-----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, FktIwKjC5F0X2UGiV4j+Ty+2W40k/MZUaU0ryp1+y3IukK9ok1ys+ttYG+ULNMu9 Rar5QEWhwgMtqiRBz45UUA== 0000094845-01-000015.txt : 20010206 0000094845-01-000015.hdr.sgml : 20010206 ACCESSION NUMBER: 0000094845-01-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 28 CONFORMED PERIOD OF REPORT: 20001126 FILED AS OF DATE: 20010205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEVI STRAUSS & CO CENTRAL INDEX KEY: 0000094845 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 940905160 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06631 FILM NUMBER: 1524846 BUSINESS ADDRESS: STREET 1: 1155 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155446000 MAIL ADDRESS: STREET 1: 1155 BATTERY STREET CITY: SAN FRAINCISCO STATE: CA ZIP: 94111 10-K 1 0001.txt FORM 10K DATED NOVEMBER 26, 2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 26, 2000 Commission file number: 333-36234 LEVI STRAUSS & CO. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 94-0905160 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1155 BATTERY STREET, SAN FRANCISCO, CALIFORNIA 94111 (Address of Principal Executive Offices) (415) 501-6000 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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 (paragraph 229.405 of this chapter) 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 the Form 10-K or any amendment to this Form 10-K. [x] The Company is privately held. Nearly all of its common equity is owned by members of the families of several descendants of the Company's founder, Levi Strauss. There is no trading in the common equity and therefore an aggregate market value based on sales or bid and asked prices is not determinable. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock $.01 par value ------ 37,278,238 shares outstanding on February 1, 2001 Documents incorporated by reference: None LEVI STRAUSS & CO. TABLE OF CONTENTS TO FORM 10-K FOR FISCAL YEAR ENDING NOVEMBER 26, 2000
PART I PAGE Item 1. Business...................................................................................... 3 Item 2. Properties.................................................................................... 12 Item 3. Legal Proceedings............................................................................. 13 Item 4. Submission of Matters to a Vote of Security Holders........................................... 13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 14 Item 6. Selected Financial Data....................................................................... 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......... 17 Item 7A.Quantitative and Qualitative Disclosures About Market Risk...................................... 33 Item 8. Financial Statements and Supplementary Data................................................... 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 72 PART III Item 10. Directors and Executive Officers of the Registrant............................................ 73 Item 11. Executive Compensation........................................................................ 77 Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 81 Item 13. Certain Relationships and Related Transactions................................................ 85 ITEM IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................. 86 SIGNATURES.............................................................................................. 92 Financial Statement Schedules........................................................................... 94 Supplemental Information................................................................................ 95
2 PART I ITEM 1. BUSINESS OVERVIEW We are one of the world's leading branded apparel companies with sales in more than 80 countries. We design and market jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories for men, women and children under our Levi's(R), Dockers(R) and Slates(R) brands. Our products are distributed in the United States primarily through chain retailers and department stores and abroad primarily through department stores and specialty retailers. We also maintain a network of approximately 750 franchised or independently owned stores dedicated to our products outside the United States and operate a small number of company-owned stores.
LEVI'S(R) BRAND DOCKERS(R) BRAND SLATES(R) BRAND --------------- ---------------- --------------- PRODUCTS: Men's, women's and kids'-- Men's, women's and boys'-- Men's and women's-- dress jeans, jeans-related products, casual pants, shorts, pants, skirts, tops, jackets, knits and woven tops, outerwear skirts, knit and woven outerwear and accessories and accessories tops, outerwear and accessories GEOGRAPHIC MARKETS: Men's and women's-- global Men's and women's-- global Men's and women's-- U.S. Kids'-- primarily U.S. Boys'-- U.S. only only PERCENTAGE OF 2000 NET SALES: 75% 23% 2%
Our business is currently organized into three geographic divisions: the Americas, consisting of the United States, Canada and Latin America; Europe, including the Middle East and Africa; and Asia Pacific. Our operations in the United States are conducted primarily through Levi Strauss & Co., while our operations outside the United States are conducted primarily through foreign subsidiaries owned directly or indirectly by Levi Strauss & Co. In 2000, we had net sales of $4.6 billion, of which the Americas, Europe and Asia Pacific accounted for 68%, 24% and 8%, respectively. In 1999, we had net sales of $5.1 billion. OUR BUSINESS STRATEGY Our primary strategic goals are to continue stabilizing our business and position it for profitable growth. We believe achievement of these objectives will help us increase our financial strength and flexibility and meet our goal of regaining investment grade ratings on our debt securities. To achieve these goals, we have several key business strategies. REINVIGORATE OUR BRANDS THROUGH BETTER PRODUCT INNOVATION AND INCREASED CONSUMER AND CHANNEL RELEVANCE. We believe that an integrated presentation of new and innovative products and marketing programs targeted to specific consumer and retail segments is crucial to generating consumer demand and increasing sales for our products. We intend to: o focus on continually updating our core products and creating new products, such as our Levi's(R) Engineered Jeans(TM), that incorporate design innovations, new fabrics and new finishes and that draw on our long heritage of originality in product design and fabrication; o design and market products that are relevant to our various consumer segments ranging from teenagers and trend initiators who demand fashion-forward styles, to urban professionals who desire sophisticated casual wear, as well as to the broad group of consumers who want mainstream, quality branded jeanswear and khaki pants for everyday and business wear; o take advantage of consumer recognition of our brands and market opportunities by expanding our product offerings in women's apparel, tops and licensed merchandise such as outerwear, shoes and belts; o capitalize on our global brand recognition and marketing capabilities by adopting successful products and design concepts developed in one region and introducing them to other geographic markets in which we operate; 3 o target our product offerings to specific distribution channels in order to reach discrete consumer segments, create differentiation for our retail customers and between our brands, strengthen our position in our existing channels and address shifts in retail distribution channels in both the United States and Europe; and o develop product-focused marketing programs using both traditional advertising vehicles such as television, print and point-of-sale materials and other vehicles such as concert sponsorships, product placement and Internet sites. ACHIEVE OPERATIONAL EXCELLENCE. We are implementing strategies and processes for more effectively anticipating and fulfilling product demand and replenishing core items. We intend to: o improve the coordination of our design, merchandising, forecasting, sourcing and logistics processes to reduce product lead times, ensure product availability and improve fill rates; o improve the linkage of product supply to consumer demand and our ability to ship product orders in a timely manner; o focus on working capital control through improved forecasting, inventory management and product mix; and o improve our product sourcing and operating efficiencies to further reduce product costs and control operating expenses. IMPROVE OUR RELATIONSHIPS WITH OUR CUSTOMERS AND UPGRADE THE PRESENTATION OF OUR PRODUCT AT RETAIL. We distribute our products in a wide variety of retail formats around the world including chain and department stores, franchise stores dedicated to our brands and specialty retailers. Through better relationships and collaborative business planning with our customers, we must ensure that the right products are available and in-stock at retail and are presented in ways that enhance brand appeal and attract consumers. We intend to: o engage in more collaborative planning and performance monitoring processes with our retail customers to achieve better product presentation, assortment and inventory management; o improve the presentation of our product at retail through new retailing formats, better fixturing and visual merchandising, on-floor merchandising services and other sales-area upgrade programs; o implement an outlet strategy through new accounts and expanded product offerings without incurring capital expenditures; o increase the number of franchised or other retail formats dedicated to our Dockers(R) brand products outside the United States in order to present the brand in a focused, image-enhancing environment. OUR BRANDS AND PRODUCTS We market a broad line of branded jeanswear, casual wear and dress pants that appeal to diverse demographic groups in markets around the world. Through a number of sub-brands and product lines under the Levi's(R), Dockers(R) and Slates(R) brands, we target specific consumer segments and provide product differentiation for our retail customers in our selected distribution channels. We focus on creating new, innovative products relevant to our target consumers, as well as ensuring that our core, traditional products are updated with new finishes, fabrications and colors. We strive to leverage our global brand recognition, product design and marketing capabilities to take products and design concepts developed in one region and introduce them in other geographic markets. 4 LEVI'S(R) BRAND We market jeans and jeans-related products under the Levi's(R) brand around the world. Since their invention in 1873, Levi's(R) jeans have become one of the most successful and widely recognized brands in the history of the apparel industry. In fiscal year 2000, sales of our Levi's(R) brand products represented approximately 75% of our net sales, and accounted for approximately 67% of net sales in the Americas, approximately 91% of net sales in Europe and approximately 95% of net sales in Asia Pacific. Our Levi's(R) brand features a wide range of product offerings including: o RED TAB(TM) PRODUCTS. Our Red Tab(TM) product line, identified by our Tab Device trademark on the back pocket, encompasses a variety of basic jeans with different silhouettes, fits, fabrics (including denim and corduroy) and finishes intended to appeal to a wide range of consumers. Our core line is anchored by the classic 501(R) button-fly jean, named by Time Magazine as the "Best Fashion of the Century" in its December 31, 1999 edition. We distribute Red Tab(TM) products worldwide through many of our distribution channels. o LEVI'S(R) ENGINEERED JEANS(TM). Developed in Europe, Levi's(R) Engineered Jeans(TM) represent our reinvention of the blue jean and the first international jeanswear launch in our history. These jeans are ergonomically engineered to fit the body's contours and have a three-dimensional shape that we believe provides innovative design, unique style, superior comfort and ease of movement. We target Levi's(R) Engineered Jeans(TM) to 15- to 24-year-olds in Asia, Europe and the Americas primarily through independent retailers, specialty stores and Original Levi's Store(R) retail shops. o SILVERTAB(R) PRODUCTS. Our Silvertab(R) line targets 15- to 19-year-olds and offers a more fashion-forward product range featuring technologically advanced fabrics, such as microfiber, nylon ripstop and "oily" canvas and innovative finishes for denim jeans. We distribute Silvertab(R) products primarily through department stores and Original Levi's Store(R) retail shops in the Americas. o OTHER PRODUCTS. Other Levi's(R) brand products include: Levi's(R) Vintage Clothing for jean "aficionados", a premium line available through high-end specialty stores and independent retailers in Europe, Asia and the United States; the Levi's(R) Red(TM) collection, a European-developed product designed to reflect both our heritage and modern design concepts; L2(R) brand that targets 15- to 24-year-old suburban youth who want fashionable products at value pricing that are distributed through chain stores in the United States and in Asia; and, in conjunction with Philips Electronics NV, Levi's(R) ICD+(TM) (Levi's(R) Industrial Clothing Division+(TM)) in Europe features an innovative line of jackets that integrate wearable electronics with fashion. DOCKERS(R) BRAND We market casual clothing, primarily pants and tops, under the Dockers(R) brand, in more than 40 countries. We launched the brand in 1986 to address an emerging consumer interest in khaki pants. We believe that the Dockers(R) brand, through its product offering and marketing, played a major role in the resurgence of khaki pants and the movement toward casual attire in the workplace by helping create a standard for business casual clothing. According to a 2000 report by the Society for Human Resource Managers, approximately 80% of U.S. workplaces today allow casual business wear at least one day a week. In fiscal year 2000, sales of Dockers(R) brand products represented approximately 23% of our net sales, accounting for approximately 31% of net sales in the Americas, approximately 9% of net sales in Europe and approximately 5% of net sales in Asia Pacific. Our Dockers(R) brand offerings are primarily targeted to men and women ages 25 to 39 and include: o DOCKERS(R) BRAND. Dockers(R) brand products are the core line of the brand. They include a broad range of casual khaki pants and are complemented by a variety of tops and seasonal pant products in a range of fits, fabrics, colors and styles. We distribute these products in the Americas, Europe and Asia through a variety of channels, including department stores and chain stores. o DOCKERS(R) PREMIUM. The Dockers(R) Premium pant line provides a range of cotton pants constructed from premium fabrics with sophisticated details in a range of finishes, fits, styles and colors. We distribute these products through department stores in the United States. 5 o DOCKERS(R) RECODE(TM). In Spring 2000, we launched the Dockers(R) Recode(TM) sub-brand exclusively in U.S. department stores in order to appeal to more fashion-involved consumers who want modern casual clothes. A slightly more fashion- forward line of pants and tops, the sub-brand consists of cotton-blended fabrications in a sophisticated color spectrum. In Fall 2000, we expanded the collection with an offering of sweaters, outerwear, shoes and belts marketed by our licensees. o DOCKERS(R) K-1 KHAKIS. The brand's first global product launch, Dockers(R) K-1 Khakis is a premium khaki pant inspired by the authentic army khaki and made from the original Cramerton(R) army cloth. In Fall 2000, we introduced a complete collection with new colors and fabrics in shirts, sweaters, belts, outerwear and a variety of pants, all inspired by military and antique workwear themes. We distribute Dockers(R) K-1 Khakis through specialty and department stores in Europe, Asia and the Americas, but will discontinue this line in the United States in 2001 in order to heighten our focus on other Dockers(R) lines. o OTHER PRODUCTS. Our other Dockers(R) product lines include Exact(TM) A Dockers(R) Brand, a collection of more refined casual dress styling available through chain stores; and Dockers(R) D(TM) products, a new boys' line distributed in the United States targeted towards boys ages 4 to 14. We work with established licensees to develop and market complementary products under the Dockers(R) brand, including outerwear and leather goods, men's and women's footwear, men's sweaters, hosiery and golf apparel. SLATES(R) BRAND We market modern, sophisticated clothes for men and women under the Slates(R) brand in the United States. Launched in Fall 1996, the Slates(R) brand became a leading men's dress pant brand at department stores by the end of 1997. Our Slates(R) brand offerings include: o MEN'S SLATES(R). The men's Slates(R) brand collection of pants, shirts, sweaters and outerwear, combines contemporary styles with modern fabrics and colors. We position the brand between casual pants and tailored clothing and design and market it to meet the 25- to 34-year-old consumer's desire for a younger and more sophisticated casual look. This brand is distributed to department stores and specialty stores. o WOMEN'S SLATES(R). In Fall 2000, we added a new line of women's dress-casual clothing to the Slates(R) brand. The "Slates(R) Janet Howard(R)" line, designed by Janet Howard, targets women ages 24 to 35 with a designer-inspired line of dress pants, skirts, tops, sweaters and dress jackets. We distribute this line of products to higher-end department stores to fill a gap between the classic and contemporary women's apparel categories. o OTHER PRODUCTS. For men's products, we produce the pants in the Slates(R) line and work with established licensees to develop and market complementary products under the Slates(R) brand, including a broad assortment of knit and woven tops, dress shirts, sweaters, hosiery and outerwear and, planned for Spring 2001, ties, sportcoats and suit separates. SALES, DISTRIBUTION AND CUSTOMERS We distribute our products on a worldwide basis through selected retail channels, including chain stores, department stores, specialty stores, dedicated franchised stores, outlets, Internet sites and mail-order catalogs. Our distribution strategy focuses on: o improving the presentation of our products at retail through introducing new retailing formats, executing new fixturing, visual merchandising and other sales-area upgrade programs and providing on-floor merchandising services; and o strengthening our relationships with our retail customers through more collaborative planning and performance monitoring processes, providing sub-brands and products to specific distribution channels in order to create points of differentiation for our customers and providing them with products targeted for their core consumers. 6 AMERICAS In the Americas, we distribute our products through national and regional chains, department stores, specialty stores and Original Levi's Store(R) and Dockers(R) Store retail shops. We have approximately 3,000 retail customers operating more than 16,800 locations in the United States and Canada. Sales of Levi's(R), Dockers(R) and Slates(R) products to our top five and top 10 customers in the United States accounted for approximately 36% and 48% of our total net sales in fiscal year 2000, and approximately 54% and 70% of our Americas net sales in fiscal year 2000, as compared to approximately 34% and 46% of our total net sales in fiscal year 1999, and approximately 51% and 69% of our Americas net sales in fiscal year 1999. Our top 10 customers in 2000, on both an Americas and total company basis, were Designs, Inc., Dillards, Inc., Federated Department Stores, Inc., Goody's Family Clothing, Inc., J.C. Penney, Kohl's Corporation, The May Department Stores Company, the Mervyn's unit of Target, Sears, Roebuck & Co. and Specialty Retailers. J.C. Penney is the only customer that represented more than 10% of our total net sales, accounting for 12%, 11% and 12% of our total net sales in fiscal years 2000, 1999 and 1998, respectively. We also target limited distribution premium products like Levi's(R) Vintage Clothing to independent, image-conscious specialty stores in major metropolitan areas who cater to more fashion-forward, trend-influential consumers. EUROPE Our European customers include large department stores, such as Corte Ingles in Spain, Galeries Lafayette in France and Karstadt Quelle AG in Germany; dedicated, single-brand Original Levi's Store(R) and Dockers(R) Store retail shops; mail order accounts; and a substantial number of independent retailers operating either a single or small group of jeans-focused stores or general clothing stores. We depend for nearly half our European sales on these independent retailers, who are under increasing pressure from both vertically integrated specialty stores and department stores. The more varied and fragmented nature of European retailing means that we are less dependent on major customers than we are in the United States. In fiscal year 2000, our top 10 European customers accounted for approximately 10% of our total European net sales. ASIA PACIFIC In Asia Pacific, we generate over half of our sales through the specialty store channel, which includes multi-brand as well as independently owned Original Levi's Store(R) retail shops. The rest of our products are sold through department stores and general merchandise stores. As in Europe, the varied and fragmented nature of Asian retailing means we are less dependent on individual customers in the region. Our Asia Pacific business is heavily weighted toward Japan, which represented approximately 63% of our 2000 net sales in the region. DEDICATED STORES We have a network of approximately 750 franchised or other independently owned stores selling Levi's(R) brand or Dockers(R) brand products under the "Original Levi's Store(R)", "Levi's(R) Store" and "Dockers(R) Store" names in Europe, Asia, Canada and Latin America. These dedicated-format stores are strategically important as vehicles for demonstrating the breadth of our product line, enhancing brand image and generating sales. These stores also are an important distribution channel in newer and smaller markets in Eastern Europe, Asia Pacific and Latin America. We own and operate a small number of stores dedicated to the Levi's(R) brand, including stores in the United States located in New York, Chicago, Orange County, San Francisco, San Diego, Boston and Seattle and in Europe in London, Milan, Paris and Berlin. We also own in the United States and Japan, and license third parties in the United States and abroad to operate outlet stores for the disposition of closeout, irregular and return goods. Sales in fiscal year 2000 through our outlet channels in the United States represented approximately 8% of our Americas net sales and approximately 5% of our total net sales. We use the outlet store channel to support our brands by moving closeout and irregular goods as quickly as possible through the stores and by reducing the flow of goods to channels that are not consistent with brand image and distribution strategies. In order to better meet consumer needs and to participate effectively in the value distribution channel, we supplement the product offering to the outlet and related stores in the United States by producing selected basic products, including jeans, khaki pants and denim shirts, specifically for those stores. 7 INTERNET We operate web sites devoted to each of the Levi's(R), Dockers(R) and Slates(R) brands as marketing vehicles to enhance consumer understanding of our brands. We do not sell products directly to consumers through the Internet. In the United States, our products are currently sold online through specifically authorized Internet sites that meet our standards, such as www.macys.com, operated by Federated, and www.jcpenney.com, operated by J.C. Penney. In Europe, authorized dealers and mail order accounts who meet our standards relating to customer service, return policy, site content, trademark use and other matters may sell our products to consumers through their own Internet sites. ADVERTISING AND PROMOTION We make substantial investments in advertising, retail and promotion activities in support of our brands to increase consumer relevance and to drive consumer demand. We expensed approximately $402.7 million, or 8.7% of total net sales, on these activities in fiscal year 2000. We advertise through a broad mix of media, including television, national publications, billboards and other outdoor vehicles. We execute both global and region-specific marketing programs to achieve consistent brand positioning while allowing flexibility to optimize program execution in local markets. Examples of our global marketing initiatives include our sponsorships of World AIDS Day and advertising campaigns associated with the global launch of Levi's(R) Engineered Jeans(TM). Our marketing strategy focuses on: o developing clear consumer value propositions that drive product development and messaging in order to differentiate our brands and products; o developing integrated marketing programs that effectively coordinate product launches and promotions with specific traditional and non-traditional advertising and retail point of sales activities; o creating superior quality, product-focused advertising; and o enhancing presentation of product at retail through innovative retail initiatives. We are increasing our use of less traditional marketing vehicles, including event and music sponsorships, product placement in television shows, music videos and films and alternative marketing techniques, including street-level and nightclub events and similar targeted, small-scale activities. Recent activities include cosponsoring with Sears the fall tour of the Grammy award winner Christina Aguilera. The multi-program "Make Them Your Own"(TM) campaign for the Levi's(R) brand in the United States, launched in summer 2000, features print and television advertising, interactive online activities and a customized tractor-trailer featuring games, product displays, video "style-cam", and karaoke that travels to concert venues and retail locations. COMPETITION The worldwide apparel industry is highly competitive and fragmented. We compete in all of our markets with numerous designers, manufacturers, private labels and specialty store retailers, both domestic and foreign. The success of our business depends on our ability to shape and stimulate consumer tastes and demands by producing innovative, attractive, and competitively priced fashion products. In fashion-sensitive markets, such as the jeans and casual wear markets, barriers to entry are sufficiently low so that talented designers and others can become meaningful competitors soon after establishing a new label. We believe that the primary factors upon which we compete are: o anticipating and responding to changing consumer demands in a timely manner; o maintaining favorable brand recognition; o developing innovative, high-quality products in sizes, colors and styles that appeal to consumers; o pricing products; 8 o providing strong and effective marketing support; o creating an acceptable value proposition for retail customers; o ensuring product availability and optimizing supply chain efficiencies with retailers; and o obtaining sufficient retail floor space and effective presentation of products at retail. We believe our competitive strengths include: o strong worldwide brand recognition; o competitive product quality and value; o long-standing relationships with leading department stores and other chain stores worldwide; o our network of franchised and other Original Levi's Store(R) and Dockers(R) Store retail shops in Europe, Asia, Canada and Latin America; and o our commitment to ethical conduct and social responsibility. We believe that the total unit sales of Levi's(R) brand jeans in the United States is second only to the combined total unit sales in the United States of VF Corporation's principal jeans brands, Wrangler, Lee and Rustler. We believe that the total unit sales of Levi's(R) brand jeans on a pan-European basis and on a pan-Asia Pacific basis is greater than the total unit sales of jeans of any single brand in those regions and that there is no single competitor offering multiple brands with greater total sales of jeans in either of those regions. AMERICAS We face intense competition across all of our brands from designer labels, vertically integrated specialty stores, mass merchandisers, private labels and fashion labels. We sell both basic and fashion-oriented products under the Levi's(R), Dockers(R) and Slates(R) brands to retailers in diverse channels across a wide range of retail price points. As a result, we face a wide range of competitors, including: o other jeanswear manufacturers, including VF Corporation, marketer of the Lee, Wrangler and Rustler brands; o fashion-oriented designer apparel marketers, including Polo Ralph Lauren Corporation, Calvin Klein, Nautica Enterprises, Guess?, Inc. and Tommy Hilfiger Corp.; o vertically integrated specialty stores, including Gap Inc., Abercrombie & Fitch, American Eagle Outfitters Inc., J. Crew and Eddie Bauer, Inc.; o lower-volume but high visibility fashion-forward jeanswear brands that appeal to the teenage market, including the FUBU, JNCO, Lucky, MUDD and Diesel brands; o casual wear manufacturers, including Haggar Corp., Liz Claiborne, Inc. and Savane International Corp.; o retailer private labels, including J.C. Penney's Arizona brand and Sears' Canyon River Blues and Canyon River Khakis brands; and o mass merchandisers, including Wal-Mart Stores, Inc., Target and Kmart. 9 EUROPE While there is no one particular brand with a strong pan-European presence, strong local brands and retailers exist in certain markets, including Diesel in Italy and Scandinavia, Pepe in Spain and Lee Cooper in France. Zara, Hennes & Mauritz AB, Energie and other vertically integrated specialty retailers, and athletic wear firms such as adidas-Salomon, also offer competitive products and are an increasing competitive force in the market. Our principal U.S. competitors, including Gap Inc. and VF Corporation, are expanding their collective presence in Europe. While these U.S. competitors generally lack the presence in Europe they enjoy in the United States, we believe they view Europe as a significant growth opportunity, and we anticipate increased competition from them going forward. ASIA PACIFIC Competitors in the jeanswear market consist of both regional brands, such as Edwin, our principal competitor in Japan, and U.S. brands, including Guess?, Lee and Wrangler, which offer basic products available in local markets. Competitors in both jeanswear and casual apparel also include vertically integrated specialty stores, such as UNIQLO, Gap Inc., Esprit and Eddie Bauer in Japan, and Giordano, a more value-focused retailer that operates throughout the region. SOURCING, MANUFACTURING AND RAW MATERIALS Our supply chain strategy focuses on improving the linkage of our product supply to consumer demand and our ability to ship product orders in a timely manner. We obtain our products from a combination of company-owned facilities and independent manufacturers. Over the last three years, we shifted our sourcing base substantially toward outsourcing by closing 29 company-owned production and finishing facilities in North America and Europe. We believe that outsourcing allows us to maintain production flexibility while avoiding the substantial capital expenditures and costs related to maintaining a large internal production capability. Each of our operating regions operates a supply chain network that provides product management, demand-forecasting, quality assurance, manufacturing and logistics support to our brands. Within each of our brands, merchandisers and designers create seasonal product plans that are intended to reflect consumer preferences, market trends and retail customer requirements. During the development phase, the merchandisers and designers work closely with the product managers to ensure completion of manufacturing specifications and costing for each product in the seasonal plan. They also consult with forecast specialists and sales representatives to determine the potential unit volume for the fashion and replenishment products in the plan. Once the brand's seasonal plan is finalized, product managers focus on sourcing the products in the plan. We purchase the fabric and raw materials used in our business, particularly denim and twill, from several suppliers, including Cone Mills, Burlington Industries, Galey & Lord, including its Swift Denim subsidiary and American Cotton Growers. In addition, we purchase thread, trim, buttons, zippers, snaps and various other product components from numerous suppliers. We do not have long-term raw materials or production contracts with any of our principal suppliers, except for Cone Mills, which is the sole worldwide supplier of the denim used for our 501(R) jeans, and which supplied approximately 24%, 22% and 24% in 2000, 1999 and 1998, respectively, of the total volume of fabrics we purchased worldwide. Our contract with Cone Mills provides for a rolling five-year term unless either Cone Mills or we elect not to extend the agreement, upon which the agreement will terminate at the end of the then-current term. The contract also ensures our supply for three years following a change of control of Cone Mills. We may terminate the Cone Mills contract at any time upon 30 days notice. We have not experienced any material difficulty in obtaining fabric and other raw materials to meet production needs in the past. Our purchased fabrics are shipped directly from fabric manufacturers to our owned manufacturing plants, to cutting facilities for cutting and shipment on to third party contractors or directly to third party contractors for garment construction. In most cases where we use contractors, we retain ownership of the fabric throughout the manufacturing process. We use numerous independent manufacturers, principally in Latin America and Asia, for the production of our garments. We also use contractors who both produce or purchase fabric and sew the garments. These package contractors represent a small but growing percentage of our production and enable us to reduce working capital relating to work-in-process inventories. We typically conduct business with our contractors on an order-by-order basis. We inspect fabrics and finished goods as part of our quality control program. We require all third party contractors who manufacture or finish products on our behalf to abide by a stringent code of conduct that sets guidelines for employment practices such as wages and benefits, working hours, health and safety, working age 10 and disciplinary practices, and for environmental, ethical and legal matters. We assess working conditions and contractors' compliance with our standards on a regular basis and implement continuous improvement plans as needed. We operate 21 dedicated distribution centers in 18 countries. Distribution center activities include receiving finished goods from our plants and contractors, inspecting those products and shipping them to our customers. In some instances, we outsource distribution activities to third party logistics providers. TRADEMARKS We regard our trademarks as our most valuable assets and believe they have substantial value in the marketing of our products. Levi's(R), Silvertab(R), 501(R), L2(R), Dockers(R), Slates(R), the Arcuate trademark, the Tab Device and Two Horse are among our core trademarks. We protect these trademarks by registering them with the U.S. Patent and Trademark Office and with governmental agencies in other countries where our products are manufactured and sold. We work vigorously to enforce and protect our trademark rights by engaging in regular market reviews, helping local law enforcement authorities detect and prosecute counterfeiters, issuing cease-and-desist letters against third parties infringing or denigrating our trademarks and initiating litigation as necessary. We also work with trade groups and industry participants seeking to strengthen laws relating to the protection of intellectual property rights in markets around the world. We grant licenses to other parties to manufacture and sell products with our trademarks in product categories and in geographic areas in which we do not operate. SEASONALITY AND BACKLOG Our sales do not vary substantially by quarter in any of our three regions, as the apparel industry has become less seasonal due to more frequent selling seasons and offerings of both basic and fashion oriented merchandise throughout the year. In addition, all of our orders are subject to cancellation. For those reasons, our order backlog may not be indicative of future shipments. SOCIAL RESPONSIBILITY We have a long-standing corporate culture characterized by ethical conduct and social responsibility. Our culture and values are reflected in policies and initiatives that we believe distinguish us from others in the apparel industry. We were a pioneer in many social and cultural areas: o We were the first multinational company to develop a comprehensive code of conduct intended to ensure that workers making our products anywhere in the world would do so in safe and healthy working conditions and be treated with dignity and respect. o Our commitment to social justice is highlighted by a unique initiative that addresses racial prejudice and seeks to improve race relations by supporting community organizations working together to eliminate racism. o We were among the first companies to offer employee benefits such as flexible time-off policies and domestic partner benefits. o We have been a leader in promoting AIDS awareness and education since 1982. We are active in the communities where we have a presence. We and the Levi Strauss Foundation jointly contributed $17.2 million during fiscal year 2000 to community agencies in over 40 countries to support employee volunteerism and programs in AIDS prevention and care, economic empowerment, youth empowerment and social justice. In addition, we support more than 75 community involvement teams worldwide that facilitate employee volunteerism and raise funds for community projects. EMPLOYEES As of November 26, 2000, we employed approximately 17,300 people, approximately 9,000 of whom were located in the United States. Most of our production and distribution employees in the United States are covered by various collective bargaining agreements. Outside the United States, most of our production and distribution employees are covered by either industry-sponsored and/or state-sponsored collective bargaining mechanisms. We consider our relations with our employees to be good and have not recently experienced any material job actions or labor shortages. 11 ITEM 2. PROPERTIES We conduct manufacturing, distribution and administrative activities in owned and leased facilities. We have renewal rights in most of our property leases. We anticipate that we will be able to extend these leases on terms satisfactory to us or, if necessary, locate substitute facilities on acceptable terms. We believe our facilities and equipment are in good condition and are suitable for our needs. Information about manufacturing, finishing and distribution facilities and other key operating properties in use as of November 26, 2000 is summarized in the following table:
LOCATION PRIMARY USE LEASED/OWNED -------- ----------- ------------ UNITED STATES Little Rock, AR.......................................................... Distribution Owned Hebron, KY............................................................... Distribution Owned Canton, MS............................................................... Distribution Owned Henderson, NV............................................................ Distribution Owned San Antonio, TX.......................................................... Finishing Owned San Antonio, TX.......................................................... Manufacturing Owned San Francisco, CA........................................................ Manufacturing Owned Blue Ridge, GA........................................................... Manufacturing Owned Powell, TN............................................................... Manufacturing Owned Brownsville, TX.......................................................... Manufacturing Owned El Paso (Kastrin), TX.................................................... Manufacturing Owned San Benito, TX........................................................... Manufacturing Owned Westlake, TX............................................................. Data Center Leased OTHER AMERICAS Buenos Aires, Argentina.................................................. Distribution Leased Cotia, Brazil............................................................ Distribution Leased Rexdale, Canada.......................................................... Distribution Owned Stoney Creek, Canada..................................................... Manufacturing Owned Brantford, Canada........................................................ Finishing Leased Edmonton, Canada......................................................... Manufacturing Leased Naucalpan, Mexico........................................................ Distribution Leased EUROPE, MIDDLE EAST AND AFRICA Schoten, Belgium......................................................... Distribution Leased Les Ulis, France......................................................... Distribution Leased Heustenstamm, Germany.................................................... Distribution Owned Kiskunhalas, Hungary..................................................... Manufacturing, Finishing Owned and Distribution Milan, Italy............................................................. Distribution Leased Amsterdam, Netherlands................................................... Distribution Leased Plock, Poland............................................................ Manufacturing and Finishing Leased Warsaw, Poland........................................................... Distribution Leased Dundee, Scotland......................................................... Manufacturing Owned Bellshill, Scotland...................................................... Finishing Owned Northhampton, U.K........................................................ Distribution Owned Cape Town, South Africa.................................................. Manufacturing, Finishing Leased and Distribution Sabedell, Spain.......................................................... Distribution Leased Bonmati, Spain........................................................... Manufacturing Owned Olvega, Spain............................................................ Manufacturing Owned Helsingborg, Sweden...................................................... Distribution Owned Corlu, Turkey............................................................ Manufacturing, Finishing Owned and Distribution ASIA PACIFIC Auckland, New Zealand.................................................... Distribution Leased Adelaide, Australia...................................................... Manufacturing and Owned Distribution Bangalore, India......................................................... Distribution Leased Jawa Barat, Indonesia.................................................... Finishing Leased Hiratsuka Kanagawa, Japan................................................ Distribution Owned Makati, Philippines...................................................... Distribution Leased Makati, Philippines...................................................... Manufacturing Leased
12 Our global headquarters and the headquarters of our Americas business are both located in leased premises in San Francisco, California. Our Europe and Asia Pacific headquarters are located in leased premises in Brussels, Belgium and Singapore. We also lease or own over 110 administrative and sales offices in 44 countries, as well as lease a number of small warehouses in nine countries. In addition, we have 52 company-operated retail and outlet stores in eight countries in owned and leased premises, of which 10 stores are outlet stores in the United States, and 15 stores are located in Poland. We also own or lease several facilities we formerly operated and have closed. ITEM 3. LEGAL PROCEEDINGS We are subject to claims against us, and we make claims against others, in the ordinary course of our business, including claims arising from the use of our trademarks and with respect to employment matters. We do not believe that the resolution of any pending claims will materially adversely affect our business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of our security holders during our 2000 fiscal fourth quarter. 13 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Our shares of common stock are held by members of the families of several descendants of our founder, Levi Strauss, and by several former members of our management. There is no established public trading market for our shares and none of our shares are convertible into shares of any other class of stock or other securities. All shares of our common stock are deposited in a voting trust, a legal arrangement that transfers the voting power of the shares to a trustee or group of trustees. The four voting trustees are Peter E. Haas, Sr., Peter E. Haas, Jr., Robert D. Haas and F. Warren Hellman. The voting trustees have the exclusive ability to elect and remove directors, amend our by-laws and take certain other actions which would normally be within the power of stockholders of a Delaware corporation. Our equity holders who, as a result of the voting trust, legally hold "voting trust certificates", not stock, retain the right to direct the trustees on specified mergers and business combinations, liquidations, sales of substantially all of our assets and specified amendments to our certificate of incorporation. The voting trust will last until April 2011, unless the trustees unanimously decide, or holders of at least two-thirds of the outstanding voting trust certificates decide, to terminate it earlier. If Robert D. Haas ceases to be a trustee for any reason, then the question of whether to continue the voting trust will be decided by the holders. If Peter E. Haas, Sr. ceases to be a trustee, his successor will be his spouse, Miriam L. Haas. The existing trustees will select the successors to the other trustees. The agreement among the stockholders and the trustees creating the voting trust contemplates that, in selecting successor trustees, the trustees will attempt to select individuals who share a common vision with the sponsors of the 1996 transaction that gave rise to the voting trust, represent and reflect the financial and other interests of the equity holders and bring a balance of perspectives to the trustee group as a whole. A trustee may be removed if the other three trustees unanimously vote for removal or if holders of at least two-thirds of the outstanding voting trust certificates vote for removal. Our common stock, as noted, and the voting trust certificates, are not publicly held or traded. All shares and the voting trust certificates are subject to a stockholders' agreement. The agreement, which expires in April 2016, limits the transfer of shares and certificates to other holders, family members, specified charities and foundations and to us. The agreement does not provide for registration rights or other contractual devices for forcing a public sale of shares, certificates or other access to liquidity. The scheduled expiration date of the stockholders' agreement is five years later than that of the voting trust agreement in order to permit an orderly transition from effective control by the voting trust trustees to direct control by the stockholders. We may hold "annual stockholders' meetings" to which all voting trust certificate holders are invited to attend. These meetings are not a "meeting of stockholders" in the traditional corporate law sense; under the voting trust agreement, the trustees, not the voting trust certificate holders, elect the directors and vote the shares on most other corporate matters. In addition, the meetings are not official formal meetings, under the voting trust agreement, of the voting trust certificate holders. Instead, these annual gatherings are opportunities for the voting trust certificate holders to interact with the board of directors and management and to learn more about our business. (b) As of January 1, 2001, there were 164 record holders of voting trust certificates. (c) We did not declare or pay any dividends in our two most recent fiscal years. Our current bank credit facilities prohibit our declaring or paying any dividends without first obtaining consents from our lenders. In addition in January 2001, we entered into indentures relating to our 11.625% senior notes due 2008 that prohibit our paying any dividends unless we meet specific requirements. For more detailed information about our bank credit facilities and senior notes, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Notes to Consolidated Financial Statements. 14 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth our selected financial data. The following selected statements of income data and cash flow data for fiscal years 2000, 1999, 1998, 1997 and 1996 and the consolidated statement of balance sheet data of such periods are derived from our financial statements that have been audited by Arthur Andersen LLP, independent public accountants. The financial data set forth below should be read in conjunction with, and is qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements and the related notes to those financial statements, included elsewhere in this report. Certain prior year amounts have been reclassified to conform to the 2000 presentation.
YEAR ENDED ---------- NOVEMBER 26, NOVEMBER 28, NOVEMBER 29, NOVEMBER 30, NOVEMBER 24, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales........................ $4,645,126 $ 5,139,458 $ 5,958,635 $ 6,861,482 $ 7,136,304 Cost of goods sold............... 2,690,170 3,180,845 3,433,081 3,962,719 4,159,371 ---------- ----------- ----------- ----------- ----------- Gross profit..................... 1,954,956 1,958,613 2,525,554 2,898,763 2,976,933 Marketing, general and administrative expenses........ 1,481,718 1,629,845 1,834,058 2,045,938 2,029,138 Other operating income (32,380) (24,387) (25,310) (26,769) (28,328) Excess capacity/restructuring (1) (33,144) 497,683 250,658 386,792 -- Global Success Sharing Plan(2) .. -- (343,873) 90,564 114,833 138,963 Special Compensation Charge(3) .. -- -- -- -- 76,983 ---------- ----------- ----------- ----------- ----------- Operating income................. 538,762 199,345 375,584 377,969 760,177 Interest expense................. 234,098 182,978 178,035 212,358 145,234 Other (income) expense, net...... (39,016) 7,868 34,849 (18,670) (4,963) ---------- ----------- ----------- ----------- ----------- Income before taxes.............. 343,680 8,499 162,700 184,281 619,906 Income tax expense............... 120,288 3,144 60,198 46,070 154,977 ---------- ----------- ----------- ----------- ----------- Net income....................... $ 223,392 $ 5,355 $ 102,502 $ 138,211 $ 464,929 ========== =========== ==========- =========== =========== OTHER FINANCIAL DATA: EBITDA(4)........................ $ 629,743 $ 319,447 $ 504,357 $ 516,863 $ 889,714 Adjusted EBITDA(5)............... 596,599 473,257 845,579 1,018,488 1,105,660 Capital expenditures............. 27,955 61,062 116,531 121,595 210,466 Ratio of adjusted EBITDA to interest....................... 2.5x 2.6x 4.7x 4.8x 7.6x Ratio of earnings to fixed charges(6)..................... 2.0x 1.0x 1.6x 1.6x 3.8x STATEMENT OF CASH FLOW DATA: Cash flows from operating activities..................... $ 305,926 $ (173,772) $ 223,769 $ 573,890 $ 494,138 Cash flows from investing activities..................... 154,223 62,357 (82,707) (76,895) (242,781) Cash flows from financing activities..................... (527,062) 224,219 (194,489) (530,302) (1,136,300) BALANCE SHEET DATA: Cash and cash equivalents....... $ 117,058 $ 192,816 $ 84,565 $ 144,484 $ 195,852 Working capital.................. 555,062 770,130 637,801 701,535 1,059,940 Total assets..................... 3,205,728 3,670,014 3,867,757 4,012,314 4,167,696 Total debt....................... 2,126,430 2,664,609 2,415,330 2,631,696 3,225,512 Stockholders' deficit(3)......... (1,098,573) (1,288,562) (1,313,747) (1,370,262) (1,481,577)
15 - -------------- (1) We reduced overhead expenses and eliminated excess manufacturing capacity through extensive restructuring initiatives executed during the past three years, including closing 29 of our owned and operated production and finishing facilities in North America and Europe. (2) Our Global Success Sharing Plan, adopted in 1996, provides for cash payments to our employees in 2002 if we achieve pre-established financial targets. We recognized and accrued expenses in 1998, 1997 and 1996 for our Global Success Sharing Plan. During 1999, we concluded that, based on our financial performance, the targets under the plan would not be achieved and that the probability of a payment in 2002 is highly unlikely. As a result, in 1999 we reversed into income $343.9 million of accrued expenses, less miscellaneous expenses, previously recorded in connection with the Global Success Sharing Plan. (3) The special compensation charge and stockholders' deficit resulted from a 1996 transaction in which our stockholders created new long-term governance arrangements for us, including the voting trust and stockholders agreement. In the 1996 transaction, a group of stockholders of our former parent, Levi Strauss Associates Inc., established a new company, LSAI Holding Corp, to which they contributed approximately 70% of the outstanding shares of Levi Strauss Associates Inc. Levi Strauss Associates Inc. was then merged with a subsidiary of LSAI Holding Corp. In the merger, shares of Levi Strauss Associates Inc. not contributed to LSAI Holding Corp., including shares held under several employee benefit and compensation plans, were converted into the right to receive cash, thereby making Levi Strauss Associates Inc. a wholly-owned subsidiary of LSAI Holding Corp. Funding for the cash payments in the merger was provided in part by cash on hand and in part from proceeds of approximately $3.3 billion of borrowings under bank credit facilities. The special compensation charge resulted from the impact of the transaction on various employee plans. In October 1996, Levi Strauss Associates Inc. and LSAI Holding Corp. were merged into Levi Strauss & Co. These transactions were accounted for as a reorganization of entities under common control. (4) EBITDA equals operating income plus depreciation and amortization expense. EBITDA is not intended to represent cash flow or any other measure of performance in accordance with generally accepted accounting principles. (5) The calculation for adjusted EBITDA is shown below:
YEAR ENDED ---------- NOVEMBER 26, NOVEMBER 28, NOVEMBER 29, NOVEMBER 30, NOVEMBER 24, 2000 1999 1998 1997 1996 ---- ----- ---- ---- ---- (DOLLARS IN THOUSANDS) EBITDA.......................... $629,743 $319,447 $504,357 $ 516,863 $ 889,714 Excess capacity reduction/restructuring....... (33,144) 497,683 250,658 386,792 -- Global Success Sharing Plan..... -- (343,873) 90,564 114,833 138,963 Special Compensation Charges.... -- -- -- 76,983 -------- -------- -------- ---------- ---------- Adjusted EBITDA................. $596,599 $473,257 $845,579 $1,018,488 $1,105,660 ======== ======== ======== ========== ==========
(6) For the purpose of computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges and less capitalized interest. Fixed charges are defined as the sum of interest, including capitalized interest, on all indebtedness, amortization of debt issuance cost and that portion of rental expense which we believe to be representative of an interest factor. 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This report contains forward-looking statements, including, in particular, statements about our plans, strategies and prospects under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Among these forward looking statements are statements regarding our anticipated performance in fiscal year 2001, specifically statements relating to our net sales, gross profit, advertising expense and capital expenditures. We have based the forward-looking statements herein on our current assumptions, expectations and projections about future events. When used in this report, the words "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements speak only as of the date of this report, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct or that we will achieve savings or other benefits anticipated in the forward-looking statements. We disclose important factors, some of which may be beyond our control, that could cause actual results to differ materially from management's expectations in this report, including, without limitation: o risks related to the impact of competitive products; o changing fashion trends; o dependence on key distribution channels; o customers and suppliers; o our supply chain executional performance; o ongoing competitive pressures in the apparel industry; o changing international retail environments; o changes in the level of consumer spending or preferences in apparel; o trade restrictions; and o political or financial conditions in countries where our products are manufactured. For more information on these and other factors, see "Factors That May Affect Future Results." We caution prospective investors not to place undue reliance on these forward-looking statements. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements and the risk factors contained throughout this report. 17 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected items in our consolidated statements of operations, expressed as a percentage of net sales (amounts may not foot due to rounding).
