirement Plan, as set forth in this instrument, as amended from time to time. 2.18 PLAN ADMINISTRATOR shall mean the person, persons or entity set forth in Section 7.1. II-4 7 2.19 PLAN BENEFIT shall mean the amount of benefit for which a Participant is eligible pursuant to Article IV and calculated in accordance with Article V. 2.20 PROFIT SHARING PLAN shall mean the American Greetings Corporation Employees' Retirement Profit Sharing Plan, as amended from time to time. 2.21 SCHEDULE shall mean a tabular summary of reduction factors referred to in Article V, which summary is attached to and made a part of this Plan. 2.22 SERVICE shall mean all periods of time that an Executive is in the employment of the Company (including acquired companies), up to but not beyond said Executive's Normal Retirement Date. Service shall include any period or periods of time an Executive (who is also a Plan Participant) is disabled and eligible for and receiving benefits under the Long Term Disability Plan, but in no event beyond age 65. Said "service" shall be calculated and determined in the sole discretion of the Board of Directors. In this document, unless the context clearly requires otherwise, the singular shall include the plural and the masculine gender shall include the feminine. II-5 8 ARTICLE III ----------- PLAN PARTICIPATION ------------------ 3.1 PARTICIPATION AS OF THE EFFECTIVE DATE. Each Executive who was a Participant of the Plan on the day before the Effective Date shall automatically be a Participant of this Plan as of the Effective Date. 3.2 PARTICIPATION AFTER THE EFFECTIVE DATE. Any other Executive shall become a Participant of this Plan on the date he is designated as such by the Board of Directors. 3.3 TERMINATION OF PARTICIPATION. Any Participant's participation in this Plan may be discontinued at any time by the Board of Directors, which discontinuation shall be set forth in writing and copies of such discontinuation shall be delivered to the Participant and the Plan Administrator. Subject to the provisions of Section 8.2, if, at the time of a Participant's discontinuation of participation, he has a right to a benefit based on the provisions of this Plan, said right shall not be forfeitable and he shall be entitled to receive a benefit solely in accordance with the provisions of the Plan at the time of his discontinuation of participation. III-1 9 ARTICLE IV ---------- ELIGIBILITY FOR PLAN BENEFIT ---------------------------- 4.1 NORMAL/LATE RETIREMENT DATE. The Normal Retirement Date of a Participant shall be the first day of the month coinciding with or next following attainment of age 65. If a Participant retires after his Normal Retirement Date, said date shall be his Late Retirement Date. 4.2 EARLY RETIREMENT DATE. A Participant who has not reached his Normal Retirement Date may retire on the first day of any month coinciding with or next following: (a) Attainment of age 55 and completion of twenty (20) years of Service; or (b) A date selected in the sole discretion of the Board of Directors irrespective of said Participant's age or years of Service. 4.3 VESTING DATE. A Participant's Vesting Date shall be the first day of the month coinciding with or next following the date as of which he has attained age 45 and has completed twenty (20) years of Service, and: (a) His employment has been terminated unilaterally by the Company; or IV-l 10 (b) His classification of Executive group has been eliminated from coverage under the Plan; or (c) He voluntarily ends his employment because of a demotion to non-Executive status; or (d) He is demoted to non-Executive status but remains in the employment of the Company. If a Participant terminates employment on such Vesting Date, he shall be eligible to commence to receive a Plan Benefit on his Normal Retirement Date or on an Early Retirement Date (commencing at or after age 55). If a Participant's employment with the Company does not terminate on said Vesting Date, his participation in this Plan shall nonetheless terminate as of said Vesting Date and his Accrued Benefit shall be computed and frozen as of said date and payable at the time or times provided for herein. 4.4 DISABILITY RETIREMENT DATE. A Participant who becomes disabled and who is eligible for and receiving benefits under the Long Term Disability Plan may retire on the later of the first day of the month coinciding with or next following: (a) Attainment of age 65, or (b) Cessation of benefit payments under the Long Term Disability Plan. IV-2 11 ARTICLE V --------- AMOUNT OF PLAN BENEFIT ---------------------- 5.1 ACCRUED BENEFIT. The term monthly "accrued benefit" means, as of any date, a monthly benefit commencing on a Participant's Normal Retirement Date in an amount equal to one-twelfth (1/12th) of the product of one percent (1%) of a Participant's Final Average Compensation times years of Service up to a maximum of twenty (20) years of Service. 