YEAR ENDED ---------- NOVEMBER 26, NOVEMBER 28, NOVEMBER 29, 2000 1999 1998 ----- ----- ----- Net sales ............................................ 100.0% 100.0% 100.0% Cost of goods sold.................................... 57.9 61.9 57.6 ----- ----- ---- Gross profit.......................................... 42.1 38.1 42.4 Marketing, general and administrative expenses........................................... 31.9 31.7 30.8 Other operating income................................ (0.7) (0.5) (0.4) Excess capacity/restructuring charges................. (0.7) 9.7 4.2 Global Success Sharing Plan........................... -- (6.7) 1.5 ----- ----- ----- Operating income...................................... 11.6 3.9 6.3 Interest expense...................................... 5.0 3.6 3.0 Other (income) expense, net........................... (0.8) 0.2 0.6 ----- ----- ----- Income before taxes................................... 7.4 0.2 2.7 Income tax expense.................................... 2.6 0.1 1.0 ----- ----- ----- Net income............................................ 4.8% 0.1% 1.7% ===== ===== ===== NET SALES SEGMENT DATA: GEOGRAPHIC Americas......................................... 67.8% 66.6% 66.1% Europe........................................... 23.8 26.5 27.7 Asia Pacific..................................... 8.4 7.0 6.2
YEAR ENDED NOVEMBER 26, 2000 AS COMPARED TO YEAR ENDED NOVEMBER 28, 1999 NET SALES. Total net sales in fiscal year 2000 decreased 9.6% to $4.6 billion, as compared to $5.1 billion in fiscal year 1999. This decrease reflects a combination of factors including volume declines, a higher percentage of closeout sales related to our efforts to clear inventories of slow moving and obsolete fashion products earlier in the year, and the impact of the depreciating Euro. Net sales declined in the Americas and Europe regions, but increased in the Asia Pacific region, as compared to the same period of 1999. If currency exchange rates were unchanged from the prior year period, net sales for fiscal year 2000 would have declined approximately 7%. Although year over year total net sales continued to decline, the rate of decline narrowed to 9.6% in fiscal 2000 as compared to 13.7% in fiscal 1999 and 13.2% in fiscal 1998. We believe that positive consumer response to our new product lines, stronger demand for our basic products such as 501(R) jeans in the U.S. and upgraded core products in Asia, improved product-focused marketing support, stronger retail relationships and incremental progress in our shipping execution contributed to the slowing decline in sales. Our narrowing sales decline, particularly in a difficult retail environment, reflects ongoing progress in our business turnaround and efforts to improve performance. We believe we are positioned both operationally and financially to work toward stabilizing our business in fiscal year 2001 and hope to achieve relatively flat net sales on a constant currency basis, compared to fiscal year 2000. In fiscal years 2000 and 1999, we had one customer that represented approximately 12% and 11%, respectively, of total net sales. No other customer accounted for more than 10% of total net sales. In the Americas, net sales decreased 8.0% to $3.1 billion, as compared to $3.4 billion in fiscal year 1999, due primarily to a drop in volume. Although, this decrease was partially attributable to a weak apparel retail market, including difficult back-to-school and holiday seasons, we experienced increased consumer interest in our Levi's(R) brand product innovations, such as Levi's(R) Engineered Jeans, and higher volume in Dockers(R) product lines. 18 In Europe, net sales decreased 18.8% to $1.1 billion, as compared to $1.4 billion in fiscal year 1999. Net sales decreased primarily due to a decline in volume caused by a continued softening of the European apparel market, certain execution issues in our supply chain, lower average unit selling prices resulting from a higher percentage of closeouts sales and the reporting impact of the depreciating Euro. If exchange rates were unchanged from the prior year period, the reported net sales decrease would have been approximately 8% in fiscal year 2000 compared to the prior year period. In the Asia Pacific region, net sales increased 9.5% to $392.4 million, as compared to $358.4 million in fiscal year 1999. The increase was primarily driven by volume growth in most markets and the effects of translation to U.S. dollar reported results. These results were achieved despite falling stock markets, political turmoil in the Philippines and slowed consumer spending in Japan. In Japan, which accounts for nearly two-thirds of our business in Asia, we experienced positive retail and consumer response to our new products and upgraded core basics. If exchange rates were unchanged from the prior year period, the reported net sales increase would have been approximately 7% in fiscal year 2000 compared to the prior year period. GROSS PROFIT. Gross profit in fiscal year 2000 of $2.0 billion was relatively flat compared to the previous year. Gross profit as a percentage of net sales, or gross margin, increased to 42.1% in fiscal year 2000, as compared to 38.1% in fiscal year 1999. The increase was primarily attributable to a better product mix, as well as improved sourcing costs and the benefit of cost reductions resulting from plant closures taken in prior years. Idle capacity associated with production downtime occurred in 1999 as factory production was curtailed prior to fully closing some North American and European plants. In fiscal year 1999 we determined that the sell-off of obsolete goods would continue in fiscal year 2000 and as a result we marked down inventories accordingly. This resulted in higher costs of goods sold in fiscal 1999, despite the recording of a workers' compensation accrual reversal of approximately $21.0 million. We do not anticipate taking any material restructuring charges relating to additional capacity reductions or reorganization efforts in 2001. We anticipate that gross margin will continue to be in our target range of 40 to 42% in fiscal year 2001. MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and administrative expenses for fiscal year 2000 decreased 9.1% to $1.5 billion, as compared to $1.6 billion for the same period last year. Marketing, general and administrative expenses as a percentage of sales for fiscal year 2000 and fiscal year 1999 were each approximately 32%. The dollar decrease in marketing, general and administrative expenses was primarily due to our continuing cost containment efforts, lower salaries and related expenses resulting from prior year restructuring initiatives, lower sales volume-related expenses, lower advertising expenses, lower information technology expenses associated with minimal year 2000 compliance costs in 2000 and an $18.0 million pension curtailment benefit in fiscal year 2000. These decreases were partially offset by increased costs for employee incentive plans in fiscal year 2000. The increase in incentive plans during fiscal year 2000 was due to stronger performance against financial targets. In addition, marketing general and administrative expenses in fiscal year 1999 included the benefit from a reversal of employee incentive costs due to weak performance against financial targets. Advertising expense for fiscal year 2000 decreased 17.8% to $402.7 million, as compared to $490.2 million in the same period in 1999. Advertising expense as a percentage of sales in fiscal year 2000 decreased 0.8 percentage points to 8.7%, as compared to 9.5% for the same period in 1999. The decrease in advertising expense as a percentage of sales for fiscal year 2000, compared to the prior year period was consistent with our plans to better focus our marketing support initiatives and to align them more effectively with new product introductions and retail presentation. In fiscal year 2001, we expect to maintain advertising spending in a range of 8 to 9%, as a percentage of sales. OTHER OPERATING INCOME. For fiscal year 2000, licensing income increased 32.8% from the same period in 1999. The increase was primarily due to more focus on expanding our brand collection with licensed merchandise such as outerwear, shoes and belts. EXCESS CAPACITY/RESTRUCTURING CHARGES. For fiscal year 2000, we reversed charges of $33.1 million primarily due to periodic reevaluation of estimates related to the restructuring initiatives. In fiscal year 1999, we recorded charges of $497.7 million that were associated with our corporate overhead restructuring initiatives and plant closures in North America and Europe. GLOBAL SUCCESS SHARING PLAN. In fiscal year 2000, we recorded no expense for Global Success Sharing Plan. In fiscal year 1999, we reversed into income $343.9 million of previously recorded expenses associated with the Global Success Sharing Plan. This reversal of the Global Success Sharing Plan liability was based on our lower estimate of financial performance through the year 2001 and the determination that payment in 2002 under the Global Success Sharing Plan is highly unlikely. OPERATING INCOME. For fiscal year 2000, we recorded operating income of $538.8 million, as compared to $199.3 million in the same period in 1999. This increase was due to an improved gross margin, lower marketing, general and administrative expenses and the reversal of restructuring charges in fiscal year 2000. In addition, reported results in fiscal year 1999 were 19 affected by charges related to the restructuring initiatives, net of benefits for the Global Success Sharing Plan reversal. Excluding the fiscal year 2000 benefit of $33.1 million related to the reversal of restructuring costs, the fiscal year 1999 charge of $497.7 million related to restructuring costs and the $343.9 million benefit related to the Global Success Sharing Plan reversal, operating income for fiscal year 2000 would have increased approximately 43% compared to the same period in 1999. INTEREST EXPENSE. Interest expense for fiscal year 2000 increased 27.9% to $234.1 million, as compared to $183.0 million for the same period in 1999. This increase was due to higher interest rates associated with new credit facilities, customer service center equipment financing agreements and higher market interest rates. OTHER INCOME/EXPENSE, NET. For fiscal year 2000 we recorded $39.0 million of other income, net, as compared to an other expense, net of $7.9 million in the same period in 1999. The increase for fiscal year 2000 was primarily attributable to a $26.1 million gain from the sale of two office buildings in San Francisco located next to our corporate headquarters, an increase in interest income and net gains in 2000 compared to net losses in 1999 on foreign currency hedging contracts. Net currency gains and losses are primarily due to the fluctuations of various currencies in relation to our foreign currency hedging positions. INCOME TAX EXPENSE. Income tax expense for fiscal year 2000 was $120.3 million compared to $3.1 million for the same period in 1999. The increase for fiscal year 2000 was primarily due to higher earnings than in 1999. Our effective tax rate for fiscal year 2000 was 35%, as compared to 37% for the same period in 1999. The lower tax rate in 2000 was due to a reassessment of potential tax settlements. NET INCOME. Net income for fiscal year 2000 increased by $218.0 million from $5.4 million in the same period in 1999. Net income for fiscal year 2000 included higher operating income, partially offset by higher interest and tax expense compared to the same period in 1999. In addition, fiscal year 2000 included a gain from the sale of office buildings and the reversal of restructuring reserves. The lower net income for the 1999 period was due to the restructuring charge of $497.7 million, partially offset by the reversal of incentive compensation and Global Success Sharing Plan accruals. Excluding the items in both fiscal years 2000 and 1999 for the reversal and charge for restructuring and Global Success Sharing Plan, net income for fiscal year 2000 would have been $201.8 million, as compared to $102.3 million in the same period in 1999. YEAR ENDED NOVEMBER 28, 1999 AS COMPARED TO YEAR ENDED NOVEMBER 29, 1998 NET SALES. Total net sales in fiscal year 1999 decreased 13.7% to $5.1 billion, as compared to $6.0 billion in fiscal year 1998. Net sales declined worldwide and in each of our regions in Levi's(R) brand basic denim products as the consumer market trended towards more fashion denim, designer and private label products, as well as non-denim products. Factors contributing to our fiscal year 1999 net sales decline for each of our regions were difficulties in matching production with demand and a higher percentage of closeout sales needed to reduce the buildup of inventories. In the Americas, net sales decreased 13.2% to $3.4 billion, as compared to $3.9 billion in fiscal year 1998. In Europe, net sales decreased 17.6% to $1.4 billion, as compared to $1.7 billion in fiscal year 1998. In the Asia Pacific region, net sales decreased 3.0% to $358.4 million, as compared to $369.4 million in fiscal year 1998. Changes in foreign exchange rates had a minimal impact on total net sales. In fiscal years 1999 and 1998, we had one customer that represented approximately 11% and 12%, respectively, of total net sales. No other customer accounted for more than 10% of total net sales. GROSS PROFIT. Gross profit as a percentage of net sales, or gross margin, decreased to 38.1% in fiscal year 1999, as compared to 42.4% in fiscal year 1998. The decrease was primarily attributable to unfavorable product mix and increased production downtime. Idle capacity associated with production downtime occurred in 1999 as factory production was curtailed prior to fully closing some North American and European plants. In fiscal year 1999 we determined that the sell-off of obsolete goods would continue in fiscal year 2000 and thus inventories were marked down accordingly resulting in higher costs of goods sold. MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and administrative expenses for fiscal year 1999 decreased 11.1% to $1.6 billion, as compared to $1.8 billion in fiscal year 1998. Marketing, general and administrative expenses as a percentage of net sales in fiscal year 1999 increased to 31.7%, as compared to 30.8% in fiscal year 1998. The dollar decrease resulted primarily from reduced selling and distribution costs associated with lower unit volume shipments, decreases in performance-related incentives and reductions in administrative and overhead expenses associated with cost reduction efforts. Advertising expenses in fiscal year 1999 increased 5.0% to $490.2 million, as compared to $466.7 million in fiscal year 1998 primarily due to various initiatives we implemented to revitalize our brand. Advertising initiatives in fiscal year 1999 included worldwide music sponsorship programs, a new Pan-European marketing campaign and a renewed focus on U.S. Dockers(R) brand promotions. 20 OTHER OPERATING INCOME. For fiscal year 1999, licensing income decreased approximately 3.6% from the same period in 1998. The decrease was primarily due to less licensing opportunities as a result of a reduced market for our brands. EXCESS CAPACITY REDUCTION/RESTRUCTURING EXPENSES. For fiscal year 1999, we incurred charges of $497.7 million, as compared to $250.7 million in fiscal year 1998. These charges were associated with the plant closures in North America and Europe and with our corporate overhead restructuring initiatives. GLOBAL SUCCESS SHARING PLAN. In fiscal year 1999, we reversed into income $343.9 million of previously recorded expenses associated with the Global Success Sharing Plan, as compared to an expense of $90.6 million recognized in fiscal year 1998. This reversal of the Global Success Sharing Plan liability was based on our lower estimate of financial performance through the year 2001 and the determination that payment in 2002 under the Global Success Sharing Plan is highly unlikely. OPERATING INCOME. Operating income for fiscal year 1999 decreased 46.9% to $199.3 million, as compared to $375.6 million in fiscal year 1998. The decrease from fiscal year 1998 was a result of lower sales and gross profit, partially offset by lower marketing general and administrative costs. Operating income for fiscal years 1999 and 1998 was adversely impacted by the North American and European plant closures and restructuring initiatives totaling $497.7 million in fiscal year 1999 and $250.7 million in fiscal year 1998. Offsetting this decrease in fiscal year 1999 was the reversal of the Global Success Sharing Plan liability totaling $343.9 million, as compared to a charge of $90.6 million in fiscal year 1998. Excluding the charges for the plant closures and restructuring initiatives and the reversal and charge for the Global Success Sharing Plan in fiscal years 1999 and 1998, operating income for fiscal year 1999 would have decreased to $353.2 million, as compared to $716.8 million in fiscal year 1998. INTEREST EXPENSE. Interest expense in fiscal year 1999 increased 2.8% to $183.0 million, as compared to $178.0 million in fiscal year 1998. This increase was due to higher average debt outstanding throughout most of fiscal year 1999. The increase in outstanding debt was primarily due to the cash outflows associated with plant closures and restructuring initiatives. OTHER EXPENSE, NET. Other expense, net in fiscal year 1999 decreased to $7.9 million compared to $34.9 million in fiscal year 1998. This decrease was primarily attributable to net gains on foreign currency contracts in fiscal year 1999, as compared to net losses in fiscal year 1998. Net currency gains and losses are primarily due to currency fluctuations in relation to our foreign currency hedging positions. INCOME TAX EXPENSE. Income tax expense for fiscal year 1999 decreased 94.8% to $3.1 million, as compared to $60.2 million in fiscal year 1998. The decrease in income tax expense is consistent with the decrease in income before taxes as the effective tax rate was 37.0% for both fiscal years. NET INCOME. Net income for fiscal year 1999 decreased 94.8% to $5.4 million, as compared to $102.5 million in fiscal year 1998. Net income for fiscal years 1999 and 1998 was adversely impacted by the pre-tax North American and European plant closures and restructuring initiatives totaling $497.7 million in fiscal year 1999 and $250.7 million in fiscal year 1998. Offsetting this decrease in fiscal year 1999 was the pre-tax reversal of the Global Success Sharing Plan liability totaling $343.9 million, as compared to a pre-tax charge of $90.6 million in fiscal year 1998. Excluding the charges for the plant closures and restructuring initiatives and the reversal and charge for the Global Success Sharing Plan in fiscal years 1999 and 1998, net income for fiscal year 1999 would have decreased by $215.2 million to $102.3 million, as compared to $317.5 million in fiscal year 1998. The principal causes of this decrease were lower net sales and lower gross margin, which were partially offset by lower marketing, general and administrative expenses. RESTRUCTURING AND EXCESS CAPACITY REDUCTION The following is a summary of the actions taken and related charges associated with our excess capacity reductions and other restructuring activities: o During September 1999, we announced plans to close one manufacturing facility and further reduce overhead costs by consolidating operations in Europe, with an estimated displacement of 960 employees. We recorded an initial charge to set up a reserve of $54.7 million. The manufacturing facility was closed in December 1999. In fiscal year 2000, $2.2 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. As a result of this reevaluation, a total of 945 employees are estimated to be displaced. As of November 26, 2000, the balance of this reserve was $6.3 million, and approximately 910 employees had been displaced. 21 o In February 1999, we announced the closure of 11 manufacturing facilities in North America. Those facilities were closed by the end of 1999, resulting in the displacement of approximately 5,900 employees. We recorded an initial charge to set up a reserve of $394.1 million in 1999. In fiscal year 2000, $13.3 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. Of this reversal, $7.1 million was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. Of this reversal, $6.1 million was primarily associated with plant closure costs and was based upon historical trends from previous plant closures. As of November 26, 2000, the balance in this reserve was $54.6 million. o In fiscal year 1999, we recorded an initial charge to set up a reserve of $48.9 million for corporate overhead reorganization initiatives with an estimated displacement of 930 employees upon completion of the reorganization. In fiscal year 2000, $9.0 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. As a result of this reevaluation, a total of 730 employees are estimated to be displaced. As of November 26, 2000, the balance of this reserve was $2.8 million, and approximately 670 employees had been displaced. o In fiscal year 1998, we recorded an initial charge to set up a reserve of $61.1 million for corporate overhead reorganization initiatives and $82.1 million for the closure of two North American finishing facilities. The two North America finishing facilities were closed during 1999. Approximately 770 and 990 employees were displaced in connection with the reorganization and facility closures, respectively. In fiscal year 2000, $3.7 million of the remaining reserve balance for the corporate overhead reorganization initiatives was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. Of this reversal, $1.8 million was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. Of this reversal, $1.9 million was primarily associated with higher sub-lease income than initially projected. In fiscal year 2000, a small amount of the remaining reserve balance for the North America finishing facilities was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. This reversal was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. As of November 26, 2000, the balances of these reserves were $1.9 million and $2.1 million, respectively. o In fiscal year 1998, we recorded an initial restructuring charge to set up a reserve of $107.5 million for reorganization initiatives and the closure of two manufacturing and two finishing facilities in Europe with an estimated displacement of 1,650 employees. The two manufacturing and two finishing facilities were closed in 1999. As of November 26, 2000, the balance of this reserve was $1.5 million and approximately 1,645 employees had been displaced. o In November 1997, we announced the closure of one finishing and 10 manufacturing facilities in North America. Those facilities were closed by the end of 1998, resulting in the displacement of approximately 6,400 employees. We recorded an initial charge to set up a reserve of $386.8 million. In fiscal year 2000, $5.0 million of the reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. This reversal was primarily associated with employee benefits that expired during 2000. As of November 26, 2000, the balance of this reserve was $2.4 million. The following table summarizes the plant closures and restructuring charges and the resulting reductions:
BALANCE AS INITIAL OF INITIAL ASSET CASH NOVEMBER 26, PROVISION WRITE-OFFS REDUCTIONS REVERSALS 2000 --------- ---------- ---------- --------- ------------ (DOLLARS IN THOUSANDS) 1997 North American Plant Closures.................................... $ 386,792 $ 42,689 $336,669 $ 4,987 $ 2,447 1998 North American Plant Closures.................................... 82,073 23,399 56,604 13 2,057 1999 North American Plant Closures.................................... 394,105 33,430 292,777 13,281 54,617 1998 Corporate Restructuring Initiatives.............................. 61,062 2,985 52,469 3,735 1,873 1999 Corporate Restructuring Initiatives.............................. 48,889 -- 37,164 8,963 2,762 1998 European Restructuring and Plant Closures........................ 107,523 10,026 95,989 -- 1,508 1999 European Restructuring and Plant Closures........................ 54,689 4,500 41,693 2,165 6,331 ---------- -------- -------- ------- ------- Total as of November 26, 2000.................................... $1,135,133 $117,029 $913,365 $33,144 $71,595 ========== ======== ======== ======= =======
The majority of the initiatives are expected to be completed by the end of 2001. 22 LIQUIDITY AND CAPITAL RESOURCES Our principal capital requirements have been to fund working capital and capital expenditures. One of our business strategies is to focus on working capital control through improved forecasting, inventory management and product mix. We are also focusing on controlling operating expenses and using cash generated from operations to further reduce debt. As of November 26, 2000, total cash and cash equivalents were $117.1 million, a $75.8 million decrease from the $192.8 million cash balance reported as of November 28, 1999. CASH PROVIDED BY/USED FOR OPERATIONS. Cash provided by operating activities in fiscal year 2000 was $305.9 million, as compared to a use of cash of $173.8 million in the same period in 1999. Although inventory increased, the composition of our inventory in fiscal year 2000 was more current and relevant to the marketplace compared to the composition of inventory in the prior year period. This reflected our efforts to clear out old merchandise from fiscal year 1999. Inventory decreased on the balance sheet due to the translation effects of foreign currency rates to the U.S. dollar. Income taxes receivable decreased during fiscal year 2000 primarily due to income tax refunds of $66.3 million received in March 2000 associated with a carryback of a net operating loss reported on our 1999 income tax return. Restructuring reserves and the related net deferred tax assets decreased during fiscal year 2000 primarily due to spending and accrual reversals related to the restructuring initiatives. Accrued salaries, wages and employee benefits, and long-term employee benefits increased during fiscal year 2000 primarily due to increased accruals for employee incentive plans. Accrued taxes increased and other long-term liabilities decreased during fiscal year 2000 due to a tentative settlement with the Internal Revenue Service in connection with an examination of our income tax returns for the years 1986 to 1989. The change in other, net during fiscal year 2000 was primarily due to the gain attributable to a sale of two office buildings in San Francisco located adjacent to our corporate headquarters. Cash used by operating activities in fiscal year 1999 was $173.8 million, as compared to cash provided by operating activities of $223.8 million in fiscal year 1998. This change was primarily due to increased spending associated with plant closures and restructuring initiatives and lower sales in fiscal year 1999. The decrease in long-term employee related benefits during fiscal year 1999 primarily reflected the reversal of the prior year's accruals for the Global Success Sharing Plan and reductions in deferred compensation. Inventory decreased during fiscal year 1999 primarily due to reduced production levels. The increase in income tax receivable for fiscal year 1999 reflected an expected income tax refund based upon a carryback of a net operating loss to be reported on our income tax return. CASH PROVIDED BY/USED FOR INVESTING ACTIVITIES. Cash provided by investing activities during fiscal year 2000 increased to $154.2 million, as compared to $62.4 million during the same period in 1999. The increase in fiscal year 2000 resulted primarily from proceeds received on increased sales of property, plant and equipment, higher realized gains on net investment hedges and lower purchases of property, plant and equipment. The higher proceeds received on the sale of property, plant and equipment was primarily attributable to a sale of two office buildings in San Francisco located adjacent to our corporate headquarters. Our capital spending for fiscal year 2000 was $28.0 million, as compared to $61.1 million for fiscal year 1999 and $116.5 million in fiscal year 1998. We expect capital spending of approximately $50.0 million in fiscal year 2001, primarily for maintenance and purchase of equipment at our remaining manufacturing facilities and distribution centers, and for computer related equipment throughout the world. As expected, we have dramatically reduced capital spending following our 1998 and 1999 plant closures. Cash provided by investing activities in fiscal year 1999 was $62.4 million, as compared to net cash used by investing activities of $82.7 million in fiscal year 1998. This change was primarily due to an increase in proceeds from the sale of property, plant and equipment mainly associated with the plant closures, and lower purchases of property, plant and equipment in fiscal year 1999. In addition, in fiscal year 1999 we had net realized gains on hedging of our net investments, as compared to net losses in fiscal year 1998. CASH PROVIDED BY/USED FOR FINANCING ACTIVITIES. Cash used for financing activities for fiscal year 2000 was $527.1 million, as compared to a source of cash of $224.2 million in the same period in 1999. Cash was used in fiscal year 2000 for repayment of existing debt. Cash provided by financing activities in fiscal year 1999 was $224.2 million, as compared to net cash used for financing activities of $194.5 million in fiscal year 1998. This change was primarily due to an increase in debt financing in fiscal year 1999. 23 FINANCIAL CONDITION CREDIT AGREEMENTS. On January 31, 2000, we amended each of our three existing credit agreements, and we entered into one new $450.0 million bridge credit agreement (the "2000 Credit Facility"). The financing package consists of four separate agreements: (1) a new $450.0 million bridge facility to fund working capital and support letters of credit, foreign exchange contracts and derivatives, (2) an amended $300.0 million revolving credit facility, extending the existing bridge facility, (3) an amended $545.0 million 364-day credit facility, and (4) an amended $584.0 million 5-year credit facility. Simultaneously with entering into these agreements, we terminated a domestic receivables-backed securitization financing. In addition, in December 1999, we entered into a five-year $89.5 million credit facility secured by most of the equipment located at our distribution centers in Nevada, Mississippi and Kentucky. The transaction documents include customary covenants governing our activities, including, among other things, limitations on our ability to sell, lease, relocate or grant liens on the equipment held in these customer service centers. In February 2000, several of our European subsidiaries entered into receivables securitization financing agreements with several lenders under which those subsidiaries may borrow up to $125.0 million, subject to specified operational conditions. The securitization agreements contain customary termination events for these arrangements, including the subsidiaries' failure to make payments or otherwise comply with their obligations under the securitization agreements, bankruptcy events, material adverse changes in financial position or receivables collection procedures, cross default to other indebtedness, failure of the portfolio to meet certain performance standards or a change in control. On February 1, 2001, we entered into a new $1.05 billion senior secured credit facility to replace the 2000 Credit Facility on more favorable terms. The new credit facility consists of a $700 million revolving credit facility and $350 million of term loans. This new facility reduces our borrowing costs and extends the maturity of our principal bank credit facility to August 2003. The new facility is secured in substantially the same manner as the 2000 Credit Facility. Collateral includes: domestic receivables, domestic inventories, certain domestic equipment, trademarks, other intellectual property, 100% of the stock in domestic subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets. Borrowings under the bank credit facilities bears interest at LIBOR or the agent bank's base rate plus an incremental borrowing spread. The new facility contains customary covenants restricting our activities as well as those of our subsidiaries, including limitations on us and our subsidiaries' ability to sell assets; engage in mergers; enter into operating leases or capital leases; enter into transactions involving related parties, derivatives or letters of credit; enter into intercompany transactions; incur indebtedness or grant liens or negative pledges on our assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third party obligations; make capital expenditures; and make changes in our corporate structure. The credit agreements will also contain financial covenants that we must satisfy on an ongoing basis, including maximum leverage ratios and minimum coverage ratios. Also in January 2001, we issued two series of notes payable, U.S. $380.0 million Dollar Notes and 125.0 million Euro Notes, totaling the equivalent of $497.5 million to qualified institutional investors. The notes are unsecured obligations and may be redeemed at any time after January 15, 2004. The notes are seven-year notes maturing on January 15, 2008. Net proceeds from the offering were used to repay a portion of the indebtedness outstanding under the 2000 Credit Facility. The indentures governing the notes contains covenants that limit us and our subsidiaries' ability to incur additional debt; pay dividends or make other restricted payments; consummate specified asset sales; enter into transactions with affiliates; incur liens, impose restrictions on the ability of a subsidiary to pay dividends or make payments to us and our subsidiaries; merge or consolidate with any other person; sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets or the assets of our subsidiaries. If the notes receive and maintain an investment grade rating by both Standard and Poor's Ratings Service and Moody's Investors Service and we and our subsidiaries are and remain in compliance with the indentures, then we and our subsidiaries will not be required to comply with specified covenants contained in the indenture. (FOR MORE INFORMATION ABOUT OUR CREDIT ARRANGEMENTS, SEE NOTES 6 AND 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) FOREIGN CURRENCY TRANSLATION The functional currency for most of our foreign operations is the applicable local currency. For those operations, assets and liabilities are translated into U.S. dollars using period-end exchange rates and income and expense accounts are translated at average monthly exchange rates. The U.S. dollar is the functional currency for foreign operations in countries with highly 24 inflationary economies and certain other subsidiaries. The translation adjustments for these entities are included in other (income) expense, net. YEAR 2000 We experienced no material disruption in customer or supplier relationships, revenue patterns or customer buying patterns as a result of the year 2000 problem. There have been no losses of revenue and we do not believe that any future contingencies related to year 2000 would have a material impact on our business. EFFECTS OF INFLATION We believe that the relatively moderate rates of inflation which have been experienced in the regions where most of our sales occur have not had a significant effect on our net sales or profitability. EURO CONVERSION On January 1, 1999, eleven European Union member states (Germany, France, the Netherlands, Austria, Italy, Spain, Finland, Ireland, Belgium, Portugal and Luxembourg) adopted the euro as their common national currency. On January 1, 2001, Greece adopted the euro as its common national currency. Until January 1, 2002, either the euro or a participating country's national currency will be accepted as legal tender. Beginning on January 1, 2002, euro-denominated bills and coins will be issued, and by July 1, 2002, only the euro will be accepted as legal tender. We have a multi-functional euro project team responsible for ensuring our ability to operate effectively during the euro transition phase and through final euro conversion. Our total program costs are not expected to be material. We have developed marketing and pricing strategies for implementation throughout the more open European market. We are currently able to make and receive payments in euros and will convert financial and information technology systems to be able to use euros as the base currency in relevant markets prior to January 1, 2002. Based on the analysis and actions taken to date, we do not expect the euro conversion to materially affect our consolidated financial position, results of operations or cash flow. NEW ACCOUNTING STANDARDS In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which replaces SFAS 125, "Accounting for Transfers and Services of Financial Assets and Extinguishments of Liabilities." This standard revises the methods for accounting for securitizations and other transfers of financial assets and collateral as outlined in SFAS 125, and requires certain additional disclosures. For transfers and servicing of financial assets and extinguishments of liabilities, this standard will be effective for our May 27, 2001 quarterly financial statements. However, for disclosures regarding securitizations and collateral, as well as recognition and reclassification of collateral, this standard will be effective for our November 25, 2001 annual financial statements. We are currently evaluating the impact of the adoption of this standard; however, we do not expect the adoption of this standard to have a material effect on our financial position or results of operations. In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, the FASB delayed the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. We adopted SFAS 133 and subsequent amendments the first day of fiscal year 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts, and for hedging activities. In summary, SFAS 133 requires all derivatives to be recognized as assets or liabilities at fair value. Fair value adjustments are made either through earnings or equity, depending upon the exposure being hedged and the effectiveness of the hedge. FOREIGN EXCHANGE HEDGING The primary purpose of our foreign exchange hedging activities is to maximize our U.S. dollar value over the long term. We manage our foreign currency exposures in a way that makes it unlikely that we will obtain hedge accounting treatment for all of our exposure management activities upon the adoption of SFAS 133. We attempt to take a long-term view of managing exposures on an economic basis, using forecasts to develop exposure positions and engage in active management of those 25 exposures with the objective of protecting future cash flows and mitigating risks. We do not hold any derivative instruments for trading purposes. As a result, not all exposure management activities and foreign currency derivative instruments will qualify for hedge accounting treatment under SFAS 133. Derivative instruments utilized in these transactions will be valued at fair value and changes in fair value will be consequently classified into earnings. Therefore, it is possible that we will experience increased volatility in earnings. We use a variety of derivative instruments, including forward, swap and option contracts, to hedge foreign currency exposures related to sourcing, net investment positions, royalties and cash management. The derivative instruments used to hedge sourcing exposure are currently recorded at their fair value and any changes in fair value are included in earnings. Under SFAS 133, a majority of these contracts would not qualify for hedge accounting treatment. We have therefore chosen to continue to mark to market all sourcing related hedge transactions at their fair value and any changes in fair value will be recorded in earnings. At November 26, 2000, the fair value of these derivative instruments hedging sourcing exposure represented a net asset of $13.7 million, which is recorded on the balance sheet. We hedge our net investment position in major currencies by using forward, swap and option contracts. The contracts hedging these net investments are currently in compliance with SFAS 52, "Foreign Currency Translation," and are considered net investment hedges. As a result, the related gains and losses are categorized as cumulative translation adjustment in the other comprehensive income section of stockholders' deficit. This will continue to be the methodology going forward for the contracts that qualify for hedge accounting treatment under SFAS 133. At November 26, 2000, the gains on these hedge contracts amounted to $1.4 million and are reflected in the cumulative translation adjustment section of other comprehensive income. The contracts hedging intercompany royalty flows are currently in compliance with SFAS 52, "Foreign Currency Translation," and are designated as net investment hedges. Therefore, the related gains and losses are categorized as cumulative translation adjustment in the other comprehensive income section of stockholders' deficit. The transactions hedging intercompany royalty flows will be considered cash flow hedges according to SFAS 133 rules. Consequently, gains and losses on the contracts that qualify and are designated for hedge accounting treatment will be deferred in other comprehensive income until the underlying royalty flow has been settled. The fair value of these transactions at November 26, 2000 amounted to a gain of $1.8 million. At the beginning of fiscal 2001, hedging activity related to outstanding cash flow hedges are valued at a gain of $1.0 million and will be reclassified into earnings as the underlying hedged items impact earnings. The derivative instruments utilized in transactions hedging cash management exposures are currently and, under SFAS 133, will continue to be marked to market at their fair value and any changes in fair value are recorded in earnings. Under SFAS 133, fair values of forward transactions and of the forward portion of swap transactions will be calculated using the discounted difference between the contract forward price and the forward price at the closing date for the remaining life of the contract. Forward points will no longer be recorded as assets or liabilities on the balance sheet and amortized over the life of the contract. Following SFAS 133 valuation principles, option contracts are also recorded at fair value. Therefore, option premiums will no longer be recorded as assets or liabilities on the balance sheet and amortized over the life of the contract. These changes in valuation methods will impact our earnings and the accumulated other comprehensive income section of stockholders' equity beginning in fiscal 2001. At adoption of SFAS 133, the earnings impact of these changes in valuation methods is an estimated gain of $1.3 million. In addition, the accumulated other comprehensive income section of stockholders' equity will decrease by approximately $0.7 million. INTEREST RATE HEDGING We are exposed to interest rate risk. It is our policy and practice to use derivative instruments, primarily interest rate swaps and options, to manage and reduce interest rate exposures. Our policy is to manage interest costs using a mix of fixed and variable debt. The fair value of these derivative instruments is not currently recorded on our financial statements. Under SFAS 133, those interest rate hedging instruments that do not qualify for hedge accounting treatment will be recorded on the balance sheet at their fair value. The related changes in fair value will be included in earnings. The earnings impact of this adjustment is estimated at a loss of $1.2 million. 26 FACTORS THAT MAY AFFECT FUTURE RESULTS RISKS RELATING TO OUR SUBSTANTIAL DEBT WE HAVE SUBSTANTIAL DEBT AND INTEREST PAYMENT REQUIREMENTS THAT MAY RESTRICT OUR FUTURE OPERATIONS AND IMPAIR OUR ABILITY TO MEET OUR OBLIGATIONS. Our substantial debt may have important consequences. For instance, it could: o make it more difficult for us to satisfy our financial obligations; o require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which will reduce funds available for other business purposes; o increase our vulnerability to general adverse economic and industry conditions; o limit our flexibility in planning for or reacting to changes in our business and the industry in which we operate; o place us at a competitive disadvantage compared to some of our competitors that have less financial leverage; and o limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes. All borrowings under our bank credit facilities are, and will continue to be, at variable rates of interest. As a result, increases in market interest rates may require a greater portion of our cash flow to be used to pay interest. Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control. We cannot provide assurance that our business will generate sufficient cash flow or that future financings will be available to provide sufficient proceeds to meet these obligations or to successfully execute our business strategy. RESTRICTIONS IN OUR BANK CREDIT FACILITIES AND OUR SENIOR NOTES MAY LIMIT OUR ACTIVITIES. Our bank credit facilities and the indentures relating to our 11.625% senior notes due 2008 contain customary restrictions, including covenants limiting our ability to incur additional debt, grant liens, make investments, consolidate, merge or acquire other businesses, sell assets, pay dividends and other distributions, make capital expenditures and enter into transactions with affiliates. We also are required to meet specified financial ratios under the terms of our bank credit facilities. These restrictions may make it difficult for us to successfully execute our business strategy or to compete in the worldwide apparel industry with companies not similarly restricted. Our bank credit facilities mature in August 2003, at which time we will be required to refinance our borrowings under those facilities. We cannot assure you that we will be able to obtain replacement financing at that time or that any available replacement financing will be on terms acceptable to us. If we are unable to obtain acceptable replacement financing on or before August 2003, we will not be able to satisfy our obligations under our bank credit facilities and may be required to take other actions to avoid defaulting on those facilities, including selling assets or surrendering assets to our lenders, which would not otherwise be in our long-term economic interest. SINCE OUR NOTES ARE EFFECTIVELY SUBORDINATED TO ALL OF OUR SECURED DEBT AND THE LIABILITIES OF OUR SUBSIDIARIES, WE MAY NOT HAVE SUFFICIENT ASSETS TO PAY AMOUNTS OWED ON THE NOTES IF A DEFAULT OCCURS. Our notes due 2003, 2006, and 2008 are general senior unsecured obligations that rank equal in right of payment with all of our existing and future unsecured and unsubordinated debt. The notes are effectively subordinated to all of our secured debt to the extent of the value of the assets securing that debt. The notes are also structurally subordinated to all obligations of our subsidiaries. Because our bank credit facilities are secured obligations, failure to comply with the terms of our bank credit facilities or our inability to pay our lenders at maturity would entitle those lenders immediately to foreclose on most of our assets, including our trademarks and the capital stock of all of our U.S. and most of our foreign subsidiaries, and the assets of our material U.S. 27 subsidiaries, which serve as collateral. In this event, those secured lenders would be entitled to be repaid in full from the proceeds of the liquidation of those assets before those assets would be available for distribution to other creditors, and, lastly, to the holders of our capital stock. Holders of the notes are creditors of Levi Strauss & Co. and not of our subsidiaries. The ability of our creditors to participate in any distribution of assets of any of our subsidiaries upon liquidation or bankruptcy will be subject to the prior claims of that subsidiary's creditors, including trade creditors, and any prior or equal claim of any equity holder of that subsidiary. In addition, the ability of our creditors to participate in distributions of assets of our subsidiaries will be limited to the extent that the outstanding shares of capital stock of any of our subsidiaries are either pledged to secure other creditors, such as under our bank credit facilities, or are not owned by us. As a result, creditors receive less, proportionately, than our secured creditors and the creditors of our subsidiaries. IF OUR FOREIGN SUBSIDIARIES ARE UNABLE TO DISTRIBUTE CASH TO US WHEN NEEDED, WE MAY BE UNABLE TO SATISFY OUR OBLIGATIONS UNDER THE NOTES. We conduct our foreign operations through foreign subsidiaries, which in fiscal year 2000 accounted for approximately 37% of our net sales. As a result, we depend in part upon dividends or other intercompany transfers of funds from our foreign subsidiaries for the funds necessary to meet our debt service obligations. We only receive the cash that remains after our foreign subsidiaries satisfy their obligations. Any agreements our foreign subsidiaries enter into with other parties, as well as applicable laws and regulations limiting the right and ability of non-U.S. subsidiaries and affiliates to pay dividends and remit earnings to affiliated companies absent special conditions, may restrict the ability of our foreign subsidiaries to pay dividends or make other distributions to us. RISKS RELATING TO THE INDUSTRY IN WHICH WE COMPETE WE FACE INTENSE COMPETITION IN THE WORLDWIDE APPAREL INDUSTRY. We face a variety of competitive challenges from other domestic and foreign jeanswear marketers, fashion-oriented apparel marketers, specialty retailers and retailers of private label jeanswear and casual apparel products, some of which have greater financial and marketing resources than we do. We compete with these companies primarily on the basis of: o anticipating and responding to changing consumer demands in a timely manner; o maintaining favorable brand recognition; o developing innovative, high-quality products in sizes, colors and styles that appeal to consumers; o appropriately pricing products; o providing strong and effective marketing support; o creating an acceptable value proposition for retail customers; o ensuring product availability and optimizing supply chain efficiencies with retailers; and o obtaining sufficient retail floor space and effective presentation of products at retail. We also face increasing competition from companies selling apparel products through the Internet, where we lack a direct, company-operated selling presence. Increased competition in the worldwide apparel industry, including from Internet-based competitors, could reduce our sales and prices and adversely affect our results of operations. In addition, the worldwide apparel industry has experienced price deflation in recent years. This price deflation is attributable to increased competition, increased product sourcing to lower cost countries, growth of the mass merchant channel of distribution and increased value-consciousness on the part of consumers. This downward pressure on prices may limit our ability to maintain or improve gross margins. Because of our high debt level, we may also be less able to respond effectively to these developments than our competitors who have less financial leverage. THE SUCCESS OF OUR BUSINESS IS SUBJECT TO CONSTANTLY CHANGING FASHION TRENDS. Our success depends in large part on our ability to anticipate, identify and respond to rapidly changing consumer demands and fashion trends in a timely manner. Any failure on our part to anticipate, identify and respond effectively to changing consumer demands and fashion trends could adversely affect retail and consumer acceptance of our products and leave us with a 28 substantial amount of unsold inventory. If that occurs, we may be forced to rely on markdowns or promotional sales to dispose of excess, slow-moving inventory, which may harm our business. At the same time, our focus on tight management of inventory may result, from time to time, in our not having an adequate supply of products to meet consumer demand and cause us to lose sales, as we experienced during 2000 with respect to 501(R) jeans in the United States. The exposure of our business to fashion trends and changes in consumer preferences is heightened by our recent decision to outsource a substantially larger proportion of our pants production to offshore manufacturers, as offshore outsourcing may increase lead times between production decisions and customer delivery. THE WORLDWIDE APPAREL INDUSTRY IS HEAVILY INFLUENCED BY GENERAL ECONOMIC CYCLES. Apparel is a cyclical industry that is heavily dependent upon the overall level of consumer spending. Purchases of apparel and related goods tend to be highly correlated with cycles in the disposable income of our consumers. As a result, any substantial deterioration in general economic conditions or increases in interest rates in any of the regions in which we compete could adversely affect the sales of our products. INCREASES IN THE PRICE OF RAW MATERIALS OR THEIR REDUCED AVAILABILITY COULD INCREASE OUR COST OF SALES AND DECREASE OUR PROFITABILITY. The principal fabrics used in our business are cotton, synthetics, wools and blends. The prices we pay for these fabrics are dependent on the market price for raw materials used to produce them, primarily cotton. The price and availability of cotton may fluctuate significantly, depending on a variety of factors, including crop yields. Any raw material price increases could increase our cost of sales and decrease our profitability unless we are able to pass higher prices on to our customers. Moreover, any decrease in the availability of cotton could impair our ability to meet our production requirements in a timely manner. OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH IMPORTING PRODUCTS. We import raw materials and finished garments into all of our operating regions. Substantially all of our import operations are subject to: o quotas imposed by bilateral textile agreements between the countries where our facilities are located and foreign countries; o customs duties imposed on imported products by the governments where our facilities are located; and o penalties imposed for, or adverse publicity relating to, violations by foreign contractors of labor and wage standards. In addition, the countries in which our products are manufactured or imported may from time to time impose additional new quotas, duties, tariffs or other restrictions on our imports or adversely modify existing restrictions. Adverse changes in these import costs and restrictions could harm our business. RISKS RELATING TO OUR BUSINESS WE MAY BE UNABLE TO REVERSE OR RECOVER FROM RECENT DECLINES IN SALES AND EARNINGS WHICH HAVE IMPAIRED OUR COMPETITIVE AND FINANCIAL POSITIONS. Our business has declined in recent years. Specifically, net sales declined from $7.1 billion in 1996 to $4.6 billion in 2000, a decrease of 35%. Consistent with these declining financial results, our market research indicates that during this period we experienced significant brand equity and market position erosion in all of the regions in which we operate, including a substantial deterioration in the perception of the Levi's(R) brand by younger consumers. In addition, our ability to reverse or recover from declines in sales depends in part on improving our supply chain, including our ability to forecast demand, plan production, ship complete and timely orders to our retail customers and to reduce product lead times through better execution and coordination across business functions from product design to customer delivery. Our declining business, and the actions we took in response to that decline, prevented us from repaying the substantial debt we incurred in the 1996 transaction as quickly as we then intended. As a result, our financial condition remains highly leveraged, reducing our operating flexibility and impairing our ability to respond to developments in the worldwide apparel industry as effectively as competitors that do not have equivalent financial leverage. 29 In response to these trends, we have made substantial strategic, operational and management changes in the past three years. We do not know whether those changes will have the desired effect on our worldwide operations or on the financial results of any of our operating regions. WE MAY BE UNABLE TO MAINTAIN OR INCREASE OUR SALES THROUGH OUR CURRENT DISTRIBUTION CHANNELS. In the United States, chain stores and department stores are currently the primary distribution channels for our products. We may be unable to increase sales of our apparel products through these distribution channels, since other channels, including vertically integrated specialty stores and mass merchants, now account for most of the growth in jeanswear and casual wear sales in the United States. Our lack of a substantial presence in the vertically integrated specialty store market, where companies such as Gap Inc. and Abercrombie & Fitch Co. compete, weakens our ability to market to younger consumers. Moreover, we do not sell products to mass merchants in the United States, such as Wal-Mart Stores, Inc., Target Corporation and Kmart Corporation, a distribution channel that continues to increase its share of overall retail spending, as well as its share of jeanswear and casual wear sales. In Europe we depend heavily on independent jeanswear retailers, which account for approximately half of our sales in that region. Independent retailers in Europe have experienced increasing difficulty competing against large department stores and increasingly prevalent vertically integrated specialty stores, evidenced, according to our internal research, by decreases in the last five years in the percentage of total jeanswear sales made by independent stores. Further declines in the independent retailer channel may adversely affect the sales of our products in Europe. We also do not have a large portfolio of company-owned stores and Internet distribution channels possessed by some of our competitors, including Gap Inc. and other vertically integrated specialty stores. Although we own a small number of stores located in selected major urban areas, we operate those stores primarily as "flagships" for marketing and branding purposes and do not expect them to produce substantial unit volume or sales. As a result, we have less control than industry competitors over the distribution and presentation at retail of our apparel products, which we believe has adversely affected our performance and could make it more difficult for us to implement our strategy. A GROUP OF KEY U.S. CUSTOMERS ACCOUNTS FOR A SIGNIFICANT PORTION OF OUR SALES. Net sales to our 10 largest customers, all of which are located in the United States, totaled approximately 48% and 46% of net worldwide sales during fiscal years 2000 and 1999. One customer, J.C. Penney Company, Inc., accounted for 12% of our fiscal year 2000 net sales and 11% of our fiscal year 1999 net sales. Moreover, we believe that consolidation in the retail industry has centralized purchasing decisions and given customers greater leverage over suppliers like us, and we expect that trend to continue, including in Europe, Canada and Mexico. While we have long-standing customer relationships, we do not have long-term contracts with any of them. As a result, purchases generally occur on an order-by-order basis, and the relationship, as well as particular orders, can be terminated by either party at any time. In addition, during the past several years, various retailers, including some of our customers, have experienced significant changes and difficulties, including consolidation of ownership, increased centralization of buying decisions, restructurings, bankruptcies and liquidations. These and other financial problems of some of our retailers, as well as general weakness in the retail environment, increase the risk of extending credit to these retailers. A significant adverse change in a customer relationship or in a customer's financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer's receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could harm our business and financial condition. WE RELY ON INDEPENDENT MANUFACTURERS FOR MOST OF OUR PRODUCTION. Our reliance on independent manufacturers for the majority of our production could harm our operations. We depend upon our contract manufacturers to secure a sufficient supply of raw materials and maintain sufficient manufacturing and shipping capacity. This dependence could subject us to difficulty in obtaining timely delivery of products of acceptable quality. In addition, a contractor's failure to ship products to us in a timely manner or to meet the required quality standards could cause us to miss the delivery date requirements of our customers. The failure to make timely deliveries may cause our customers to cancel orders, refuse to accept deliveries, impose non-compliance charges through invoice deductions or other charge-backs, demand reduced prices or reduce future orders, any of which could harm our sales, reputation and overall profitability. We require contractors to meet our standards in terms of working conditions, environmental protection and other matters before we are willing to place business with them. As such, we may not be able to obtain the lowest-cost production. In addition, 30 any failure by our independent manufacturers to adhere to labor or other laws, or any divergence of any independent manufacturer's labor practices from those generally considered ethical in the United States, and the potential negative publicity relating to any of these events, could harm our business and reputation. We do not have long-term contracts with any of our independent manufacturers, and any of these manufacturers may unilaterally terminate their relationship with us at any time. In addition, the recent trend in the apparel industry towards outsourcing has intensified competition for quality contractors, some of which have long-standing relationships with our competitors. To the extent we are not able to secure or maintain relationships with manufacturers that are able to fulfill our requirements, our operations would be harmed. WE RELY ON A FEW KEY SUPPLIERS FOR A LARGE PORTION OF OUR FABRIC PURCHASES. Three vendors, Cone Mills Corporation, Burlington Industries, Inc. and Galey & Lord, Inc., including its Swift Denim subsidiary, supplied approximately 53% of our total volume of fabric purchases worldwide in 2000. Cone Mills, our largest supplier, supplies various fabrics to us and is the sole supplier of the denim used for our 501(R) jeans. Purchases from Cone Mills accounted for approximately 24% of our total fabric purchases in 2000. Our supply agreement with Cone Mills provides for a rolling five-year term unless either Cone Mills or we elect not to extend the agreement, upon which the agreement will terminate at the end of the then-current term. Cone Mills and we may also terminate the agreement in the event of bankruptcy or insolvency of the other party or a material breach by the other that is not cured within a specified time period. We may also terminate the agreement at any time upon 30 days notice to Cone Mills. We do not have long-term supply agreements with any other principal suppliers, and we compete with other apparel companies for supply capacity. We cannot provide assurance that we will be able to obtain adequate supply if there occurs a significant disruption in any of our supplier relationships, including any disruption caused by a change of control, bankruptcy or other financial or operating difficulty of any of our suppliers, or in the markets for the fabrics we purchase, including disruptions arising from mill closures or consolidation resulting from excess industry capacity or otherwise. Any of those disruptions could impair our ability to deliver products to customers in a timely manner and harm our business. WE HAVE RECENTLY MADE SIGNIFICANT CHANGES IN OUR SENIOR MANAGEMENT TEAM, AND OUR CURRENT SENIOR MANAGEMENT TEAM HAS LIMITED APPAREL INDUSTRY EXPERIENCE. We have replaced five members of our senior management team with external hires during the past two years and created one new position. With two exceptions, none of the recent additions to our management team has prior experience in the apparel industry. This includes our president and chief executive officer, Philip Marineau, and the head of our worldwide supply chain, Karen Duvall. In addition, during that period we made several key internal appointments, including president of the U.S. Levi's(R) brand, president of the U.S. Dockers(R) and Slates(R) brands and president of our European business. We cannot provide assurance that our management team will be able to successfully execute our strategy, and our business and financial condition may suffer if they fail to do so. THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. We compete for the services of qualified personnel. Our inability to retain and attract qualified personnel or the loss of any of our current key executives or key members of our design, merchandising or marketing staff could harm our business. Our ability to retain and attract qualified employees has been adversely affected by the San Francisco location of our corporate and Americas headquarters, including the high cost of living and competitive labor market in the San Francisco and Silicon Valley area. Other factors that have affected our ability to retain and attract employees include the disruption associated with our restructuring initiatives, our deteriorating financial position in recent years and our lack of stock option or other equity-based compensation programs and resulting reliance on cash incentive programs tied to our financial performance. OUR SUCCESS DEPENDS ON THE CONTINUED PROTECTION OF OUR TRADEMARKS AND OTHER PROPRIETARY INTELLECTUAL PROPERTY RIGHTS. Our trademarks and other intellectual property rights are important to our success and competitive position, and the loss or inability to enforce trademarks and other proprietary intellectual property rights could harm our business. We devote substantial resources to the establishment and protection of our trademarks and other proprietary intellectual property rights on a worldwide basis. We cannot provide assurance that our efforts to establish and protect our trademarks and other proprietary intellectual property rights will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products. Moreover, we cannot provide assurance that others will not assert rights in, or ownership of, our trademarks and other proprietary intellectual property or that we will be able successfully to resolve those claims. In addition, the laws of some foreign countries may not allow us to protect our proprietary rights to the same extent as we do in the United States and other 31 countries. Because our brand recognition is such an important part of our strategy, we are especially dependent upon the protection of our trademarks. OUR INTERNATIONAL OPERATIONS EXPOSE US TO POLITICAL AND ECONOMIC RISKS. In fiscal year 2000, approximately 37% of our net sales were generated outside the United States, and a substantial amount of our products came from sources outside of the country of distribution. As a result, we are subject to the risks of doing business abroad, including: o political and economic instability; o exchange controls; o language and other cultural barriers; o foreign tax treaties and policies; and o restrictions on the transfer of funds to or from foreign countries. Our financial performance on a U.S. dollar denominated basis is also subject to fluctuations in currency exchange rates. For example, during fiscal year 2000, changes in foreign currency rates, particularly the Euro, were primarily responsible for approximately 44% of the net sales decline from the prior year period for our Europe division. Approximately $131.4 million of the decrease in total net sales for fiscal year 2000, as compared to the same period in 1999, was due to the effects of translating non-U.S. currency reported sales results into U.S. dollars. From time to time we enter into agreements seeking to reduce our foreign currency exposure, but we cannot provide assurance that our efforts will be successful. OUR EARNINGS MAY FLUCTUATE BECAUSE OF OUR EXPOSURE MANAGEMENT POLICIES. We manage our foreign currency exposures in a way that makes it unlikely that we will obtain hedge accounting treatment for all of our exposure management activities upon the adoption of Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." We take a long-term view of managing our exposures on an economic basis. We use forecasts to develop exposure positions and engage in active management of those exposures with the objective of protecting future cash flows and mitigating risks. As a result, not all of our exposure management activities and foreign currency derivative instruments will qualify for hedge accounting treatment under SFAS 133. We would be required to mark to market those exposure management instruments that do not qualify for hedge accounting treatment and, as a result, it is possible that we will experience increased volatility in our earnings. We adopted SFAS 133 and its subsequent amendments on November 27, 2000. OUR APPROACH TO CORPORATE GOVERNANCE MAY LEAD US TO TAKE ACTIONS THAT CONFLICT WITH OUR CREDITORS' INTEREST AS HOLDERS OF NOTES. All of our common stock is owned by a voting trust described under "Principal Stockholders." Four voting trustees have the exclusive ability to elect and remove directors, amend our by-laws and take other actions which would normally be within the power of stockholders of a Delaware corporation. Although the voting trust agreement gives the holders of two-thirds of the outstanding voting trust certificates the power to remove trustees and terminate the voting trust, three of the trustees, as a group based on their ownership of voting trust certificates, have the ability to block all efforts by the two-thirds of the holders of the voting trust certificates to remove a trustee or terminate the voting trust. In addition, the concentration of voting trust certificate ownership in a small group of holders, including these three trustees, gives this group the voting power to block stockholder action on matters for which the holders of the voting trust certificates are entitled to vote and direct the trustees under the voting trust agreement. Our principal stockholders created the voting trust in part to ensure that we would continue to operate in a socially responsible manner while seeking the greatest long-term benefit for our stockholders, employees and other stakeholders and constituencies. We measure our success not only by growth in economic value, but also by our reputation, the quality of our constituency relationships and our commitment to social responsibility. As a result, we cannot provide assurance that the voting trustees will cause us to be operated and managed in a manner that benefits our creditors or that the interests of the voting trustees or our principal equity holders will not diverge from our creditors. 32 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK DERIVATIVE FINANCIAL INSTRUMENTS We are exposed to market risk primarily related to foreign exchange, interest rates and the price of cotton. We actively manage foreign currency and interest rate risk with the objective of reducing fluctuations in actual and anticipated cash flows by entering into a variety of derivative instruments including spot, forward, options and swaps. We currently do not hedge our exposure to the price of cotton with derivative instruments. FOREIGN EXCHANGE RISK Foreign exchange market risk exposures are primarily related to cash management activities, raw material and finished goods purchases, net investments and royalty flows from affiliates. 33 The following table presents notional amounts, average exchange rates and fair values for forward and swap contracts by currency. All amounts are stated in U.S. dollar equivalents. The notional amount represents the total net position outstanding as of the stated date. A positive amount represents a long position in U.S. dollars, while a negative amount represents a short position in U.S. dollars, versus the relevant currency. The net position is the sum of all buy transactions minus the sum of all sell transactions. The unrealized gain (loss) is the fair value of the outstanding position. The average forward rate is the forward rate weighted by the total of the transacted amounts. All transactions will mature before August 2001.
OUTSTANDING FORWARD AND SWAP TRANSACTIONS (DOLLARS IN THOUSANDS EXCEPT AVERAGE RATES) AS OF AS OF NOVEMBER 26, NOVEMBER 28, CURRENCY DATA 2000 1999 --------- ------ ---- ---- Australian Dollar..................................... Notional amount $ (3,522) $ (16,528) Unrealized gain (23) 230 Average forward rate 0.52 0.65 Canadian Dollar....................................... Notional amount $(11,021) $ (50,360) Unrealized gain (41) 64 Average forward rate 1.56 1.46 Euro . ............................................... Notional amount $(69,045) $(137,416) Unrealized gain 5,439 18,672 Average forward rate 0.83 1.06 British Pound......................................... Notional amount $(65,862) $ (81,591) Unrealized gain 1,413 675 Average forward rate 1.43 1.62 Japanese Yen.......................................... Notional amount $(54,168) $(115,369) Unrealized gain (loss) 2,198 (3,175) Average forward rate 107.57 106.47 Mexican Peso.......................................... Notional amount $ (1,511) $ (7,339) Unrealized gain (loss) (194) (110) Average forward rate 9.8 9.47 Swedish Krona......................................... Notional amount $(54,630) $ (94,675) Unrealized gain 501 655 Average forward rate 10.16 8.32 Other Currencies...................................... Notional amount $ 1,785 $ (10,406) Unrealized gain (loss) 300 (79) Average forward rate N/A N/A -------- --------- Total Unrealized Gain............................ $ 9,593 $ 16,932 ======== =========
The following table presents notional amounts, average strike rates, book values and fair values of outstanding foreign currency options. All amounts are stated in U.S. dollar equivalents. The notional amount represents the total net position outstanding as of the stated date should the option be exercised. A positive amount represents a long position in U.S. dollars, while a negative amount represents a short position in U.S. dollars, versus the relevant currency. The carrying value is the amount reported in our financial statements. It equals the sum of the non-amortized portion of the option premium and the intrinsic value of the option. The market value represents the fair value reported by our counterparties. The average strike rate is weighted by the total of the notional amounts. All transactions will expire before June 2001. 34
OUTSTANDING OPTIONS TRANSACTIONS (DOLLARS IN THOUSANDS EXCEPT AVERAGE RATES) AS OF AS OF NOVEMBER 26, NOVEMBER 28, CURRENCY DATA 2000 1999 --------- ----- ---- ---- Australian Dollar.................................. Notional amount $ 12,750 $ 3,585 Carrying value 30 30 Market value 75 (250) Average strike rate 0.52 0.65 Canadian Dollar.................................... Notional amount $10,000 $30,000 Carrying value 217 6 Market value 158 25 Average strike rate 1.53 1.48 Euro .......................................... Notional amount $634,588 $365,006 Carrying value 5,341 9,374 Market value 5,091 6,181 Average strike rate 0.88 1.06 British Pound...................................... Notional amount (8,444) -- Carrying value -- (2) Market value -- 53 Average strike rate 1.32 1.61 Hong Kong Dollar................................... Notional amount $ -- $ 3,000 Carrying value -- -- Market value -- (2) Average strike rate -- 7.93 Japanese Yen....................................... Notional amount $ 20,000 $55,000 Carrying value 1,853 (1,602) Market value 1,041 (3,749) Average strike rate 109.18 111.83 Swedish Krona...................................... Notional amount $ -- $ 30,902 Carrying value -- -- Market value -- 30 Average strike rate -- 8.40 Mexican Peso....................................... Notional amount $ 5,000 $ -- Carrying value (77) -- Market value (76) -- Average strike rate 9.84 -- South Africa Rand.................................. Notional amount $ -- $ -- Carrying value (55) -- Market value -- -- Average strike rate 7.69 -- -------- -------- Total Carrying Value.......................... $ 7,309 $ 7,806 ======== ======== Total Market Value............................ $ 6,289 $ 2,288 ======== ========
35 INTEREST RATE RISK We have an interest rate risk management policy designed to manage the interest rate risk on our borrowings by entering into a variety of interest rate derivatives. The following table provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and interest rates by contractual maturity dates. The applicable floating rate index is included for variable rate instruments. Notional amounts are the amounts outstanding at the end of the stated period. All amounts are stated in U.S. dollar equivalents.
INTEREST RATE TABLE AS OF NOVEMBER 26, 2000 (DOLLARS IN THOUSANDS UNLESS OTHERWISE STATED) YEAR ENDED ----------------------------------------- FAIR VALUE 2000 2001 2002 2003 2004 2005 2006 2000 --------- ---------- --------- --------- --------- --------- --------- --------- DEBT INSTRUMENTS Fixed Rate (US$)...........$ 856,637 $ 850,548 $ 844,774 $ 488,465 $ 481,571 $ 450,000 -- $ 685,031 Average Interest Rate.... 7.05% 7.03% 7.02% 7.15% 7.13% 7.00% -- -- Fixed Rate (Yen 20 billion)$ 184,043 $ 184,043 $ 184,043 $ 184,043 $ 184,043 $ 184,043 $ 184,043 $ 133,945 Average Interest Rate.... 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% -- Variable Rate (US$)........$1,071,185 $1,069,417 $ 68,143 $ 56,889 $ 24,365 -- -- $1,071,185 Average Interest Rate*... 8.85% 8.85% 7.64% 8.06% 9.68% -- -- -- INTEREST RATE DERIVATIVE FINANCIAL INSTRUMENTS RELATED TO DEBT Interest Rate Options Collar = Locked fixed payer rate in 6.72%-7.20% range/Receive variable 3 month LIBOR, combined with Receive 8.25% fix/Pay variable 3 month LIBOR $ 75,000 $ 75,000 - - - - - $ (85) Combination Pay fix 7%/ Receive fix 8% vs variable 3 month LIBOR $ 75,000 $ 75,000 - - - - - $ 2 Combination Pay fix 8.10%/ Pay fix 6.72% vs Receive 3 month LIBOR $ 75,000 $ 75,000 - - - - - $ (170) Collar = Locked fixed payer rate in average 6.75%-7.20% range $ 200,000 $ 200,000 - - - - - $ (537) - -------------- *Assumes no change in short-term interest rates
36
INTEREST RATE TABLE AS OF NOVEMBER 28, 1999 (DOLLARS IN THOUSANDS UNLESS OTHERWISE STATED) YEAR ENDED FAIR ------------ VALUE 1999 2000 2001 2002 2003 2004 2005 1999 ----- ----- ----- ----- ----- ----- ----- ----- DEBT INSTRUMENTS Fixed Rate (US$)................ $ 800,000 $800,000 $800,000 $800,000 $450,000 $450,000 $450,000 $ 626,307 Average Interest Rate......... 6.91% 6.91% 6.91% 6.91% 7.00% 7.00% 7.00% -- Fixed Rate (Yen 20 billion)..... $ 188,679 $188,679 $188,679 $188,679 $188,679 $188,679 $188,679 $ 148,113 Average Interest Rate......... 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% -- Variable Rate (US$)............. $1,642,836 $631,800 $631,800 -- -- -- -- $1,650,315 Average Interest Rate*........ 6.12% 6.16% 6.16% -- -- -- -- -- INTEREST RATE DERIVATIVE FINANCIAL INSTRUMENTS RELATED TO DEBT Interest Rate Swaps Payer swaps (Pay fix/Receive variable)................... $ 425,000 -- -- -- -- -- -- $ (2,119) Average rate received = US$ 3 month LIBOR................. 5.49% -- -- -- -- -- -- -- Average rate paid............. 6.72% -- -- -- -- -- -- -- Receiver swaps (Receive fix/Pay variable)........... $ 325,000 $325,000 $325,000 $325,000 $200,000 $200,000 $200,000 $ (1,596) Average rate received....... 6.91% 6.84% 6.84% 6.84% 6.80% 6.80% 6.80% -- Average rate paid = US$ 3 month LIBOR................. +5.69bp +6.15bp +6.15bp +6.15bp +10.00bp +10.00bp +10.00bp -- Receiver swaps (Receive fix/ Pay variable) with periodic `Knock-Out' option.......... $ 50,000 $ 50,000 $ 50,000 $ 50,000 -- -- -- $ (1,124) Average rate received......... 6.58% 6.58% 6.58% 6.58% -- -- -- -- Average rate paid = US$ 6 month LIBOR................. 6.13% -- -- -- -- -- -- -- - -------------- * Assumes no change in short-term interest rates
37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Levi Strauss & Co.: We have audited the accompanying consolidated balance sheets of Levi Strauss & Co. (a Delaware corporation) and subsidiaries as of November 26, 2000 and November 28, 1999, and the related consolidated statements of income, stockholders' deficit and cash flows for each of the three fiscal years in the period ended November 26, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the financial position of Levi Strauss & Co. and subsidiaries as of November 26, 2000 and November 28, 1999, and the results of their operations and their cash flows for each of the three fiscal years in the period ended November 26, 2000 in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II listed in the index of financial statements (not presented herein) is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP San Francisco, California January 17, 2001, except with respect to the matters discussed in Note 18, as to which the date is February 1, 2001. 38
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) NOVEMBER 26, NOVEMBER 28, 2000 1999 ASSETS ---- ---- Current Assets: Cash and cash equivalents ............................................................... $ 117,058 $ 192,816 Trade receivables, net of allowance for doubtful accounts of $29,717 in 2000 and $30,017 in 1999........................................................................ 660,128 759,273 Income taxes receivable.................................................................. -- 70,000 Inventories: Raw materials........................................................................ 120,760 137,082 Work-in-process...................................................................... 84,871 100,523 Finished goods....................................................................... 446,618 433,882 ----------- ----------- Total inventories............................................................... 652,249 671,487 Deferred tax assets...................................................................... 250,817 300,972 Other current assets..................................................................... 168,621 172,195 ----------- ----------- Total current assets............................................................ 1,848,873 2,166,743 Property, plant and equipment, net of accumulated depreciation of $495,986 in 2000 and $548,437 in 1999........................................................................... 574,039 714,523 Goodwill and other intangibles, net of accumulated amortization of $164,826 in 2000 and $158,052 in 1999........................................................................... 264,956 275,318 Non-current deferred tax assets............................................................... 439,692 453,235 Other assets.................................................................................. 78,168 60,195 ----------- ----------- TOTAL ASSETS.................................................................... $ 3,205,728 $ 3,670,014 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current maturities of long-term debt and short-term borrowings........................... $ 231,290 $ 233,992 Accounts payable......................................................................... 268,473 262,389 Restructuring reserves................................................................... 71,595 288,281 Accrued liabilities...................................................................... 395,660 415,273 Accrued salaries, wages and employee benefits............................................ 257,021 194,130 Accrued taxes............................................................................ 69,772 2,548 ----------- ----------- Total current liabilities....................................................... 1,293,811 1,396,613 Long-term debt, less current maturities....................................................... 1,895,140 2,430,617 Postretirement medical benefits............................................................... 545,574 541,815 Long-term employee related benefits........................................................... 358,849 325,518 Long-term tax liabilities..................................................................... 166,854 216,542 Other long-term liabilities................................................................... 20,588 20,696 Minority interest ............................................................................ 23,485 26,775 ----------- ----------- Total liabilities............................................................... 4,304,301 4,958,576 ----------- ----------- Stockholders' Deficit: Common stock--$.01 par value; 270,000,000 shares authorized; 37,278,238 shares issued and outstanding................................................................. 373 373 Additional paid-in capital............................................................... 88,808 88,812 Accumulated deficit...................................................................... (1,171,864) (1,395,256) Accumulated other comprehensive income (loss)............................................ (15,890) 17,509 ----------- ----------- Stockholders' deficit........................................................... (1,098,573) (1,288,562) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT..................................... $ 3,205,728 $ 3,670,014 =========== ===========
The accompanying notes are an integral part of these financial statements. 39
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 26, NOVEMBER 28, NOVEMBER 29, 2000 1999 1998 ---- ---- ---- Net sales.................................................................... $ 4,645,126 $ 5,139,458 $ 5,958,635 Cost of goods sold........................................................... 2,690,170 3,180,845 3,433,081 ----------- ----------- ----------- Gross profit............................................................ 1,954,956 1,958,613 2,525,554 Marketing, general and administrative expenses............................... 1,481,718 1,629,845 1,834,058 Other operating income....................................................... (32,380) (24,387) (25,310) Excess capacity reduction/restructuring...................................... (33,144) 497,683 250,658 Global Success Sharing Plan.................................................. -- (343,873) 90,564 ----------- ----------- ----------- Operating income........................................................ 538,762 199,345 375,584 Interest expense............................................................. 234,098 182,978 178,035 Other (income) expense, net.................................................. (39,016) 7,868 34,849 ----------- ----------- ----------- Income before taxes..................................................... 343,680 8,499 162,700 Provision for taxes.......................................................... 120,288 3,144 60,198 ----------- ----------- ----------- Net income.............................................................. $ 223,392 $ 5,355 $ 102,502 =========== =========== =========== Earnings per share -- basic and diluted...................................... $ 5.99 $ 0.14 $ 2.75 =========== =========== =========== Weighted-average common shares outstanding................................... 37,278,238 37,278,238 37,278,238 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 40
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (DOLLARS IN THOUSANDS) ACCUMULATED ADDITIONAL OTHER COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS' STOCK CAPITAL DEFICIT INCOME (LOSS) DEFICIT ----- ------- ------- ------------- ------- BALANCE AT NOVEMBER 30, 1997................................... $373 $88,812 $(1,503,113) $ 43,666 $(1,370,262) ---- ------- ------------ -------- ----------- Net income..................................................... -- -- 102,502 -- 102,502 Translation adjustment (net of tax of $3,811)..................................................... -- -- -- (45,987) (45,987) ---- ------- ------------ -------- ----------- Total comprehensive income..................................... -- -- 102,502 (45,987) 56,515 ---- ------- ------------ -------- ----------- BALANCE AT NOVEMBER 29, 1998................................... 373 88,812 (1,400,611) (2,321) (1,313,747) ---- ------- ----------- -------- ----------- Net income..................................................... -- -- 5,355 -- 5,355 Minimum pension liability (net of tax benefit of $457)......... -- -- -- (778) (778) Translation adjustment (net of tax of $8,686)..................................................... -- -- -- 20,608 20,608 ---- ------- ----------- -------- ----------- Total comprehensive income..................................... -- -- 5,355 19,830 25,185 ---- ------- ----------- -------- ----------- BALANCE AT NOVEMBER 28, 1999................................... 373 88,812 (1,395,256) 17,509 (1,288,562) ---- ------- ----------- -------- ----------- Net income..................................................... -- -- 223,392 -- 223,392 Treasury stock................................................. -- (4) -- -- (4) Minimum pension liability (net of tax of $457)....................................................... -- -- -- 778 778 Translation adjustment (net of tax of benefit $21,216).................................................... -- -- -- (34,177) (34,177) ---- ------- ----------- -------- ----------- Total comprehensive income..................................... -- (4) 223,392 (33,399) 189,989 ---- ------- ----------- -------- ----------- BALANCE AT NOVEMBER 26, 2000................................... $373 $88,808 $(1,171,864) $(15,890) $(1,098,573) ==== ======= ============ ======== ===========
The accompanying notes are an integral part of these financial statements. 41
LEVI STRAUSS & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 26, NOVEMBER 28, NOVEMBER 29, 2000 1999 1998 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................... $ 223,392 $ 5,355 $ 102,502 Adjustments to reconcile net cash provided by (used for) operating activities: Depreciation and amortization........................................... 90,981 120,102 128,773 Gain on dispositions of property, plant and equipment................... (24,683) (3,802) (1,807) Unrealized foreign exchange (gains) losses.............................. (5,194) (10,130) 27,219 Decrease in trade receivables........................................... 54,032 57,643 31,806 Decrease (increase) in income taxes receivable.......................... 70,000 (70,000) -- (Increase) decrease in inventories...................................... (20,949) 106,979 45,754 Increase in other current assets........................................ (17,974) (47,284) (29,410) (Increase) decrease in other long-term assets........................... (22,436) 18,572 5,679 Decrease (increase) in net deferred tax assets.......................... 55,179 29,340 (43,761) Increase in accounts payable and accrued liabilities.................... 33,073 11,362 31,595 (Decrease) increase in restructuring reserves........................... (216,686) 43,630 (99,452) Increase (decrease) in accrued salaries, wages and employee benefits.... 70,859 (22,974) (23,404) Increase (decrease) in accrued taxes.................................... 49,618 (32,640) (22,520) Increase (decrease) in long-term employee related benefits.............. 43,320 (376,204) 127,823 (Decrease) increase in other long-term liabilities...................... (52,075) 149 (27,893) Other, net.............................................................. (24,531) (3,870) (29,135) --------- --------- --------- Net cash provided by (used for) operating activities............... 305,926 (173,772) 223,769 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment................................... (27,955) (61,062) (116,531) Proceeds from sale of property, plant and equipment.......................... 114,048 69,455 31,185 Decrease (increase) in net investment hedges................................. 67,978 53,736 (2,532) Other, net ............................................................... 152 228 5,171 --------- --------- --------- Net cash provided by (used for) investing activities............... 154,223 62,357 (82,707) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt..................................... 376,196 1,462,052 1,959,611 Repayments of long-term debt................................................. (903,371) (1,230,145) (2,037,627) Net increase (decrease) in short-term borrowings............................. 118 (7,688) (116,437) Other, net .................................................................. (5) -- (36) --------- --------- --------- Net cash (used for) provided by financing activities............... (527,062) 224,219 (194,489) --------- --------- --------- Effect of exchange rate changes on cash...................................... (8,845) (4,553) (6,492) --------- --------- --------- Net (decrease) increase in cash and cash equivalents............... (75,758) 108,251 (59,919) Beginning cash and cash equivalents.......................................... 192,816 84,565 144,484 --------- --------- --------- ENDING CASH AND CASH EQUIVALENTS............................................. $ 117,058 $ 192,816 $ 84,565 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest................................................................ $202,355 $ 172,688 $ 167,907 Income taxes............................................................ 56,982 82,675 146,717 Restructuring initiatives............................................... 183,542 416,123 313,700
The accompanying notes are an integral part of these financial statements. 42 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The consolidated financial statements of Levi Strauss & Co. and its wholly- owned and majority-owned foreign and domestic subsidiaries ("LS&CO." or "Company") are prepared in conformity with generally accepted accounting principles in the United States ("U.S."). All significant intercompany balances and transactions have been eliminated. LS&CO. is privately held primarily by descendants and relatives of its founder, Levi Strauss. The Company's fiscal year consists of 52 or 53 weeks, ending on the last Sunday of November in each year. The 2000, 1999 and 1998 fiscal years consisted of 52 weeks and ended November 26, 2000, November 28, 1999 and November 29, 1998, respectively. The fiscal year end for certain foreign subsidiaries is November 30 due to certain local statutory requirements. All references to years relate to fiscal years rather than calendar years. Certain prior year amounts have been reclassified to conform to the 2000 presentation. 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 the related notes to the financial statements. Changes in such estimates, based on more accurate future information, may affect amounts reported in future periods. NATURE OF OPERATIONS The Company is one of the world's leading branded apparel companies with operations in more than 40 countries and sales in more than 80 countries. The Company designs and markets jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories, for men, women and children, under the Levi's(R), Dockers(R) and Slates(R) brands. The Company markets its Levi's(R) and Dockers(R) brand products in three geographic regions: the Americas, Europe and Asia Pacific. The Slates(R) brand products are marketed in the United States. As of November 26, 2000, the Company employed approximately 17,300 people. The stockholders' deficit resulted from a 1996 transaction in which the Company's stockholders created new long-term governance arrangements, including the voting trust and stockholders agreement. As a result, shares of stock of a former parent company, Levi Strauss Associates Inc., including shares held under several employee benefit and compensation plans, were converted into the right to receive cash. The funding for the cash payments in this arrangement was provided in part by cash on hand and in part from proceeds of approximately $3.3 billion of borrowings under bank credit facilities. The Company's ability to satisfy its obligations and to reduce its total debt depends on the Company's future operating performance and on economic, financial, competitive and other factors, many of which are beyond the Company's control. The Company relies on a number of suppliers for its manufacturing processes, particularly Cone Mills Corporation, which has been and remains the sole supplier of the denim used for 501(R) jeans through the Company's only long-term supply contract. In 2000, 1999 and 1998, Cone Mills Corporation supplied approximately 24%, 22% and 24%, respectively, of the total volume of fabrics purchased worldwide by the Company. The loss of Cone Mills Corporation or other principal suppliers could have an adverse effect on the Company's results of operations. A group of key U.S. customers accounts for a significant portion of the Company's total net sales. Net sales to the Company's 10 largest customers, all of which are located in the United States, total approximately 48, 46 and 43 percent of net worldwide sales during fiscal years 2000, 1999 and 1998, respectively. 43 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Most of the Company's production and distribution employees in the U.S. are covered by various collective bargaining agreements. Outside the U.S., most of the Company's production and distribution employees are covered by either industry-sponsored and/or state-sponsored collective bargaining mechanisms. The Company considers its relations with its employees to be good and have not recently experienced any material job actions or labor shortages. REVENUE RECOGNITION Revenue from the sale of product is recognized upon shipment of products to customers. Allowances for estimated returns and discounts are recognized when sales are recorded. Provisions for returns and discounts are estimated based on various market data, historical trends and information from customers. Actual returns and discounts do not materially differ from estimates. ADVERTISING COSTS In accordance with SOP 93-7, "Reporting on Advertising Costs," the Company expenses advertising costs as incurred. Advertising expense is recorded in marketing, general and administrative expenses. For fiscal years 2000, 1999 and 1998 total advertising expense was $402.7 million, $490.2 million and $466.7 million, respectively. OTHER OPERATING INCOME Other operating income consists principally of licensing fees. MINORITY INTEREST Minority interest is included in other (income) expense, net, and includes a 16.4% minority interest of Levi Strauss Japan K.K. and a 49.0% minority interest of Levi Strauss Istanbul Konfeksigon. EARNINGS PER SHARE Basic earnings per share ("EPS") is computed by dividing net income by the weighted-average number of common shares outstanding for the period and excludes the dilutive effect of common shares that could potentially be issued. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding plus all potential dilutive common shares. The Company does not have any potentially dilutive securities. Therefore, basic and diluted EPS are the same. The weighted-average number of common shares outstanding is 37,278,238 for all periods presented. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at amortized cost, which approximates fair market value. INVENTORY VALUATION Inventories are valued at the lower of average cost or market value and include materials, labor and manufacturing overhead. Market value is calculated on the basis of anticipated selling price less allowances to maintain a targeted gross margin for each product. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost, less accumulated depreciation. The cost is depreciated on a straight-line basis over the estimated useful lives of the related assets. Buildings are depreciated over 40 years, and leasehold improvements are depreciated over the lesser of the life of the improvement or the initial lease term. Machinery and equipment includes furniture and fixtures, automobiles and trucks, and computers and are depreciated over a range from three to twenty years. 44 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company adopted Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," in the first quarter of fiscal year 2000. SOP 98-1 requires certain costs for computer software developed or obtained for internal use to be capitalized. Capitalized software is carried at cost less accumulated amortization and is amortized over three years on a straight-line basis. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangibles are carried at cost, less accumulated amortization. Goodwill resulted primarily from a 1985 acquisition of LS&CO. by Levi Strauss Associates Inc., a former parent company that was subsequently merged into the Company in 1996. Goodwill is being amortized on a straight-line basis over 40 years through the year 2025. Other intangibles consist primarily of tradenames, which were valued as a result of the 1985 acquisition. Tradenames and other intangibles are being amortized over the estimated useful lives of the related assets, which range from six to 40 years. LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standards No. ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company reviews long-lived assets, including goodwill and other intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of an asset exceeds the expected future undiscounted cash flows, the Company measures and records an impairment loss for the excess of the carrying value of the asset over its fair value. INCOME TAXES Deferred income tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. TRANSLATION ADJUSTMENT The functional currency for most of the Company's foreign operations is the applicable local currency. For those operations, assets and liabilities are translated into U.S. dollars using period-end exchange rates and income and expense accounts are translated at average monthly exchange rates. Net changes resulting from such translations are recorded as a separate component of accumulated other comprehensive income in the consolidated financial statements. The U.S. dollar is the functional currency for foreign operations in countries with highly inflationary economies and certain other subsidiaries. The translation adjustments for these entities are included in other (income) expense, net. SELF-INSURANCE The Company is partially self-insured for workers' compensation and certain employee health benefits. Accruals for losses are made based on the Company's claims experience and actuarial assumptions followed in the insurance industry. Actual losses could differ from accrued amounts. SECURITIZATIONS The Company accounts for securitization of receivables in accordance with SFAS 125, "Accounting for Transfers and Services of Financial Assets and Extinguishments of Liabilities." (SEE "NEW ACCOUNTING STANDARDS" BELOW ON THE ISSUANCE OF SFAS 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES.") INTEREST RATE SWAPS The Company enters into interest rate swap transactions to manage interest rate exposures on its debt. Net interest receivable or payable on the swap transactions is included in interest expense. Gains or losses that result from the early termination of swap 45 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) agreements are deferred and amortized over the shorter of the original maturity date of the swap or the remaining term of the associated debt as a component of interest expense. (SEE "NEW ACCOUNTING STANDARDS" BELOW FOR DISCLOSURE ON THE ADOPTION OF SFAS 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.") FOREIGN EXCHANGE CONTRACTS The Company enters into foreign exchange contracts to hedge against known foreign currency denominated exposures, particularly dividends and intercompany royalties, loans, sourcing and other transactions with its foreign affiliates and licensees. The accounting treatment of these instruments is dependent on the exposure being hedged. Forward and swap transactions hedging the Company's cash management and sourcing exposures are reported at market value, with gains and losses included in current earnings in other (income) expense, net. Option premiums on these hedges is amortized straight-line over the life of the option and is also included in other (income) expense, net. The intrinsic value is used to mark the option value to market through current earnings. Forward and swap transactions hedging net investments in foreign affiliates and royalties are also reported at market value but the market gain or loss is included in translation adjustment, a component of comprehensive income, which is included in stockholders' deficit on the balance sheet. Similarly, option premiums on hedges of net investments and royalties are amortized to the translation equity account. The intrinsic value of the options is used to mark the instruments to market at each financial statement date with the change in value recorded in translation adjustment. At November 26, 2000 and November 28, 1999, the net effect of exchange rate changes related to net investment hedge transactions was a $57.2 million increase and a $27.0 million increase respectively, to the translation adjustment. (SEE "NEW ACCOUNTING STANDARDS" BELOW FOR DISCLOSURE ON THE ADOPTION OF SFAS 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.") NEW ACCOUNTING STANDARDS In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which replaces SFAS 125, "Accounting for Transfers and Services of Financial Assets and Extinguishments of Liabilities." This standard revises the methods for accounting for securitizations and other transfers of financial assets and collateral as outlined in SFAS 125, and requires certain additional disclosures. For transfers and servicing of financial assets and extinguishments of liabilities, this standard will be effective for the Company's May 27, 2001 quarterly financial statements. However, for disclosures regarding securitizations and collateral, as well as recognition and reclassification of collateral, this standard will be effective for the Company's November 25, 2001 annual financial statements. The Company is currently evaluating the impact of the adoption of this standard; however, it does not expect the adoption of this standard to have a material effect on its financial position or results of operations. In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, the FASB delayed the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. The Company adopted SFAS 133 and subsequent amendments the first day of fiscal year 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts, and for hedging activities. In summary, SFAS 133 requires all derivatives to be recognized as assets or liabilities at fair value. Fair value adjustments are made either through earnings or equity, depending upon the exposure being hedged and the effectiveness of the hedge. FOREIGN EXCHANGE HEDGING The primary purpose of the Company's foreign exchange hedging activities is to maximize the U.S. dollar value of the Company over the long term. The Company manages its foreign currency exposures in a way that makes it unlikely that it will obtain hedge accounting treatment for all of its exposure management activities upon the adoption of SFAS 133. The Company attempts to take a long-term view of managing exposures on an economic basis, using forecasts to develop exposure positions and engages in active management of those exposures with the objective of protecting future cash flows and mitigating risks. The Company does not hold any derivative instruments for trading purposes. As a result, not all exposure management activities and foreign currency derivative instruments will qualify for hedge accounting treatment under SFAS 133. Derivative instruments utilized in these transactions will be valued at fair value and changes in fair value will be consequently classified into earnings. Therefore, it is possible that the Company will experience increased volatility in earnings. 46 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company uses a variety of derivative instruments, including forward, swap and option contracts, to hedge foreign currency exposures related to sourcing, net investment positions, royalties and cash management. The derivative instruments used to hedge sourcing exposure are currently recorded at their fair value and any changes in fair value are included in earnings. Under SFAS 133, a majority of these contracts would not qualify for hedge accounting treatment. The Company has therefore chosen to continue to mark to market all sourcing related hedge transactions at their fair value and any changes in fair value will be recorded in earnings. At November 26, 2000, the fair value of these derivative instruments hedging sourcing exposure represented a net asset of $13.7 million, which is recorded on the balance sheet. The Company hedges its net investment position in major currencies by using forward, swap and option contracts. The contracts hedging these net investments are currently in compliance with SFAS 52, "Foreign Currency Translation," and are considered net investment hedges. As a result, the related gains and losses are categorized as cumulative translation adjustment in the other comprehensive income section of stockholders' deficit. This will continue to be the methodology going forward for the contracts that qualify for hedge accounting treatment under SFAS 133. At November 26, 2000, the gains on these hedge contracts amounted to $1.4 million and are reflected in the cumulative translation adjustment section of other comprehensive income. The contracts hedging intercompany royalty flows are currently in compliance with SFAS 52, "Foreign Currency Translation," and are designated as net investment hedges. Therefore, the related gains and losses are categorized as cumulative translation adjustment in the other comprehensive income section of stockholders' deficit. The transactions hedging intercompany royalty flows will be considered cash flow hedges according to SFAS 133 rules. Consequently, gains and losses on the contracts that qualify and are designated for hedge accounting treatment will be deferred in other comprehensive income until the underlying royalty flow has been settled. The fair value of these transactions at November 26, 2000 amounted to a gain of $1.8 million. At the beginning of fiscal 2001, hedging activity related to outstanding cash flow hedges are valued at a gain of $1.0 million and will be reclassified into earnings as the underlying hedged items impact earnings. The derivative instruments utilized in transactions hedging cash management exposures are currently and, under SFAS 133, will continue to be marked to market at their fair value and any changes in fair value are recorded in earnings. Under SFAS 133, fair values of forward transactions and of the forward portion of swap transactions will be calculated using the discounted difference between the contract forward price and the forward price at the closing date for the remaining life of the contract. Forward points will no longer be recorded as assets or liabilities on the balance sheet and amortized over the life of the contract. Following SFAS 133 valuation principles, option contracts are also recorded at fair value. Therefore, option premiums will no longer be recorded as assets or liabilities on the balance sheet and amortized over the life of the contract. These changes in valuation methods will impact the Company's earnings and the accumulated other comprehensive income section of stockholders' equity beginning in fiscal 2001. At adoption of SFAS 133, the earnings impact of these changes in valuation methods is an estimated gain of $1.3 million. Additionally the accumulated other comprehensive income section of stockholders' equity will decrease by approximately $0.7 million. INTEREST RATE HEDGING The Company is exposed to interest rate risk. It is the Company's policy and practice to use derivative instruments, primarily interest rate swaps and options, to manage and reduce interest rate exposures. The Company's policy is to manage interest costs using a mix of fixed and variable debt. The fair value of these derivative instruments is not currently recorded on the Company's financial statements. Under SFAS 133, those interest rate hedging instruments that do not qualify for hedge accounting treatment will be recorded on the balance sheet at their fair value. The related changes in fair value will be included in earnings. The earnings impact of this adjustment is estimated at a loss of $1.2 million. 47 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2: EXCESS CAPACITY REDUCTIONS/RESTRUCTURING RESERVES NORTH AMERICA PLANT CLOSURES Over the last three years, the Company has closed 29 of its owned and operated production and finishing facilities in North America and Europe in order to reduce costs, eliminate excess capacity and align its sourcing strategy with changes in the industry and in consumer demand. Plant closures were announced in November 1997, in which ten manufacturing facilities as well as a finishing center in the U.S. were closed by the end of 1998, displacing approximately 6,400 employees. The Company recorded an initial charge of $386.8 million in 1997 that consisted of $42.7 million for asset write-offs, $327.8 million for severance and employee benefits and $16.3 million for other restructuring costs. In fiscal year 2000, $5.0 million of the reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. This reversal was primarily associated with employee benefits that expired during 2000. The ending balances for this reserve are displayed in the table below. In line with the above plans, the Company announced in November 1998 the closure of two more finishing centers in the U.S. that were closed by the end of 1999, displacing approximately 990 employees. The Company recorded an initial charge of $82.1 million in 1998 that consisted of $23.4 million for asset write-offs, $56.5 million for severance and employee benefits and $2.2 million for other restructuring costs. In fiscal year 2000, a small amount of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. This reversal was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. The ending balances for this reserve are displayed in the table below. Also in conjunction with such plans, the Company announced in February 1999 the closure of 11 additional manufacturing facilities in North America that were closed by the end of 1999, displacing approximately 5,900 employees. The Company recorded an initial charge of $394.1 million in 1999 that consisted of $33.4 million for asset write-offs, $299.4 million for severance and employee benefits and $61.3 million for other restructuring costs. In fiscal year 2000, $13.3 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. Of this reversal, $7.1 million was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. Of this reversal, $6.1 million was primarily associated with plant closure costs and was based upon historical trends from previous plant closures. The ending balances of this reserve are displayed in the table below.
1997 NORTH AMERICA PLANT CLOSURES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits................................ $30,582 $ -- $(17,830) $12,752 $(4,987) $(7,544) $ 221 Other restructuring costs.................. 11,863 -- (8,925) 2,938 -- (712) 2,226 ------- ---- -------- ------- ------- ------- ------ Total................................. $42,445 $ -- $(26,755) $15,690 $(4,987) $(8,256) $2,447 ======= ==== ======== ======= ======= ======= ======
48 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1998 NORTH AMERICA PLANT CLOSURES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits................................. $54,552 $ -- $ (50,407) $4,145 $ (13) $(2,683) $ 1,449 Other restructuring costs................... 1,902 -- (101) 1,801 -- (1,193) 608 ------- ---- --------- ------ ------ ------- ------- Total.................................. $56,454 $ -- $ (50,508) $5,946 $ (13) $(3,876) $ 2,057 ======= ==== ========= ====== ====== ======= =======
1999 NORTH AMERICA PLANT CLOSURES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits................................. $ -- $299,368 $(183,131) $116,237 $(7,132) $(89,253) $19,852 Other restructuring costs................... -- 61,307 (17,865) 43,442 (6,149) (2,528) 34,765 ------- -------- --------- -------- -------- --------- ------- Total.................................. $ -- $360,675 $(200,996) $159,679 $(13,281) $(91,781) $54,617 ======= ======== ========= ======== ======== ======== =======
CORPORATE REORGANIZATION INITIATIVES In 1998, the Company instituted various corporate reorganization initiatives, displacing approximately 770 employees. The goal of these initiatives was to reduce overhead costs and consolidate operations. The Company recorded initial charges of $61.1 million in 1998 that consisted of $3.0 million for asset write-offs, $50.1 million for severance and employee benefits and $7.9 million for other restructuring costs. In fiscal year 2000, $3.7 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. Of this reversal, $1.8 million was primarily associated with employee benefits and was based upon historical trends and future projections of medical and other employee benefits. Of this reversal, $1.9 million was primarily associated with higher sub-lease income than initially projected. The ending balances for this reserve are displayed in the table below. In line with such overhead reorganization initiatives, the Company recorded additional charges of $48.9 million in 1999 that consisted of $45.0 million for severance and employee benefits and $3.9 million for other restructuring costs and an estimated displacement of 930 employees. In fiscal year 2000, $9.0 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. As a result of this reevaluation, a total of 730 employees are estimated to be displaced. As of November 26, 2000, approximately 670 employees had been displaced. The ending balances for this reserve are displayed in the table below.
1998 CORPORATE REORGANIZATION INITIATIVES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits......... $50,139 $ -- $(45,893) $ 4,246 $(1,838) $(2,308) $ 100 Other restructuring costs............... 7,198 -- (786) 6,412 (1,897) (2,742) 1,773 ------- ---- -------- ------- ------- ------- ------ Total.............................. $57,337 $ -- $(46,679) $10,658 $(3,735) $(5,050) $1,873 ======= ==== ======== ======= ======= ======= ======
49 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1999 CORPORATE REORGANIZATION INITIATIVES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits.......... $ -- $44,952 $(1,402) $43,550 $(7,695) $(33,093) $2,762 Other restructuring costs................ -- 3,937 (2,257) 1,680 (1,268) (412) -- ------- ------- ------- ------- ------- -------- ------ Total............................... $ -- $48,889 $(3,659) $45,230 $(8,963) $(33,505) $2,762 ======= ======= ======= ======= ======= ======== ======
EUROPE REORGANIZATION AND PLANT CLOSURES In September 1998 the Company announced plans to close two manufacturing and two finishing facilities, and reorganize operations throughout Europe, displacing approximately 1,650 employees. These plans were prompted by decreased demand for denim jeans products and a resulting over-capacity in the Company's European owned and operated plants. The production facilities were closed by the end of 1999. The Company recorded an initial charge of $107.5 million in 1998 that consisted of $10.0 million for asset write-offs and $97.5 million for severance and employee benefits. As of November 26, 2000, approximately 1,645 employees had been displaced. The ending balances for this reserve are displayed in the table below. In conjunction with such plans in Europe, the Company announced in September 1999 plans to close a production facility and reduce capacity at a finishing facility in the United Kingdom, to further reduce overhead costs and consolidate operations, and to displace approximately 960 employees. The production facility was closed in December 1999. The Company recorded an initial charge of $54.7 million in 1999 that consisted of $4.5 million for asset write-offs, $48.2 million for severance and employee benefits and $2.0 million for other restructuring costs. In fiscal year 2000, $2.2 million of the remaining reserve balance was reversed due to the periodic reevaluation resulting from updated estimates and assumptions. As a result of this reevaluation, a total of 945 employees are estimated to be displaced. As of November 26, 2000, approximately 910 employees had been displaced. The ending balances for this initial charge are displayed in the table below.