5.2 NORMAL/LATE PLAN BENEFIT. The Normal/Late Plan Benefit payable to a Participant who retires on his Normal/Late Retirement Date shall equal: (a) His Accrued Benefit determined as of his Normal Retirement Date, (b) Minus his Pension Plan Benefit Offset, if any. 5.3 EARLY PLAN BENEFIT. The Early Plan Benefit payable to a Participant who retires on an Early Retirement Date shall equal his Accrued Benefit determined as of such Early Retirement Date: (a) Reduced by the appropriate reduction factor specified in the Schedule, (b) Minus his Pension Plan Benefit Offset, if any. V-l 12 Except as otherwise provided in the next succeeding sentence, Early Plan Benefit payments shall commence on the later of a Participant's earliest Early Retirement Date or the first day of the month coinciding with or next following his attainment of age 55. In lieu of commencing to receive his Early Plan Benefit on such date, a Participant may defer the commencement of his payments to the first day of any month but not beyond his Normal Retirement Date; provided that he submits written notification to the Plan Administrator at least sixty (60) days before the date he wishes to have his Early Plan Benefit commence. 5.4 VESTED PLAN BENEFIT. The Vested Plan Benefit payable to a Participant who has attained a Vesting Date shall equal his Accrued Benefit determined as of the date his participation in the Plan terminates, which amount shall be adjusted as described in: (a) Section 5.3(b), if the Participant does not make written request for his Plan Benefit to commence before retiring on his Normal Retirement Date, or (b) Section 5.3(a) and (b), if the Participant submits a written request at least sixty (60) days before the date on which he wishes to retire to have his Plan Benefit commence, which date may be the first day of any month coinciding with or next following his attainment of age 55. V-2 13 5.5 DISABILITY PLAN BENEFIT. The Plan Benefit payable to a Participant who retires on a Disability Retirement Date shall equal: (a) His Accrued Benefit determined as of his Disability Retirement Date, (b) Minus the applicable Pension Plan Benefit Offset, if any. Anything in this Plan to the contrary notwithstanding, an Executive who becomes disabled on or after an Early Retirement Date but ceases to be disabled before his Disability Plan Benefit would have otherwise commenced shall be eligible to receive an Early Plan Benefit as provided for in Section 5.3. 5.6 FORM OF PAYMENT. All Plan Benefits payable under this Plan will be made on a one hundred eighty (180) month certain and continuous basis, under which the Participant's Plan Benefit is payable to him for his lifetime, with the provision that upon his death after the commencement of payments to him and before a total of one hundred eighty (180) monthly payments shall have been made, the balance of said monthly payments will be paid to his Beneficiary. V-3 14 5.7 RECALCULATION OF PLAN BENEFITS. Anything in this Plan to the contrary notwithstanding, any Plan Benefit calculated and payable under this Plan, whether it is payable to a Participant or a Beneficiary named under this Plan or named under the Pension Plan, shall be offset by any benefit payment due from the Pension Plan (including the value of a lump sum cashed out benefit, if any) as of the first day of the month on which such Pension Plan payment commences. V-4 15 ARTICLE VI ---------- DEATH BENEFIT ------------- 6.1 ELIGIBILITY FOR DEATH BENEFIT. Upon the death of: (a) A Participant who was an Executive at his date of death and was then eligible to have elected to retire on an Early or Normal/Late Retirement Date (including a Participant receiving benefits under the Long Term Disability Plan who became disabled on or after the date as of which he was eligible to retire on an Early Retirement Date); or (b) A Participant who was retired on an Early Retirement Date but who had not yet commenced to be paid a Plan Benefit; or (c) A former Participant who becomes such in accordance with Section 4.3 and dies on or after attaining age 55, a benefit shall be paid to his Beneficiary commencing as of the first day of the month coinciding with or next following his date of death or the month he would have attained age 55, if later. VI-l 16 6.2 AMOUNT OF DEATH BENEFIT. The amount of benefit payable to said deceased Participant's Beneficiary shall be determined as of its commencement date, as if the deceased Participant had retired (or begun to receive his Plan Benefit) on such date and had then died with the form of payment prescribed in Section 5.6 in force. VI-2 17 ARTICLE VII ----------- ADMINISTRATION, FUNDING AND PLAN MODIFICATION --------------------------------------------- 7.1 PLAN ADMINISTRATOR. The "administrator" of this Plan shall be the Treasurer of the Company, who shall serve in this capacity at the pleasure of the Board of Directors. The Plan Administrator shall determine the amount of any payments made from this Plan, which payments shall be subject to the approval of the Board of Directors. The records of the Plan Administrator and Company shall be conclusive in respect to all matters in the administration of the Plan. 7.2 APPLYING FOR BENEFITS. A letter must be filed with the Plan Administrator by the Participant at least sixty (60) days prior to the date said participant wishes to commence to receive his Plan Benefit. 7.3 EXPENSES. All costs and expenses incurred in the administration of this Plan shall be paid by the Company. 7.4 FUNDING PROHIBITION. This Plan shall be and shall remain unfunded. All benefits due or payable under this Plan shall be paid from the general assets of the Company. VII-l 18 7.5 PLAN INTERPRETATION. All questions of interpretation, construction or application arising under this Plan shall be decided by the Plan Administrator, subject to the approval of the Board of Directors, which decisions shall be final and conclusive upon all persons. 7.6 TERMINATION, SUSPENSION OR AMENDMENT OF THE PLAN. The Board of Directors may, in its sole discretion, terminate, suspend or amend this Plan at any time. No such termination, suspension or amendment shall adversely affect: (a) The benefits or rights thereto of any Participant who has retired, whether or not he has commenced to receive a Plan Benefit; or (b) The right of any Participant to receive the amount, on an immediate or deferred basis, computed under Article V to which he would be entitled under this Plan prior to its suspension, termination or amendment taking into account such person's age, Service and Final Average Compensation as of the date of such termination, suspension or amendment; VII-2 19 provided, however, that subsections (a) and (b) above shall not apply to any such termination, suspension or amendment if a change has occurred in the law (or the interpretation of such laws) which would result in an adverse effect to the Company or such Participants if this Plan were to remain in effect and unamended in its form immediately prior to such occurrence. VII-3 20 ARTICLE VIII ------------ GENERAL CONDITIONS ------------------ 8.1 NO ASSIGNMENT OF BENEFIT. It is a condition of this Plan and all rights of each Participant shall be subject thereto, that no right or interest of any Participant of the Plan shall be assignable or subject to execution, garnishment, attachment, pledge, bankruptcy or levy of any kind, but excluding devolution by death or mental incompetency. Further, no interest of a Participant and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest of any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment, or encumbrance by or through a Participant. If any attempt is made to alienate, pledge or charge any such interest of any such benefit for any debt, liabilities in tort or contract, or otherwise, of any Participant contrary to the prohibitions of the preceding sentence, then the Plan Administrator in his discretion may suspend or forfeit the interest of such person and during the period of such suspension, or in the case of forfeiture, the Plan Administrator shall hold such interest for the benefit of, or shall make the benefit payments to which such Participant would otherwise be entitled to, to the Beneficiary or to some member of the Participant's or Beneficiary's family to be selected in the sole discretion of the Board of Directors. VIII-1 21 8.2 FORFEITURE OF BENEFITS. Anything in this Plan to the contrary notwithstanding, the Company shall be relieved of any and all obligations to commence to pay or continue the payment of benefits under this Plan, if any Executive, who is otherwise entitled, to a Plan Benefit, shall: (a) At any time up to ten (10) years after his retirement, acquire five percent (5%) or more of the voting stock of a competing business or, without written consent of the Company, be employed as a director, officer, employee, consultant, advisor, partner or owner of a "competing business", where a competing business shall be any business which is substantially similar to the whole or any part of the business conducted by the Company; (b) Fail to act as a consultant to the Company, upon its request, subsequent to said Executive's termination of employment; provided, said Executive is reimbursed at a reasonable rate of compensation for the services being rendered; (c) Divulge any trade secrets; (d) Commit, attempt to commit or allegedly commit a felony, or engage in the commission of a felonious act of any type. VIII-2 22 8.3 NO IMPLIED RIGHTS. No Participant or any other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in it. The Company may terminate the employment of any Executive or other employee as freely and with the same, effect as if this Plan were not in operation. VIII-3 23 AMERICAN GREETINGS CORPORATION ------------------------------ SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN -------------------------------------- SCHEDULE A ----------
Reduction Factors for Benefits Payable Prior to Age 65 ----------------------- Age* At Which Reduction Benefits Begin Factor -------------- ------ 65 0.00% 64 2.88 63 5.76 62 8.64 61 11.52 60 14.40 59 17.28 58 20.16 57 23.04 56 25.92 55 28.80 * For completed months of age, use straight line interpolation