1998 EUROPE REORGANIZATION AND PLANT CLOSURES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- -------- (DOLLARS IN THOUSANDS) Severance and employee benefits...... $88,415 $ -- $(77,762) $10,653 $ -- $(9,145) $1,508 ------- ----- -------- ------- ---- ------- ------ Total........................... $88,415 $ -- $(77,762) $10,653 $ -- $(9,145) $1,508 ======= ===== ======== ======= ==== ======= ======
1999 EUROPE REORGANIZATION AND PLANT CLOSURES BALANCE BALANCE BALANCE AT AT AT 11/29/98 CHARGES REDUCTIONS 11/28/99 REVERSALS REDUCTIONS 11/26/00 -------- ------- ---------- -------- --------- ---------- --------- (DOLLARS IN THOUSANDS) Severance and employee benefits...... $ -- $ 48,160 $(9,747) $38,413 $(2,165) $(30,557) $5,691 Other restructuring costs............ -- 2,029 (17) 2,012 -- (1,372) 640 ---- -------- ------- ------- ------- -------- ------ Total........................... $ -- $ 50,189 $(9,764) $40,425 $(2,165) $(31,929) $6,331 ==== ======== ======= ======= ======= ======== ======
Severance and employee benefits relate to severance packages, out-placement and career counseling for employees affected by the plant closures, and reorganization initiatives. Reductions consist of payments for severance and employee benefits, other restructuring costs and actual losses on disposal of assets. The balance of severance and employee benefits and other restructuring costs are included under restructuring reserves on the balance sheet. The majority of the initiatives are expected to be completed by the end of 2001. 50 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3: INCOME TAXES The U.S. and non-U.S. components of income before taxes are as follows:
2000 1999 1998 ---- ---- ---- (DOLLARS IN THOUSANDS) U.S. ...................................................... $185,161 $ 6,025 $ 61,197 Non-U.S. .................................................. 158,519 2,474 101,503 -------- -------- -------- Total................................................. $343,680 $ 8,499 $162,700 ======== ======== ========
The provision for taxes consists of the following:
2000 1999 1998 ---- ---- ---- (DOLLARS IN THOUSANDS) Federal-U.S. Current.................................................... $ (9,417) $(53,441) $(36,879) Deferred................................................... 23,851 20,589 1,812 -------- ------- ------- $ 14,434 $(32,852) $(35,067) ======== ======== ======== State-U.S. Current.................................................... $ 3,758 $ (521) $ 458 Deferred................................................... 6,552 776 4,423 -------- -------- -------- $ 10,310 $ 255 $ 4,881 ======== ======== ======== Non-U.S. Current.................................................... $ 62,249 $ 32,663 $132,089 Deferred................................................... 33,295 3,078 (41,705) -------- -------- -------- $ 95,544 $ 35,741 $ 90,384 ======== ======== ======== Total Current.................................................... $ 56,590 $(21,299) $ 95,668 Deferred................................................... 63,698 24,443 (35,470) -------- -------- -------- $120,288 $ 3,144 $ 60,198 ======== ======== ========
At November 26, 2000, cumulative non-U.S. operating losses of $150.3 million generated by the Company were available to reduce future non-U.S. taxable income. Approximately $109.5 million of the non-U.S. operating losses expire between the years 2001 and 2010 and the remainder of the non-U.S. losses carry-forward indefinitely. Income taxes due to translation adjustment, recorded in the translation equity adjustment, was $21.2 million, $8.7 million and $3.8 million for 2000, 1999 and 1998, respectively. Temporary differences which give rise to deferred tax assets and liabilities at November 26, 2000 and November 28, 1999 were as follows: 51 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2000 1999 DEFERRED DEFERRED TAX ASSETS TAX ASSETS (LIABILITIES) (LIABILITIES) ------------- ------------- (DOLLARS IN THOUSANDS) Postretirement benefits............................................. $ 207,318 $ 215,361 Employee compensation and benefit plans............................. 159,321 146,261 Inventory........................................................... 55,876 86,311 Depreciation and amortization....................................... (8,765) 4,713 Foreign exchange gains/losses....................................... (36,364) (36,834) Restructuring and special charges................................... 32,366 102,501 Tax on unremitted non-U.S. earnings................................. 149,174 153,551 State income tax.................................................... (20,693) (21,352) Foreign losses...................................................... 33,000 30,000 Foreign tax credit carryforward..................................... 78,984 55,745 Alternative minimum tax credit carryforward......................... 26,362 6,845 Other............................................................... 71,930 66,105 Less valuation allowance............................................ (58,000) (55,000) --------- --------- $ 690,509 $ 754,207 ========= =========
The $58.0 million deferred tax valuation allowance at November 26, 2000 represents the portion of the Company's consolidated deferred tax assets for which the Company, based upon its projections as of that date, does not believe that the realization is more likely than not. The Company's effective income tax rate for fiscal years 2000, 1999 and 1998 differs from the statutory federal income tax rate as follows:
2000 1999 1998 ---- ---- ---- Statutory rate.................................................................. 35.0% 35.0% 35.0% Changes resulting from: State income taxes, net of federal income tax benefit...................... 2.0 2.0 2.0 Change in valuation allowance.............................................. 0.7 15.2 6.0 Acquisition-related book and tax bases differences......................... 1.1 43.6 2.3 Reversal of prior years' accruals.......................................... (3.6) (55.0) (11.3) Other, net................................................................. (0.2) (3.8) 3.0 ---- ---- ---- Effective rate.................................................................. 35.0% 37.0% 37.0% ==== ==== ====
The consolidated U.S. income tax returns of the Company for 1986 through 1999 are under examination by the Internal Revenue Service ("IRS"). A tentative settlement agreement covering most issues has been reached with the IRS covering the years 1986 through 1989. The Company believes it has made adequate provision for income taxes and interest for all periods under review. NOTE 4: PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment ("PP&E") are as follows:
2000 1999 ---- ---- (DOLLARS IN THOUSANDS) Land ........................................................ $ 34,458 $ 48,483 Buildings and leasehold improvements......................... 416,935 566,046 Machinery and equipment...................................... 610,599 643,463 Construction in progress..................................... 8,033 4,968 ---------- ---------- Total PP&E.............................................. 1,070,025 1,262,960 Accumulated depreciation..................................... (495,986) (548,437) ---------- ---------- PP&E, net.................................................... $ 574,039 $ 714,523 ========== ==========
52 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As a result of the excess capacity reduction and reorganization initiatives charges (SEE NOTE 2 TO THE CONSOLIDATED FINANCIAL STATEMENTS), the Company recognized impairment losses in 1999 and 1998 of $37.9 million and $36.4 million, respectively, related to certain plant assets. The impairment losses were recorded as a reduction of the book value of machinery and equipment in the table above. The adjustment to net realizable value was determined by estimating the proceeds realizable on sale or lease of these assets. As of November 26, 2000, the Company had approximately $12.0 million of PP&E, net, available for sale. Depreciation expense for 2000, 1999 and 1998 was $80.2 million, $108.7 million and $114.3 million, respectively. Construction in progress at November 26, 2000 related to various projects. It is estimated that approximately $6.0 million in costs will be incurred to complete these projects in 2001. These projects consist of sales office capital improvements, sourcing projects, internally developed software and facilities infrastructure. Construction in progress at November 28, 1999 related to various projects that were completed and placed into service in 2000. NOTE 5: GOODWILL AND OTHER INTANGIBLE ASSETS The components of goodwill and other intangible assets are as follows:
2000 1999 ---- ---- (DOLLARS IN THOUSANDS) Goodwill........................................................... $ 351,474 $ 351,474 Tradenames and other intangibles................................... 78,308 81,896 --------- --------- Total intangible assets....................................... 429,782 433,370 Accumulated amortization related to goodwill....................... (133,995) (125,208) Other accumulated amortization..................................... (30,831) (32,844) --------- --------- Intangible assets, net............................................. $ 264,956 $ 275,318 ========= =========
The Company reduced other intangibles by $3.6 million to remove fully amortized assets in 2000. In 1999, there was an impairment loss of $13.6 million related to obsolete technology that was recorded in other (income) expense, net. Amortization expense for 2000, 1999 and 1998 was $10.8 million, $11.4 million and $14.4 million, respectively. 53 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6: DEBT AND LINES OF CREDIT Debt and lines of credit are summarized below:
2000 1999 ---- ---- (DOLLARS IN THOUSANDS) LONG-TERM DEBT: Unsecured: Credit facilities................................................................ $ -- $1,417,000 Notes: 6.80%, due 2003............................................................. 348,559 348,065 7.00%, due 2006............................................................. 447,207 446,735 Yen-denominated eurobond: 4.25%, due 2016............................................................. 183,486 188,679 ---------- ---------- 979,252 2,400,479 Secured: Credit Facilities................................................................ 988,639 -- Customer Service Center Equipment Financing...................................... 85,013 -- European Receivables-backed securitization financing agreement................... 31,148 -- Domestic Receivables-backed securitization financing agreement................... -- 214,000 Industrial development revenue refunding bond.................................... 10,000 10,000 Notes payable, at various rates, due in installments through 2006................ 1,295 6,331 ---------- ---------- 2,095,347 2,630,810 Current maturities..................................................................... (200,207) (200,193) ---------- ---------- Total.................................................................. $1,895,140 $2,430,617 ========== ========== UNUSED LINES OF CREDIT: Long-term .................................................................... $ -- $ -- Short-term .................................................................... 469,992 201,689 ---------- ---------- Total.................................................................. $ 469,992 $ 201,689 ========== ==========
NOTES EXCHANGE OFFER In May 2000, the Company filed a registration statement on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act") with the SEC relating to an exchange offer of its 6.80% notes due 2003 and 7.00% notes due 2006 (see "1996 Notes Offering" below). The exchange offer gave holders of these notes the opportunity to exchange these old notes, which were issued on November 6, 1996 under Rule 144A of the Securities Act, for new notes that are registered under the Securities Act of 1933. The new notes are identical in all material respects to the old notes except that the new notes are registered. The exchange offer ended on June 20, 2000. As a result of the exchange offer, all but $20 thousand of the $350.0 million aggregate principal amount of 6.80% old notes due 2003 were exchanged for the 6.80% exchange notes due 2003; and all $450.0 million aggregate principal amount of the 7.00% old notes due 2006 were exchanged for the 7.00% exchange notes due 2006. The Company was not obligated by any agreement including its credit facility agreements to engage in the exchange offer. The Company initiated the exchange offer to give holders of these notes the opportunity to exchange the old notes for registered notes. 1996 NOTES OFFERING In 1996, the Company issued two series of notes payable totaling $800.0 million to qualified institutional investors in reliance on Rule 144A under the U.S. Securities and Exchange Act of 1933 (the "Notes Offering"). The notes are unsecured obligations of the Company and are not subject to redemption before maturity. The issuance was divided into two series: $350.0 million seven-year notes maturing in November 2003 and $450.0 million ten-year notes maturing in November 2006. The seven- and ten-year notes bear interest at 6.80% and 7.00% per annum, respectively, payable semi-annually in May and November of each year. Discounts of $8.2 million on the original issue are being amortized over the term of the notes using an approximate 54 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) effective-interest rate method. Net proceeds from the Notes Offering were used to repay a portion of the indebtedness outstanding under a 1996 credit facility agreement. YEN-DENOMINATED EUROBOND PLACEMENT In 1996, the Company issued a 20 billion yen principal amount eurobond (equivalent to approximately $180.0 million at the time of issuance) due in November 2016, with interest payable at 4.25% per annum. The bond is redeemable at the option of the Company at a make-whole redemption price commencing in 2006. Net proceeds from the placement were used to repay a portion of the indebtedness outstanding under a 1996 credit facility agreement. CREDIT FACILITIES On January 31, 2000 the Company amended three of its credit facility agreements and entered into one new agreement to reflect its current financial position and extend maturity dates (the "2000 Credit Facility"). The financing package consists of four separate agreements: (1) a new $450.0 million bridge facility to fund working capital and support letters of credit, foreign exchange contracts and derivatives, (2) an amended $300.0 million revolving credit facility, extending the existing bridge facility, (3) an amended $545.0 million 364-day credit facility, and (4) an amended $584.0 million 5-year credit facility. Simultaneously with entering into these agreements, the Company terminated a domestic receivables-backed securitization financing. All four facilities are secured by domestic receivables, domestic inventories, certain domestic equipment, trademarks, other intellectual property, 100% of the stock in domestic subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets. The maturity date for all credit facilities is January 31, 2002. Borrowings under the bank credit facilities bear interest at LIBOR or the agent bank's base rate plus an incremental borrowing spread. For the bridge facility, the spread is 3.00% over LIBOR or 1.75% over the base rate. For each of the three amended facilities, the spread is 3.25% over LIBOR or 2.00% over the base rate. In addition, if by February 1, 2001 the Company has not completed one or more private or public capital-raising transactions yielding net proceeds of at least $300.0 million, which are required to be used to reduce commitments under the bank credit facilities, the Company will be required to pay its lenders an additional borrowing spread of 1.00% on outstanding borrowings under the bank credit facilities, plus a one-time additional fee of 2.00% of total commitments as of January 31, 2001. The Company's borrowing spread will be increased by 0.25% quarterly until those capital-raising transactions are completed. In February 2001, the Company entered into a new $1.05 billion senior secured credit facility to replace the 2000 Credit Facility on more favorable terms. Also in January 2001, the Company issued two series of notes payable totaling the equivalent of $497.5 million to qualified institutional investors. (SEE NOTE 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) The credit agreements relating to the 2000 Credit Facility contain customary covenants restricting the Company's activities as well as those of its subsidiaries, including limitations on the Company's and its subsidiaries' ability to sell assets; engage in mergers; enter into operating leases or capital leases; enter into transactions involving related parties, derivatives or letters of credit; enter into intercompany transactions; incur indebtedness or grant liens or negative pledges on the Company's assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third party obligations; make capital expenditures; and make changes in the Company's corporate structure. The credit agreements also contain financial covenants that the Company must satisfy on an ongoing basis, including a maximum leverage ratio, a minimum coverage ratio and a minimum earnings base calculation. The Company was in compliance with financial covenants required by the credit facility agreements as of November 26, 2000. 55 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CUSTOMER SERVICE CENTER EQUIPMENT FINANCING In December 1999 the Company entered into a secured financing transaction consisting of a five-year credit facility secured by owned equipment at Customer Service Centers located in Nevada, Mississippi and Kentucky. The amount financed in December 1999 was $89.5 million, comprised of a $59.5 million tranche ("Tranche 1") and a $30.0 million tranche ("Tranche 2"). Borrowings under Tranche 1 have a fixed interest rate equal to the yield of a four-year Treasury note plus an incremental borrowing spread. Borrowings under Tranche 2 have a floating quarterly interest rate equal to the 90 day LIBOR plus an incremental borrowing spread based on the Company's leverage ratio at that time. Proceeds from the borrowings were used to reduce the commitment amounts of the then-existing credit facilities. EUROPEAN RECEIVABLES SECURITIZATION AGREEMENTS In February 2000, several of the Company's European subsidiaries entered into receivable securitization financing agreements with several lenders to borrow up to $125.0 million. Any borrowings under the facilities must be used to reduce the commitment levels under the Company's bank credit facilities. During November 2000, 36.5 million euro (or approximately $30.7 million at time of borrowing) were borrowed under these agreements at initial interest rates of 6.72%. Interest rates under this agreement are variable based on commercial paper market conditions, and the debt ratings of the underlying conduit. In December 2000, an additional 10.4 million euro (equivalent to approximately $9.3 million at time of borrowing) at an initial interest rate of 6.70% was borrowed under these agreements. Borrowings are collateralized by a security interest in the receivables of these subsidiaries. These securitizations did not meet the criteria for sales accounting under SFAS 125 and therefore have been accounted for as a secured borrowing. INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BOND In 1995, the City of Canton, Mississippi issued an industrial development revenue refunding bond with a principal amount of $10.0 million, and the proceeds were loaned to the Company to help finance the cost of acquiring a customer service center in Canton. Interest payments are due monthly at a variable rate based upon the J.J. Kenny Index, reset weekly at a maximum rate of 13.00%, and the principal amount is due June 1, 2003. The bond is secured by a letter of credit that expires on June 15, 2001, which the Company has the opportunity to extend or renew. DOMESTIC RECEIVABLES-BACKED SECURITIZATION FINANCING AGREEMENT The Company terminated its domestic receivables-backed securitization financing agreement in January 2000 in connection with the 2000 Credit Facility amendment (see above). During April 1999, the Company, through a wholly owned special purpose entity, Levi Strauss Funding Corp. ("LSFC"), entered into a U.S. receivables-backed securitization financing agreement. LSFC's sole business consisted of purchasing receivables from the Company and its affiliates as part of this financing transaction. LSFC was a separate corporation with its own separate creditors who, in any liquidation of the Company or its affiliates, was entitled to be satisfied out of LSFC's assets prior to any value in LSFC being available to the equity holders of LSFC. Under the terms of the agreement as of November 28, 1999, borrowings of $214.0 million were collateralized by a security interest in LSFC's receivables. The maximum amount outstanding varied based upon the level of eligible receivables as defined under the agreement. The Company intended to extend the commitment period beyond one year as of November 28, 1999, and therefore borrowings under this agreement were classified as long-term debt. The net borrowings from this facility were used to repay a portion of the indebtedness outstanding in the credit facilities during fiscal year 1999. The fees under this agreement were variable based on outstanding receivables and the Company's debt ratings. Interest rates ranged from 4.90% to 5.54% with an effective weighted average interest rate of 5.69% during 1999. 56 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) PRINCIPAL SHORT-TERM AND LONG-TERM DEBT PAYMENTS As of November 26, 2000, the required aggregate short-term and long-term debt principal payments for the next five years and thereafter are as follows: PRINCIPAL PAYMENTS -------- (DOLLARS IN YEAR THOUSANDS) ---- 2001 ........................................ $ 194,763 2002*........................................ 838,629 2003 ........................................ 397,506 2004 ........................................ 8,521 2005 ........................................ 56,202 Thereafter................................... 630,809 ---------- Total................................... $2,126,430 ========== - -------------- * The 2000 Credit Facility has payment terms maturing in 2002. The Company intends and is able to extend these borrowings using various funding vehicles. In February 2001, the Company entered into a new $1.05 billion senior secured credit facility to replace the 2000 Credit Facility on more favorable terms. Also in January 2001, the Company issued two series of notes payable totaling the equivalent of $497.5 million to qualified institutional investors. (SEE NOTE 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) SHORT-TERM CREDIT LINES AND STAND-BY LETTERS OF CREDIT At November 26, 2000, the Company had unsecured and uncommitted short-term credit lines available totaling $17.5 million at various rates. These credit arrangements may be canceled by the bank lenders upon notice and generally have no compensating balance requirements or commitment fees. At November 26, 2000 and November 28, 1999, the Company had $193.4 million and $89.4 million, respectively, of standby letters of credit with various international banks, of which $52.5 million and $70.6 million, respectively, serves as guarantees by the creditor banks to cover U.S. workers' compensation claims. In addition, $109.6 million of these standby letters of credit under the secured bank credit facility support short-term credit lines at November 26, 2000. The Company pays fees on the standby letters of credit. Borrowings against the letters of credit are subject to interest at various rates. INTEREST RATE SWAPS The Company is exposed to interest rate risk. It is the Company's policy and practice to use derivative instruments, primarily interest rate swaps and options, to manage and reduce interest rate exposures. At November 26, 2000, the Company had no interest rate swap transactions outstanding. During the fourth quarter of 2000, interest rate swap transactions outstanding with the total notional principal amount of $425.0 million that converted floating rate liabilities to fixed rates matured and the Company terminated $375.0 million of its swap transactions that converted fixed rate liabilities to floating rates. The Company has entered into interest rate option structures (caps and floors) to reduce or neutralize the exposure to changes in variable interest rates. The structures represent an outstanding amount of $425.0 million and cover a series of variable cash flows through November 2001. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate derivative transactions. However, the Company believes these counterparties are creditworthy financial institutions and does not anticipate nonperformance. 57 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INTEREST RATES ON BORROWINGS The Company's weighted average interest rate on borrowings outstanding during 2000 and 1999, including the impact of interest rate swap transactions, was 9.50% and 6.95%, respectively. NOTE 7: COMMITMENTS AND CONTINGENCIES FOREIGN EXCHANGE CONTRACTS At November 26, 2000, the Company had U.S. dollar forward currency contracts to sell the aggregate equivalent of $621.4 million and to buy the aggregate equivalent of $363.4 million of various foreign currencies. The Company also had Euro forward currency contracts to sell the aggregate equivalent of $58.5 million and to buy the aggregate equivalent of $32.9 million of various foreign currencies. Additionally, the Company had U.S. dollar option contracts to sell the aggregate equivalent of $1.3 billion and to buy the aggregate equivalent of $661.2 million of various foreign currencies. The Company also had Euro option contracts to buy the foreign currency aggregate equivalent of $8.4 million. These contracts are at various exchange rates and expire at various dates through August 2001. Most option transactions, included in the amounts above, are for the exchange of Euro and U.S. dollar. At November 26, 2000, the Company had bought U.S. dollar options to sell the equivalent of $537.2 million against the Euro. To finance the option premiums related to these options, the Company sold options having the obligation to buy Euro for an equivalent of $97.3 million U.S. dollars. The Company's market risk is generally related to fluctuations in the currency exchange rates. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the foreign exchange contracts. However, the Company believes these counterparties are creditworthy financial institutions and does not anticipate nonperformance. OTHER CONTINGENCIES In the ordinary course of its business, the Company has pending various cases involving contractual matters, employee-related matters, distribution questions, product liability claims, trademark infringement and other matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company's financial position or results of operations. The operations and properties of the Company comply with all applicable federal, state and local laws enacted for the protection of the environment, and with permits and approvals issued in connection therewith, except where the failure to comply would not reasonably be expected to have a material adverse effect on the Company's financial position or business operations. Based on current available information, the Company does not consider there to be any circumstances existing that would be reasonably likely to form the basis of an action against the Company that could have a material adverse effect on the Company's financial position or business operations. 58 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8: FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of certain financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amount and estimated fair value (in each case including accrued interest) of the Company's financial instrument assets and (liabilities) at November 26, 2000 and November 28, 1999 are as follows:
NOVEMBER 26, 2000 NOVEMBER 28,1999 ----------------- ---------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE ----- ---------- ----- ---------- (DOLLARS IN THOUSANDS) DEBT INSTRUMENTS: Credit facilities................................ $(1,000,131) $(1,000,131) $(1,424,449) $(1,424,449) Yen-denominated eurobond placement............... (184,043) (133,945) (189,274) (148,113) Notes offering................................... (799,606) (628,000) (798,640) (626,307) European Receivables-backed securitization....... (31,148) (31,148) -- -- Domestic Receivables-backed securitization....... -- -- (215,836) (215,836) Industrial development revenue refunding bond.......................................... (10,036) (10,036) (10,030) (10,030) Customer service center equipment financing...... (86,901) (86,901) -- -- CURRENCY AND INTEREST RATE HEDGES: Foreign exchange forward contracts............... $ 9,830 $ 9,593 $ 16,972 $ 16,932 Foreign exchange option contracts................ 7,309 6,289 7,806 2,288 Interest rate swap contracts..................... -- -- (2,224) (4,839) Interest rate option contracts................... (457) (789) -- --
Quoted market prices or dealer quotes are used to determine the estimated fair value of foreign exchange contracts, option contracts and interest rate swap contracts. Dealer quotes and other valuation methods, such as the discounted value of future cash flows, replacement cost, and termination cost have been used to determine the estimated fair value for long-term debt and the remaining financial instruments. The carrying values of cash and cash equivalents, trade receivables, current assets, certain current and non-current maturities of long-term debt, short-term borrowings and taxes approximate fair value. The fair value estimates presented herein are based on information available to the Company as of November 26, 2000 and November 28, 1999. Although the Company is not aware of any factors that would substantially affect the estimated fair value amounts, such amounts have not been updated since those dates and, therefore, the current estimates of fair value at dates subsequent to November 26, 2000 and November 28, 1999 may differ substantially from these amounts. Additionally, the aggregation of the fair value calculations presented herein do not represent and should not be construed to represent the underlying value of the Company. 59 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 9: LEASES The Company is obligated under operating leases for facilities, office space and equipment. At November 26, 2000, obligations under long-term leases are as follows: MINIMUM LEASE PAYMENTS -------- (DOLLARS IN THOUSANDS) 2001 ............................................... $ 61,879 2002 ............................................... 58,413 2003 ............................................... 52,885 2004 ............................................... 48,322 2005 ............................................... 45,851 Remaining years..................................... 208,768 -------- Total minimum lease payments................... $476,118 ======== The total minimum lease payments on operating leases have not been reduced by estimated future income of $15.9 million from non-cancelable subleases. In general, leases relating to real estate include renewal options of up to approximately 20 years, except for the San Francisco headquarters office lease, which contains multiple renewal options of up to 78 years. Some leases contain escalation clauses relating to increases in operating costs. Certain operating leases provide the Company with an option to purchase the property after the initial lease term at the then prevailing market value. Rental expense for 2000, 1999 and 1998 was $78.1 million, $86.1 million and $80.2 million, respectively. NOTE 10: PENSION AND POSTRETIREMENT BENEFIT PLANS The Company has numerous non-contributory defined benefit retirement plans covering substantially all employees. It is the Company's policy to fund its retirement plans based on actuarial recommendations, consistent with applicable laws and income tax regulations. Plan assets, which may be denominated in foreign currencies and issued by foreign issuers, are invested in a diversified portfolio of securities including stocks, bonds, real estate investment funds and cash equivalents. Benefits payable under the plans are based on either years of service or final average compensation. The Company retains the right to amend, curtail or discontinue any aspect of the plans at any time. The Company also sponsors other retirement plans, primarily for foreign employees. Expense for these plans in 2000, 1999 and 1998 totaled $5.0 million, $12.0 million and $7.5 million, respectively. The Company maintains two plans that provide postretirement benefits, principally health care, to substantially all domestic retirees and their qualified dependents. These plans have been established with the intention that they will continue indefinitely. However, the Company retains the right to amend, curtail or discontinue any aspect of the plans at any time. Under the Company's current policies, employees become eligible for these benefits when they reach age 55 with 15 years of credited service. The plans are contributory and contain certain cost-sharing features, such as deductibles and coinsurance. The Company's policy is to fund postretirement benefits as claims and premiums are paid. In November 2000, the Company announced a plan change for those who retire after March 31, 1989. These changes were effective January 1, 2001 and resulted in increased contributions from retirees for medical coverage and the elimination of any dental subsidies. The Company instituted early retirement programs offered to those affected by the Company's excess capacity reduction initiatives and various reorganization initiatives (SEE NOTE 2 TO THE CONSOLIDATED FINANCIAL STATEMENTS). A reduced benefit is payable under the programs based on reduced years of age and service than under the defined benefit retirement plans. These programs resulted in the recognition of net curtailment gains and losses and early retirement incentives. 60 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PENSION BENEFITS POSTRETIREMENT BENEFITS ---------------- ----------------------- NOVEMBER 26, NOVEMBER 28, NOVEMBER 26, NOVEMBER 28, 2000 1999 2000 1999 ---- ---- ---- ---- (DOLLARS IN THOUSANDS) CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year........................ $669,440 $631,788 $ 525,065 $ 483,708 Service cost................................................... 18,661 23,743 7,006 7,480 Interest cost.................................................. 43,678 43,154 34,943 33,485 Plan participants' contributions............................... 267 337 1,596 1,140 Plan amendments................................................ -- -- (27,740) -- Actuarial (gain) loss.......................................... (74,274) (23,140) 10,577 9,698 Net curtailment (gain) loss.................................... (18,184) 21,973 -- 13,774 Settlement (gain) loss......................................... (187) 540 -- -- Benefits paid*................................................. (37,341) (28,955) (32,330) (24,220) -------- -------- --------- --------- Benefit obligation at end of year.............................. 602,060 669,440 519,117 525,065 -------- -------- --------- --------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year................. 572,576 500,789 -- -- Actual return on plan assets................................... 91,631 94,976 -- -- Employer contribution.......................................... 12,817 5,429 30,734 23,080 Plan participants' contributions............................... 267 337 1,596 1,140 Benefits paid*................................................. (37,341) (28,955) (32,330) (24,220) -------- -------- --------- --------- Fair value of plan assets at end of year....................... 639,950 572,576 -- -- -------- -------- --------- --------- Funded status.................................................. 37,891 (96,864) (519,117) (525,065) Unrecognized actuarial gain.................................... (136,913) (9,247) (31,221) (41,724) Unrecognized prior service cost................................ 13,306 6,737 (27,740) -- -------- -------- --------- --------- Net amount recognized.......................................... $(85,716) $(99,374) $(578,078) $(566,789) ======== ======== ========= =========
- -------------- * Pension benefits are paid by a trust. Postretirement benefits are paid by the Company.
PENSION BENEFITS POSTRETIREMENT BENEFITS ---------------- ----------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Amounts recognized in the consolidated balance sheets Consist of: Prepaid benefit cost........................................... $ 3,282 $ 1,882 $ -- $ -- Accrued benefit cost (including short-term).................... (95,635) (107,352) (578,078) (566,789) Intangible asset............................................... 6,637 4,861 -- -- Accumulated other comprehensive income......................... -- 1,235 -- -- --------- --------- --------- --------- Net amount recognized............................................... $(85,716) $ (99,374) $(578,078) $(566,789) ========= ========= ========= ========= WEIGHTED-AVERAGE ASSUMPTIONS: Discount rate....................................................... 8.0% 7.0% 8.0% 7.0% Expected return on plan assets...................................... 9.0% 9.0% -- -- Rate of compensation increase....................................... 6.0% 6.0% -- --
For postretirement benefits measurement purposes, a 9.50% and 4.75% annual rate of increase in the per capita cost of covered health care and Medicare Part B benefits, respectively, were assumed for 2000, declining gradually to 5.50% and 2.75% by the year 2009 and remaining at those rates thereafter. 61 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PENSION BENEFITS ---------------- 2000 1999 1998 ---- ---- ---- (DOLLARS IN THOUSANDS) COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost................................................ $18,661 $23,743 $31,553 Interest cost............................................... 43,678 43,154 41,073 Expected return on plan assets.............................. (52,337) (44,871) (42,698) Amortization of prior service cost.......................... 2,052 2,309 2,947 Recognized actuarial (gain) loss............................ (670) (487) 10 Net curtailment (gain) loss................................. (18,184) 21,973 2,030 Settlement (gain) loss...................................... (187) 540 -- ------- ------- ------- Net periodic benefit cost................................... $(6,987) $46,361 $34,915 ======= ======= =======
POSTRETIREMENT BENEFITS ----------------------- 2000 1999 1998 ---- ---- ---- (DOLLARS IN THOUSANDS) COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost................................................ $ 7,006 $ 7,480 $10,565 Interest cost............................................... 34,943 33,485 35,098 Expected return on plan assets.............................. -- -- -- Amortization of prior service cost.......................... -- -- -- Recognized actuarial gain................................... -- (345) -- Net curtailment loss........................................ -- 13,774 964 ------- ------- ------- Net periodic benefit cost................................... $41,949 $54,394 $46,627 ======= ======= =======
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $66.2 million, $57.8 million, and $0 million, respectively, as of November 26, 2000, and $235.0 million, $223.8 million, and $163.8 million, respectively, as of November 28, 1999. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects to postretirement benefits:
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT INCREASE DECREASE -------- -------- (DOLLARS IN THOUSANDS) Effect on total of service and interest cost components......... $ 5,934 $ (4,894) Effect on the postretirement benefit obligation................. 60,197 (53,251)
NOTE 11: EMPLOYEE INVESTMENT PLANS The Company maintains three employee investment plans. The Employee Investment Plan of Levi Strauss & Co. ("EIP") and the Levi Strauss & Co. Employee Long-Term Investment and Savings Plan ("ELTIS") are two qualified plans that cover eligible compensated Home Office employees and U.S. field employees. The Capital Accumulation Plan of Levi Strauss & Co. ("CAP") is a non-qualified, self-directed investment program for highly compensated employees (as defined by the Internal Revenue Code). Total amounts charged to expense for these plans in 2000, 1999 and 1998 were $12.8 million, $14.4 million and $19.7 million, respectively. EIP/ELTIS Under EIP and ELTIS, eligible employees may contribute and direct up to 10% of their annual compensation to various investments among a series of mutual funds. The Company may match 50% of the contributions made by employees to all funds maintained under the qualified plans. Employees are always 100% vested in the Company match. The ELTIS also includes a company profit sharing provision with payments made at the sole discretion of the board of directors. The EIP and the ELTIS 62 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) allow employees a choice of either pre-tax or after-tax contributions. In December 2000, the Company announced changes to the EIP plan that were effective January 1, 2001. These changes allow eligible employees to contribute and direct up to 15% of their annual compensation to various investments among a series of mutual funds. The Company may continue to match 50% of the contributions made by employees to all funds maintained under the qualified plans up to the first 10% of contributions made by employees. CAP The CAP allows eligible employees to contribute on an after-tax basis up to 10% of their annual compensation to an individual retail brokerage account. The Company generally matches 75% of these contributions made by employees in cash to each employee's account. Employees are always 100% vested in the Company match. All investment decisions, related commissions and charges, investment results and tax reporting requirements are the responsibility of the employee, not the Company. Associated with the changes in the EIP plan above that were effective January 1, 2001, eligible employees will be eligible to participate in the CAP plan after reaching certain contribution thresholds in the EIP plan and salary thresholds. NOTE 12: EMPLOYEE COMPENSATION PLANS PARTNERS IN PERFORMANCE PLAN The Partners in Performance Plan ("PIP") is a program for all salaried worldwide employees and is intended to align the objectives of employees with the strategic objectives of the Company and interests of the Company stockholders. ANNUAL INCENTIVE PLAN The Annual Incentive Plan ("AIP"), the short-term portion of PIP, is intended to reward individual and team contributions to the Company's objectives during the year. The amount of incentive earned depends upon the performance and salary grade level of the individual and also depends on corporate, group, division and affiliate financial results against pre-established targets. Provisions for AIP are recorded in accrued salaries, wages and employees benefits. Total amounts charged to expense for 2000 and 1998 were $65.1 million and $24.9 million, respectively. In 1999, the Company did not meet pre-established targets for AIP and did not record an expense for 1999. LONG-TERM INCENTIVE PLANS Leadership Shares ("LS") is a feature of PIP and was introduced in early 1999. LS replaced the executive Long-Term Incentive Plan ("LTIP") with 1999 LS grants partially based on individual executive performance during fiscal year 1998. It places greater emphasis on an individual's ability to contribute and affect the Company's long-term strategic objectives. LS is a performance unit plan which grants units or "shares" at an initial value of $0 each. These "shares" are not stock and do not represent equity interests in the Company. A competitive level of five-year Company financial performance is determined by examining expected value growth at other companies. This growth is then tied to competitive external long-term incentive pay so that the Company will pay its executives at competitive levels when they achieve competitive growth. At the end of each fiscal year, a share value will be determined and communicated to participants. The shares vest in one-third increments at the end of the third, fourth and fifth fiscal years of the performance period. The Company accounts for the expense related to LS on a straight-line basis based on estimates of future performance against plan targets. LTIP, which previously represented the portion of PIP related to long-term incentives, ended for all employees during fiscal year 1999 and was replaced by LS for employees at management levels. These incentives were awarded as performance units with each grant's unit value measured based on the Company's three-year cumulative earnings performance and return on investment against pre-established targets. Awards were based on an individual's grade level, salary and performance and are paid in one-third annual increments beginning in the year following the three-year performance cycle of the grant. Existing LTIP units that were previously granted will be paid out according to the plan schedule. 63 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Special Long-Term Incentive Plan ("SLTIP") is intended to provide incentive and reward performance over time for certain key senior employees above and beyond PIP awards. Awards under this plan have the same grant unit value, vesting period and pay-out cycle as grants made under LTIP. A Long-Term Performance Plan ("LTPP"), which awarded grants in 1994 and 1995, finished paying out in 2000. Total net amounts charged to expense for these long-term incentive plans in 2000 and 1998 were $72.7 million and $14.9 million, respectively. In 1999, the Company did not meet some of the pre-established targets for these long-term incentive plans and therefore reversed a portion of prior year accruals totaling $32.5 million. OTHER COMPENSATION PLANS GLOBAL SUCCESS SHARING PLAN The Global Success Sharing Plan ("GSSP") was adopted in 1996 and was designed to allow all eligible employees to share in the Company's future success by providing a cash payment based on the achievement of pre-established financial targets. The plan called for an aggregate cash payment, ranging from 3% to 10% of the achieved cumulative cash flow (defined as earnings before interest, taxes, depreciation, amortization and certain other items) to be paid by the Company to all eligible employees, assuming a minimum cumulative cash flow is reached. If the Company were to meet its planned target, an estimated payment of $758.0 million could be due in 2002 (exclusive of all employer-related taxes). However, in 1999, the Company lowered its estimate of financial performance through the year 2001 and determined that payment in 2002 is highly unlikely and therefore the Company did not recognize any GSSP expense in 2000. In 1999, the Company reversed prior years' GSSP accruals totaling $343.9 million, less miscellaneous plan expenses. The total amount charged to expense for this plan in 1998 was $90.6 million. CASH PERFORMANCE SHARING PLAN The Cash Performance Sharing Plan awards a cash payment to production employees worldwide based on a percentage of annual salary and certain earnings criteria. The largest individual plan is the U.S. Field Profit Sharing Plan that covers approximately 5,600 U.S. employees. Total amounts charged to expense for this plan in 2000 were $9.2 million. The Company did not meet certain earnings criteria established by the plan and therefore no expense was recognized for the 1999 plan. The total amount charged to expense for this plan in 1998 was $6.9 million. KEY EMPLOYEE RECOGNITION AND COMMITMENT PLAN The Key Employee Recognition and Commitment Plan ("KEP") was adopted in 1996 and was designed to recognize and reward key employees for making significant contributions to the Company's future success. Units awarded to employees under the plan are subject to a four-year vesting period, which commenced in fiscal 1997. Units are exercisable in one-third increments at the end of fiscal years 2001 through 2003 upon reaching a certain minimum cumulative earnings criteria threshold at each fiscal year-end. Employees may elect to defer the exercise of each one-third increment until final payment in 2004. Payments may occur earlier under certain circumstances. Unit values will be directly related to the excess over the threshold of the cumulative cash flow (defined as earnings before interest, taxes, depreciation, amortization, GSSP and certain other items) generated by the Company at the end of the fiscal years 2001 through 2003. The Company did not recognize any KEP expense in 2000. In 1999, the Company lowered its estimate of financial performance through the year 2003 and, consequently, decreased the KEP accrual rate to 0% and reversed prior years KEP accruals totaling $13.6 million. The amount charged to expense for this plan in 1998 was $5.9 million. SPECIAL DEFERRAL PLAN The Special Deferral Plan ("SDP") was adopted during 1996 and was designed to replace the Company's Stock Appreciation Rights Plan ("SARs"). Existing SARs were transferred in the SDP at a value of $265 per share. The SDP had grants in 1992 and 1994, both of which were fully vested as of November 26, 2000. The SDP bases the appreciation/depreciation of units on certain tracked mutual funds or the prime rate, at the election of the employee. There were no additional grants under the SDP in 2000 and 1999. During 2000 and 1999, SDP grants exercised resulted in cash disbursements of $9.8 million and $10.6 million, respectively. 64 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The amounts charged (net of forfeitures) to expense for the plan in 2000, 1999 and 1998 were $1.0 million, $(2.3) million and $8.0 million, respectively. NOTE 13: LONG-TERM EMPLOYEE RELATED BENEFITS Long-term employee related benefits are as follows: 2000 1999 ---- ---- (DOLLARS IN THOUSANDS) Workers' compensation....................... $59,307 $64,004 Long-term performance programs.............. 80,549 8,511 Deferred compensation....................... 93,681 105,025 Pension and profit sharing.................. 125,312 147,978 -------- -------- Total.................................. $358,849 $325,518 ======== ======== Included in the liability for workers' compensation are accrued expenses related to the Company's program that provides for early identification and treatment of employee injuries. Changes in the Company's safety programs, medical and disability management and the long-term effects of statutory changes have decreased workers' compensation costs substantially from historical trends. Provisions for workers' compensation of $13.6 million and $29.7 million were recorded during fiscal years 2000 and 1999, respectively. Payments and reclassifications to current liabilities represented a reduction of approximately $28.0 million in fiscal year 2000 and $33.0 million in fiscal year 1999. Fiscal year 1999 also included a reduction of $21.0 million related to reversals of previously estimated costs. Long-term performance programs include accrued liabilities for LS and LTIP (SEE NOTE 12 TO THE CONSOLIDATED FINANCIAL STATEMENTS). NOTE 14: COMMON STOCK The Company has a capital structure consisting of 270,000,000 authorized shares of common stock, par value $.01 per share, of which 37,278,238 shares are issued and outstanding. NOTE 15: RELATED PARTIES COMPENSATION OF DIRECTORS Directors of the Company who are also stockholders or employees of the Company do not receive compensation for their services as directors. Directors who are not stockholders or employees (Angela Glover Blackwell, James C. Gaither, Peter A. Georgescu, Patricia Salas Pineda, T. Gary Rogers and G. Craig Sullivan) receive annual compensation of approximately $62,000. This amount includes an annual retainer fee of $6,000, meeting fees of $1,000 per meeting day attended and long-term variable pay in the form of 1,800 LS units, for a target value of $45,000 per year (SEE NOTE 12 TO THE CONSOLIDATED FINANCIAL STATEMENTS). In November 2000, the Personnel Committee approved an increase in directors' annual retainer fee from $6,000 to $36,000. The actual amount for each of the above payments varies depending on the years of service, the number of meetings attended and the actual value of the granted units upon vesting. Directors in their first six years of service receive a cash amount equivalent to the target value of their long-term variable pay or $45,000. This amount is decreased by 1/3 each year at the start of actual payments from LTIP. Directors who are not employees or stockholders also receive travel accident insurance while on Company business and are eligible to participate in a deferred compensation plan. Messrs. Gaither, Georgescu, Rogers, and Sullivan and Ms. Blackwell and Ms. Pineda each received 1,800 LS units in 2000. Mr. Gaither, Ms. Blackwell and Ms. Pineda each received 1,800 LS units in 1999. In 2000, Ms. Blackwell, Mr. Gaither and Ms. Pineda each received payments of $30,637 under LTIP and LTPP combined. In 1999, Mr. Gaither, Ms. Blackwell and Ms. Pineda each received payments under LTIP and LTPP of approximately $59,000. OTHER TRANSACTIONS F. Warren Hellman, a director of the Company is a general partner of Hellman & Friedman LLC, an investment banking firm, and has provided financial advisory services to the Company in the past. However, the Company did not pay any fees to 65 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Hellman & Friedman LLC during fiscal years 2000, 1999 and 1998. At November 26, 2000 and November 28, 1999, Mr. Hellman and his family, other partners, and former partners of Hellman & Friedman LLC beneficially owned an aggregate of less than 5% of the outstanding common stock of the Company. James C. Gaither, a director of the Company, is a senior counsel of the law firm Cooley Godward LLP. The firm provided legal services to the Company in 2000, 1999 and 1998 and received in fees approximately $60,000, $165,000 and $74,000, respectively. ESTATE TAX REPURCHASE POLICY The Company has a policy under which it will, subject to certain conditions, repurchase a portion of the shares offered by the estate of a deceased stockholder in order to generate funds for payment of estate taxes. The purchase price will be based on a valuation received from an investment banking or appraisal firm. Estate repurchase transactions will be subject to, among other things, compliance with applicable laws governing stock repurchases, board approval, and restrictions under the Company's credit facilities (SEE NOTE 6 TO THE CONSOLIDATED FINANCIAL STATEMENTS). The policy does not create a contractual obligation on the Company. No shares have been repurchased under this policy for 2000, 1999 and 1998. NOTE 16: BUSINESS SEGMENT INFORMATION The Company manages its only segment, the apparel business, based on geographic regions consisting of the Americas, which includes the United States, Canada and Latin America; Europe, the Middle East and Africa; and Asia Pacific. All Other consists of functions that are directed by the corporate office and are not allocated to a specific geographic region. Under Geographic Information for all periods presented, no other single country other than the United States had net sales exceeding 10% of consolidated net sales. The Company designs and markets jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories, for men, women and children, under the Company's Levi's(R), Dockers(R) and Slates(R) brands. Its products are distributed in the United States primarily through chain retailers and department stores and abroad through department stores, specialty retailers and franchised stores. The Company also maintains a network of approximately 750 franchised or independently owned stores dedicated to its products outside the United States and operates a small number of company-owned stores in eight countries. The Company obtains its products from a combination of company-owned facilities and independent manufacturers. The Company evaluates performance and allocates resources based on regional profits or losses. The accounting policies of the regions are the same as those described in Note 1, "Summary of Significant Accounting Policies." Regional profits exclude net interest expense, special compensation program expenses, excess capacity reduction/restructuring charges and expenses that are controlled at the corporate level. Management financial information for the Company is as follows: 66 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ASIA AMERICAS EUROPE PACIFIC ALL OTHER CONSOLIDATED -------- ------ ------- --------- ------------ (DOLLARS IN THOUSANDS) 2000: Net sales from external customers......................... $3,148,219 $1,104,522 $392,385 $ -- $4,645,126 Intercompany sales........................................ 65,600 911,489 33,523 -- 1,010,612 Depreciation and amortization expense..................... 64,109 21,151 5,721 -- 90,981 Earnings contribution..................................... 449,900 225,800 55,300 -- 731,000 Interest expense.......................................... -- -- -- 234,098 234,098 Excess capacity reduction/restructuring................... -- -- -- (33,144) (33,144) Corporate and other expenses.............................. -- -- -- 186,366 186,366 Income before income taxes........................... -- -- -- -- 343,680 Total regional assets..................................... 5,187,778 1,461,877 471,068 -- 7,120,723 Elimination of intercompany assets........................ -- -- -- -- 3,914,994 Total assets......................................... -- -- -- -- 3,205,728 Expenditures for long-lived assets........................ 16,900 8,323 2,732 -- 27,955 UNITED FOREIGN STATES COUNTRIES CONSOLIDATED ------ --------- ------------ GEOGRAPHIC INFORMATION: Net sales................................................................. $2,923,799 $1,721,327 $4,645,126 Long-lived assets......................................................... 1,141,523 358,281 1,499,804 ASIA ALL AMERICAS EUROPE PACIFIC OTHER CONSOLIDATED -------- ------ ------- ----- ------------ (DOLLARS IN THOUSANDS) 1999: Net sales from external customers................... $3,420,326 $1,360,782 $358,350 $ -- $5,139,458 Intercompany sales.................................. 50,584 1,045,119 38,923 -- 1,134,626 Depreciation and amortization expense............... 86,078 27,474 6,550 -- 120,102 Earnings contribution............................... 279,900 242,700 28,500 -- 551,100 Interest expense.................................... -- -- -- 182,978 182,978 Excess capacity reduction/restructuring............. -- -- -- 497,683 497,683 Global Success Sharing Plan......................... -- -- -- (343,873) (343,873) Corporate and other expenses........................ -- -- -- 205,813 205,813 Income before income taxes..................... -- -- -- -- 8,499 Total regional assets............................... 4,701,974 1,625,396 576,533 -- 6,903,903 Elimination of intercompany assets.................. -- -- -- -- 3,233,889 Total assets................................... -- -- -- -- 3,670,014 Expenditures for long-lived assets.................. 36,578 20,518 3,966 -- 61,062 UNITED FOREIGN STATES COUNTRIES CONSOLIDATED ------ --------- ------------ GEOGRAPHIC INFORMATION: Net sales................................................................... $3,201,809 $1,937,649 $5,139,458 Long-lived assets........................................................... 1,273,304 423,026 1,696,330
67 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ASIA ALL AMERICAS EUROPE PACIFIC OTHER CONSOLIDATED -------- ------ ------- ----- ------------ (DOLLARS IN THOUSANDS) 1998: Net sales from external customers..................... $3,938,786 $1,650,479 $369,370 $ -- $5,958,635 Intercompany sales.................................... 81,583 1,124,962 45,322 -- 1,251,867 Depreciation and amortization expense................. 93,588 29,607 5,578 -- 128,773 Earnings contribution................................. 420,700 361,700 53,100 -- 835,500 Interest expense...................................... -- -- -- 178,035 178,035 Excess capacity reduction/restructuring............... -- -- -- 250,658 250,658 Global Success Sharing Plan........................... -- -- -- 90,564 90,564 Corporate and other expenses.......................... -- -- -- 153,543 153,543 Income before income taxes....................... -- -- -- -- 162,700 Total regional assets................................. 4,319,535 1,895,210 312,358 -- 6,527,103 Elimination of intercompany assets.................... -- -- -- -- 2,659,345 Total assets..................................... -- -- -- -- 3,867,757 Expenditures for long-lived assets.................... 57,417 54,439 4,675 -- 116,531 UNITED FOREIGN STATES STATES COUNTRIES CONSOLIDATED ------ --------- ------------ GEOGRAPHIC INFORMATION: Net sales................................................................... $3,672,295 $2,286,340 $5,958,635 Long-lived assets........................................................... 1,541,011 471,838 2,012,849
For 2000, 1999 and 1998, the Company had one customer that represented approximately 12%, 11% and 12%, respectively, of net sales. No other customer accounted for more than 10% of net sales. 68 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 17: QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 Net sales........................................................ $1,082,437 $1,149,044 $1,127,740 $1,285,905 Cost of goods sold............................................... 632,442 661,469 663,418 732,841 ---------- ---------- ---------- ---------- Gross profit..................................................... 449,995 487,575 464,322 553,064 Marketing, general and administrative............................ 322,111 367,417 358,524 433,666 Other operating income........................................... (4,183) (6,265) (10,404) (11,528) Excess capacity/restructuring.................................... -- -- -- (33,144) ---------- ---------- ---------- ---------- Operating income................................................. 132,067 126,423 116,202 164,070 Interest expense................................................. 56,782 60,989 59,406 56,921 Other income, net................................................ (24,958) (3,835) (1,359) (8,864) ---------- ---------- ---------- ---------- Income before taxes.............................................. 100,243 69,269 58,155 116,013 Income tax expense............................................... 35,084 24,245 20,354 40,605 ---------- ---------- ---------- ---------- Net income....................................................... $ 65,159 $ 45,024 $ 37,801 $ 75,408 ========= ========== ========== ========== Earnings per share--basic and diluted............................. $ 1.75 $ 1.21 $ 1.01 $ 2.02 ========= ========== ========== ========== 1999 Net sales........................................................ $1,278,322 $1,227,910 $1,226,413 $1,406,813 Cost of goods sold............................................... 814,673 737,303 747,766 881,103 ---------- ---------- ---------- ---------- Gross profit..................................................... 463,649 490,607 478,647 525,710 Marketing, general and administrative............................ 419,085 407,677 338,223 464,860 Other operating income........................................... (5,733) (5,349) (5,025) (8,280) Excess capacity/restructuring.................................... 394,105 11,780 -- 91,798 Global Success Sharing Plan...................................... -- -- -- (343,873) ---------- ---------- ---------- ---------- Operating income (loss).......................................... (343,808) 76,499 145,449 321,205 Interest expense................................................. 43,157 43,819 45,742 50,260 Other (income) expense, net...................................... (10,394) (15,582) 12,164 21,680 ---------- ---------- ---------- ---------- Income (loss) before taxes....................................... (376,571) 48,262 87,543 249,265 Income tax expense (benefit)..................................... (139,331) 17,857 32,391 92,227 ---------- ---------- ---------- ---------- Net income (loss)................................................ $ (237,240) $ 30,405 $ 55,152 $ 157,038 ========== ========== ========== ========== Earnings (loss) per share--basic and diluted...................... $ (6.36) $ 0.82 $ 1.48 $ 4.21 ========== ========== ========== ==========
During the fourth quarter of fiscal 2000, the Company recorded the reversal of $33.1 million of restructuring costs. This reversal was based on periodic evaluation of current restructuring assumptions and estimates. (SEE NOTE 2 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) Additionally, in connection with physical inventories, actuarial studies of postretirement benefits and workers' compensation, and reviews of other liabilities, the Company recorded adjustments related to warranty provisions, physical inventory provisions and postretirement benefits in the fourth quarter of fiscal 2000 that resulted in a net increase of approximately 8 percent to fourth quarter operating income. 69 LEVI STRAUSS & CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 18: SUBSEQUENT EVENTS SENIOR NOTES OFFERING On January 18, 2001, the Company issued two series of notes payable totaling the equivalent of $497.5 million to qualified institutional investors in reliance on Rule 144A under the Securities Act and outside the U. S. in accordance with Regulation S under the Securities Act (the "Senior Notes Offering"). The notes are unsecured obligations of the Company and may be redeemed at any time after January 15, 2005. The issuance is divided into two series: U.S. $380.0 million Dollar Notes and 125 million Euro Notes. Both series of notes are seven-year notes maturing on January 15, 2008 and bear interest at 11.625% per annum, payable semi-annually in January and July of each year. These notes were offered at a discount of $5.2 million to be amortized over the term of the notes. Costs representing underwriting fees and other expenses of $14.4 million on the original issue will be amortized over the term of the notes. Net proceeds from the offering were used to repay a portion of the indebtedness outstanding under the 2000 Credit Facility. The indentures governing the notes contain covenants that limit the Company's and its subsidiaries' ability to incur additional debt; pay dividends or make other restricted payments; consummate specified asset sales; enter into transactions with affiliates; incur liens, impose restrictions on the ability of a subsidiary to pay dividends or make payments to the Company and its subsidiaries; merge or consolidate with any other person; sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's assets or the assets of the Company's subsidiaries. If the Company experiences a change in control as defined in the indentures governing the notes, the Company will be required under the indentures to make an offer to repurchase the notes at a price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the date of repurchase. If the notes receive and maintain an investment grade rating by both Standard and Poor's Ratings Service and Moody's Investors Service and the Company and its subsidiaries are and remain in compliance with the indentures, then the Company and its subsidiaries will not be required to comply with specified covenants contained in the indenture. Under an agreement to be entered into with the initial purchasers of the notes, the Company will be obligated to file and cause to be effective a registration statement under the Securities Act with respect to an offer to exchange the notes for notes registered under the Securities Act with substantially identical terms to the notes, except that the registered exchange notes will generally be freely transferable, and, in certain circumstances, to file and cause to be filed a shelf registration statement with respect to the resale of the notes. The interest rate on the notes will be subject to increase under particular circumstances if the Company is not in compliance with these obligations. SENIOR SECURED CREDIT FACILITY On February 1, 2001, the Company entered into a new $1.05 billion senior secured credit facility to replace the 2000 Credit Facility on more favorable terms. The new credit facility consists of a $700 million revolving credit facility and $350 million of term loans. This new facility reduces the Company's borrowing costs and extends the maturity of the Company's principal bank credit facility to August 2003. The new facility is secured in substantially the same manner as the 2000 Credit Facility. Collateral includes: domestic receivables, domestic inventories, certain domestic equipment, trademarks, other intellectual property, 100% of the stock in domestic subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets. Borrowings under the bank credit facilities bear interest at LIBOR or the agent bank's base rate plus an incremental borrowing spread. The new facility contains customary covenants restricting the Company's activities as well as those of its subsidiaries, including limitations on the Company's and its subsidiaries' ability to sell assets; engage in mergers; enter into operating leases or capital leases; enter into transactions involving related parties, derivatives or letters of credit; enter into intercompany transactions; incur indebtedness or grant liens or negative pledges on the Company's assets; make loans or other investments; pay dividends or repurchase stock or other securities; guaranty third party obligations; make capital expenditures; and make changes in the Company's corporate structure. The credit agreements also contain financial covenants that the Company must satisfy on an ongoing basis, including maximum leverage ratios and minimum coverage ratios. 70 The following is a pro forma table as of November 26, 2000, of the required aggregate short-term and long-term debt principal payments for the next five years and thereafter that includes the senior notes offering and the senior secured credit facility. PRINCIPAL PAYMENTS -------- (DOLLARS IN YEAR THOUSANDS) ---- 2001 ........................................ $ 77,616 2002 ........................................ 89,637 2003 ........................................ 783,702 2004 ........................................ 8,521 2005 ........................................ 56,202 Thereafter................................... 1,123,190 ---------- Total................................... $2,138,868 ========== 71 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINAN- CIAL DISCLOSURE None 72 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Set forth below is information concerning our directors and executive officers as of January 1, 2001.
NAME AGE OFFICE AND POSITION ---- --- ------------------- Peter E. Haas, Sr. .................................. 82 Director, Chairman of the Executive Committee Robert D. Haas....................................... 58 Director, Chairman of the Board of Directors Philip A. Marineau................................... 54 Director, President and Chief Executive Officer Angela Glover Blackwell.............................. 55 Director Robert E. Friedman................................... 51 Director Tully M. Friedman.................................... 58 Director James C. Gaither..................................... 63 Director Peter A. Georgescu................................... 61 Director Peter E. Haas, Jr. .................................. 53 Director Walter J. Haas....................................... 51 Director F. Warren Hellman.................................... 66 Director Patricia Salas Pineda................................ 49 Director T. Gary Rogers....................................... 58 Director G. Craig Sullivan.................................... 60 Director R. John Anderson..................................... 49 Senior Vice President and President, Levi Strauss Asia Pacific David G. Bergen...................................... 45 Senior Vice President and Chief Information Officer William B. Chiasson.................................. 48 Senior Vice President and Chief Financial Officer Karen Duvall......................................... 37 Senior Vice President, Worldwide Supply Chain James Lewis.......................................... 50 Senior Vice President and President, Levi Strauss Americas Joseph Middleton..................................... 45 Senior Vice President and President, Levi Strauss Europe, Middle East, Africa Albert F. Moreno..................................... 57 Senior Vice President, General Counsel and Assistant Secretary Fred Paulenich....................................... 36 Senior Vice President, Worldwide Human Resources
All members of the Haas family are descendants of our founder, Levi Strauss. Peter E. Haas, Sr. is the father of Peter E. Haas, Jr. and the uncle of Robert D. Haas and Walter J. Haas. Robert E. Friedman is a descendant of Daniel E. Koshland, who joined his brother-in-law, Walter A. Haas, Sr., in our management in 1922. PETER E. HAAS, SR. became Chairman of the Executive Committee of our Board of Directors in 1989 after serving as Chairman of our Board since 1981. He has been a member of our Board since 1948. He joined us in 1945, became President in 1970 and Chief Executive Officer in 1976. Mr. Haas is a former Director of American Telephone and Telegraph Co., Crocker National Corporation and Crocker National Bank. ROBERT D. HAAS is the Chairman of our Board. He was named Chairman in 1989 and served as Chief Executive Officer from 1984 until 1999. Mr. Haas joined us in 1973 and served in a variety of marketing, planning and operating positions before becoming Chief Executive Officer. PHILIP A. MARINEAU, a director since 1999, is our President and Chief Executive Officer. Prior to joining us, Mr. Marineau was the President and Chief Executive Officer of Pepsi-Cola North America from 1997 to 1999. From 1996 to 1997, Mr. Marineau was President and Chief Operating Officer of Dean Foods Company. From 1972 to 1996, Mr. Marineau held a series of positions at Quaker Oats Company including President and Chief Operating Officer from 1993 to 1996. ANGELA GLOVER BLACKWELL, a director since 1994, is founder and president of PolicyLink, a nonprofit research, advocacy and communications organization devoted to eliminating poverty and strengthening communities. From 1995 to 1998, Ms. Blackwell was Senior Vice President of the Rockefeller Foundation where she oversaw the foundation's domestic and cultural divisions. Ms. Blackwell was the founder of Oakland, California's Urban Strategies Council, a nonprofit organization focused on reducing persistent urban poverty. ROBERT E. FRIEDMAN, a director since 1998, is founder and Chairman of the Board of the Corporation for Enterprise Development, a Washington, D.C.-based not-for-profit economic development research, technical assistance and demonstration 73 organization which he founded in 1979. The Corporation for Enterprise Development works with public and private policymakers in governments, international organizations, corporations, private foundations, labor unions and community groups to design and implement economic development strategies. TULLY M. FRIEDMAN, a director since 1985, is Chairman and Chief Executive Officer of Friedman Fleischer & Lowe LLC, a private equity investment firm he founded in 1997. Formerly, Mr. Friedman was a founding partner of Hellman & Friedman, a private investment firm formed in 1984. Prior to forming Hellman & Friedman in 1984, he was a managing director and general partner of Salomon Brothers Inc. Mr. Friedman currently serves on the board of directors of The Clorox Company, Mattel, Inc., McKesson Corporation, Archimedes Technology Group, Brand Farm, Inc. and Advanced Career Technologies, Inc. JAMES C. GAITHER, a director since 1988, is Managing Director of Sutter Hill Ventures, a venture capital investment firm and senior counsel of the law firm of Cooley Godward LLP in San Francisco, California. Prior to joining Cooley Godward in 1969, he served as law clerk to the Honorable Earl Warren, Chief Justice of the United States, special assistant to the Assistant Attorney General in the U.S. Department of Justice and staff assistant to the President of the United States, Lyndon B. Johnson. Mr. Gaither is currently a director of Basic American, Inc., Blue Martini Software, Nvidia Corporation and Siebel Systems, Inc. PETER A. GEORGESCU, a director since February 2000, is Chairman Emeritus of Young & Rubicam Inc. (now WPP Group plc), a global advertising agency. Prior to his retirement in January 2000, Mr. Georgescu served as Chairman and Chief Executive Officer of Young & Rubicam since 1993 and, prior to that, as President of Y&R Inc. from 1990 to 1993, Y&R Advertising from 1986 to 1990 and President of its Young & Rubicam international division from 1982 to 1986. Mr. Georgescu is currently a director of IFF Corporation and Briggs & Stratton, Inc. PETER E. HAAS, JR., a director since 1985, is a director or trustee of each of the Levi Strauss Foundation, Red Tab Foundation, San Francisco Foundation, The Stern Grove Festival Foundation, Walter and Elise Haas Fund and the Novato Youth Center Honorary Board. Mr. Haas was one of our managers from 1972 to 1989. He was Director of Product Integrity of The Jeans Company, one of our former operating units, from 1984 to 1989. He served as Director of Materials Management for Levi Strauss USA in 1982 and Vice President and General Manager in the Menswear Division in 1980. WALTER J. HAAS, a director since 1995, served as Chairman and Chief Executive Officer of the Oakland A's Baseball Company from 1993 to 1995, President and Chief Executive Officer from 1991 to 1993 and in other management positions with the club from 1980 to 1991. F. WARREN HELLMAN, a director since 1985, has served as chairman and general partner of Hellman & Friedman LLC, a private investment firm, since its inception in 1984. Previously, he was a general partner of Hellman Ferri (now Matrix Partners) and managing director of Lehman Brothers Kuhn Loeb, Inc. Mr. Hellman is currently a director of Il Fornaio (America) Corp., DN&E Walter & Co., WPP Group plc and Sugar Bowl Corporation. PATRICIA SALAS PINEDA, a director since 1991, is currently Vice President of Legal, Human Resources, Government Relations and Environmental Affairs and Corporate Secretary of New United Motor Manufacturing, Inc. She has held this position since 1996. Prior to assuming that position, she served as General Counsel from 1990 to 1996. Ms. Pineda is currently a trustee of the RAND Corporation and a director of the James Irvine Foundation. T. GARY ROGERS, a director since 1998, is Chairman of the Board and Chief Executive Officer of Dreyer's Grand Ice Cream, Inc., a manufacturer and marketer of premium ice cream products. He has held this position since 1977. He serves as a director of Shorenstein Company, L.P., Stanislaus Food Products and Gardonjim Farms. G. CRAIG SULLIVAN, a director since 1998, is Chairman of the Board and Chief Executive Officer of The Clorox Company, a major consumer products firm. Prior to his election as Vice Chairman and Chief Executive Officer of Clorox in 1992, Mr. Sullivan was group vice president with overall responsibility for manufacturing and marketing, the company's laundry and cleaning products in the United States, the international business, the manufacturing and marketing of products for the food service industry and the corporate purchasing and distribution functions. R. JOHN ANDERSON, President of our Asia Pacific Division since 1998, joined us in 1979. Mr. Anderson served as General Manager of Levi Strauss Canada and as President of Levi Strauss Canada and Latin America from 1996 to 1998. He has held a series of merchandising positions with us in Europe and the United States, including Vice President, Merchandising and Product Development for the Levi's(R) brand in 1995. 74 DAVID G. BERGEN, our Chief Information Officer, joined us in November 2000. He was most recently senior vice president and chief information officer of CarStation.com. From 1998 to 2000, Mr. Bergen was senior vice president and chief information officer of LVMH, Inc. Prior to joining LVMH, Inc., Mr. Bergen held a series of management positions at GAP Inc., including most recently Vice President of Application Development. WILLIAM B. CHIASSON, our Senior Vice President and Chief Financial Officer, joined us in 1998. From 1988 to 1998, Mr. Chiasson held various positions with Kraft Foods Inc., a subsidiary of Philip Morris Companies, including Senior Vice President of Finance and Information Systems. Prior to joining Kraft Foods, he was Vice President and Controller for Baxter Healthcare Corporation, Hospital Group. KAREN DUVALL, our Senior Vice President of Worldwide Supply Chain, joined us in 2000. Ms. Duvall was Vice President of Global Operations for Warner Lambert Company, a major pharmaceutical firm, from 1997 to 2000. At Warner Lambert, Ms. Duvall also served as Director of Global Sourcing for Marketing Services from 1996 to 1997. From 1994 to 1996, Ms. Duvall was a management consultant at Booz Allen & Hamilton. JAMES LEWIS, our Senior Vice President and President, Levi Strauss Americas, joined us in 2000. From 1995 to 2000, Mr. Lewis held various positions with Liz Claiborne, Inc., including Group President (responsible for all of Liz Claiborne's operating units), Group President for the Liz Claiborne women's casual apparel division and Division President for LizWear. Before joining Liz Claiborne, Mr. Lewis was Senior Vice President, Merchandise, Design and Production Planning for Haggar Clothing Company for ten years. JOSEPH MIDDLETON, our Senior Vice President and President of Levi Strauss Europe, Middle East and Africa since 1999, joined us in 1981. He held the position of General Manager of the Dockers(R) brand in Europe from 1993 to 1999, General Manager of Levi Strauss New Zealand from 1990 to 1993 and a variety of other positions from 1981 to 1990. ALBERT F. MORENO, our Senior Vice President and General Counsel since 1996, joined us in 1978. He held the position of Chief Counsel for Levi Strauss North America from 1994 to 1996 and Deputy General Counsel from 1985 to 1994. He is a member of the Board of Directors of Xcel Energy, Inc. FRED PAULENICH, our Senior Vice President of Worldwide Human Resources, joined us in 2000. Prior to joining us, Mr. Paulenich was Vice President and Chief Personnel Officer of Pepsi-Cola North America from 1999 to 2000. At Pepsi-Cola, he has held a series of management positions including Vice President of Headquarters Human Resources from 1996 to 1998 and Vice President of Personnel from 1995 to 1996. OUR BOARD OF DIRECTORS Our board of directors has 14 members. Directors are elected annually by the trustees of the voting trust and serve for one-year terms. Directors may be removed, with or without cause, by the trustees of the voting trust. COMMITTEES. Our board of directors currently has three committees. o AUDIT. Our audit committee reviews, with management and with independent and internal auditors, our accounting and reporting policies and internal controls, the scope, cost and outcome of the independent audit and the selection of an auditor. --Members:Blackwell, T. Friedman, Georgescu, P.E. Haas, Jr., W.J. Haas, Hellman, Pineda and Sullivan. o PERSONNEL. Our personnel committee reviews our employee compensation and benefit programs, approves and monitors incentive programs, establishes the compensation of and approves the perquisites and reimbursed expenses for members of senior management and administers a number of our executive and employee compensation plans. --Members: R. Friedman, Gaither, Georgescu, Hellman, Pineda, Rogers and Sullivan. o CORPORATE ETHICS AND SOCIAL RESPONSIBILITY. Our corporate ethics and social responsibility committee reviews our efforts to meet our social responsibilities and to maintain policies, programs and practices that conform with moral, legal and social standards. In addition, the corporate ethics and social responsibility committee also reviews our 75 employment practices, our equal employment opportunity compliance and compliance with our code of worldwide business ethics and recommends contributions to outside beneficiaries and the Levi Strauss Foundation. --Members:Blackwell, R. Friedman, T. Friedman, Gaither, Georgescu, P.E. Haas, Jr., P.E. Haas, Sr., R.D. Haas, W.J. Haas, Marineau and Rogers. COMPENSATION. Directors who are also stockholders or employees do not receive compensation for their services as directors. Directors who are not stockholders or employees, Mr. Gaither, Ms. Blackwell, Ms. Pineda, Mr. Rogers, Mr. Sullivan and Mr. Georgescu, receive annual compensation of approximately $62,000. This amount includes an annual retainer fee of $6,000, meeting fees of $1,000 per meeting day attended and long-term variable pay in the form of 1,800 Leadership Shares units, for a target value of $45,000 per year. In November 2000, the Personnel Committee approved an increase in directors' annual retainer to $36,000. The actual amount for each payment varies depending on the years of service, the number of meetings attended and the actual value of the granted units upon vesting. Directors, in their first six years of service, receive a cash amount equivalent to the target value of their long-term variable pay or $45,000. This amount is decreased by 1/3 each year at the start of actual payments from the Long-Term Incentive Plan. Mr. Gaither, Mr. Georgescu, Ms. Blackwell, Ms. Pineda, Mr. Rogers and Mr. Sullivan each received 1,800 Leadership Shares units in 2000. Mr. Gaither, Ms. Blackwell and Ms. Pineda each received payments under the Long-Term Incentive Plan and the Long-Term Performance Plan of approximately $30,637 in 2000. Directors who are not employees or stockholders are eligible to participate in a deferred compensation plan. PERSONNEL COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of our personnel committee in 2000 were Mr. Friedman, Mr. Gaither, Mr. Georgescu, Mr. Hellman, Ms. Pineda, Mr. Rogers and Mr. Sullivan. Mr. Hellman is chairman and a general partner of Hellman & Friedman, a private investment firm that has provided financial advisory services to us in the past. We did not pay any fees to Hellman & Friedman during fiscal year 2000. Mr. Gaither is senior counsel of the law firm Cooley Godward LLP. Cooley Godward provided legal services to us in 2000 and received approximately $60,000 in fees. 76 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION This table provides compensation information for our chief executive officer and other executive officers who were our most highly compensated officers in 2000.
SUMMARY COMPENSATION TABLE LONG-TERM ANNUAL COMPENSATION COMPENSATION ---------------------------- ------------ ALL OTHER NAME/PRINCIPAL POSITION YEAR SALARY BONUS (1) LTIP PAYOUTS (2) COMPENSATION (3) - ------------------------------------------------------------------------------------------------------------------------ Philip A. Marineau 2000 $1,000,000 $2,250,000 $ -- $1,173,761 President and Chief Executive 1999 153,846 -- -- 3,172,234 Officer (4) Robert D. Haas 2000 1,050,000 1,800,000 -- 78,750 Chairman of the Board 1999 1,248,462 -- 187,000 90,000 William B. Chiasson 2000 475,969 661,650 -- 351,558 Senior Vice President and 1999 450,449 -- -- -- Chief Financial Officer James Lewis 2000 432,692 412,500 -- 816,243 Senior Vice President and 1999 -- -- -- -- President, Levi Strauss Americas (5) Albert F. Moreno 2000 351,731 429,550 -- 23,742 Senior Vice President and 1999 299,322 -- 24,959 22,588 General Counsel
__________________ (1) We pay annual bonuses under our Annual Incentive Plan. The Annual Incentive Plan is intended to reward individual contributions to our objectives during the year. The amount of incentive earned depends upon the performance and salary grade level of the individual and also depends on corporate, group, division and affiliate financial results against pre-established targets. We did not pay any bonuses for 1999 performance. (2) These reflect amounts earned during 2000 under our Long-Term Incentive Plan, a performance unit plan now replaced by our Leadership Shares Plan. Under the Long-Term Incentive Plan, we granted performance units to participants with an initial target value. At the end of a three-year measurement period, we determine the actual per unit value based on our estimated relative shareholder return and return on investment over that period. Once valued, we pay out the unit value in cash in equal installments over a three-year period. Interest at the prime rate is added to the second and third installments. The amounts shown in the table relate to the 1998 to 2000 measurement period and will be paid in equal installments in 2001, 2002 and 2003. Due to performance during this period, we estimate the current value of the 1998 grant to be $0 per unit. Messrs. Marineau, Chiasson and Lewis were not employed by us at the time this grant was made. (3) For all officers except Mr. Lewis, the amounts shown include contributions we made on their behalf to our Capital Accumulation Plan. The Capital Accumulation Plan is a non-qualified investment plan that permits eligible employees to contribute up to ten percent of their pay, on an after-tax basis, to an individual retail brokerage account established in the employee's name. We generally match 75% of the employee's contributions. We established the Capital Accumulation Plan because Internal Revenue Code rules limit savings opportunities under tax-qualified plans for a number of our employees. The 1999 amount shown for Mr. Marineau reflects a $3.0 million signing bonus under his employment agreement and reimbursement of relocation expenses. The 2000 amount shown for Mr. Marineau reflects relocation-related income of $1,095,877 as well as a Capital Accumulation Plan contribution of $77,885. The 2000 amount shown for Mr. Chiasson reflects a special payment of $326,250 to replace forfeited long-term grants from a previous employer and a Capital 77 Accumulation Plan match of $25,308. The 2000 amount shown for Mr. Lewis reflects a hiring bonus of $614,398 and relocation-related expenses of $201,845. (4) Mr. Marineau joined us on September 27, 1999. (5) Mr. Lewis joined us on April 24, 2000.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR (2000) ESTIMATED FUTURE PAYOUTS (1) ---------------------------------- NUMBER OF LEADERSHIP PERFORMANCE NAME/PRINCIPAL POSITION SHARES AWARDED PERIOD (2) MINIMUM ($) TARGET - -------------------------------------------------------------------------------------------------------------------- Philip A. Marineau 980,000 5 years -- $24,500,000 President and Chief Executive Officer (3) Robert D. Haas 90,000 5 years -- 2,250,000 Chairman of the Board William B. Chiasson 108,000 5 years -- 2,700,000 Senior Vice President and Chief Financial Officer James Lewis 108,000 5 years -- 2,700,000 Senior Vice President and President, Levi Strauss Americas (4) Albert F. Moreno 40,000 5 years -- 1,000,000 Senior Vice President and General Counsel
__________________ (1) The Leadership Shares Plan is a long-term cash performance unit plan. Under this plan, we establish a five-year financial performance target for each grant based on, among other things, our performance and expected shareholder value growth at comparable companies. The actual value of the units is determined based on performance against these measures. Performance at the target level will yield a per unit value of $25. If performance does not meet a threshold standard, then the units will have no value. Performance above target yields correspondingly larger unit values; there is no limit on maximum award potential. (2) The performance period is five years from the time of award. The awards vest in one-third increments on the last day of the third, fourth and fifth fiscal years of the performance period. Unless deferred, we pay the awards in the year after they vest. (3) As provided in Mr. Marineau's employment agreement, in February 2000 we granted him 170,000 Leadership Shares units as his annual grant for the year. We also granted him an additional 810,000 Leadership Shares units to compensate him for the potential value of stock options he forfeited upon leaving his previous employer to join us. (4) As provided in Mr. Lewis' employment agreement, we granted him 108,000 Leadership Shares units upon his joining us. This award reflects three elements: a regular annual grant of 42,500 units, a special sign-on grant of 40,000 units and a replacement for options forfeited upon leaving his previous employer of 25,500 units. 78 PENSION PLAN TABLE The following table shows the estimated annual benefits payable upon retirement under our Home Office Pension Plan, benefit restoration plans and deferred compensation plan to persons in various compensation and years-of-service classifications prior to mandatory offset of Social Security benefits:
- --------------------------------------------------------------------------------------------------------------- YEARS OF SERVICE COVERED ------------------------------------------------------------------------------------------ COMPENSATION 5 10 15 20 25 30 35 - --------------------------------------------------------------------------------------------------------------- 150,000 15,000 30,000 45,000 60,000 75,000 76,875 78,750 225,000 22,500 45,000 67,500 90,000 112,500 115,313 118,125 300,000 30,000 60,000 90,000 120,000 150,000 153,750 157,500 375,000 37,500 75,000 112,500 150,000 187,500 192,188 196,875 450,000 45,000 90,000 135,000 180,000 225,000 230,625 236,250 525,000 52,500 105,000 157,500 210,000 262,500 269,063 275,625 600,000 60,000 120,000 180,000 240,000 300,000 307,500 315,000 675,000 67,500 135,000 202,500 270,000 337,500 345,938 354,375 750,000 75,000 150,000 225,000 300,000 375,000 384,375 393,750 825,000 82,500 165,000 247,500 330,000 412,500 422,813 433,125 900,000 90,000 180,000 270,000 360,000 450,000 461,250 472,500 975,000 97,500 195,000 292,500 390,000 487,500 499,688 511,875 1,050,000 105,000 210,000 315,000 420,000 525,000 538,125 551,250 1,125,000 112,500 225,000 337,500 450,000 562,500 576,563 590,625 1,200,000 120,000 240,000 360,000 480,000 600,000 615,000 630,000 1,275,000 127,500 255,000 382,500 510,000 637,500 653,438 669,375 - ---------------------------------------------------------------------------------------------------------------
The table assumes retirement at the age of 65, with payment to the employee in the form of a single-life annuity. As of year-end 2000, the credited years of service for Messrs. Marineau, Haas, Chiasson, Lewis and Moreno were 1, 27, 2, 0 and 22, respectively. The 2000 compensation covered by the Pension Plan, Benefit Restoration Plan and Deferred Compensation Plan for Messrs. Marineau, Haas, Chiasson, Lewis and Moreno were $1.00 million, $1.05 million, $475,969, $0 and $351,731, respectively. Mr. Lewis joined us on April 24, 2000 and does not yet have a credited year of service. EMPLOYMENT AGREEMENTS PHILIP MARINEAU. We have an employment agreement with Philip Marineau, our President and Chief Executive Officer. The agreement provides for a minimum base salary of $1.00 million in accordance with our executive salary policy and a target annual cash bonus of 90% of base salary, with a maximum bonus of 180% of base salary. In addition, Mr. Marineau is eligible to participate in all other executive compensation and benefit programs, including the Leadership Shares Plan. Under the employment agreement, we made a one-time grant of 810,000 Leadership Shares units to compensate him for the potential value of stock options he forfeited upon leaving his previous employer to join us. We also provide under the agreement a supplemental pension benefit to Mr. Marineau. The agreement terminates in September 2002 but extends automatically after this date until terminated by either Mr. Marineau or us. We may terminate the agreement upon Mr. Marineau's death or disability, for cause (as defined in the agreement), and without cause upon 30 days notice. Mr. Marineau may terminate the agreement for good reason (as defined in the agreement) or other than for good reason upon 30 days notice to us. The consequences of termination depend on the basis for the termination: o If we terminate without cause or if Mr. Marineau terminates for good reason, Mr. Marineau will be entitled to: (i) severance payments equal to three times the sum of his base salary as of the termination date plus his most recent target or, if greater, annual bonus, (ii) amounts accrued or earned under our compensation and benefit plans and (iii) an amount in respect of the Leadership Shares units granted in the one-time grant described above. o If we terminate for cause or if Mr. Marineau terminates for other than good reason, then the agreement will terminate without our having further obligations to Mr. Marineau other than for amounts accrued or earned under 79 our compensation and benefit programs (which does not include unvested Leadership Shares units or target bonus amounts not payable as of the date of termination). o If we terminate for any reason other than cause or if Mr. Marineau terminates for good reason within 12 months after a change in control (as defined in the agreement), Mr. Marineau will be entitled to: (i) severance payments equal to three times the sum of his base salary as of the termination date plus his most recent target or, if greater, annual bonus, (ii) amounts accrued or earned under our compensation and benefit plans, (iii) an amount in respect of the Leadership Shares units granted in the one-time grant described above, (iv) full and immediate vesting in all outstanding Leadership Shares grants; (v) full and immediate vesting in his supplemental pension benefit; and (vi) if any amounts paid are treated as parachute payments (as defined in Section 280G(b)(2) of the Internal Revenue Code), an amount equal to the applicable excise tax and any taxes on this reimbursement payment. JAMES LEWIS. We have an employment agreement with James Lewis, our Senior Vice President, and President, Levi Strauss Americas. The agreement provides for a minimum base salary of $750,000 per year with a bonus target equal to 55% of base salary, and a maximum bonus equal to 110% of base salary. For fiscal year 2000, which is the first year of Mr. Lewis' employment, he is guaranteed under the agreement to earn at least his target bonus amount; later years' bonus payouts are not guaranteed. Under the agreement, Mr. Lewis received a one-time lump sum of $300,000 net of taxes to assist with relocation expenses. Mr. Lewis is eligible to participate in all of our executive compensation and benefit programs, including the Leadership Shares Plan. Under his employment agreement, Mr. Lewis received 108,000 Leadership Shares units for his 2000 grant. This award reflects three elements: a signing bonus, a normal grant for the year and a replacement for options forfeited upon leaving his previous employer to join us. In addition, in 2001 we will compensate Mr. Lewis for other incentive amounts he forfeited upon leaving his previous employer. Under the terms of the agreement, Mr. Lewis will be eligible for a supplemental pension benefit. If Mr. Marineau leaves us during the first five years of Mr. Lewis' employment and Mr. Lewis remains with us through that five-year period, Mr. Lewis will receive an additional five years of credited service under the supplemental pension benefit. The agreement has a five-year term ending in April 2005. We may terminate Mr. Lewis' employment agreement upon death or disability, for cause, as defined in the agreement, or without cause upon 60 days' notice. Mr. Lewis may terminate the agreement for good reason, as defined in the agreement, or other than for good reason upon 60 days' notice to us. The consequences of termination depend on the basis for the termination: o If we terminate without cause or if Mr. Lewis terminates for good reason, Mr. Lewis will be entitled to: (i) severance payments equal to two times the sum of his base salary as of the termination date plus his most recent target bonus; (ii) payment in respect of the vested portions of his Leadership Shares units; (iii) in the case of termination by Mr. Lewis for good reason, full and immediate vesting in all outstanding Leadership Shares units and immediate vesting in his supplemental retirement benefit unless at the time of termination Mr. Marineau is no longer the chief executive officer; and (iv) amounts accrued or earned under our compensation and benefit plans. o If we terminate for cause or if Mr. Lewis terminates for other than good reason, then the agreement will terminate without our having further obligations to Mr. Lewis other than payment of base salary and accrued vacation pay through the date of termination and vested amounts under our compensation and benefit plans. o If within 12 months following a change in control, as defined in the agreement, we terminate for any reason other than for cause or if Mr. Lewis terminates due to good reason, Mr. Lewis will be entitled to: (i) two times the sum of his base salary as of the termination date plus his most recent target bonus, (ii) accelerated vesting of his unvested Leadership Shares units; (iii) full vesting in his supplemental pension benefit; and (iv) amounts accrued or earned under our compensation and benefit plans. Mr. Lewis in his sole discretion shall be able to accept these benefits or choose to have these benefits capped at the Internal Revenue Service limit in order to avoid excise taxes. 80 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT All shares of our common stock are deposited in a voting trust, a legal arrangement that transfers the voting power of the shares to a trustee or group of trustees. The four voting trustees are Peter E. Haas, Sr., Peter E. Haas, Jr., Robert D. Haas and F. Warren Hellman. The voting trustees have the exclusive ability to elect and remove directors, amend our by-laws and take certain other actions which would normally be within the power of stockholders of a Delaware corporation. Our equity holders who, as a result of the voting trust, legally hold "voting trust certificates", not stock, retain the right to direct the trustees on specified mergers and business combinations, liquidations, sales of substantially all of our assets and specified amendments to our certificate of incorporation. The voting trust will last until April 2011, unless the trustees unanimously decide, or holders of at least two-thirds of the outstanding voting trust certificates decide, to terminate it earlier. If Robert D. Haas ceases to be a trustee for any reason, then the question of whether to continue the voting trust will be decided by the holders. If Peter E. Haas, Sr. ceases to be a trustee, his successor will be his spouse, Miriam L. Haas. The existing trustees will select the successors to the other trustees. The agreement among the stockholders and the trustees creating the voting trust contemplates that, in selecting successor trustees, the trustees will attempt to select individuals who share a common vision with the sponsors of the 1996 transaction that gave rise to the voting trust, represent and reflect the financial and other interests of the equity holders and bring a balance of perspectives to the trustee group as a whole. A trustee may be removed if the other three trustees unanimously vote for removal or if holders of at least two-thirds of the outstanding voting trust certificates vote for removal. The table on the following page contains information about the beneficial ownership of our voting trust certificates as of January 1, 2001, by: o Each of our directors and each of our five most highly compensated officers; o Each person known by us to own beneficially more than 5% of our voting trust certificates; and o All of our directors and officers as a group. Under the rules of the Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power", which includes the power to vote or to direct the voting of the security, or "investment power", which includes the power to dispose of or to direct the disposition of the security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which that person has no economic interest. Except as described in the footnotes to the table below, the individuals named in the table have sole voting and investment power with respect to all voting trust certificates beneficially owned by them, subject to community property laws where applicable. 81
PERCENTAGE OF NUMBER OF VOTING VOTING TRUST TRUST CERTIFICATES CERTIFICATES NAME BENEFICIALLY OWNED OUTSTANDING ---- ------------------- ----------- Peter E. Haas, Sr. ............................................................. 8,376,426(1) 22.47% Peter E. Haas, Jr. ............................................................. 4,642,472(2) 12.45% Josephine B. Haas............................................................... 4,103,750(3) 11.01% Robert D. Haas.................................................................. 3,723,679(4) 9.99% Evelyn D. Haas.................................................................. 3,515,116(5) 9.43% Miriam L. Haas.................................................................. 2,980,200(6) 7.99% Margaret E. Haas................................................................ 2,643,110(7) 7.09% Robert E. Friedman.............................................................. 1,320,134(8) 3.54% F. Warren Hellman............................................................... 527,342(9) 1.41% Walter J. Haas.................................................................. 258,348(10) * Tully M. Friedman............................................................... 246,196(11) * James C. Gaither................................................................ -- -- Peter A. Georgescu(12).......................................................... -- -- Angela Glover Blackwell......................................................... -- -- Philip A. Marineau.............................................................. -- -- Patricia Salas Pineda........................................................... -- -- T. Gary Rogers.................................................................. -- -- G. Craig Sullivan............................................................... -- -- William B. Chiasson............................................................. -- -- Directors and executive officers as a group (22 persons)(13).................... 19,094,597 51.22%
__________________ * Represents beneficial ownership of less than 1%. (1) Includes 670,000 voting trust certificates held by a trust for the benefit of Josephine B. Haas, former spouse of Mr. Haas. Mr. Haas has sole voting power and Mrs. Josephine B. Haas has sole investing powers with respect to those voting trust certificates. Excludes 2,980,200 voting trust certificates held by Mr. Haas' wife, Miriam L. Haas. Also excludes 3,515,116 voting trust certificates held by a trust for which Mr. Haas is co-trustee. Mr. Haas disclaims beneficial ownership of those voting trust certificates. (2) Includes a total of 2,243,684 voting trust certificates held by Mr. Haas' wife, children and trusts for the benefit of his children for which Mr. Haas is trustee; 61,709 voting trust certificates held by trusts, for which Mr. Haas is trustee, for the benefit of Michael S. Haas; and 148,500 voting trust certificates held by a charitable annuity lead trust. Mr. Haas disclaims beneficial ownership of all of those voting trust certificates. Includes 300,272 voting trust certificates held by the Josephine B. Haas Family Partnership, for which Mr. Haas is managing general partner. (3) Includes 721,029 voting trust certificates held by a trust, for which Mrs. Haas is trustee, for the benefit of Michael S. Haas. Excludes 1,203,255 voting trust certificates held by a trust, for which Mrs. Haas is co-trustee, for the benefit of Margaret E. Haas. Mrs. Haas disclaims ownership of all of those voting trust certificates. Includes 300,272 voting trust certificates held by the Josephine B. Haas Family Partnership, for which Mrs. Haas is a limited partner. (4) Includes 527,674 voting trust certificates owned by the spouse and daughter of Mr. Haas and by trusts for the benefit of his daughter. Mr. Haas disclaims beneficial ownership of those voting trust certificates. (5) These voting trust certificates are held by the Walter A. Haas, Jr. QTIP Trust, for which Evelyn D. Haas and Peter E. Haas, Sr. are co-trustees. (6) Excludes 40,000 voting trust certificates held by Mrs. Haas' sons. Mrs. Haas disclaims beneficial ownership of those voting trust certificates. Excludes 7,706,426 voting trust certificates held by Peter E. Haas, Sr. Mrs. Haas disclaims beneficial ownership of those voting trust certificates. (7) Includes 1,439 voting trust certificates held by a trust for the benefit of Ms. Haas' son. Ms. Haas disclaims beneficial ownership of those voting trust certificates. (8) Includes 92,500 voting trust certificates held by Mr. Friedman's children and by trusts, for which Mr. Friedman is co-trustee, for the benefit of his children and 195,834 voting trust certificates held by trusts, for which Mr. Friedman is co-trustee, for the benefit of Mr. Friedman's nieces and nephew. Mr. Friedman disclaims beneficial ownership of those voting trust certificates. Includes 1,010,000 voting trust certificates held by Copper Reservoir, a California limited partnership, for which Mr. Friedman is a general partner. 82 (9) Excludes 360,314 voting trust certificates held by a trust, for which Mr. Hellman is co-trustee, for the benefit of the daughter of Robert D. Haas. Mr. Hellman disclaims beneficial ownership of those voting trust certificates. (10) Includes 248,348 voting trust certificates held by trusts, for which Mr. Haas is trustee or co-trustee, for the benefit of Mr. Haas' children. Mr. Haas disclaims beneficial ownership of those voting trust certificates. (11) Includes 24,115 voting trust certificates held by a trust, for which Mr. Friedman is trustee, for the benefit of Mr. Friedman's former wife, Ann Barry. Also includes 25,000 voting trust certificates held by The Friedman Family Partnership. Mr. Friedman disclaims beneficial ownership of all but 500 of the Friedman Family Partnership voting trust certificates. (12) Mr. Georgescu was elected to the Board on February 10, 2000. (13) As of January 1, 2001, there were 164 record holders of voting trust certificates. The percentage of beneficial ownership shown in the table is based on 37,278,238 shares of common stock and related voting trust certificates outstanding as of January 1, 2001. The business address of all persons listed, including the trustees under the voting trust, is 1155 Battery Street, San Francisco, California 94111. STOCKHOLDERS' AGREEMENT Our common stock and the voting trust certificates are not publicly held or traded. All shares and the voting trust certificates are subject to a stockholders' agreement. The agreement, which expires in April 2016, limits the transfer of shares and certificates to other holders, family members, specified charities and foundations and to us. The agreement does not provide for registration rights or other contractual devices for forcing a public sale of shares, certificates or other access to liquidity. The scheduled expiration date of the stockholders' agreement is five years later than that of the voting trust agreement in order to permit an orderly transition from effective control by the voting trust trustees to direct control by the stockholders. ESTATE TAX REPURCHASE POLICY We have a policy under which we will repurchase a portion of the shares offered by the estate of a deceased stockholder in order to generate funds for payment of estate taxes. The purchase price will be based on a valuation received from an investment banking or appraisal firm. Estate repurchase transactions are subject to applicable laws governing stock repurchases, board approval and restrictions under our credit agreements. Our bank credit facilities prohibit repurchases without the consent of the lenders, and the indentures relating to our 11.625% notes due 2008 limit our ability to make repurchases. (SEE NOTE 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS.) The policy does not create a contractual obligation on our part. We may amend or terminate this policy at any time. No shares were repurchased under this policy in 2000, 1999 or 1998. VALUATION POLICY We have a policy under which we obtain, and make available to our stockholders, an annual valuation of our voting trust certificates. The policy provides that we will make reasonable efforts to defend valuations we obtain which are challenged in any tax or regulatory proceeding involving a stockholder (including an estate) that used the valuation and that was challenged on that use. The policy provides that we will not indemnify any stockholder against any judgment or settlement amounts or expenses specific to any individual stockholder arising from the use of a valuation. We may amend or terminate this policy at any time. VOTING TRUSTEE COMPENSATION The voting trust agreement provides that trustees who are also beneficial owners of 1% or more of our stock are not entitled to compensation for their services as trustees. Trustees who are not beneficial owners of more than 1% of our outstanding stock may receive such compensation, upon approval of our Board. All trustees are entitled to reimbursement for reasonable expenses and charges, which may be incurred in carrying out their duties as trustees. Of the current trustees, Mr. Hellman beneficially owns less than 1% of our outstanding stock. He is not currently receiving compensation from us for his service as a trustee. All of the other trustees each beneficially owns more than 1% of our outstanding stock. 83 VOTING TRUSTEE INDEMNIFICATION Under the voting trust agreement, the trustees are not liable to us or to the holders of voting trust certificates for any actions undertaken in their capacity as trustees, except in cases of willful misconduct. The voting trust will indemnify the trustees in respect of actions taken by them under the voting trust agreement in their capacity as trustees, except in cases of willful misconduct. We have agreed to reimburse the voting trust for any amounts paid by the trust as a result of its indemnity obligation on behalf of the trustees. LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS As permitted by Delaware law, we have included in our certificate of incorporation a provision to eliminate generally the personal liability of directors for monetary damages for breach or alleged breach of their fiduciary duties as directors. In addition, our by-laws provide that we are required to indemnify our officers and directors under a number of circumstances, including circumstances in which indemnification would otherwise be discretionary, and we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified. In addition, our board of directors adopted resolutions making clear that officers and directors of our foreign subsidiaries are covered by these indemnification provisions. We are not aware of any pending or threatened litigation or proceeding involving a director, officer, employee or agent of ours in which indemnification would be required or permitted. We believe that these indemnification provisions are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities under the Securities Act may be granted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the Commission this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 84 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS F. Warren Hellman, one of our directors, is a general partner of Hellman & Friedman LLC, a private investment firm that has provided financial advisory services to us in the past. We did not pay any fees to Hellman & Friedman LLC during the years 2000, 1999 and 1998. James C. Gaither, one of our directors, is senior counsel of the law firm Cooley Godward LLP. Cooley Godward provided legal services to us in 2000, 1999 and 1998, for which we paid fees of approximately $60,000, $165,000 and $74,000 in those years. 85 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) List the following documents filed as a part of the report: 1. Financial Statements The following consolidated financial statements of the Company are included in Item 8: Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders' Deficit Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Quarterly Financial Data (Unaudited) 2. Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts.......Form 10-K page 94 All other schedules have been omitted because they are inapplicable, not required or the information is included in the Consolidated Financial Statements or Notes thereto. 3. Exhibits 3.1 Restated Certificate of Incorporation of the Registrant. Previously filed as Exhibit 3.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 3.2 Bylaws of the Registrant. Previously filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.1 Indenture, dated as of November 6, 1996, between the Registrant and Citibank, N.A., relating to the 6.80% Notes due 2003 and the 7.00% Notes due 2006. Previously filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.2 Fiscal Agency Agreement, dated as of November 21, 1996, between the Registrant and Citibank, N.A., relating to 20 billion yen 4.25% bonds due 2016. Previously filed as Exhibit 4.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.3 Lease Intended as Security, dated as of December 3, 1996, among the Registrant, First Security Bank, National Association as Agent and named lessors. Previously filed as Exhibit 4.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.4 Supplemental Indenture, dated as of May 16, 2000, between the Registrant and Citibank, N.A., relating to the 6.80% Notes due 2003 and the 7.00% Notes due 2006. Previously filed as Exhibit 4.4 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. 4.5 Purchase Agreement, dated as of January 12, 2001, among the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% US Dollar Notes due 2008 and the 11.625% Euro Notes due 2008. Filed herewith. 4.6 Registration Rights Agreement, dated of January 18, 2001, bet- ween the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% US Dollar Notes due 2008. Filed herewith. 4.7 Registration Rights Agreement, dated of January 18, 2001, bet- ween the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% Euro Notes due 2008. Filed herewith. 86 4.8 U.S. Dollar Indenture, dated of January 18, 2001, between the Registrant and Citibank, N.A., relating to the 11.625% US Dollar Notes due 2008. Filed herewith. 4.9 Euro Indenture, dated of January 18, 2001, between the Regis- trant and Citibank, N.A., relating to the 11.625% Euro Notes due 2008. Filed herewith. 9 Voting Trust Agreement, dated as of April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant), Robert D. Haas, Peter E. Haas, Sr., Peter E. Haas, Jr., F. Warren Hellman, as voting trustees, and the stockholders. Previously filed as Exhibit 9 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.1 Stockholders Agreement, dated as of April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant) and the stockholders. Previously filed as Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.2 Bridge Credit Agreement, dated as of January 31, 2000, among the Registrant, the Financial Institutions party thereto and Bank of America, N.A. Previously filed as Exhibit 10.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.3 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.4 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.4 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.5 Limited Waiver, dated as of February 29, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.5 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.6 Amended and Restated 1997 364-Day Credit Agreement among the Registrant, the Lenders party thereto and Bank of America, N.A. Previously filed as Exhibit 10.6 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.7 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.7 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.8 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.8 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.9 Amended and Restated 1999 180-Day Credit Agreement among the Registrant, the Lenders parties thereto and Bank of America, N.A. Previously filed as Exhibit 10.9 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.10 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.10 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.11 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.11 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.12 Limited Waiver, dated as of February 29, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.12 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 87 10.13 1997 Second Amended and Restated Credit Agreement, dated as of January 31, 2000, among the Registrant, the Lenders parties thereto and Bank of America, N.A. Previously filed as Exhibit 10.13 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.14 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.14 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.15 Guaranty, dated as of January 31, 2000, between certain subsidiaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.15 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.16 Form of European Receivables Agreement, dated February 2000, between the Registrant and Tulip Asset Purchase Company B.V. Previously filed as Exhibit 10.16 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.17 Form of European Servicing Agreement, dated January 2000, between Registrant and Tulip Asset Purchase Company B.V. Previously filed as Exhibit 10.17 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.18 Supply Agreement, dated as of March 30, 1992, and First Amendment to Supply Agreement, between the Registrant and Cone Mills Corporation. Previously filed as Exhibit 10.18 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.19 Home Office Pension Plan. Previously filed as Exhibit 10.19 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.20 Employee Investment Plan. Previously filed as Exhibit 10.20 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.21 Capital Accumulation Plan. Previously filed as Exhibit 10.21 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.22 Special Deferral Plan. Previously filed as Exhibit 10.22 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.23 Key Employee Recognition and Commitment Plan. Previously filed as Exhibit 10.23 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.24 Global Success Sharing Plan. Previously filed as Exhibit 10.24 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.25 Deferred Compensation Plan for Executives. Previously filed as Exhibit 10.25 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.26 Deferred Compensation Plan for Outside Directors. Previously filed as Exhibit 10.26 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.27 Excess Benefit Restoration Plan. Previously filed as Exhibit 10.27 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.28 Supplemental Benefit Restoration Plan. Previously filed as Exhibit 10.28 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 88 10.29 Leadership Shares Plan. Previously filed as Exhibit 10.29 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.30 Annual Incentive Plan. Previously filed as Exhibit 10.30 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.31 Long-Term Incentive Plan. Previously filed as Exhibit 10.31 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.32 Long-Term Performance Plan. Previously filed as Exhibit 10.32 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.33 Employment Agreement, dated as of September 30, 1999, between the Registrant and Philip Marineau. Previously filed as Exhibit 10.33 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.34 Supplemental Executive Retirement Agreement, dated as of January 1, 1998, between the Registrant and Gordon Shank. Previously filed as Exhibit 10.34 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.35 Form of Indemnification Agreement, dated as of November 30, 1995, for members of the Special Committee of Board of Directors created by the Board of Directors on November 30, 1995. Previously filed as Exhibit 10.35 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.36 Discretionary Supplemental Executive Retirement Plan Arrange- ment for Selected Executive Officers. Previously filed as Exhibit 10.36 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. * 10.37 Employment Agreement, dated as of May 15, 2000, between the Registrant and James Lewis. Previously filed as Exhibit 10.37 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. * 10.38 First Amendment to Bridge Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.39 First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.40 First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.41 First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.42 Amendment to Deferred Compensation Plan for Executives effec- tive March 1, 2000. Filed herewith. * 10.43 Amendments to Employee Investment Plan effective April 3, 2000. Filed herewith. * 89 10.44 Amendments to Capital Accumulation Plan effective April 3, 2000. Filed herewith. * 10.45 Amendment to Deferred Compensation Plan for Executives effec- tive August 1, 2000. Filed herewith. * 10.46 Amendment to Employee Investment Plan effective November 28, 2000. Filed herewith. * 10.47 Amendments to Capital Accumulation Plan, Supplemental Benefit Restoration Plan, and Employee Investment Plan effective January 1, 2001. Filed herewith. * 10.48 Amendments to Employee Investment Plan effective January 1, 2001. Filed herewith. * 10.49 Amendment to Capital Accumulation Plan, Plan Document and Employee Booklet effective January 1, 2001. Filed herewith. * 10.50 Second Amendment to Bridge Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.51 Second Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.52 Second Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.53 Second Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.54 Third Amendment to Amended and Restated 1999 180 Day Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.55 Third Amendment to Amended and Restated 1997 364 Day Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.56 Third Amendment to 1997 Second Amended and Restated Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.57 Credit Agreement, dated as of February 1, 2001, among the Registrant, the Initial Lenders and Issuing Banks named therein, Bank of America, N.A., as Administrative Agency and Collateral Agent, Bank of America Securities LLC and Salomon Smith Barney Inc., as Co-Arrangers and Joint Book Managers, Citicorp USA, Inc., as Syndication Agent, and The Bank of Nova Scotia, as Documentation Agent. Filed herewith. 10.58 Pledge and Security Agreement, dated as of February 1, 2001, among the Registrant, certain subsidiaries of the Registrant and Bank of American, N.A., as agent. Filed herewith. 10.59 Subsidiary Guaranty, dated as of February 1, 2001, between certain subsidiaries of the Registrant and Bank of American, N.A., as agent. Filed herewith. 90 10.60 Forms of Amendments to European Receivables and Servicing Agreements among Registrant, certain subsidiaries of Registrant and Tulip Asset Purchase B.V. effective November 22, 2000. Filed herewith. 12 Statements re: Computation of Ratios. Filed herewith. 21 Subsidiaries of the Registrant. Filed herewith. 24 Power of Attorney. Contained in signature pages hereto. 27 Financial Data Schedule. Filed herewith. * Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K Current Report on Form 8-K on October 24, 2000 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated October 24, 2000 and titled "Adverse Market Conditions Prompt Levi Strauss & Co. to Postpone Private Placement of Senior Notes." Current Report on Form 8-K on December 27, 2000 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated December 26, 2000 and titled "Levi Strauss & Co. Obtains Commitment for New $1.5 Billion Senior Secured Credit Facility." Current Report on Form 8-K on January 10, 2001 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated January 10, 2001 and titled "Levi Strauss & Co. Fourth-Quarter and Fiscal 2000 Financial Results Show Substantial Progress in Business Turnaround." Current Report on Form 8-K on January 11, 2001 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated January 10, 2001 and titled "Levi Strauss & Co. Fourth-Quarter and Fiscal 2000 Financial Results Show Substantial Progress in Business Turnaround." In the press release, certain previously reported financial information for the fourth quarter and fiscal year 1999 was reclassified to conform to the fiscal year 2000 financial statement presentation. Current Report on Form 8-K on January 11, 2001 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated January 11, 2001 and titled "Levi Strauss & Co. to Relaunch Private Placement of Senior Notes Due 2008." Current Report on Form 8-K on February 1, 2001 filed pursuant to Item 5 of the report, containing a copy of the Company's press release dated February 1, 2001 and titled "Levi Strauss & Co. Receives $1.05 Billion Senior Secured Credit Facility; Completes $500 Million Bond Offering." 91 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEVI STRAUSS & CO. By: /s/ WILLIAM B. CHIASSON ----------------------------- William B. Chiasson Senior Vice President and Chief Financial Officer Date: FEBRUARY 1, 2001 KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William B. Chiasson, Gary W. Grellman and Jay A. Mitchell, and each of them, his or her attorney-in-fact with power of substitution for him or her in any and all capacities, to sign any amendments, supplements or other documents relating to this Annual Report on Form 10-K he deems necessary or appropriate, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that such attorney-in-fact or his substitute may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities 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 --------- ----- /s/ ROBERT D. HAAS Chairman of the Board - ---------------------------------------------- Date: February 1, 2001 Robert D. Haas /s/ PHILIP A. MARINEAU Director, President and - ---------------------------------------------- Chief Executive Philip A. Marineau Officer Date: February 1, 2001 /s/ PETER E. HAAS, SR. Director - --------------------------------------------- Date: February 1, 2001 Peter E. Haas, Sr. Director - ---------------------------------------------- Date: February 1, 2001 Angela Glover Blackwell /s/ ROBERT E. FRIEDMAN Director - ---------------------------------------------- Date: February 1, 2001 Robert E. Friedman /s/ TULLY M. FRIEDMAN Director - ---------------------------------------------- Date: February 1, 2001 Tully M. Friedman /s/ JAMES C. GAITHER Director - ---------------------------------------------- Date: February 1, 2001 James C. Gaither 92 SIGNATURE TITLE --------- ----- /s/ PETER A. GEORGESCU Director - ---------------------------------------------- Date: February 1, 2001 Peter A. Georgescu /s/ PETER E. HAAS, JR. Director - ---------------------------------------------- Date: February 1, 2001 Peter E. Haas, Jr. /s/ WALTER J. HAAS Director - ---------------------------------------------- Date: February 1, 2001 Walter J. Haas /s/ F. WARREN HELLMAN Director - ---------------------------------------------- Date: February 1, 2001 F. Warren Hellman /s/ PATRICIA SALAS PINEDA Director - --------------------------------------------- Date: February 1, 2001 Patricia Salas Pineda /s/ T. GARY ROGERS Director - ---------------------------------------------- Date: February 1, 2001 T. Gary Rogers /s/ G. CRAIG SULLIVAN Director - ---------------------------------------------- Date: February 1, 2001 G. Craig Sullivan /s/ GARY W. GRELLMAN Vice President and Controller - ---------------------------------------------- (Principal Accounting Officer) Gary W. Grellman Date: February 1, 2001 93 SCHEDULE II LEVI STRAUSS & CO. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in Thousands) BALANCE AT ADDITIONS BALANCE AT ALLOWANCE FOR BEGINNING CHARGED TO DEDUCTIONS END OF DOUBTFUL ACCOUNTS OF PERIOD EXPENSES TO RESERVES PERIOD - ----------------- ---------- ---------- ----------- ---------- November 26, 2000 $30,017 $12,171 $12,471 $29,717 ======= ======= ======= ======= November 28, 1999 39,987 5,396 15,366 30,017 ======= ======= ======= ======= November 29, 1998 31,620 9,762 1,395 39,987 ======= ======= ======= ======= 94 SUPPLEMENTAL INFORMATION The Company will furnish an annual report to security holders subsequent to this filing. 95 EXHIBIT INDEX 3.1 Restated Certificate of Incorporation of the Registrant. Previously filed as Exhibit 3.