24 AMENDMENT NO. 1 --------------- To American Greetings Corporation Supplemental Executive Retirement Plan -------------------------------------- WHEREAS, American Greetings Corporation, an Ohio Corporation, (hereinafter referred to as the "Company") hereby adopts this Amendment No. 1 to the American Greetings Corporation Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan"). WHEREAS, pursuant to Section 7.6 of the Plan, the Company reserves the right to make amendments thereto; and NOW, THEREFORE, the Company hereby amends the Plan as follows: 1. Section 2.2 of the Plan is hereby amended in its entirety to read as follows: "2.2 SERVICE shall be determined in the sole discretion of the Board of Directors and shall generally mean all periods of time that an Executive is in the employment of the Company up to but not beyond said Executive's Normal Retirement Date, including any period or periods of time said Executive (who is also a Plan Participant) is disabled and eligible for and receiving benefits under the Long Term Disability Plan, but in no event beyond his Normal Retirement Age." 25 2. This Amendment No. 1 shall be effective_________________________________. IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this Amendment No. 1 to be executed on this _________ day of ____________________. AMERICAN GREETINGS CORPORATION By__________________________________ Its_________________________________ 26 AMENDMENT NO. 2 --------------- To American Greetings Corporation Supplemental Executive Retirement Plan -------------------------------------- WHEREAS, American Greetings Corporation, an Ohio Corporation, (hereinafter referred to as the "Company") hereby adopts this Amendment No. 2 to the American Greetings Corporation Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan"). WHEREAS, pursuant to Section 7.6 of the Plan, the Company reserves the right to make amendments thereto; and NOW, THEREFORE, the Company hereby amends the Plan as follows: 1. Section 2.15 of the Plan is hereby amended in its entirety to read as follows: "2.15 PENSION PLAN BENEFIT shall mean the accrued nonforfeitable monthly benefit (if any) to which an executive is entitled under the Pension Plan calculated on a straight life annuity basis." 2. Section 2.16 of the Plan is hereby amended in its entirety to read as follows: "2.16 PENSION PLAN BENEFIT OFFSET shall mean the amount of the Participant's Pension Plan Benefit to which he (or, in the event of his death, his Beneficiary) is entitled as of the actual date said benefit is or commences to be paid from the Pension Plan, which amount is adjusted as of said date to a value equivalent to a one hundred eighty (180) month certain and continuous benefit." 27 3. Section 5.7 of the Plan is hereby amended to delete the words, "as of the first day of the month on which such Pension Plan payment commences" and substitutes a period therefor. 4. This Amendment No. 2 shall be effective _________________, _________. IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this Amendment No. 2 to be executed on this ________ day of ______________________. AMERICAN GREETINGS CORPORATION By__________________________________ Its_________________________________ EX-21 9 EXHIBIT 21 1 EXHIBIT 21 American Greetings Corporation Subsidiaries of the Registrant State / Jurisdiction Subsidiary of Incorporation - ---------- ---------------- A. G. Industries, Inc. North Carolina Camden Graphics Group United Kingdom Carlton Cards (Canada) Limited Canada Carlton Cards (United Kingdom) Limited United Kingdom Carlton Cards Retail, Inc. Connecticut CreataCard, Inc. Ohio Interactive Marketing, Inc. Ohio Hanson White Ltd. United Kingdom John Sands (Australia) Ltd. Delaware John Sands (New Zealand) Ltd. Delaware Magnivision, Inc. Delaware Plus Mark, Inc. Ohio EX-23 10 EXHIBIT 23 1 EXHIBIT 23 American Greetings Corporation Consent of Independent Auditors We consent to the incorporation by reference in (i) Post-Effective Amendment Number 1 dated May 27, 1986 to Registration Statement No. 2-89471 on Form S-3, (ii) Post-Effective Amendment Number 1 dated May 31, 1984 to Registration Statement No. 2-84911 on Form S-8, (iii) Registration Statement No. 33-975 on Form S-8 dated November 7, 1985, (iv) Registration Statement No. 33-16180 on Form S-8 dated July 31, 1987, (v) Post-Effective Amendment Number 1 dated May 17, 1991 to Registration Statement No. 33-39726 on Form S-3, (vi) Registration Statement No. 33-45673 on Form S-8 dated February 4, 1992, (vii) Registration Statement No. 33-58582 on Form S-8 dated February 22, 1993, (viii) Post-Effective Amendment Number 1 dated March 29, 1993 to Registration Statement No. 33-52196 on Form S-3, (ix) Registration Statement No. 33-50255 on Form S-3 dated September 15, 1993, (x) Registration Statement No. 33-57221 on Form S-3 dated January 16, 1995, (xi) Registration Statement No. 33-61037 on Form S-8 dated July 14, 1995, and (xii) Registration Statement No. 33-08123 on Form S-8 dated July 15, 1996, and (xiii) Registration Statement No. 33-53197 on Form S-3A dated June 5, 1998, of our report dated March 25, 1999, with respect to the consolidated financial statements and schedule of American Greetings Corporation included in this Annual Report (Form 10-K) for the year ended February 28, 1999. /s/ Ernst & Young LLP Cleveland, Ohio May 25, 1999 EX-27 11 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PART II, ITEM 8 OF THE FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR FEB-28-1999 MAR-01-1998 FEB-28-1999 144,555 0 390,740 15,583 251,289 1,145,818 958,623 523,817 2,419,328 417,674 0 0 0 69,093 1,277,518 2,419,328 2,205,706 2,205,706 757,080 757,080 0 8,472 29,326 281,597 101,375 180,222 0 0 0 180,222 2.56 2.53
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