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 3.2 Bylaws of the Registrant. Previously filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.1 Indenture, dated as of November 6, 1996, between the Registrant and Citibank, N.A., relating to the 6.80% Notes due 2003 and the 7.00% Notes due 2006. Previously filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.2 Fiscal Agency Agreement, dated as of November 21, 1996, between the Registrant and Citibank, N.A., relating to 20 billion yen 4.25% bonds due 2016. Previously filed as Exhibit 4.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.3 Lease Intended as Security, dated as of December 3, 1996, among the Registrant, First Security Bank, National Association as Agent and named lessors. Previously filed as Exhibit 4.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 4.4 Supplemental Indenture, dated as of May 16, 2000, between the Registrant and Citibank, N.A., relating to the 6.80% Notes due 2003 and the 7.00% Notes due 2006. Previously filed as Exhibit 4.4 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. 4.5 Purchase Agreement, dated as of January 12, 2001, among the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% US Dollar Notes due 2008 and the 11.625% Euro Notes due 2008. Filed herewith. 4.6 Registration Rights Agreement, dated of January 18, 2001, between the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% US Dollar Notes due 2008. Filed herewith. 4.7 Registration Rights Agreement, dated of January 18, 2001, between the Registrant and Salomon Smith Barney Inc. and the other Initial Purchases named therein, relating to the 11.625% Euro Notes due 2008. Filed herewith. 4.8 U.S. Dollar Indenture, dated of January 18, 2001, between the Registrant and Citibank, N.A., relating to the 11.625% US Dollar Notes due 2008. Filed herewith. 4.9 Euro Indenture, dated of January 18, 2001, between the Registrant and Citibank, N.A., relating to the 11.625% Euro Notes due 2008. Filed herewith. 9 Voting Trust Agreement, dated as of April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant), Robert D. Haas, Peter E. Haas, Sr., Peter E. Haas, Jr., F. Warren Hellman, as voting trustees, and the stockholders. Previously filed as Exhibit 9 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.1 Stockholders Agreement, dated as of April 15, 1996, among LSAI Holding Corp. (predecessor of the Registrant) and the stockholders. Previously filed as Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.2 Bridge Credit Agreement, dated as of January 31, 2000, among the Registrant, the Financial Institutions party thereto and Bank of America, N.A. Previously filed as Exhibit 10.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 96 10.3 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.4 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.4 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.5 Limited Waiver, dated as of February 29, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.5 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.6 Amended and Restated 1997 364-Day Credit Agreement among the Registrant, the Lenders party thereto and Bank of America, N.A. Previously filed as Exhibit 10.6 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.7 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.7 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.8 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.8 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.9 Amended and Restated 1999 180-Day Credit Agreement among the Registrant, the Lenders parties thereto and Bank of America, N.A. Previously filed as Exhibit 10.9 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.10 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.10 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.11 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.11 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.12 Limited Waiver, dated as of February 29, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.12 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.13 1997 Second Amended and Restated Credit Agreement, dated as of January 31, 2000, among the Registrant, the Lenders parties thereto and Bank of America, N.A. Previously filed as Exhibit 10.13 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.14 Pledge and Security Agreement, dated as of January 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.14 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.15 Guaranty, dated as of January 31, 2000, between certain subsi- diaries of the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.15 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.16 Form of European Receivables Agreement, dated February 2000, between the Registrant and Tulip Asset Purchase Company B.V. Previously filed as Exhibit 10.16 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 97 10.17 Form of European Servicing Agreement, dated January 2000, bet- ween Registrant and Tulip Asset Purchase Company B.V. Previously filed as Exhibit 10.17 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.18 Supply Agreement, dated as of March 30, 1992, and First Amendment to Supply Agreement, between the Registrant and Cone Mills Corporation. Previously filed as Exhibit 10.18 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. 10.19 Home Office Pension Plan. Previously filed as Exhibit 10.19 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.20 Employee Investment Plan. Previously filed as Exhibit 10.20 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.21 Capital Accumulation Plan. Previously filed as Exhibit 10.21 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.22 Special Deferral Plan. Previously filed as Exhibit 10.22 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.23 Key Employee Recognition and Commitment Plan. Previously filed as Exhibit 10.23 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.24 Global Success Sharing Plan. Previously filed as Exhibit 10.24 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.25 Deferred Compensation Plan for Executives. Previously filed as Exhibit 10.25 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.26 Deferred Compensation Plan for Outside Directors. Previously filed as Exhibit 10.26 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.27 Excess Benefit Restoration Plan. Previously filed as Exhibit 10.27 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.28 Supplemental Benefit Restoration Plan. Previously filed as Exhibit 10.28 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.29 Leadership Shares Plan. Previously filed as Exhibit 10.29 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.30 Annual Incentive Plan. Previously file as Exhibit 10.30 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.31 Long-Term Incentive Plan. Previously filed as Exhibit 10.31 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.32 Long-Term Performance Plan. Previously filed as Exhibit 10.32 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.33 Employment Agreement, dated as of September 30, 1999, between the Registrant and Philip Marineau. Previously filed as Exhibit 10.33 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.34 Supplemental Executive Retirement Agreement, dated as of January 1, 1998, between the Registrant and Gordon Shank. Previously filed as Exhibit 10.34 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 98 10.35 Form of Indemnification Agreement, dated as of November 30, 1995, for members of the Special Committee of Board of Directors created by the Board of Directors on November 30, 1995. Previously filed as Exhibit 10.35 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 3, 2000. * 10.36 Discretionary Supplemental Executive Retirement Plan Arrange- ment for Selected Executive Officers. Previously filed as Exhibit 10.36 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. * 10.37 Employment Agreement, dated as of May 15, 2000, between the Registrant and James Lewis. Previously filed as Exhibit 10.37 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on May 17, 2000. * 10.38 First Amendment to Bridge Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.39 First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.40 First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.41 First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver, dated July 31, 2000, between the Registrant and Bank of America, N.A. Previously filed as Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on September 29, 2000. 10.42 Amendment to Deferred Compensation Plan for Executives effec- tive March 1, 2000. Filed herewith. * 10.43 Amendments to Employee Investment Plan effective April 3, 2000. Filed herewith. * 10.44 Amendments to Capital Accumulation Plan effective April 3, 2000. Filed herewith. * 10.45 Amendment to Deferred Compensation Plan for Executives effec- tive August 1, 2000. Filed herewith. * 10.46 Amendment to Employee Investment Plan effective November 28, 2000. Filed herewith. * 10.47 Amendments to Capital Accumulation Plan, Supplemental Benefit Restoration Plan, and Employee Investment Plan effective January 1, 2001. Filed herewith. * 10.48 Amendments to Employee Investment Plan effective January 1, 2001. Filed herewith. * 10.49 Amendment to Capital Accumulation Plan, Plan Document and Employee Booklet effective January 1, 2001. Filed herewith. * 10.50 Second Amendment to Bridge Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 99 10.51 Second Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.52 Second Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.53 Second Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver, dated September 29, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.54 Third Amendment to Amended and Restated 1999 180 Day Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.55 Third Amendment to Amended and Restated 1997 364 Day Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.56 Third Amendment to 1997 Second Amended and Restated Credit Agreement, dated as of October 13, 2000, between the Registrant and Bank of America, N.A. Filed herewith. 10.57 Credit Agreement, dated as of February 1, 2001, among the Registrant, the Initial Lenders and Issuing Banks named therein, Bank of America, N.A., as Administrative Agency and Collateral Agent, Bank of America Securities LLC and Salomon Smith Barney Inc., as Co-Arrangers and Joint Book Managers, Citicorp USA, Inc., as Syndication Agent, and The Bank of Nova Scotia, as Documentation Agent. Filed herewith. 10.58 Pledge and Security Agreement, dated as of February 1, 2001, among the Registrant, certain subsidiaries of the Registrant and Bank of American, N.A., as agent. Filed herewith. 10.59 Subsidiary Guaranty, dated as of February 1, 2001, between certain subsidiaries of the Registrant and Bank of American, N.A., as agent. Filed herewith. 10.60 Forms of Amendments to European Receivables and Servicing Agreements among Registrant, certain subsidiaries of Registrant and Tulip Asset Purchase B.V. effective November 22, 2000. Filed herewith. 12 Statements re: Computation of Ratios. Filed herewith. 21 Subsidiaries of the Registrant. Filed herewith. 24 Power of Attorney. Contained in signature pages hereto. 27 Financial Data Schedule. Filed herewith. * Management contract, compensatory plan or arrangement. 100 EX-4.5 2 0002.txt PURCHASE AGREEMENT, DATED AS OF JANUARY 12, 2001 EXECUTION COPY -------------- LEVI STRAUSS & CO. $498,975,000 $380,000,000 11 5/8% Senior Notes Due 2008 125,000,000 Euro Dollars 11 5/8% Senior Notes Due 2008 PURCHASE AGREEMENT New York, New York January 12, 2001 Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc. As Representatives of the Initial Purchasers c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Levi Strauss & Co., a corporation organized under the laws of Delaware (the "Company"), proposes to issue an sell to the several parties named in Schedule I hereto (the "Initial Purchasers"), for whom you (the "Representatives")are acting as representatives, $380,000,000 principal amount of its 11 5/8% Senior Notes Due 2008 (the "Dollar Notes") and 125,000,000 euro dollars principal amount of its 11 5/8% Senior Notes due 2008 (the "Euro Notes" and together with the Dollar Notes, the "Securities"). The Securities are to be issued under two indentures, one with regard to the Dollar Notes and one with regard to the Euro Notes (the "Indentures"), both dated as of January 18, 2001, between the Company and Citibank, N.A., as trustee (the "Trustee"). The Dollar Notes and the Euro Notes each have the benefit of a Registration Rights Agreement (together, the "Registration Rights Agreements"), each dated January 18, 2001, between the Company and the Initial Purchasers, pursuant to which the Company has agreed to register the Securities under the Act subject to the terms and conditions therein specified. To the extent there are no additional parties listed on Schedule I other than you, the term Representatives as used herein shall mean you as the Initial Purchasers, and the terms Representatives and Initial Purchasers shall mean either the singular or plural as the context requires. The use of the neuter in this Agreement shall include the feminine and masculine wherever appropriate. Certain terms used herein are defined in Section 17 hereof. The sale of the Securities to the Initial Purchasers will be made without registration of the Securities under the Act in reliance upon exemptions from the registration requirements of the Act. In connection with the sale of the Securities, the Company has prepared a preliminary offering memorandum, dated October 3, 2000 (as amended or supplemented at the Execution Time, including any and all exhibits thereto and any information incorporated by reference therein, the "Preliminary Memorandum"), and a final offering memorandum, dated January 12, 2001 (as 1 amended or supplemented at the Execution Time, including any and all exhibits thereto and any information incorporated by reference therein, the "Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information concerning the Company and the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Memorandum and the Final Memorandum, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchasers. Unless stated to the contrary, references herein to the Final Memorandum at the Execution Time are not meant to include any information incorporated by reference therein subsequent to the Execution Time, and any references herein to the terms "amend", "amendment" or "supplement" with respect to the Final Memorandum shall be deemed to refer to and include any information filed under the Exchange Act subsequent to the Execution Time which is incorporated by reference therein. 1. Representations and Warranties. The Company represents ------------------------------ and warrants to each Initial Purchaser as set forth below in this Section 1. (a) The Preliminary Memorandum, at the date thereof, did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. At the Execution Time and on the Closing Date (as defined in Section 3 hereof), the Final Memorandum did not, and will not (and any amendment or supplement thereto, at the date thereof and at the Closing Date will not), contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty ----------------- as to the information contained in or omitted from the Preliminary Memorandum or the Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein. (b) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representations) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Securities under the Act. (c) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representations) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States. (d) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Act. (e) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representations) has engaged in any directed selling efforts with respect to the Securities, and each of them has complied with the offering restrictions requirements of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (f) The Company has been advised by The Portal Market of the NASD that both the Dollar Notes and the Euro Notes have been designated Portal-eligible securities in accordance with the rules and regulations of the NASD and the Company has applied to 2 have the Dollar Notes and the Euro Notes listed on the Luxembourg Stock Exchange and has been advised by the Luxembourg Stock Exchange that both the Dollar Notes and the Euro Notes are eligible for approval subject to notice of issuance and the Company's compliance with the rules and regulations of that exchange. (g) The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum will not be, an "investment company" within the meaning of the Investment Company Act, without taking account of any exemption arising out of the number of holders of the Company's securities. (h) The Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. (i) The Company has not paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company (except as contemplated by this Agreement). (j) The Company has not taken, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (k) Each of the Company and its subsidiaries has been duly incorporated or organized and is validly existing as a corporation or other valid legal entity in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate or company power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign corporation or other valid legal entity and is in good standing under the laws of each jurisdiction which requires such qualification, except in jurisdictions in which the failure to be so qualified or to be in good standing has not had and would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, a "Material Adverse Effect" shall mean a material adverse effect on, or a material adverse change in, the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole. (l) All the outstanding shares of capital stock of each subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Memorandum and other than the Company's subsidiaries in Japan and Turkey, all outstanding shares of capital stock of the subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances. (m) The Company's authorized equity capitalization is as set forth in the Final Memorandum, and the Voting Trust Agreement entered into as of April 15, 1996 among the Voting Trustees and stockholders of the Company conforms in all material respects to the description thereof contained in the Final Memorandum. (n) The statements in the Final Memorandum under the headings "Important Federal Income Tax Considerations", "Description of Notes", "Exchange Offer; Registration Rights", "Business--Trademarks", "Business--Legal Proceedings" and "Risk Factors--Our success depends on the continued protection of our trademarks and other proprietary intellectual property rights", insofar as such statements summarize legal matters, agreements, 3 documents or proceedings discussed therein, are, in all materiaL respects, accurate and fair summaries of such legal matters, agreements, documents or proceedings. (o) This Agreement has been duly authorized, executed and delivered by the Company; the Indentures have been duly authorized and, assuming due authorization, execution and delivery thereof by the Trustee, when executed and delivered by the Company, will constitute legal, valid and binding instruments enforceable against the Company in accordance with their terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity); the Securities have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Indentures and delivered to and paid for by the Initial Purchasers, will have been duly executed and delivered by the Company and will constitute the legal, valid and binding obligations of the Company entitled to the benefits of the applicable Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity); and the Registration Rights Agreements have been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the other parties thereto, constitute legal, valid and binding instruments enforceable against the Company in accordance with their terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity). (p) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or in the Indentures or the Registration Rights Agreements, except such as will be obtained under the Act and the Trust Indenture Act in connection with the transactions contemplated by the Registration Rights Agreements and such as may be required under the blue sky or securities laws of any jurisdiction in connection with the transactions contemplated by this Agreement and the Registration Rights Agreements. (q) Neither the execution and delivery of the Indentures, this Agreement or the Registration Rights Agreements, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of its subsidiaries; (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which any of their respective properties is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority of the United States or any state thereof having jurisdiction over the Company, any of its subsidiaries or any of their respective properties or to the Company's knowledge, any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States having jurisdiction over the Company, any of its subsidiaries or any of their respective properties, except, with respect to (x) clause (ii) and (y) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States described in clause (iii) as to which 4 the Company has no knowledge, for conflicts, violations, breaches or impositions that would not reasonably be expected to have a Material Adverse Effect. (r) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Final Memorandum present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein); and the selected financial data set forth under the caption "Selected Historical Consolidated Financial Information" in the Final Memorandum fairly present, on the basis stated in the Final Memorandum, the information included therein. (s) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement, the Indentures or the Registration Rights Agreements, or the consummation of any of the transactions contemplated hereby or thereby; or (ii) could reasonably be expected to have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (t) The Company and each of its subsidiaries own, lease or license all such properties as are necessary to the conduct of their respective operations as presently conducted. (u) Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter or bylaws; (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, other than such violations or defaults the occurrence of which would not reasonably be expected to have a Material Adverse Effect, whether or not arising from the transactions in the ordinary course of business. (v) Arthur Andersen, LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries and delivered their report with respect to the audited consolidated financial statements and schedules included in the Final Memorandum, are independent public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. (w) To the Company's knowledge, there are no material stamp or other issuance or transfer taxes or duties or other material similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Securities. (x) The Company has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect, whether or not arising from 5 transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such tax or other assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (y) No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its subsidiaries' principal suppliers, contractors or customers that in any such case could have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (z) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; except as would not have a Material Adverse Effect, there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (aa) No subsidiary of the Company is currently contractually prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Final Memorandum or the Company's Bridge Credit Agreement, with Bank of America, N.A. as administrative agent and collateral agent, dated as of January 31, 2000, as amended, the Company's Amended and Restated 1999 180 Day Credit Agreement, with Bank of America, N.A. as administrative agent and collateral agent, dated as of January 31, 2000, as amended, the Company's Amended and Restated 1997 364 Day Credit Agreement, with Bank of America, N.A. as administrative agent and collateral agent, dated as of January 31, 2000, as amended, and the Company's 1997 Second Amended and Restated Credit Agreement, with Bank of America, N.A. as administrative agent and collateral agent dated as of January 31, 2000, as amended (the "Existing Bank Credit Facilities"). (bb) The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, other than such licenses, certificates, permits or other authorizations, the failure of which to possess would not have a Material 6 Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (cc) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; and (iii) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (dd) In the ordinary course of its business, the Company periodically reviews the effect of applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws") on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties); on the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). (ee) Except as would not have a Material Adverse Effect, each of the Company and its subsidiaries has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the regulations and published interpretations thereunder with respect to each "plan" (as defined in Section 3(3) of ERISA and such regulations and published interpretations) in which employees of the Company and its subsidiaries are eligible to participate and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and such regulations and published interpretations; the Company and its subsidiaries have not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA. (ff) The subsidiaries listed on Annex A attached hereto are the only significant subsidiaries of the Company as defined by Rule l-02 of Regulation S-X under the Act (the "Subsidiaries"). (gg) The Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks (including the Levi's(R), Dockers(R) and Slates(R) trademarks), trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the "Intellectual Property") necessary for the conduct of the Company's business as now conducted free and clear of any material security interests, claims, liens or encumbrances, except as would not have a Material Adverse Effect or as set forth in or contemplated in (i) the Final Memorandum (exclusive of any amendment or 7 supplement thereto) or (ii) the Existing Bank Credit Facilities, and none of the Intellectual Property, to the best knowledge of the Company, conflicts with the valid trademark, trade name, copyright, patent, patent right or intangible asset of any other Person to the extent that such conflict has or would have a Material Adverse Effect. Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Initial Purchasers in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Initial Purchaser. 2. Purchase and Sale. Subject to the terms and conditions and ----------------- in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company: (a) at a purchase price of 96.337% of the principal amount thereof, plus accrued interest, if any, from January 18, 2001 to the Closing Date, the principal amount of Dollar Notes set forth opposite such Initial Purchaser's name on Schedule I hereto, and (b) at a purchase price of 96.873% of the principal amount thereof, plus accrued interest, if any, from January 18, 2001 to the Closing Date, the principal amount of Euro Notes set forth opposite such Initial Purchaser's name on Schedule I hereto. 3. Delivery and Payment. Delivery of and payment for the ---------------------- Securities shall be made at 10:00 A.M., New York City time, on January 18, 2001, or at such time on such later date (not later than three Business Days after the foregoing date) as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Initial Purchasers against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the Company. Delivery of the Dollar Notes shall be made through the facilities of The Depository Trust Company and delivery of the Euro Notes shall be made through the facilities of the Euroclear System and Clearstream, Luxembourg, unless the Representatives shall otherwise instruct. 4. Offering by Initial Purchasers. Each Initial Purchaser, ------------------------------ severally and not jointly, represents and warrants to and agrees with the Company that: (a) It has not offered or sold, and will not offer or sell, any Securities except (i) to those persons it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A; or (ii) in accordance with the restrictions set forth in Exhibit A hereto. (b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States. 5. Agreements. The Company agrees with each Initial Purchaser ---------- that: (a) The Company will furnish to each Initial Purchaser and to counsel for the Initial Purchasers, without charge, during the period referred to in paragraph (c) below, as many 8 copies of the Final Memorandum and any amendments and supplements there to as you may reasonably request. (b) The Company will not amend or supplement the Final Memorandum, other than by filing documents under the Exchange Act that are incorporated by reference therein, without the prior written consent of the Representatives; provided, however, that, prior to the -------- ------- completion of the distribution of the Securities by the Initial Purchasers (as determined by the Initial Purchasers), the Company will not file any document under the Exchange Act that is incorporated by reference in the Final Memorandum unless, prior to such proposed filing, the Company has furnished the Representatives with a copy of such document for their review and the Representatives have not reasonably objected to the filing of such document. The Company will promptly advise the Representatives when any document filed under the Exchange Act that is incorporated by reference in the Final Memorandum shall have been filed with the Commission. (c) If at any time prior to the completion of the sale of the Securities by the Initial Purchasers (as determined by the Representatives), any event occurs as a result of which the Final Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend or supplement the Final Memorandum to comply with applicable law, the Company promptly (i) will notify the Representatives of any such event; (ii) subject to the requirements of paragraph (b) of this Section 5, will prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and (iii) will supply any supplemented or amended Final Memorandum to the several Initial Purchasers and counsel for the Initial Purchasers without charge in such quantities as you may reasonably request. (d) The Company will arrange, if necessary, for the qualification of the Securities for sale by the Initial Purchasers under the laws of such jurisdictions in the United States and the European Union as the Representatives may reasonably designate and will maintain such qualifications in effect so long as required for the sale of the Securities; provided that in no event shall the Company be -------- obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. The Company will promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (e) The Company will not, and will not permit any of its Affiliates (other than the Initial Purchasers, as to whom the Company makes no covenant) to, resell, under circumstances that would require the registration of the Securities under the Act, any Securities that have been acquired by any of them. (f) Neither the Company, nor any of its Affiliates (other than the Initial Purchasers, as to whom the Company makes no covenant), nor any person acting on its or their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Securities under the Act. (g) Neither the Company, nor any of its Affiliates (other than the Initial Purchasers, as to whom the Company makes no covenant), nor any person acting on its or their behalf 9 will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States. (h) So long as any of the Securities are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, the Company will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act or it is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities. (i) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any directed selling efforts with respect to the Securities, and each of them will comply with the offering restrictions requirements of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (j) The Company will cooperate with the Representatives and use its best efforts to (i) permit the Dollar Notes to be eligible for clearance and settlement through The Depository Trust Company, (ii) permit the Euro Notes to be eligible for clearance and settlement through the Euroclear System and Clearstream, Luxembourg and (iii) cause both the Dollar Notes and the Euro Notes to be approved for listing on the Luxembourg Stock Exchange. (k) The Company will not offer, sell, contract to sell, grant any other option to purchase or otherwise dispose of, directly or indirectly, or announce the offering of, or file a registration statement for, any debt securities issued or guaranteed by the Company or any of its direct or indirect subsidiaries, or enter into any agreement to do any of the foregoing (other than (x) the Securities and the New Securities (as defined in the Registration Rights Agreements), (y) pursuant to any credit facility permitted under the Indentures and (z) purchase money debt and any other non-capital markets debt permitted under the Indentures) for a period of 90 days from the date the Securities are issued without the prior written consent of Salomon Smith Barney Inc. (l) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (m) The Company will not, at any time prior to the expiration of three years after the Closing Date, be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, and will not be or become a closed-end investment company required to be registered but not registered thereunder. (n) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation of the Indentures and the Registration Rights Agreements, the issuance of the Securities and the fees of the Trustee; (ii) the preparation, printing or reproduction of the Preliminary Memorandum and Final Memorandum and each amendment or supplement to either of them; (iii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the 10 Preliminary Memorandum and Final Memorandum, and all amendments or supplements to either of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iv) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (v) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Initial Purchasers relating to such registration and qualification); (vii) admitting the Securities for trading in The Portal Market of the NASD and on the Luxembourg Stock Exchange; (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; (ix) the fees and expenses of the Company's accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder. It is understood, however, that, except as provided in this Section, and Sections 7 and 8 hereof, the Initial Purchasers will pay all of their own costs and expenses, including the fees of their counsel, Cravath, Swaine & Moore. 6. Conditions to the Obligations of the Initial Purchasers. --------------------------------------------------------- The obligations of the Initial Purchasers to purchase the Securities shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) The Company shall have requested and caused Wachtell, Lipton, Rosen & Katz, counsel for the Company, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) the Indentures have been duly authorized, executed and delivered, and, assuming due authorization, execution and delivery by the Trustee, constitute legal, valid and binding instruments enforceable against the Company in accordance with their terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Securities have been duly and validly authorized and, when executed and authenticated in accordance with the provisions of the Indentures and delivered to and paid for by the Initial Purchasers under this Agreement, will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indentures (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Registration Rights Agreements have been duly authorized, executed and delivered and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding instruments enforceable against the Company in accordance with their terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting 11 creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); and the statements set forth under the heading "Description of Notes" and "Exchange Offer; Registration Rights" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Securities, the Indentures and the Registration Rights Agreements, provide, in all material respects, a fair summary of such provisions; (ii) the statements in the Final Memorandum under the heading "Important Federal Income Tax Considerations", insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings; (iii) such counsel has acted as special counsel for the Company in connection with the transactions contemplated by the Purchase Agreement, and does not and has not acted for the Company as regular outside counsel for litigation, ERISA, antitrust, intellectual property, commercial, corporate or other matters, and has participated in conferences with officers and other representatives of the Company, and representatives and counsel to the Initial Purchasers, all of whom participated in the preparation of the Final Memorandum, at which conferences the contents of the Final Memorandum were discussed, and, although it has not independently verified, and is not passing upon and assumes no responsibility for, the accuracy, completeness or fairness of, or otherwise verified, the statements made in, the Final Memorandum, no facts have come to its attention which lead it to believe that the Final Memorandum (other than the financial statements and related notes thereto and the other financial, statistical, reserve and accounting data included in or omitted from the Final Memorandum, all as to which it expresses no opinion), on the date thereof or at the Closing Date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (iv) this Agreement has been duly authorized, executed and delivered by the Company; (v) neither the execution and delivery of the Indentures, this Agreement or the Registration Rights Agreements, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company; (ii) the terms of the Company's Existing Bank Credit Facilities, including any covenant contained therein; or (iii) any law, rule or regulation of the United States applicable to securities transactions or the General Corporation Law of the State of Delaware; (vi) assuming the accuracy of the representations and warranties and compliance with the agreements contained herein, no registration of the Securities under the Act, and no qualification of an indenture under the Trust Indenture Act, is required for the offer and sale by the Initial Purchasers of the Securities in the manner contemplated by this Agreement; and 12 (vii) the Company is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum, will not be an "investment company" as defined in the Investment Company Act without taking account of any exemption arising out of the number of holders of the Company's securities. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of Delaware and New York or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion may contain customary assumptions, exceptions, limitations, qualifications and comments. References to the Final Memorandum in this Section 6(a) include any amendment or supplement thereto at the Closing Date. (b) The Company shall have requested and caused Albert F. Moreno, Esq., Senior Vice President and General Counsel for the Company, to furnish to the Representatives his opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) each of the Company and the subsidiaries listed on Annex A (individually, a "Subsidiary" and collectively, the "Subsidiaries") has been duly incorporated or organized and is validly existing as a corporation or other valid legal entity in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate or company power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign corporation or other valid legal entity and is in good standing under the laws of each jurisdiction which requires such qualification, except in jurisdictions in which the failure to be so qualified or to be in good standing has not had and would not reasonably be expected to have a Material Adverse Effect; (ii) all the outstanding shares of capital stock of the Company and each Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Memorandum and other than the Company's subsidiaries in Japan and Turkey, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the knowledge of such counsel, after due inquiry, any other security interests, claims, liens or encumbrances; (iii) the Company's authorized equity capitalization is as set forth in the Final Memorandum; (iv) to the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property that is not adequately disclosed in the Final Memorandum, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not singly or in the aggregate, result in a Material Adverse Effect; (v) such counsel has no reason to believe that at the Execution Time and on the Closing Date the Final Memorandum contained or contains any untrue statement 13 of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); (vi) assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 4 of this Agreement, no consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or in the Indentures and the Registration Rights Agreements, except such as will be obtained under the Act and the Trust Indenture Act in connection with the transactions contemplated by the Registration Rights Agreements and such as may be required under the blue sky or securities laws of any jurisdiction in connection with the transactions contemplated by this Agreement and the Registration Rights Agreements and such other approvals (specified in such opinion) as have been obtained; and (vii) neither the execution and delivery of the Indentures, this Agreement or the Registration Rights Agreements, the issue and sale of the Securities, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of its subsidiaries; (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which any of their respective properties is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority of the United States or any state thereof having jurisdiction over the Company, any of its subsidiaries or any of their respective properties or to the knowledge of such counsel, any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States having jurisdiction over the Company, any of its subsidiaries or any of their respective properties, except, with respect to (x) clause (ii) and (y) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States described in clause (iii) as to which such counsel has no knowledge, for conflicts, violations, breaches or impositions that would not reasonably be expected to have a Material Adverse Effect. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of Delaware and California or the Federal laws of the United States, to the extent he deems proper and specified in such opinion, upon the opinion of other counsel of good standing whom he believes to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent he deems proper, on certificates of other responsible officers of the Company and public officials. Such opinion may contain customary assumptions, exceptions, limitations, qualifications and comments. References to the Final Memorandum in this Section 6(a) include any amendment or supplement thereto at the Closing Date. 14 (c) The Representatives shall have received from Cravath, Swaine & Moore, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indentures, the Registration Rights Agreements, the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (d) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chief Financial Officer and the Treasurer, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Final Memorandum, any amendment or supplement to the Final Memorandum and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company has complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and (ii) since the date of the most recent financial statements included in the Final Memorandum (exclusive of any amendment or supplement thereto), there has been no material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). (e) At the Execution Time and at the Closing Date, the Company shall have requested and caused Arthur Andersen, LLP to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder, that they have performed a review of the unaudited interim financial information of the Company for the nine-month period ended August 27, 2000 and as at August 27, 2000 and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules included or incorporated in the Final Memorandum and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related rules and regulations adopted by the Commission thereunder that would apply to the Final Memorandum if the Final Memorandum were a prospectus included in a registration statement on Form S-1 under the Act; (ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; their limited review, in accordance with the standards established under Statement on Auditing Standards No. 71, of the unaudited interim financial information for the nine-month period ended August 27, 2000 and as at August 27, 2000, as indicated in their report included or incorporated in the Final Memorandum; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect 15 to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and executive, audit and personnel committees of the Company and the Subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to November 28, 1999, nothing came to their attention which caused them to believe that: (1) any unaudited financial statements included or incorporated in the Final Memorandum do not comply in form in all material respects with applicable accounting requirements and with the related rules and regulations adopted by the Commission with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated in the Final Memorandum; (2) with respect to the period subsequent to August 27, 2000, there were any changes, at a specified date not more than five days prior to the date of the letter, in the long-term debt of the Company and its subsidiaries or capital stock of the Company or decreases in the stockholders' deficit of the Company as compared with the amounts shown on the August 27, 2000 consolidated balance sheet included or incorporated in the Final Memorandum, or for the period from August 28, 2000 to such specified date there were any decreases, as compared with the corresponding period in the preceding quarter in net sales, gross profit, operating income, interest expense, income before taxes or in total or per share amounts of net income of the Company and its subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; or (3) the information included in response to Regulation S-K, Item 301 (Selected Financial Data), Item 402 (Executive Compensation) and Item 503(d) (Ratio of Earnings to Fixed Charges) is not in conformity with the disclosure requirements of Regulation S-K; and (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in the Final Memorandum, including the information set forth under the captions "Summary", "Risk Factors", "Selected Historical Consolidated Financial Information", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" in the Final Memorandum, the information included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included or incorporated in the Company's Quarterly Reports on Form 10-Q, incorporated in the Final Memorandum and information included in the Company's Current Reports on Form 8-K, dated September 19, 2000, June 6, 2000, January 10, 2000 and January 11, 2000, incorporated in the Final Memorandum agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation. 16 References to the Final Memorandum in this Section 6(e) include any amendment or supplement thereto at the date of the applicable letter. It is understood that the letter dated the Closing Date will include audited financial statements for the Company's fiscal year ending November 26, 2000. (f) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Final Memorandum (exclusive of any amendment or supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (e) of this Section 6; or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to market the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). (g) The Securities shall have been designated as Portal-eligible securities in accordance with the rules and regulations of the NASD, all filings necessary for the listing of the Securities on the Luxembourg Stock Exchange shall have been made by the Company or its counsel, neither the Company nor its listing agent shall have received notice that the Securities are not eligible for listing or that the Securities will not be listed on the Luxembourg Stock Exchange, the application for the listing of the Securities on the Luxembourg Stock Exchange shall not have been denied, and the Securities shall be eligible for clearance and settlement through The Depository Trust Company, in the case of the Dollar Notes, and the Euroclear System and Clearstream, Luxembourg, in the case of the Euro Notes. (h) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or potential decrease in any such rating (including notice of an adverse change in the outlook for such rating) or of a possible change in any such rating that does not indicate the direction of the possible change. (i) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 will be delivered at the office of counsel for the Initial Purchasers, at Cravath, Swaine & Moore, 825 Eighth Avenue, New York, NY 10019, on the Closing Date. 17 7. Reimbursement of Expenses. If the sale of the Securities -------------------------- provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Initial Purchasers, the Company will reimburse the Initial Purchasers severally through Salomon Smith Barney Inc. on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees -------------------------------- to indemnify and hold harmless each Initial Purchaser, the directors, officers, employees and agents of each Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Memorandum, the Final Memorandum (or in any supplement or amendment thereto) or any information provided by the Company to any holder or prospective purchaser of Securities pursuant to Section 5(h), or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in -------- ------- any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchasers through the Representatives specifically for inclusion therein; and provided further, however, that with -------- ------- ------- respect to any untrue statement or omission of a material fact made in the Preliminary Memorandum, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of any Initial Purchaser from whom the person asserting any such loss, claim, damage or liability purchased the Securities concerned in any initial resale of the Securities by the Initial Purchaser, to the extent that any such loss, claim, damage or liability of such Initial Purchaser occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (i) the untrue statement or omission of a material fact contained in the Preliminary Memorandum was corrected in the Final Memorandum, (ii) the Company had previously furnished copies of the Final Memorandum to the Initial Purchasers and (iii) such loss, claim, damage or liability results from the fact that there was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person, a copy of the Final Memorandum. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Initial Purchaser severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Initial Purchaser, but only with reference to written information relating to such Initial Purchaser furnished to the Company by or on behalf of such Initial Purchaser through the Representatives specifically for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any amendment or supplement thereto). This indemnity agreement will be in addition to any liability which any Initial Purchaser may otherwise 18 have. The Company acknowledges that the statements set forth in the last paragraph of the cover page regarding the delivery of the Securities and, under the heading "Plan of Distribution", (i) the list of Initial Purchasers and their respective participation in the sale of the Securities; (ii) the sentences related to concessions and reallowances; and (iii) the paragraph related to stabilization, syndicate covering transactions and penalty bids in the Preliminary Memorandum and the Final Memorandum, constitute the only information furnished in writing by or on behalf of the Initial Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any amendment or supplement thereto). (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the - -------- ------- indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. The indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for fees and expenses of more than one separate law firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as incurred. Such firm shall be designated by Salomon Smith Barney Inc. in the case of the parties indemnified pursuant to Section 8(a) and by the Company in the case of parties indemnified pursuant to Section 8(b). Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Initial Purchasers severally agree to contribute to the aggregate losses, claims, damages and 19 liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and one or more of the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Initial Purchasers on the other from the offering of the Securities; provided, however, that in no case shall any Initial -------- ------- Purchaser (except as may be provided in any agreement among the Initial Purchasers relating to the offering of the Securities) be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by such Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Initial Purchasers severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (after deducting discounts and commissions to the Initial Purchasers, but before deducting expenses) received by it, and benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions in each case set forth on the cover of the Final Memorandum. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Initial Purchasers on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Initial Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Initial Purchaser shall have the same rights to contribution as such Initial Purchaser, and each person who controls the Company within the meaning of either the Act or the Exchange Act and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 9. Default by an Initial Purchaser. If any one or more ------------------------------- Initial Purchasers shall fail to purchase and pay for any of the Securities agreed to be purchased by such Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names on Schedule I hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Initial Purchasers) the Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase; provided, however, that in the event --------- ------- that the aggregate principal amount of Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth on Schedule I hereto, the remaining Initial Purchasers shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Initial Purchasers do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Initial Purchaser or the Company. In the event of a default by any Initial Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Final Memorandum or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Initial Purchaser of its 20 liability, if any, to the Company or any nondefaulting Initial Purchaser for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to ----------- termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in securities generally on the New York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum prices shall have been established on such Exchange or the Nasdaq National Market; (ii) a banking moratorium shall have been declared either by Federal or New York State authorities; or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). 11. Representations and Indemnities to Survive. The respective ------------------------------------------ agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities; provided, however, that the representations and warranties of -------- ------- the Company shall be deemed to be made at the Execution Time and the Closing Date only. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement. 12. Notices. All communications hereunder will be in writing ------- and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Salomon Smith Barney Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney Inc. at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to (415) 501-7650 and confirmed to it at Levi's Plaza, 1155 Battery Street, San Francisco, CA 94111, attention of the Legal Department. 13. Successors. This Agreement will inure to the benefit of ---------- and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and --------------- construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 15. Counterparts. This Agreement may be executed in one or ------------ more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 16. Headings. The section headings used herein are for -------- convenience only and shall not affect the construction hereof. 17. Definitions. The terms which follow, when used in this ----------- Agreement, shall have the meanings indicated. 21 "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" shall have the meaning specified in Rule 501(b) of Regulation D. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in the City of New York. "Clearstream, Luxembourg" means Clearstream Banking, S.A. "Commission" shall mean the Securities and Exchange Commission. "Euroclear System" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear Clearance System. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder. "NASD" shall mean the National Association of Securities Dealers, Inc. "Regulation D" shall mean Regulation D under the Act. "Regulation S" shall mean Regulation S under the Act. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. 22 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Company and the several Initial Purchasers. Very truly yours, Levi Strauss & Co. by __________________________ Name: William B. Chiasson Title: Senior Vice President and Chief Financial Officer 23 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc. By: Salomon Smith Barney Inc. by ______________________ Name: Title: For themselves and the other several Initial Purchasers named in Schedule I to the foregoing Agreement. SCHEDULE I Principal Principal Amount of Amount of Euro Dollar Notes Dollar Notes Initial Purchasers to be Purchased to be Purchased - ------------------ --------------- --------------- Salomon Smith Barney Inc. $209,000,000 68,750,000 Banc of America Securities LLC 64,600,000 21,250,000 Scotia Capital (USA) Inc. 64,600,000 21,250,000 Chase Securities Inc. 34,200,000 11,250,000 Banc One Capital Markets, Inc 7,600,000 2,500,000 ------------ ----------- Total $380,000,000 125,000,000 Annex A Significant Subsidiaries Levi Strauss & Co. (Canada) Inc. Levi Strauss & Co. Europe S.A. Levi Strauss & Co. Financial Services Levi Strauss Financial Center Corporation Levi Strauss Funding Corp. Levi's Only Stores, Inc. Levi Strauss (U.K.) Limited EXHIBIT A Selling Restrictions for Offers and ----------------------------------- Sales outside the United States ------------------------------- (1)(a) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. Each Initial Purchaser represents and agrees that, except as otherwise permitted by Section 4(a)(i) of the Agreement to which this is an exhibit, it has offered and sold the Securities, and will offer and sell the Securities, (i) as part of their distribution at any time; and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S under the Act. Accordingly, each Initial Purchaser represents and agrees that neither it, nor any of its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and that it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Initial Purchaser agrees that, at or prior to the confirmation of sale of Securities (other than a sale of Securities pursuant to Section 4(a)(i) of the Agreement to which this is an exhibit), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the distribution compliance period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and January 18, 2001, except in either case in accordance with Regulation S or Rule 144A under the Act. Terms used above have the meanings given to them by Regulation S." (b) Each Initial Purchaser also represents and agrees that it has not entered and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its Affiliates or with the prior written consent of the Company. (c) Terms used in this section have the meanings given to them by Regulation S. (2) Each Initial Purchaser represents and agrees that (i) it has not offered or sold, and prior to the expiration of the period of six months from the issue date of the Securities will not offer or sell, any Securities in the United Kingdom, other than to persons whose ordinary business it is to buy, hold, manage or dispose of investments, whether as principal or as agent, for the purpose of their businesses or in circumstances which do not constitute an offer to the public within the meaning of the Public Offers of Securities Regulations 1995 (the "POSR") or the Financial Services Act 1986 of the United Kingdom (the "FSA"); (ii) it has complied and will comply with all applicable provisions of the POSR and the FSA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom the document may otherwise lawfully be issued or passed on. A-1 EX-4.6 3 0003.txt REGISTRATION RIGHTS AGREEMENT LEVI STRAUSS & CO $380,000,000 11 5/8% Senior Notes Due 2008 REGISTRATIONS RIGHTS AGREEMENT New York, New York January 18, 2001 Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc. As Representatives of the Initial Purchasers c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Levi Strauss & Co., a corporation organized under the laws of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), its $380,000,000 of 11 5/8% Senior Notes Due 2008 ( the "Securities") relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Company agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without ----------- definition shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person shall mean any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Euro Notes" shall mean the Company's euro denominated 11 5/8% Senior Notes due 2008. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Prospectus" shall mean the prospectus included in the Exchange Offer Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the New Securities (and, if the Company so chooses and to the extent permitted by applicable law, any portion of the Company's debt securities offered in exchange for the Euro Notes) covered by such Exchange Offer Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. 2 "Exchange Offer Registration Period" shall mean the 180-day period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer (and, if the Company so chooses and to the extent permitted by applicable law, with respect to an offer to issue and deliver to the holders of the Euro Notes, in exchange for the Euro Notes, a like aggregate principal amount of the Company's debt securities denominated in euros), all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Exchange Offer Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company). "Holder" shall have the meaning set forth in the preamble hereto. "Indenture" shall mean the indenture relating to the Securities, dated as of January 18, 2001, between the Company and Citibank, N.A., as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Initial Purchaser" shall have the meaning set forth in the preamble hereto. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" shall mean debt securities of the Company identical in all material respects to the Securities (except that the interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate) and to be issued under the Indenture or the New Securities Indenture. "New Securities Indenture" shall mean an indenture between the Company and the New Securities Trustee, identical in all material respects to the Indenture (except that the interest rate step-up provisions will be modified or eliminated, as appropriate). "New Securities Trustee" shall mean the Trustee or a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the New Securities under the New Securities Indenture. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. 3 "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer of the Company to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) The Company shall prepare -------------------------- and, not later than 60 days following the date of the original issuance of the Securities, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 120 days of the date of the original issuance of the Securities. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New 4 Securities (assuming that such Holder is not an Affiliate of the Company, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 Business Days and not more than 45 Business Days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law); (iii) use its reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; provided that if any Initial Purchaser holds -------- Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company) after the expiration of the Exchange Offer Registration Period, that Initial Purchaser shall have the right, for 90 days immediately following the expiration of the Exchange Offer Registration Period, to request the Company to prepare a prospectus for use by that Initial Purchaser for sales of New Securities, and the Company shall use its reasonable best efforts to prepare that prospectus for such use; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee, the New Securities Trustee or an Affiliate of either of them; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, if requested or required by the Commission, provide a supplemental letter to the Commission (A) stating that the Company is conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May ----------------------------------- 13, 1988) and Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); ---------------------------- and (B) including a representation that the Company has not entered into any 5 arrangement or understanding with any person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any person to participate in the distribution of the New Securities; and (vii) comply in all respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancelation in accordance with Section 4(s) all Securities so accepted for exchange; and (iii) cause the New Securities Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley -------------- and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation - ------------ ----------------------------------- (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction which must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company or one of its Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any person to participate in the distribution of the Securities or the New Securities within the meaning of the Act; and 6 (iii) such Holder is not an Affiliate of the Company. (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Company shall use its best efforts to cause the CUSIP Service Bureau to issue the same CUSIP numbers for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) due to any change in law or ------------------ applicable interpretations thereof by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any other reason the Exchange Offer Registration Statement is not declared effective within 120 days of the date of original issuance of the Securities or the Registered Exchange Offer is not consummated within 150 days of the date of original issuance of the Securities; (iii) any Initial Purchaser so requests within 45 days of consummation of the Registered Exchange Offer with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than an Initial Purchaser) so requests within 45 days of consummation of the Registered Exchange Offer on the basis that such Holder was not eligible to participate in the Registered Exchange Offer or does not receive freely tradeable New Securities in the Registered Exchange Offer other than by reason of such Holder being an Affiliate of the Company (it being understood that a requirement to deliver a Prospectus in connection with market-making activities or other trading shall not result in the applicable securities not being "freely tradeable"); or (v) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver an Exchange Offer Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Company shall effect a Shelf Registration Statement in accordance with subsection (b) below. (b) (i) The Company shall as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such 7 Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the Closing Date or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (A) such action is required by applicable law; or (B) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. The Company is expressly permitted to suspend the effectiveness of the Shelf Registration Statement in good faith in connection with the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. 4. Additional Registration Procedures. In connection with any ---------------------------------- Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. (a) The Company shall: (i) furnish to you, not less than five Business Days prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose; 8 (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus contained in the Exchange Offer Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Company shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder; (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Holders shall ensure that written -------- ------- information furnished to the Company by or on behalf of any Holder specifically for inclusion in such Registration Statement and any amendment thereto, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Holders shall ensure that written -------- ------- information furnished to the Company by or on behalf of any Holder specifically for inclusion in such Registration Statement and any amendment thereto, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company shall advise you, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall 9 confirm such advice in writing (which notice pursuant to clauses (ii) through (v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. (d) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time. (e) The Company shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. 10 (g) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Company shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such person may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such United States and European Union jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; provided that in no event shall the -------- Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits in any such jurisdiction where it is not then so subject. (j) The Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. (k) Upon the occurrence of any event contemplated by subsections (c)ii) through (v) above, the Company shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to Initial Purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 and the Shelf Registration Statement provided for in Section 3(b) shall each be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section. 11 (l) Not later than the effective date of any Registration Statement, the Company shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Company shall comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company shall cause the Indenture or the New Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (o) The Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to (i) furnish to the Company such information regarding the Holder and the distribution of such Securities as the Company may from time to time reasonably require for inclusion in such Registration Statement and (ii) provide the indemnity contemplated by Section 6(b). The Company may exclude from such Shelf Registration Statement the Securities of any Holder that fails to furnish such information or fails to provide the indemnity within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, the Company shall enter into such agreements (including if requested an underwriting agreement in customary form) and take all other reasonable, appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any) with respect to all parties to be indemnified pursuant to Section 6. (q) In the case of any Shelf Registration Statement, the Company shall: (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; provided, however, that any information that is designated in writing -------- ------- by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that the Company shall -------- ------- 12 be entitled to coordinate such access to its financial and other records, corporate documents and properties in a manner that does not unreasonably interfere with the business operations of the Company or its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is -------- ------- designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that the Company shall be entitled to respond to such information requests in a coordinated fashion such that such requests do not unreasonably interfere with the business operations of the Company or its subsidiaries; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. 13 The actions set forth in clauses (iii), (iv), (v) and (vi) of this subsection shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (r) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company (or to such other person as directed by the Company) in exchange for the New Securities, the Company shall mark, or cause to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (s) The Company will use its reasonable best efforts (i) if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement; or (ii) if the Securities were not previously rated, to cause the Securities covered by a Registration Statement to be rated with at least one nationally recognized statistical rating agency, if so requested by Majority Holders with respect to the related Registration Statement or by any Managing Underwriters. (t) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such Broker-Dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by: (i) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Rules. (u) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 14 5. Registration Expenses. The Company shall bear all expenses --------------------- incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. 6. Indemnification and Contribution. (a) The Company agrees -------------------------------- to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder specifically for inclusion therein; and provided further, however, that with respect to any untrue statement or omission of a material fact made in a preliminary Prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any person to the extent that any such loss, claim, damage or liability of such person occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (i) the untrue statement or omission of a material fact contained in the preliminary Prospectus was corrected in the final Prospectus or in an amendment or supplement thereto, (ii) the Company had previously furnished copies of the final Prospectus, amendment or supplement to such person and (iii) such loss, claim, damage or liability results from the fact that there was not sent or given by such person at or prior to the written confirmation of the sale of such Securities, a copy of the final Prospectus, amendment or supplement. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute as provided in Section 6(d) to Losses of each underwriter of Securities or New Securities, as the case may be, registered 15 under a Shelf Registration Statement, their directors, officers, employees or agents and each person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. (b) Each Holder of securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs such Registration Statement and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such -------- ------- counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, 16 without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. The indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for fees and expenses of more than one separate law firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as incurred. Such firm shall be designated by Salomon Smith Barney Inc. in the case of the parties indemnified pursuant to Section 6(a) and by the Company in the case of parties indemnified pursuant to Section 6(b). Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent - -------- ------- Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act or selling Securities or New Securities, as applicable, under a Shelf Registration Statement. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus 17 forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the directors, officers, employees, agents or controlling persons referred to in this Section hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities -------------------------- or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders, provided, however, that such Managing -------- ------- Underwriters must be reasonably satisfactory to the Company. (b) No person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such person (i) agrees to sell such person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements; (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; and (iii) agrees to be bound by Section 6(b) hereof. 8. No Inconsistent Agreements. The Company has not, as of the -------------------------- date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and 18 waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Securities (or, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter -------- that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. Notices. All notices and other communications provided for ------- or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Smith Barney Inc. (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. Successors. This Agreement shall inure to the benefit of ---------- and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and the New Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder who receives and accepts any benefits of this Agreement and who is thereafter bound by the obligations of this Agreement may specifically enforce the provisions of this Agreement as if an original party hereto. Notwithstanding the foregoing, nothing herein shall be deemed to permit any assignment, transfer or other disposition of Securities or New Securities in violation of the terms of the Purchase Agreement or the Indenture. Each Holder who receives and accepts any benefits of 19 this Agreement will be deemed to agree to be bound by and comply with the terms and provisions of this Agreement. 12. Counterparts. This Agreement may be in signed ------------ counterparts, each of which shall an original and all of which together shall constitute one and the same agreement. 13. Headings. The headings used herein are for convenience -------- only and shall not affect the construction hereof. 14. Applicable Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. Severability. In the event that any one of more of the ------------ provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 16. Securities Held by the Company, etc. Whenever the consent ------------------------------------ or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates shall be disregarded and deemed not to be outstanding in determining whether such consent or approval was given by the Holders of such required percentage. 20 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Initial Purchasers. Very truly yours, Levi Strauss & Co. by -------------------------- Name: Title: 21 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc By: Salomon Smith Barney Inc. by ----------------------- Name: Title: For themselves and the other several Initial Purchasers named in Schedule I to the Purchase Agreement. 22 ANNEX A Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution". 23 ANNEX B Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution". 24 ANNEX C PLAN OF DISTRIBUTION Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 2001, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Securities by brokers-dealers. New Securities received by Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such New Securities. Any Broker-Dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit resulting from any such resale of New Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Securities Act. 25 ANNEX D Rider A ------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: _______________________________________ Address: _______________________________________ _______________________________________ Rider B - ------- If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 26 EX-4.7 4 0004.txt REGISTRATION RIGHTS AGREEMENT LEVI STRAUSS & CO. 125,000,000 Euro Dollars 11 5/8% Senior Notes Due 2008 REGISTRATION RIGHTS AGREEMENT New York, New York January 18, 2001 Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc. As Representatives of the Initial Purchasers c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Levi Strauss & Co., a corporation organized under the laws of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), its 125,000,000 euro dollars of 11 5/8% Senior Notes Due 2008 ( the "Securities") relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Company agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without ----------- definition shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person shall mean any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Dollar Notes" shall mean the Company's U.S. dollar denominated 11 5/8% Senior Notes due 2008. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Prospectus" shall mean the prospectus included in the Exchange Offer Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the New Securities (and, if the Company so chooses and to the extent permitted by applicable law, any portion of the Company's debt securities offered in exchange for the Dollar Notes) covered by such Exchange Offer Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. 2 "Exchange Offer Registration Period" shall mean the 180-day period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer (and, if the Company so chooses and to the extent permitted by applicable law, with respect to an offer to issue and deliver to the holders of the Dollar Notes, in exchange for the Dollar Notes, a like aggregate principal amount of the Company's debt securities denominated in U.S. dollars), all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Exchange Offer Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company). "Holder" shall have the meaning set forth in the preamble hereto. "Indenture" shall mean the indenture relating to the Securities, dated as of January 18, 2001, between the Company and Citibank, N.A., as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Initial Purchaser" shall have the meaning set forth in the preamble hereto. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" shall mean debt securities of the Company identical in all material respects to the Securities (except that the interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate) and to be issued under the Indenture or the New Securities Indenture. "New Securities Indenture" shall mean an indenture between the Company and the New Securities Trustee, identical in all material respects to the Indenture (except that the interest rate step-up provisions will be modified or eliminated, as appropriate). "New Securities Trustee" shall mean the Trustee or a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the New Securities under the New Securities Indenture. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. 3 "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer of the Company to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) The Company shall prepare ---------- and, not later than 60 days following the date of the original issuance of the Securities, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 120 days of the date of the original issuance of the Securities. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New 4 Securities (assuming that such Holder is not an Affiliate of the Company, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 Business Days and not more than 45 Business Days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law); (iii) use its reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; provided that if any Initial Purchaser holds -------- Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company) after the expiration of the Exchange Offer Registration Period, that Initial Purchaser shall have the right, for 90 days immediately following the expiration of the Exchange Offer Registration Period, to request the Company to prepare a prospectus for use by that Initial Purchaser for sales of New Securities, and the Company shall use its reasonable best efforts to prepare that prospectus for such use; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee, the New Securities Trustee or an Affiliate of either of them; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, if requested or required by the Commission, provide a supplemental letter to the Commission (A) stating that the Company is conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May ----------------------------------- 13, 1988) and Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); ---------------------------- and (B) including a representation that the Company has not entered into any 5 arrangement or understanding with any person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any person to participate in the distribution of the New Securities; and (vii) comply in all respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancelation in accordance with Section 4(s) all Securities so accepted for exchange; and (iii) cause the New Securities Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley -------------- and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation - ------------- ----------------------------------- (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction which must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company or one of its Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any person to participate in the distribution of the Securities or the New Securities within the meaning of the Act; and 6 (iii) such Holder is not an Affiliate of the Company. (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Company shall use its best efforts to cause the CUSIP Service Bureau to issue the same CUSIP numbers for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) due to any change in law or ------------------ applicable interpretations thereof by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any other reason the Exchange Offer Registration Statement is not declared effective within 120 days of the date of original issuance of the Securities or the Registered Exchange Offer is not consummated within 150 days of the date of original issuance of the Securities; (iii) any Initial Purchaser so requests within 45 days of consummation of the Registered Exchange Offer with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than an Initial Purchaser) so requests within 45 days of consummation of the Registered Exchange Offer on the basis that such Holder was not eligible to participate in the Registered Exchange Offer or does not receive freely tradeable New Securities in the Registered Exchange Offer other than by reason of such Holder being an Affiliate of the Company (it being understood that a requirement to deliver a Prospectus in connection with market-making activities or other trading shall not result in the applicable securities not being "freely tradeable"); or (v) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver an Exchange Offer Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Company shall effect a Shelf Registration Statement in accordance with subsection (b) below. (b) (i) The Company shall as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such 7 Holders and set forth in such Shelf Registration Statement; provided, however, -------- ------- that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to New -------- ------- Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the Closing Date or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (A) such action is required by applicable law; or (B) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. The Company is expressly permitted to suspend the effectiveness of the Shelf Registration Statement in good faith in connection with the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. 4. Additional Registration Procedures. In connection with any ---------------------------------- Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. (a) The Company shall: (i) furnish to you, not less than five Business Days prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose; 8 (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus contained in the Exchange Offer Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Company shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder; (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Holders shall ensure that written -------- ------- information furnished to the Company by or on behalf of any Holder specifically for inclusion in such Registration Statement and any amendment thereto, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Holders shall ensure that written -------- ------- information furnished to the Company by or on behalf of any Holder specifically for inclusion in such Registration Statement and any amendment thereto, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company shall advise you, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall 9 confirm such advice in writing (which notice pursuant to clauses (ii) through (v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. (d) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time. (e) The Company shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. 10 (g) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Company shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such person may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such United States and European Union jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; provided that in no event shall the -------- Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits in any such jurisdiction where it is not then so subject. (j) The Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. (k) Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Company shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to Initial Purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 and the Shelf Registration Statement provided for in Section 3(b) shall each be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section. 11 (l) Not later than the effective date of any Registration Statement, the Company shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Company shall comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company shall cause the Indenture or the New Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (o) The Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to (i) furnish to the Company such information regarding the Holder and the distribution of such Securities as the Company may from time to time reasonably require for inclusion in such Registration Statement and (ii) provide the indemnity contemplated by Section 6(b). The Company may exclude from such Shelf Registration Statement the Securities of any Holder that fails to furnish such information or fails to provide the indemnity within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, the Company shall enter into such agreements (including if requested an underwriting agreement in customary form) and take all other reasonable, appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any) with respect to all parties to be indemnified pursuant to Section 6. (q) In the case of any Shelf Registration Statement, the Company shall: (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; provided, however, that any information that is designated in writing -------- ------- by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that the Company shall -------- ------- 12 be entitled to coordinate such access to its financial and other records, corporate documents and properties in a manner that does not unreasonably interfere with the business operations of the Company or its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is -------- ------- designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that the Company shall be entitled to respond to such information requests in a coordinated fashion such that such requests do not unreasonably interfere with the business operations of the Company or its subsidiaries; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. 13 The actions set forth in clauses (iii), (iv), (v) and (vi) of this subsection shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (r) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company (or to such other person as directed by the Company) in exchange for the New Securities, the Company shall mark, or cause to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (s) The Company will use its reasonable best efforts (i) if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement; or (ii) if the Securities were not previously rated, to cause the Securities covered by a Registration Statement to be rated with at least one nationally recognized statistical rating agency, if so requested by Majority Holders with respect to the related Registration Statement or by any Managing Underwriters. (t) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such Broker-Dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by: (i) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Rules. (u) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 14 5. Registration Expenses. The Company shall bear all expenses --------------------- incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. 6. Indemnification and Contribution. (a) The Company agrees -------------------------------- to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, -------- ------- that the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder specifically for inclusion therein; and provided further, however, that with respect to any untrue -------- ------- ------- statement or omission of a material fact made in a preliminary Prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any person to the extent that any such loss, claim, damage or liability of such person occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (i) the untrue statement or omission of a material fact contained in the preliminary Prospectus was corrected in the final Prospectus or in an amendment or supplement thereto, (ii) the Company had previously furnished copies of the final Prospectus, amendment or supplement to such person and (iii) such loss, claim, damage or liability results from the fact that there was not sent or given by such person at or prior to the written confirmation of the sale of such Securities, a copy of the final Prospectus, amendment or supplement. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute as provided in Section 6(d) to Losses of each underwriter of Securities or New Securities, as the case may be, registered 15 under a Shelf Registration Statement, their directors, officers, employees or agents and each person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. (b) Each Holder of securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs such Registration Statement and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such -------- ------- counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, 16 without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. The indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for fees and expenses of more than one separate law firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as incurred. Such firm shall be designated by Salomon Smith Barney Inc. in the case of the parties indemnified pursuant to Section 6(a) and by the Company in the case of parties indemnified pursuant to Section 6(b). Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent - -------- ------- Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act or selling Securities or New Securities, as applicable, under a Shelf Registration Statement. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus 17 forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the directors, officers, employees, agents or controlling persons referred to in this Section hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities -------------------------- or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders, provided, however, that such Managing -------- ------- Underwriters must be reasonably satisfactory to the Company. (b) No person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such person (i) agrees to sell such person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements; (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; and (iii) agrees to be bound by Section 6(b) hereof. 8. No Inconsistent Agreements. The Company has not, as of the -------------------------- date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and 18 waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Securities (or, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter -------- that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. Notices. All notices and other communications provided for ------- or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Smith Barney Inc. (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Company, initially at its address set forth in the Purchase Agreement All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. Successors. This Agreement shall inure to the benefit of ---------- and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and the New Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder who receives and accepts any benefits of this Agreement and who is thereafter bound by the obligations of this Agreement may specifically enforce the provisions of this Agreement as if an original party hereto. Notwithstanding the foregoing, nothing herein shall be deemed to permit any assignment, transfer or other disposition of Securities or New Securities in violation of the terms of the Purchase Agreement or the Indenture. Each Holder who receives and accepts any benefits of 19 this Agreement will be deemed to agree to be bound by and comply with the terms and provisions of this Agreement. 12. Counterparts. This Agreement may be in signed counter- ------------ parts, each of which shall an original and all of which together shall constitute one and the same agreement. 13. Headings. The headings used herein are for convenience -------- only and shall not affect the construction hereof. 14. Applicable Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. Severability. In the event that any one of more of the ------------ provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 16. Securities Held by the Company, etc. Whenever the consent ------------------------------------ or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates shall be disregarded and deemed not to be outstanding in determining whether such consent or approval was given by the Holders of such required percentage. 20 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Initial Purchasers. Very truly yours, Levi Strauss & Co. by -------------------------- Name: Title: 21 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Banc of America Securities LLC Scotia Capital (USA) Inc. Chase Securities Inc. Banc One Capital Markets, Inc By: Salomon Smith Barney Inc. by ----------------------- Name: Title: For themselves and the other several Initial Purchasers named in Schedule I to the Purchase Agreement. 22 ANNEX A Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution". 23 ANNEX B Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution". 24 ANNEX C PLAN OF DISTRIBUTION Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 2001, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Securities by brokers-dealers. New Securities received by Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such New Securities. Any Broker-Dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit resulting from any such resale of New Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Securities Act. 25 ANNEX D Rider A - ------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________________________ Address: ___________________________________________ ___________________________________________ Rider B - ------- If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 26 EX-4.8 5 0005.txt U.S. DOLLAR INDENTURE EXECUTION COPY LEVI STRAUSS & CO. 11 5/8% Senior Notes due 2008 _____________________________ U.S. DOLLAR INDENTURE Dated as of January 18, 2001 _____________________________ CITIBANK, N.A., Trustee ================================================================================ 2 TABLE OF CONTENTS Page ---- ARTICLE I Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions 1 SECTION 1.02. Other Definitions 40 SECTION 1.03. Incorporation by Reference of Trust Indenture Act 41 SECTION 1.04. Rules of Construction 41 ARTICLE II The Securities -------------- SECTION 2.01. Amount of Securities; Issuable in Series 42 SECTION 2.02. Form and Dating 44 SECTION 2.03. Execution and Authentication 44 SECTION 2.04. Registrar and Paying Agent 45 SECTION 2.05. Paying Agent to Hold Money in Trust 45 SECTION 2.06. Securityholder Lists 46 SECTION 2.07. Replacement Securities 46 SECTION 2.08. Outstanding Securities 46 SECTION 2.09. Temporary Securities 47 SECTION 2.10. Cancellation 47 SECTION 2.11. Defaulted Interest 47 SECTION 2.12. CUSIP Numbers 48 ARTICLE III Redemption ---------- SECTION 3.01. Notices to Trustee 48 SECTION 3.02. Selection of Securities To Be Redeemed 48 SECTION 3.03. Notice of Redemption 49 SECTION 3.04. Effect of Notice of Redemption 49 SECTION 3.05. Deposit of Redemption Price 50 SECTION 3.06. Securities Redeemed in Part 50 3 ARTICLE IV Covenants --------- SECTION 4.01 Covenant Suspension 50 SECTION 4.02. Payment of Securities 51 SECTION 4.03. SEC Reports 51 SECTION 4.04. Limitation on Debt 52 SECTION 4.05. Limitation on Restricted Payments 55 SECTION 4.06. Limitation on Liens 58 SECTION 4.07. Limitation on Asset Sales 58 SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries 62 SECTION 4.09. Limitation on Transactions with Affiliates 64 SECTION 4.10. Designation of Restricted and Unrestricted Subsidiaries 65 SECTION 4.11. Limitation on Sale and Leaseback Transactions 67 SECTION 4.12. Change of Control 67 SECTION 4.13. Further Instruments and Acts 69 ARTICLE V Successor Company ----------------- SECTION 5.01. When Company May Merge or Transfer Assets 69 ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01. Events of Default 71 SECTION 6.02. Acceleration 73 SECTION 6.03. Other Remedies 74 SECTION 6.04. Waiver of Past Defaults 74 SECTION 6.05. Control by Majority 74 SECTION 6.06. Limitation on Suits 75 SECTION 6.07. Rights of Holders to Receive Payment 75 SECTION 6.08. Collection Suit by Trustee 75 SECTION 6.09. Trustee May File Proofs of Claim 76 SECTION 6.10. Priorities 76 4 SECTION 6.11. Undertaking for Costs 76 SECTION 6.12. Waiver of Stay or Extension Laws 77 ARTICLE VII Trustee ------- SECTION 7.01. Duties of Trustee 77 SECTION 7.02. Rights of Trustee 79 SECTION 7.03. Individual Rights of Trustee 80 SECTION 7.04. Trustee's Disclaimer 80 SECTION 7.05. Notice of Defaults 80 SECTION 7.06. Reports by Trustee to Holders 80 SECTION 7.07. Compensation and Indemnity 81 SECTION 7.08. Replacement of Trustee 81 SECTION 7.09. Successor Trustee by Merger 83 SECTION 7.10. Eligibility; Disqualification 83 SECTION 7.11. Preferential Collection of Claims Against Company 83 ARTICLE VIII Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance 84 SECTION 8.02. Conditions to Defeasance 85 SECTION 8.03. Application of Trust Money 86 SECTION 8.04. Repayment to Company 86 SECTION 8.05. Indemnity for Government Obligations 87 SECTION 8.06. Reinstatement 87 ARTICLE IX Amendments ---------- SECTION 9.01. Without Consent of Holders 87 SECTION 9.02. With Consent of Holders 88 SECTION 9.03. Compliance with Trust Indenture Act 89 SECTION 9.04. Revocation and Effect of Consents and Waivers 89 SECTION 9.05. Notation on or Exchange of Securities 90 SECTION 9.06. Trustee to Sign Amendments 90 SECTION 9.07. Payment for Consent 90 5 ARTICLE X Miscellaneous ------------- SECTION 10.01. Trust Indenture Act Controls 91 SECTION 10.02. Notices 91 SECTION 10.03. Communication by Holders with Other Holders 92 SECTION 10.04. Certificate and Opinion as to Conditions Precedent 92 SECTION 10.05. Statements Required in Certificate or Opinion 92 SECTION 10.06. When Securities Disregarded 93 SECTION 10.07. Rules by Trustee, Paying Agent and Registrar 93 SECTION 10.08. Legal Holidays 93 SECTION 10.09. Governing Law 93 SECTION 10.10. No Recourse Against Others 93 SECTION 10.11. Successors 94 SECTION 10.12. Multiple Originals 94 SECTION 10.13. Table of Contents; Headings 94 Appendix A - Provisions Relating to Initial Securities and Exchange Securities Exhibit 1 to Appendix A - Form of Initial Security Exhibit A - Form of Exchange Security Exhibit B - Form of Transferee Letter of Representation CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- --------- 310 (a) (1) 7.10 (a) (2) 7.10 (a) (3) N.A. (a) (4) N.A. (b) 7.08; 7.10 (c) N.A. 311 (a) 7.11 (b) 7.11 (c) N.A. 312 (a) 2.06 (b) N.A. (c) N.A. 313 (a) 7.06 (b)(1) N.A. (b)(2) 7.06 (c) N.A. (d) 7.06 314 (a) 4.02; 4.10; N.A. (b) N.A. (c)(1) N.A. (c)(2) N.A. (c)(3) N.A. (d) N.A. (e) N.A. (f) 4.10 315 (a) 7.01 (b) 7.05; N.A. (c) 7.01 (d) 7.01 (e) 6.11 316 (a) (last sentence) N.A. (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 317 (a)(1) 6.08 (a)(2) 6.09 (b) 2.05 318 (a) N.A. N.A. Means Not Applicable. __________________ Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. INDENTURE dated as of January 18, 2001, between LEVI STRAUSS & CO., a Delaware corporation (the "Company") and CITIBANK, N.A., a national banking association duly organized and existing under the laws of the U.S.A., as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's U.S. dollar denominated 11 5/8% Senior Notes due 2008, to be issued, from time to time, in one or more series as in this Indenture provided (the "Initial Securities") and, if and when issued pursuant to a registered or private exchange for the Initial Securities, the Company's 11 5/8% Senior Notes due 2008 (the "Exchange Securities" and, together with the Initial Securities, the "Securities"): ARTICLE I Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ----------- "Additional Assets" means: (a) any Property (other than cash, cash equivalents, securities and inventory) to be owned by the Company or any Restricted Subsidiary and used in a Related Business; or (b) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of that Capital Stock by the Company or another Restricted Subsidiary from any Person other than the Company or an Affiliate of the Company; provided, however, that, in the -------- ------- case of this clause (b), the Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means: (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with that specified Person, or 2 (b) any other Person who is a director or officer of that specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of that 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. For purposes of Section 4.09 and Section 4.07 and the definition of "Additional Assets" only, "Affiliate" shall also mean any Beneficial Owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase that Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any Beneficial Owner pursuant to the first sentence hereof. "Asset Sale" means any sale, lease, transfer, issuance or other disposition (or series of related sales, leases, transfers, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), (b) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary, (c) in the case of any disposition by the Company or a Restricted Subsidiary to any Person, any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary, or (d) in the case of any disposition by the Company to a Restricted Subsidiary of the Company, any other assets of the Company, other than dispositions in the ordinary course of business of raw materials to a Restricted Subsidiary to be used in the manufacture of finished goods, of finished goods to a Restricted Subsidiary for resale by the Restricted Subsidiary or its designee or of work in process to a Restricted Subsidiary, 3 other than, in the case of clause (a), (b), (c) or (d) above, (1) any disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary, (2) any disposition that constitutes a Permitted Investment or Restricted Payment permitted by Section 4.05, (3) any disposition effected in compliance with the first paragraph in Section 5.01, (4) a sale of accounts receivables and related assets of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Entity, (5) a transfer of accounts receivables and related assets of the type specified in the definition of "Qualified Receivables Transaction" (or a fractional undivided interest therein) by a Receivables Entity in connection with a Qualified Receivables Transaction, and (6) a transfer of accounts receivable of the type specified in the definition of "Credit Facility" that is permitted under clause (b) of the second paragraph of Section 4.04. Notwithstanding the foregoing, if at any time, the aggregate Fair Market Value of assets disposed of by the Company to its Subsidiaries since the Issue Date, other than (a) Permitted Investments comprised of cash or cash equivalents, (b) dispositions pursuant to paragraphs (4), (5) and (6) above and (c) dispositions by the Company to a Restricted Subsidiary of raw materials to be used in the manufacture of finished goods, of finished goods and of work in process, exceeds 10% of Consolidated Tangible Assets, all asset dispositions in excess thereof shall be treated as Asset Sales subject to the restrictions set forth in Section 4.07. For purposes of this paragraph, the aggregate Fair Market Value of assets so transferred at any time shall be calculated by using the sum of the Fair Market Value of each asset disposition as of the date of its disposition. 4 "Attributable Debt" in respect of a Sale and Leaseback Trans- action means, at any date of determination, (a) if the Sale and Leaseback Transaction is a Capital Lease Obligation, the amount of Debt represented thereby according to the definition of "Capital Lease Obligation", and (b) in all other instances, the greater of: (1) the Fair Market Value of the Property subject to the Sale and Leaseback Transaction, and (2) the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in the Sale and Leaseback Transaction (including any period for which the lease has been extended). "Average Life" means, as of any date of determination, with respect to any Debt or Preferred Stock, the quotient obtained by dividing: (a) the sum of the product of the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of that Debt or redemption or similar payment with respect to that Preferred Stock multiplied by the amount of the payment by (b) the sum of all payments of this kind. "Beneficial Owner" means a beneficial owner as defined in Rule 13d-3 under the Exchange Act, except that: (a) a Person will be deemed to be the Beneficial Owner of all shares that the Person has the right to acquire, whether that right is exercisable immediately or only after the passage of time, (b) for purposes of clause (a) of the definition of "Change of Control", Permitted Holders will be deemed to be the Beneficial Owners of any Voting Stock of a corporation or other legal entity held by any other corporation or other legal entity so long as the Permitted Holders Beneficially Own, directly or indirectly, in the aggregate a majority of the total 5 voting power of the Voting Stock of that corporation or other legal entity, and (c) for purposes of clause (b) of the definition of "Change of Control", any "person" or "group" (as those terms are defined in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, shall be deemed to be the Beneficial Owners of any Voting Stock of a corporation or other legal entity held by any other corporation or legal entity ("the parent corporation"), so long as that person or group Beneficially Owns, directly or indirectly, in the aggregate a majority of the total voting power of the Voting Stock of that parent corporation. The term "Beneficially Own" shall have a corresponding meaning. "Board of Directors" means the Board of Directors of the Company (or, in the case of Section 4.09(2), the applicable Restricted Subsidiary) or any committee thereof duly authorized to act on behalf of such 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. "Business Day" means each day that is not a Legal Holiday. "Capital Lease Obligations" means any obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; and the amount of Debt represented by that obligation shall be the capitalized amount of the obligations determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under that lease prior to the first date upon which that lease may be terminated by the lessee without payment of a penalty. For purposes of Section 4.06, a Capital Lease Obligation shall be deemed secured by a Lien on the Property being leased. 6 "Capital Stock" means, with respect to any Person, any shares or other equivalents (however designated) of any class of corporate stock or partnership interests or any other participations, rights, warrants, options or other interests in the nature of an equity interest in that Person, including Preferred Stock, but excluding any debt security convertible or exchangeable into that equity interest. "Capital Stock Sale Proceeds" means the aggregate cash proceeds received by the Company from the issuance or sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or the Subsidiary for the benefit of their employees) by the Company of its Capital Stock (other than Disqualified Stock) after the Issue Date, net of attorneys' fees, accountants' fees, initial purchasers' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with the issuance or sale and net of taxes paid or payable as a result thereof. "Change of Control" means the occurrence of any of the following events: (a) prior to the first Public Equity Offering that results in a Public Market, the Permitted Holders cease to be the Beneficial Owners, directly or indirectly, of a majority of the total voting power of the Voting Stock of the Company, whether as a result of the issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise; or (b) on or after the first Public Equity Offering that results in a Public Market, if any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of 35% or more of the total voting power of the Voting Stock of the Company; provided, however, that the -------- ------- Permitted Holders are the Beneficial Owners, directly or indirectly, in the aggregate of a lesser percentage of the total voting power of the Voting Stock of the Company than that other person or group; and provided further, that the ---------------- 7 provisions of this clause (b) will not apply to Voting Trustees serving in that capacity under the Voting Trust Arrangement; or (c) the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all the assets of the Company and the Restricted Subsidiaries, considered as a whole (other than a disposition of assets as an entirety or virtually as an entirety to a Wholly Owned Restricted Subsidiary or one or more Permitted Holders) shall have occurred, or the Company merges, consolidates or amalgamates with or into any other Person (other than one or more Permitted Holders) or any other Person (other than one or more Permitted Holders) merges, consolidates or amalgamates with or into the Company, in any event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other Property, other than transaction where: (1) the outstanding Voting Stock of the Company is reclassified into or exchanged for other Voting Stock of the Company or for Voting Stock of the surviving corporation or transferee, and (2) the Holders of the Voting Stock of the Company immediately prior to the transaction own, directly or indirectly, not less than a majority of the Voting Stock of the Company or the surviving corporation or transferee immediately after the transaction and in substantially the same proportion as before the transaction; or (d) during any period of two consecutive years, individuals who at the beginning of that period constituted the Board of Directors (together with any new directors whose election or appointment by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of not less than three-fourths of the directors then still in office who were either directors at the beginning of that period or whose election or nomination for election was previously so approved or by a vote of the Voting Trustees pursuant to the terms of the Voting Trust Arrangement) cease for any reason to constitute a majority of the Board of Directors then in office; or 8 (e) the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Price Protection Agreement" means, in respect of a Person, any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in commodity prices. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Current Liabilities" means, as of any date of determination, the aggregate amount of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating: (a) all intercompany items between the Company and any Restricted Subsidiary or between Restricted Subsidiaries, and (b) all current maturities of long-term Debt. "Consolidated Fixed Charges" means, for any period, the total interest expense (net of interest income) of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, (a) interest expense attributable to leases constituting part of a Sale and Leaseback Transaction and to Capital Lease Obligations, (b) amortization of debt discount and debt issuance cost, including commitment fees, (c) capitalized interest, (d) non-cash interest expense, 9 (e) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (f) net costs associated with Interest Rate Agreements (including amortization of fees), (g) Disqualified Stock Dividends, (h) Preferred Stock Dividends, (i) interest Incurred in connection with Investments in discontinued operations, (j) interest accruing on any Debt of any other Person to the extent that Debt is Guaranteed by the Company or any Restricted Subsidiary, and (k) the cash contributions to any employee stock ownership plan or similar trust to the extent those contributions are used by the plan or trust to pay interest or fees to any Person (other than the Company) in connection with Debt Incurred by the plan or trust. Notwithstanding anything to the contrary contained herein, commissions, discounts, yield and other fees and charges Incurred in connection with any transaction (including, without limitation, any Qualified Receivables Transaction) pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets of the type specified in the definition of "Qualified Receivables Transaction" shall be included in Consolidated Fixed Charges. "Consolidated Fixed Charges Coverage Ratio" means, as of any date of determination, the ratio of: (a) the aggregate amount of EBITDA for the most recent four consecutive fiscal quarters ending at least 45 days prior to such determination date to (b) Consolidated Fixed Charges for those four fiscal quarters; 10 provided, however, that: -------- ------- (1) if (A) since the beginning of that period the Company or any Restricted Subsidiary has Incurred any Debt that remains outstanding or Repaid any Debt, or (B) the transaction giving rise to the need to calculate the Consolidated Fixed Charges Coverage Ratio involves an Incurrence or Repayment of Debt, Consolidated Fixed Charges for that period shall be calculated after giving effect on a pro forma basis to that Incurrence or Repayment as if the Debt was Incurred or Repaid on the first day of that period, provided that, in the event of any Repayment of Debt, EBITDA for that period shall be calculated as if the Company or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to Repay such Debt, and (2) if (A) since the beginning of that period the Company or any Restricted Subsidiary shall have made any Asset Sale or an Investment (by merger or otherwise) in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of Property which constitutes all or substantially all of an operating unit of a business, (B) the transaction giving rise to the need to calculate the Consolidated Fixed Charges Coverage Ratio involves an Asset Sale, Investment or acquisition, or (C) since the beginning of that period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of that period) shall have made such an Asset Sale, Investment or acquisition, 11 EBITDA for that period shall be calculated after giving pro forma effect to the Asset Sale, Investment or acquisition as if the Asset Sale, Investment or acquisition occurred on the first day of that period. If any Debt bears a floating rate of interest and is being given pro forma effect, the interest expense on that Debt shall be calculated as if the base interest rate in effect for the floating rate of interest on the date of determination had been the applicable base interest rate for the entire period (taking into account any Interest Rate Agreement applicable to that Debt if the applicable Interest Rate Agreement has a remaining term in excess of 12 months). In the event the Capital Stock of any Restricted Subsidiary is sold during the period, the Company shall be deemed, for purposes of clause (1) above, to have Repaid during that period the Debt of that Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for that Debt after the sale. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; provided, -------- however, that there shall not be included in such Consolidated Net Income: - ------- (a) any net income (loss) of any Person (other than the Company) if that Person is not a Restricted Subsidiary, except that: (1) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of any such Person for that period shall be included in such Consolidated Net Income up to the aggregate amount of cash distributed by that Person during that period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (c) below), and (2) the Company's equity in a net loss of that Person other than an Unrestricted Subsidiary for the specified period shall be included in determining such Consolidated Net Income, (b) for purposes of Section 4.05 only, any net income (loss) of any Person acquired by the Company or any of its consolidated Subsidiaries in a pooling of interests transaction for any period prior to the date of the acquisition, 12 (c) any net income (loss) of any Restricted Subsidiary if the Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions, directly or indirectly, to the Company, except that: (1) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of the Restricted Subsidiary for the period shall be included in Consolidated Net Income up to the aggregate amount that would have been permitted at the date of determination to be dividended to the Company or another Restricted Subsidiary by that Restricted Subsidiary without prior approval by a third party (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and government regulations applicable to that Restricted Subsidiary or its shareholders, during that period as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Restricted Subsidiary, to the limitation contained in this clause), and (2) the Company's equity in a net loss of the Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (d) any gain (but not loss) realized upon the sale or other disposition of any Property of the Company or any of its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business, (e) any extraordinary gain or loss, (f) the cumulative effect of a change in accounting principles, (g) any unrealized gains or losses of the Company or its consolidated Subsidiaries on any Hedging Obligations, and (h) any non-cash compensation expense realized for grants of performance shares, stock options or other rights to officers, directors and employees of the Company or any Restricted Subsidiary, provided that those shares, options or other rights can be redeemed 13 at the option of the holder only for Capital Stock of the Company (other than Disqualified Stock). Notwithstanding the foregoing, for purposes of Section 4.05 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent the dividends, repayments or transfers increase the amount of Restricted Payments permitted under that covenant pursuant to clause (c)(4) thereof. "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries as the total assets (less accumulated depreciation, amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries, after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of (without duplication): (a) the excess of cost over fair market value of assets or businesses acquired; (b) any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Company immediately preceding the Issue Date as a result of a change in the method of valuation in accordance with GAAP; (c) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (d) minority interests in consolidated Subsidiaries held by Persons other than the Company or any Restricted Subsidiary; (e) treasury stock; (f) cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and 14 (g) Investments in and assets of Unrestricted Subsidiaries. "Consolidated Tangible Assets" means, as of any date of determination, the sum of the amounts of Consolidated Net Tangible Assets and Consolidated Current Liabilities as of such date. "Credit Facilities" means, with respect to the Company or any Restricted Subsidiary, one or more debt or commercial paper facilities (including related Guarantees) with banks, investment banks, insurance companies, mutual funds or other institutional lenders (including our Existing Bank Credit Facilities), providing for revolving credit loans, term loans, receivables or inventory financing (including through the sale of receivables or inventory to institutional lenders or to special purpose, bankruptcy remote entities formed to borrow from institutional lenders against those receivables or inventory) or trade or standby letters of credit, in each case together with any Refinancings thereof by a lender or syndicate of lenders; provided that, in the case of a transaction in which any accounts receivable are sold, conveyed or otherwise transferred by the Company or any of its subsidiaries to another Person other than a Receivables Entity, then that transaction must satisfy the following three conditions: (a) if the transaction involves a transfer of accounts receivable with Fair Market Value equal to or greater than $25.0 million, the Board of Directors shall have determined in good faith that the transaction is economically fair and reasonable to the Company or the Subsidiary that sold, conveyed or transferred the accounts receivable, (b) the sale, conveyance or transfer of accounts receivable by the Company or the Subsidiary is made at Fair Market Value and (c) the financing terms, covenants, termination events and other provisions of the transaction shall be market terms (as determined in good faith by the Board of Directors if Board approval is required under clause (a)). "Currency Exchange Protection Agreement" means, in respect of a Person, any foreign exchange contract, currency swap agreement, currency option or other similar agreement or arrangement designed to protect that Person against fluctuations in currency exchange rates. 15 "Debt" means, with respect to any Person on any date of determination (without duplication): (a) the principal of and premium (if any) in respect of: (1) debt of the Person for money borrowed, and (2) debt evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Person is responsible or liable; (b) all Capital Lease Obligations of the Person and all Attributable Debt in respect of Sale and Leaseback Transactions entered into by the Person; (c) all obligations of the Person issued or assumed as the deferred purchase price of Property, all conditional sale obligations of the Person and all obligations of the Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (d) all obligations of the Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (a) through (c) above) entered into in the ordinary course of business of the Person to the extent those letters of credit are not drawn upon or, if and to the extent drawn upon, the drawing is reimbursed no later than the third Business Day following receipt by the Person of a demand for reimbursement following payment on the letter of credit); (e) the amount of all obligations of the Person with respect to the Repayment of any Disqualified Stock or, with respect to any Subsidiary of the Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (f) all obligations of the type referred to in clauses (a) through (e) of other Persons and all dividends of other Persons for the payment of which, in either case, the Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; 16 (g) all obligations of the type referred to in clauses (a) through (f) of other Persons secured by any Lien on any Property of the Person (whether or not such obligation is assumed by the Person), the amount of such obligation being deemed to be the lesser of the value of that Property or the amount of the obligation so secured; and (h) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Debt of any Person at any date shall be the outstanding balance at that date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at that date. The amount of Debt represented by a Hedging Obligation shall be equal to: (1) zero if the Hedging Obligation has been Incurred pursuant to clause (e), (f) or (g) of the second paragraph of Section 4.04, or (2) if the Hedging Obligation is not Incurred pursuant to clauses (e), (f) or (g) of the second paragraph of Section 4.04, then 105% of the aggregate net amount, if any, that would then be payable by the Company and any Restricted Subsidiary on a per counter-party basis pursuant to Section 6(e) of the ISDA Master Agreement (Multicurrency-Cross Border) in the form published by the International Swaps and Derivatives Association in 1992 (the "ISDA Form"), as if the date of determination were a date that constitutes or is substantially equivalent to an Early Termination Date, as defined in the ISDA Form, with respect to all transactions governed by the ISDA Form, plus the equivalent amount under the terms of any other Hedging Obligations that are not Incurred pursuant to clauses (e), (f) or (g) of the second paragraph of Section 4.04, each such amount to be estimated in good faith by the Company. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in either case at the option of the holder thereof) or otherwise: 17 (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable at the option of the holder thereof for Debt or Disqualified Stock, on or prior to, in the case of clause (a), (b) or (c), the first anniversary of the Stated Maturity of the Securities. "Disqualified Stock Dividends" means all dividends with respect to Disqualified Stock of the Company held by Persons other than a Wholly Owned Restricted Subsidiary. The amount of any dividend of this kind shall be equal to the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the Company. "EBITDA" means, for any period, an amount equal to, for the Company and its consolidated Restricted Subsidiaries: (a) the sum of Consolidated Net Income for that period, plus the following to the extent reducing Consolidated Net Income for that period: (1) the provision for taxes based on income or profits or utilized in computing net loss, (2) Consolidated Fixed Charges, (3) depreciation, (4) amortization of intangibles, (5) any other non-cash items (other than any non-cash item to the extent that it represents an accrual of or reserve for cash expenditures in any future period), and (6) any one-time, non-recurring expenses relating to, or arising from, any closures of manufacturing facilities on or after the Issue Date, in each case incurred within 12 months after such closure, minus 18 (b) all non-cash items increasing Consolidated Net Income for that period (other than any such non-cash item to the extent that it will result in the receipt of cash payments in any future period). Notwithstanding the foregoing clause (a), the provision for taxes and the depreciation, amortization and non-cash items of a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of that Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by that Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its shareholders. "Equipment Financing Transaction" means any arrangement (together with any Refinancings thereof) with any Person pursuant to which the Company or any Restricted Subsidiary Incurs Debt secured by a Lien on equipment or equipment related property of the Company or any Restricted Subsidiary. "Euro Notes" means the Company's 11 5/8% Senior Notes due 2008 denominated in euros and issued pursuant to an indenture dated the date hereof between the Company and Citibank, N.A. as trustee. "Event of Default" has the meaning set forth in Section 6.01 "Exchange Act" means the Securities Exchange Act of 1934. "Existing Bank Credit Facilities" means: (a) the Bridge Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York and Bank One, N.A., as amended as of July 31, 2000 and September 29, 2000, (b) the Amended and Restated 1999 180 Day Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, 19 Citicorp U.S.A. Incorporated and Morgan Guaranty Trust Company of New York, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000, (c) the Amended and Restated 1997 364 Day Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York, Commerzbank AG, Credit Lyonnais, Bank One, N.A., The Sumitomo Bank, Ltd., ABN AMRO Bank N.V., Banca Commerciale Italiana, Banque Nationale de Paris, Criplo-Cassa di Risparmio delle Provincie Lombarde S.p.A., Societe Generale, Mellon Bank National Association, KBC Bank N.V., UniCredito Italiano S.p.A., Deutsche Bank Aktiengesellschaft, Wachovia Bank N.A., Bankers Trust Company and First Hawaiian Bank, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000, and (d) the 1997 Second Amended and Restated Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York, Commerzbank AG, Credit Lyonnais, The Chase Manhattan Bank, Bank One, N.A., The Sumitomo Bank, Ltd., ABN AMRO Bank N.V., Banca Commerciale Italiana, Banque Nationale de Paris, Cariplo-Cassa di Risparmio delle Provincie Lombarde S.p.A., CIBC Inc., The Royal Bank of Canada, The Sanwa Bank, Limited, The Toronto-Dominion Bank, KBC Bank N.V., PNC Bank N.A., Societe Generale, BankBoston N.A., The Industrial Bank of Japan, Limited, Mellon Bank National Association, The Tokai Bank Limited, The Bank of Tokyo-Mitsubishi Limited, Union Bank of California, N.A. Banca Monte dei Paschi di Siena S.p.A., UniCredito Italiano S.p.A., Deutsche Bank Aktiengesellschaft, San Paolo IMI S.p.A., Cooperative Centrale Raiffeisent--Boerenleenbank B.A., UBS AG, Wachovia Bank N.A., Bankers Trust Company and First Hawaiian Bank, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000. "Existing Policies" means (1) the Company's estate tax repurchase policy under which the Company repurchases a portion of a deceased stockholder's shares to generate funds for payment of estate taxes and (2) the Company's valuation policy under which the Company obtains an annual valuation of the Company's Voting Trust Certificates, as both policies exist at the Issue Date or as they may exist from time to time, provided that if either of these policies is 20 materially amended after the Issue Date in a manner less favorable to the Company than the policy as existing on the Issue Date, then that amended policy shall be deemed not to be an Existing Policy. "Fair Market Value" means, with respect to any Property, the price that could be negotiated in an arm's length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. For purposes of Section 4.05 and Section 4.07 and the definitions of "Qualified Receivables Transaction" and "Credit Facilities", Fair Market Value shall be determined, except as otherwise provided, (a) if the Property has a Fair Market Value equal to or less than $25.0 million, by any Officer of the Company, or (b) if the Property has a Fair Market Value in excess of $25.0 million, by a majority of the Board of Directors and evidenced by a Board Resolution, dated within 12 months of the relevant transaction, delivered to the Trustee. "Foreign Restricted Subsidiary" means any Restricted Subsidiary which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means United States generally accepted accounting principles as in effect from time to time, including those set forth: (a) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) in the statements and pronouncements of the Financial Accounting Standards Board, (c) in other statements by another entity as approved by a significant segment of the accounting profession, and (d) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements 21 in staff accounting bulletins and similar written statements from the accounting staff of the Commission. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of that Person: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) the Debt of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include: - -------- ------- (1) endorsements for collection or deposit in the ordinary course of business, or (2) a contractual commitment by one Person to invest in another Person for so long as the Investment is reasonably expected to constitute a Permitted Investment under clause (a), (b) or (i) of the definition of "Permitted Investment". The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligation" of any Person means any obligation of that Person pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement, Commodity Price Protection Agreement or any other similar agreement or arrangement. "Holder" or "Securityholder" means the Person in whose name the Security is registered on the Security register described in Section 2.04. "Incur" means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of that Debt or other obligation or the recording, as required pursuant to GAAP or 22 otherwise, of any Debt or obligation on the balance sheet of that Person (and "Incurrence" and "Incurred" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of that - -------- ------- Person that exists at such time, and is not theretofore classified as Debt, becoming Debt shall not be deemed an Incurrence of that Debt; provided further, ---------------- however, that any Debt or other obligations of a Person existing at the time the - ------- Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by that Subsidiary at the time it becomes a Subsidiary; and provided further, however, that solely for purposes of ---------------- ------- determining compliance with Section 4.04, amortization of debt discount or premium shall not be deemed to be the Incurrence of Debt, provided that in the case of Debt sold at a discount or at a premium, the amount of the Debt Incurred shall at all times be the aggregate principal amount at Stated Maturity. "Indenture" means this Indenture as amended or supplemented from time to time. "Independent Financial Advisor" means an investment banking firm of national standing or any third party appraiser of national standing, provided that the firm or appraiser is not an Affiliate of the Company. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate option agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates. "Investment" by any Person means any direct or indirect loan (other than advances to customers and suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of that Person), advance or other extension of credit or capital contribution (by means of transfers of cash or other Property to others or payments for Property or services for the account or use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person. For purposes of Section 4.05, Section 4.10 and the definition of "Restricted Payment", Investment shall include the portion (proportionate to the Company's equity interest in the Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that the Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a -------- ------- redesignation of that Subsidiary as a Restricted Subsidiary, the Company shall be 23 deemed to continue to have a permanent Investment in an Unrestricted Subsidiary of an amount (if positive) equal to: (a) the Company's Investment in that Subsidiary at the time of such redesignation, less (b) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of that Subsidiary at the time of such redesignation. In determining the amount of any Investment made by transfer of any Property other than cash, the Property shall be valued at its Fair Market Value at the time of the Investment. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P. "Issue Date" means the first date on which the Securities are initially issued. "Issue Date Euro Notes" means Euro Notes issued on the first date on which the Euro Notes are initially issued. "Lien" means, with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to that Property (including any Capital Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction). "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Available Cash" from any Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Debt or other obligations relating to the Property that is the subject of that Asset Sale or received in any other non-cash form), in each case net of: 24 (a) all legal, title and recording tax expenses, commissions and other fees (including, without limitation, brokers' or investment bankers' commissions or fees) and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of the Asset Sale, (b) all payments made on any Debt that is secured by any Property subject to the Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to that Property, or which must by its terms, or in order to obtain a necessary consent to the Asset Sale, or by applicable law, be repaid out of the proceeds from the Asset Sale, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of the Asset Sale, and (d) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the Property disposed in the Asset Sale and retained by the Company or any Restricted Subsidiary after the Asset Sale. "Officer" means the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or the Assistant Treasurer of the Company. "Officers' Certificate" means a certificate signed by two Officers of the Company, at least one of whom shall be the principal executive officer or principal financial officer of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means the holders of Voting Stock as of the Issue Date, together with any Voting Trustee and any Person who is a "Permitted Transferee" of the holders, as that term is defined in the Stockholders Agreement dated as of April 15, 1996 between the Company and the stockholders of the Company party thereto as that Stockholders Agreement was in effect on the Issue Date, except that transferees pursuant to Section 2.2(a)(x) of that Stockholders Agreement shall not be deemed to be Permitted Transferees for purposes of the Indenture. 25 "Permitted Investment" means any Investment by the Company or a Restricted Subsidiary in: (a) any Restricted Subsidiary or any Person that will, upon the making of such Investment, become a Restricted Subsidiary, provided that the primary business of the Restricted Subsidiary is a Related Business; (b) any Person if as a result of the Investment that Person is merged or consolidated with or into, or transfers or conveys all or substantially all its Property to, the Company or a Restricted Subsidiary, provided that the Person's primary business is a Related Business; (c) Temporary Cash Investments; (d) receivables owing to the Company or a Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that those trade terms may include such -------- ------- concessionary trade terms as the Company or the Restricted Subsidiary deems reasonable under the circumstances; (e) payroll, travel and similar advances to cover matters that are expected at the time of those advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (f) loans and advances to employees made in the ordinary course of business consistent with past practices of the Company or the applicable Restricted Subsidiary, as the case may be, provided that those loans and advances do not exceed $5.0 million at any one time outstanding; (g) stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or a Restricted Subsidiary or in satisfaction of judgments; (h) any Person to the extent the Investment represents the non-cash portion of the consideration received in connection with an Asset Sale consummated in compliance with Section 4.07; 26 (i) a Receivables Entity or any Investment by a Receivables Entity in any other Person in connection with a Qualified Receivables Transaction, including Investments of funds held in accounts permitted or required by the arrangements governing that Qualified Receivables Transaction or any related Indebtedness; provided that any Investment in a Receivables Entity is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest; (j) customers or suppliers of the Company or any of its subsidiaries in the form of extensions of credit or transfers of property, to the extent otherwise constituting an Investment, and in the ordinary course of business and any Investments received in the ordinary course of business in satisfaction or partial satisfaction thereof; (k) any Person if the Investments are outstanding on the Issue Date and not otherwise described in clauses (a) through (j) above; and (l) any Person made for Fair Market Value that do not exceed $100.0 million outstanding at any one time in the aggregate. "Permitted Liens" means: (a) Liens (including, without limitation and to the extent constituting a Lien, negative pledges) to secure Debt permitted to be Incurred under clause (b) of the second paragraph of Section 4.04, regardless of whether the Company and the Restricted Subsidiaries are actually subject to the covenant contained in Section 4.04 at the time the Lien is Incurred; (b) Liens (including, without limitation and to the extent constituting a Lien, negative pledges) to secure Debt permitted to be Incurred under clause (h) of the second paragraph of Section 4.04, regardless of whether the Company and the Restricted Subsidiaries are actually subject to the covenant contained in Section 4.04 at the time the Lien is Incurred, provided that any Lien of this kind may not extend to any Property of the Company or any Restricted Subsidiary, other than the Property acquired, constructed or leased with the proceeds of that Debt and any improvements or accessions to that Property; 27 (c) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (d) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens and other similar Liens, on the Property of the Company or any Restricted Subsidiary arising in the ordinary course of business and securing payment of obligations that are not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (e) Liens on the Property of the Company or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice, including banker's liens and rights of set-off, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property and which do not in the aggregate impair in any material respect the use of Property in the operation of the business of the Company and the Restricted Subsidiaries taken as a whole; (f) Liens on Property at the time the Company or any Restricted Subsidiary acquired the Property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that any Lien of this kind -------- ------- may not extend to any other Property of the Company or any Restricted Subsidiary; provided further, however, that the Liens shall not have ---------------- ------- been Incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which the Property was acquired by the Company or any Restricted Subsidiary; 28 (g) Liens on the Property of a Person at the time that Person becomes a Restricted Subsidiary; provided, however, that any Lien of -------- ------- this kind may not extend to any other Property of the Company or any other Restricted Subsidiary that is not a direct Subsidiary of that Person; provided further, however, that the Lien was not Incurred in ---------------- ------- anticipation of or in connection with the transaction or series of transactions pursuant to which the Person became a Restricted Subsidiary; (h) pledges or deposits by the Company or any Restricted Subsidiary under worker's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company or any Restricted Subsidiary or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary, or deposits for the payment of rent, in each case Incurred in the ordinary course of business; (i) Liens (including, without limitation and to the extent constituting Liens, negative pledges), assignments and pledges of rights to receive premiums, interest or loss payments or otherwise arising in connection with worker's compensation loss portfolio transfer insurance transactions or any insurance or reinsurance agreements pertaining to losses covered by insurance, and Liens (including, without limitation and to the extent constituting Liens, negative pledges) in favor of insurers or reinsurers on pledges or deposits by the Company or any Restricted Subsidiary under workmen's compensation laws, unemployment insurance laws or similar legislation; (j) utility easements, building restrictions and such other encumbrances or charges against real Property as are of a nature generally existing with respect to properties of a similar character; (k) Liens arising out of judgments or awards against the Company or a Restricted Subsidiary with respect to which the Company or the Restricted Subsidiary shall then be proceeding with an appeal or other proceeding for review; 29 (l) Liens in favor of surety bonds or letters of credit issued pursuant to the request of and for the account of the Company or a Restricted Subsidiary in the ordinary course of its business, provided that these letters of credit do not constitute Debt; (m) leases or subleases of real property granted by the Company or a Restricted Subsidiary to any other Person in the ordinary course of business and not materially impairing the use of the real property in the operation of the business of the Company or the Restricted Subsidiary; (n) Liens (including, without limitation and to the extent constituting Liens, negative pledges) on intellectual property arising from intellectual property licenses entered into in the ordinary course of business; (o) Liens or negative pledges attaching to or related to joint ventures engaged in a Related Business, restricting Liens on interests in those joint ventures; (p) Liens existing on the Issue Date not otherwise described in clauses (a) through (o) above; (q) Liens not otherwise described in clauses (a) through (p) above on the Property of any Restricted Subsidiary to secure any Debt permitted to be Incurred by the Restricted Subsidiary pursuant to Section 4.04; (r) Liens on the Property of the Company or any Restricted Subsidiary to secure any Refinancing, in whole or in part, of any Debt secured by Liens referred to in clause (b), (e), (f), (g), (k) or (l) above; provided, however, that any Lien of this kind shall be limited -------- ------- to all or part of the same Property that secured the original Lien (together with improvements and accessions to such Property) and the aggregate principal amount of Debt that is secured by the Lien shall not be increased to an amount greater than the sum of: (1) the outstanding principal amount, or, if greater, the committed amount, of the Debt ecured by Liens described under clause (b), (e), (f), (g), (k) or (l) above, as the case may be, at the time the original Lien became a Permitted Lien under the indenture, and 30 (2) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, incurred by the Company or the Restricted Subsidiary in connection with the Refinancing; (s) Liens not otherwise permitted by clauses (a) through (r) above that are Liens permitted by the Existing Bank Credit Facilities as they exist on the Issue Date; and (t) Liens not otherwise permitted by clauses (a) through (s) above encumbering assets having an aggregate Fair Market Value not in excess of 5.0% of Consolidated Net Tangible Assets, as determined based on the consolidated balance sheet of the Company as of the end of the most recent fiscal quarter ending at least 45 days prior to the date the Lien shall be Incurred. "Permitted Refinancing Debt" means any Debt that Refinances any other Debt, including any successive Refinancings, so long as: (a) the new Debt is in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) not in excess of the sum of: (1) the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding of the Debt being Refinanced, and (2) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to the Refinancing, (b) the Average Life of the new Debt is equal to or greater than the Average Life of the Debt being Refinanced, (c) the Stated Maturity of the new Debt is no earlier than the Stated Maturity of the Debt being Refinanced, and (d) the new Debt shall not be senior in right of payment to the Debt that is being Refinanced; 31 provided, however, that Permitted Refinancing Debt shall not include: - -------- ------- (x) Debt of a Subsidiary that Refinances Debt of the Company or (y) Debt of the Company or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary. "Person" means any individual, corporation, company (including any limited liability company), association, partnership, joint venture, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of that Person, over shares of any other class of Capital Stock issued by that Person. "Preferred Stock Dividends" means all dividends with respect to Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Restricted Subsidiary. The amount of any dividend of this kind shall be equal to the quotient of the dividend divided by the difference between one and the maximum statutory federal income rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of the Preferred Stock. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation performed in accordance with Article 11 of Regulation S-X promulgated under the Securities Act, as interpreted in good faith by the Board of Directors after consultation with the independent certified public accountants of the Company, or otherwise a calculation made in good faith by the Board of Directors after consultation with the independent certified public accountants of the Company, as the case may be. "Property" means, with respect to any Person, any interest of that Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock in, and other securities of, any other Person. For purposes of any calculation required pursuant to the indenture, the value of any Property shall be its Fair Market Value. 32 "principal" of any Debt (including the Securities) means the principal amount of such Debt plus the premium, if any, on such Debt. "Public Equity Offering" means an underwritten public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after: (a) a Public Equity Offering has been consummated, and (b) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Purchase Money Debt" means Debt: (a) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds, in each case where the maturity of the Debt does not exceed the anticipated useful life of the Property being financed, and (b) Incurred to finance the acquisition, construction or lease by the Company or a Restricted Subsidiary of the Property, including additions and improvements thereto; provided, however, that the Debt is Incurred within 180 days after the - -------- ------- acquisition, construction or lease of the Property by the Company or Restricted Subsidiary. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to: (a) a Receivables Entity (in the case of a transfer by the Company or any of its Subsidiaries) and 33 (b) any other Person (in the case of a transfer by a Receivables Entity), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing those accounts receivable, all contracts and all Guarantees or other obligations in respect of those accounts receivable, proceeds of those accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable; provided that: (1) if the transaction involves a transfer of accounts receivable with Fair Market Value equal to or greater than $25.0 million, the Board of Directors shall have determined in good faith that the Qualified Receivables Transaction is economically fair and reasonable to the Company and the Receivables Entity, (2) all sales of accounts receivable and related assets to or by the Receivables Entity are made at Fair Market Value and (3) the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by the Board of Directors). The grant of a security interest in any accounts receivable of the Company or any of its Restricted Subsidiaries to secure the Credit Facilities shall not be deemed a Qualified Receivables Transaction. "Rating Agencies" mean Moody's and S&P. "Real Estate Financing Transaction" means any arrangement with any Person pursuant to which the Company or any Restricted Subsidiary Incurs Debt secured by a Lien on real property of the Company or any Restricted Subsidiary and related personal property together with any Refinancings thereof. "Receivables Entity" means a Wholly Owned Subsidiary of the Company (or another Person formed for the purposes of engaging in a Qualified Receivables Transaction with the Company in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable 34 and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Company and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to that business, and (with respect to any Receivables Entity formed after the Issue Date) which is designated by the Board of Directors (as provided below) as a Receivables Entity and (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (1) is Guaranteed by the Company or any Subsidiary of the Company (excluding Guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (2) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (3) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or the Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve the entity's financial condition or cause the entity to achieve certain levels of operating results other than pursuant to Standard Securitization Undertakings. Any designation of this kind by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to the designation and an Officers' Certificate certifying that the designation complied with the foregoing conditions. 35 "Refinance" means, in respect of any Debt, to refinance, extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or to issue other Debt, in exchange or replacement for, that Debt. "Refinanced" and "Refinancing" shall have correlative meanings. "Related Business" means any business that is related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Repay" means, in respect of any Debt, to repay, prepay, repurchase, redeem, legally defease or otherwise retire that Debt. "Repayment" and "Repaid" shall have correlative meanings. For purposes of Section 4.07 and Section 4.04 and the definition of "Consolidated Fixed Charges Coverage Ratio", Debt shall be considered to have been Repaid only to the extent the related loan commitment, if any, shall have been permanently reduced in connection therewith. "Restricted Payment" means: (a) any dividend or distribution (whether made in cash, securities or other Property) declared or paid on or with respect to any shares of Capital Stock of the Company or any Restricted Subsidiary (including any payment in connection with any merger or consolidation with or into the Company or any Restricted Subsidiary), except for any dividend or distribution that is made to the Company or the parent of the Restricted Subsidiary or any dividend or distribution payable solely in shares of Capital Stock (other than Disqualified Stock) of the Company; (b) the purchase, repurchase, redemption, acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary (other than from the Company or a Restricted Subsidiary) or any securities exchangeable for or convertible into Capital Stock of the Company or any Restricted Subsidiary, including the exercise of any option to exchange any Capital Stock (other than for or into Capital Stock of the Company that is not Disqualified Stock); (c) the purchase, repurchase, redemption, acquisition or retirement for value, prior to the date for any scheduled maturity, sinking fund or amortization or other installment payment, of any 36 Subordinated Obligation (other than the purchase, repurchase or other acquisition of any Subordinated Obligation purchased in anticipation of satisfying a scheduled maturity, sinking fund or amortization or other installment obligation, in each case due within one year of the date of acquisition); (d) any Investment (other than Permitted Investments) in any Person; or (e) the issuance, sale or other disposition of Capital Stock of any Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary if the result thereof is that the Restricted Subsidiary shall cease to be a Restricted Subsidiary, in which event the amount of the "Restricted Payment" shall be the Fair Market Value of the remaining interest, if any, in the former Restricted Subsidiary held by the Company and the other Restricted Subsidiaries. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Service or any successor to the rating agency business thereof. "Sale and Leaseback Transaction" means any direct or indirect arrangement relating to Property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers that Property to another Person and the Company or a Restricted Subsidiary leases it from that other Person together with any Refinancings thereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933. "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are customary in an accounts receivable securitization transaction involving a comparable company. 37 "Stated Maturity" means, with respect to any security, the date specified in the security as the fixed date on which the payment of principal of the security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of the security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless that contingency has occurred). "Subordinated Obligation" means any Debt of the Company (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" means, in respect of any Person, any corporation, company (including any limited liability company), association, partnership, joint venture or other business entity of which a majority of the total voting power of the Voting Stock is at the time owned or controlled, directly or indirectly, by: (a) that Person, (b) that Person and one or more Subsidiaries of that Person, or (c) one or more Subsidiaries of that Person. "Temporary Cash Investments" means any of the following: (a) Investments in U.S. Government Obligations maturing within 365 days of the date of acquisition thereof; (b) Investments in time deposit accounts, banker's acceptances, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company organized under the laws of the United States of America or any state thereof having capital, surplus and undivided profits aggregating in excess of $500 million or issued by a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development having total assets in excess of $500 million (or its foreign currency equivalent at the time), and in any case whose long-term debt is rated "A-3" or "A-" or higher according to Moody's or S&P (or a similar 38 equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)); (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) entered into with: (1) a bank meeting the qualifications described in clause (b) above, or (2) any primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (d) Investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any other country that is a member of the Organization for Economic Cooperation and Development, and in any case with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or"A-1" (or higher) according to S&P (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act); and (e) direct obligations (or certificates representing an ownership interest in such obligations) of any state of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of such state is pledged and which are not callable or redeemable at the issuer's option, provided that: (1) the long-term debt of the state is rated "A-3" or "A-" or higher according to Moody's or S&P (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), and (2) the obligations mature within 180 days of the date of acquisition thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, that, in the event the TIA is amended after such date, "Trust Indenture Act" means, to the 39 extent required by any such amendments, the Trust Indenture Act of 1939 as so amended. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means any officer within the Corporate Trust Administration department of the Trustee (or any successor group of the trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (a) any Subsidiary of the Company that is designated after the Issue Date as an Unrestricted Subsidiary as permitted or required pursuant to Section 4.10 and is not thereafter redesignated as a Restricted Subsidiary as permitted pursuant thereto; and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in THE WALL STREET JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. In determining the aggregate principal amount of Euro Notes outstanding, such amount will be treated as the U.S. Dollar Equivalent determined as of the date of issuance of such Euro Notes. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. 40 "Voting Stock" of any Person means all classes of Capital Stock or other interests (including partnership interests, and in the case of the Company, Voting Trust Certificates) of that Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Voting Trust Arrangement" means the Voting Trust Arrangement entered into as of April 15, 1996 by and among Robert D. Haas; Peter E. Haas, Sr.; Peter E. Haas, Jr.; and F. Warren Hellman as the Voting Trustees and the stockholders of the Company who are parties thereto. "Voting Trust Certificates" means those certificates issued pursuant to the Voting Trust Arrangement. "Voting Trustees" means the persons entitled to act as voting trustees under the Voting Trust Arrangement. "Wholly Owned Restricted Subsidiary" means, at any time, a Restricted Subsidiary all the Voting Stock of which (except directors' qualifying shares) is at that time owned, directly or indirectly, by the Company and its other Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions. ----------------- Defined in Term Section ---- ---------- "Affiliate Transaction" 4.09 "Bankruptcy Law" 6.01 "Change of Control Offer" 4.12 "Change of Control Payment Date" 4.12 "Change of Control Purchase Price" 4.12 "covenant defeasance option" 8.01 "Custodian" 6.01 "Event of Default" 6.01 "Exchange Security" Appendix A "Global Security" Appendix A "legal defeasance option" 8.01 "Legal Holiday" 10.08 "Offer Amount" 4.07 "Offer Period" 4.07 41 "Original Securities" 2.01 "Paying Agent" 2.04 "Prepayment Offer" 4.07 "Registered Exchange Offer" Appendix A "Registrar" 2.04 "Shelf Registration statement" Appendix A "Surviving Person" 5.01 SECTION 1.03. Incorporation by Reference of Trust Indenture ----------------------------------------------- Act. This Indenture is subject to the mandatory provisions of the TIA, which are - --- incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context --------------------- otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; 42 (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Debt shall not be deemed to be subordinate or junior to secured Debt merely by virtue of its nature as unsecured Debt; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (8) the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock. ARTICLE II The Securities -------------- SECTION 2.01. Amount of Securities; Issuable in Series. The ----------------------------------------- aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is (x) $850.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company. All Securities shall be identical in all respects other than issue prices and issuance dates. The Securities may be issued in one or more series; provided, however, that any Securities issued with original issue discount - -------- ------- ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Securities that are issued with a different amount of OID or are not issued with OID. All Securities of any one series shall be substantially identical except as to denomination. Subject to Section 2.03, the Trustee shall authenticate Securities for original issue on the Issue Date in the aggregate principal amount of $380.0 million (the "Original Securities"). With respect to any Securities issued after the Issue Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A), there shall be established in or pursuant to a resolution of the Board of Directors, and subject to Section 2.03, set forth, or determined in the manner provided in an Officers' 43 Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of such Securities: (1) whether such Securities shall be issued as part of a new or existing series of Securities and the title of such Securities (which shall distinguish the Securities of the series from Securities of any other series); (2) the aggregate principal amount of such Securities that may be authenticated and delivered under this Indenture, which shall be in an aggregate principal amount not to exceed (x) $350.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company that are not Issue Date Euro Notes (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the same series pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and except for Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (3) the issue price and issuance date of such Securities, including the date from which interest on such Securities shall accrue; (4) if applicable, that such Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends that shall be borne by any such Global Security in addition to or in lieu of that set forth in Exhibit 1 to Appendix A and any circumstances in addition to or in lieu of those set forth in Section 2.3 of Appendix A 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 depository for such Global Security or a nominee thereof; and (5) if applicable, that such Securities shall not be issued in the form of Initial Securities subject to Appendix A, but shall be issued in the form of Exchange Securities as set forth in Exhibit A. 44 If any of the terms of any series are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate or the trust indenture supplemental hereto setting forth the terms of the series. SECTION 2.02. Form and Dating. Provisions relating to the ---------------- Initial Securities of each series and the Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities of each series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities of each series may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. Each Security shall be dated the date of its authentication. The terms of the Securities of each series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.03. Execution and Authentication. Two Officers shall ---------------------------- sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. 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 written order of the Company in the form of an Officers' Certificate for the authentication and delivery of such Securities, and the Trustee in accordance with such written order of the Company shall authenticate and deliver such Securities. 45 A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Registrar and Paying Agent. The Company shall --------------------------- maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to ----------------------------------- each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of 46 Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Securityholder Lists. The Trustee shall preserve -------------------- in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.07. Replacement Securities. If a mutilated Security ---------------------- is surrendered to the Registrar or if the Holder of a Security claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding ----------------------- at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. 47 If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive ---------------------- Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancellation. The Company at any time may ------------ deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and dispose of all Securities surrendered for registration of transfer, exchange, payment or cancellation in its customary manner. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Company defaults in a ------------------ payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. 48 SECTION 2.12. CUSIP Numbers. The Company in issuing the -------------- Securities may use "CUSIP", "ISIN" or "Common Code" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP", "ISIN" or "Common Code" numbers in notices of redemption as a convenience to Holders; provided, -------- however, that neither the Company nor the Trustee shall have any responsibility -------- for any defect in the "CUSIP", "ISIN" or "Common Code" number that appears on any Security, check, advice of payment or redemption notice, and any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in such numbers. ARTICLE III Redemption ---------- SECTION 3.01. Notices to Trustee. If the Company elects to ------------------ redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and that such redemption is being made pursuant to paragraph 5 of the Securities. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer -------------------------------------- than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be 49 in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not -------------------- more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------ redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid 50 at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the ------------------------------ redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a --------------------------- Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV Covenants --------- SECTION 4.01. Covenant Suspension. During any period of time ------------------- that: (a) the Securities have Investment Grade Ratings from both Rating Agencies and (b) no Default or Event of Default has occurred and is continuing under the Indenture, the Company and the Restricted Subsidiaries will not be subject to the following Sections of the Indenture: Section 4.04, Section 4.05, Section 4.07, Section 4.08, clause (x) of the third paragraph (and as referred to in the first paragraph) of Section 4.10, and clause (e) of the first paragraph of Article 5. 51 (collectively, the "Suspended Covenants"). In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, one or both of the Rating Agencies withdraws its rating or downgrades the rating assigned to the Securities below the required Investment Grade Rating or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants for all periods after that withdrawal, downgrade, Default or Event of Default and, furthermore, compliance with the provisions of Section 4.05 with respect to Restricted Payments made after the time of the withdrawal, downgrade, Default or Event of Default will be calculated in accordance with the terms of that covenant as though that covenant had been in effect during the entire period of time from the Issue Date, provided that there will not be deemed to have occurred a Default or Event of Default with respect to that covenant during the time that the Company and the Restricted Subsidiaries were not subject to the Suspended Covenants (or after that time based solely on events that occurred during that time). SECTION 4.02. Payment of Securities. The Company shall ----------------------- promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. SECTION 4.03. SEC Reports. Notwithstanding that the Company ----------- may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Commission and provide the Trustee and Holders of Securities with annual reports and information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to those Sections, and the information, documents and reports to be so filed and provided at the times specified for the filing of the information, documents and reports under those Sections; provided, -------- however, that the Company shall not be so obligated to file the information, - ------- documents and reports with the Commission if 52 the Commission does not permit those filings. The Company shall also comply with the other provisions of TIA ss. 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates). SECTION 4.04. Limitation on Debt. The Company shall not, and ------------------ shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Debt unless, after giving effect to the application of the proceeds thereof, no Default or Event of Default would occur as a consequence of the Incurrence or be continuing following the Incurrence and either: (1) the Debt is Debt of the Company and after giving effect to the Incurrence of the Debt and the application of the proceeds thereof, the Consolidated Fixed Charges Coverage Ratio would be greater than 2.00 to 1.00 if the Debt is Incurred from the Issue Date through January 15, 2004, and 2.50 to 1.00 if the Debt is Incurred thereafter, or (2) the Debt is Permitted Debt. The term "Permitted Debt" is defined to include the following: (a) Debt of the Company evidenced by the Original Securities; (b) Debt of the Company or a Restricted Subsidiary under any Credit Facilities, Incurred by the Company or a Restricted Subsidiary pursuant to a Real Estate Financing Transaction, a Sale and Leaseback Transaction or an Equipment Financing Transaction, or Incurred by a Receivables Entity in a Qualified Receivables Transaction that is not recourse to the Company or any other Restricted Subsidiary of the Company (except for Standard Securitization Undertakings), provided that the aggregate principal amount of all Debt of this kind at any one time outstanding shall not exceed the greater of: 53 (1) $1.6 billion, which amount shall be permanently reduced by the amount of Net Available Cash used to Repay Debt under the Credit Facilities pursuant to Section 4.07 and (2) the sum of the amounts equal to: (A) 50% of the book value of the inventory of the Company and the Restricted Subsidiaries and (B) 85% of the book value of the accounts receivable of the Company and the Restricted Subsidiaries, in the case of each of clauses (A) and (B) as of the most recently ended quarter of the Company for which financial statements of the Company have been provided to the Holders of Securities; (c) Debt of the Company owing to and held by any Restricted Subsidiary and Debt of a Restricted Subsidiary owing to and held by the Company or any Restricted Subsidiary; provided, however, that (1) any -------- ------- subsequent issue or transfer of Capital Stock or other event that results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of that Debt (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of that Debt by the issuer thereof, and (2) if the Company is the obligor on that Indebtedness, the Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities; (d) Debt of a Restricted Subsidiary outstanding on the date on which that Restricted Subsidiary was acquired by the Company or otherwise became a Restricted Subsidiary (other than Debt Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which that Restricted Subsidiary became a Subsidiary of the Company or was otherwise acquired by the Company), provided that at the time that Restricted Subsidiary was acquired by the Company or otherwise became a Restricted Subsidiary and after giving effect to the Incurrence of that Debt, the Company would have been able to Incur $1.00 of additional Debt pursuant to clause (1) of the first paragraph of this covenant; 54 (e) Debt under Interest Rate Agreements entered into by the Company or a Restricted Subsidiary for the purpose of limiting interest rate risk in the ordinary course of the financial management of the Company or that Restricted Subsidiary and not for speculative purposes, provided that the obligations under those agreements are related to payment obligations on Debt otherwise permitted by the terms of this covenant; (f) Debt under Currency Exchange Protection Agreements entered into by the Company or a Restricted Subsidiary for the purpose of limiting currency exchange rate risks directly related to transactions entered into by the Company or that Restricted Subsidiary in the ordinary course of business and not for speculative purposes; (g) Debt under Commodity Price Protection Agreements entered into by the Company or a Restricted Subsidiary in the ordinary course of the financial management of the Company or that Restricted Subsidiary and not for speculative purposes; (h) Debt Incurred in respect of Capital Lease Obligations and Purchase Money Debt, provided that the aggregate principal amount of all Debt of this kind does not exceed the Fair Market Value, on the date of Incurrence thereof, of the Property acquired, constructed or leased, and provided further, that the aggregate principal amount outstanding of all Debt of this kind at any one time, together with all Permitted Refinancing Debt Incurred and outstanding in respect of these Capital Lease Obligations and Purchase Money Debt, does not exceed $50.0 million; (i) Debt outstanding on the Issue Date not otherwise described in clauses (a) through (h) above; (j) Debt of the Company or a Restricted Subsidiary in an aggregate principal amount outstanding at any one time not to exceed $100.0 million; and (k) Permitted Refinancing Debt Incurred in respect of Debt Incurred pursuant to clause (1) of the first paragraph of this covenant and clauses (a), (d), (h) and (i) above. 55 SECTION 4.05. Limitation on Restricted Payments. The Company --------------------------------- shall not make, and shall not permit any Restricted Subsidiary to make, directly or indirectly, any Restricted Payment if at the time of, and after giving effect to, the proposed Restricted Payment, (a) a Default or Event of Default shall have occurred and be continuing, (b) the Company could not Incur at least $1.00 of additional Debt pursuant to clause (1) of the first paragraph of Section 4.04 or (c) the aggregate amount of that Restricted Payment and all other Restricted Payments declared or made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of: (1) 50% of the aggregate amount of Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of the Restricted Payment (or if the aggregate amount of Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), plus (2) Capital Stock Sale Proceeds, plus (3) the sum of: (A) the aggregate net cash proceeds received by the Company or any Restricted Subsidiary from the issuance or sale after the Issue Date of convertible or exchangeable Debt that has been converted into or exchanged for Capital Stock (other than Disqualified Stock) of the Company, and (B) the aggregate amount by which Debt of the Company or any Restricted Subsidiary is reduced on the Company's consolidated balance sheet on or after the Issue Date upon the conversion or exchange of any Debt issued or sold on or prior to the Issue Date that is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the 56 Company, excluding, in the case of clause (A) or (B): (x) any Debt issued or sold to the Company or a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any Subsidiary for the benefit of their employees, and (y) the aggregate amount of any cash or other Property distributed by the Company or any Restricted Subsidiary upon any such conversion or exchange, plus (4) an amount equal to the sum of: (A) the net reduction in Investments in any Person other than the Company or a Restricted Subsidiary resulting from dividends, repayments of loans or advances or other transfers of Property, in each case to the Company or any Restricted Subsidiary from that Person, less the cost of the disposition of those Investments, and (B) the lesser of the net book value or the Fair Market Value of the Company's equity interest in an Unrestricted Subsidiary at the time the Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Person, the amount of Investments previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in that Person. Notwithstanding the foregoing limitation, the Company may: (a) pay dividends on its Capital Stock within 60 days of the declaration thereof if, on said declaration date, the dividends could have been paid in compliance with the Indenture; provided, however, that at the time of the payment of the dividend, no other Default or Event of Default shall have occurred and be continuing (or result therefrom); provided further, however, that the dividend shall be included in the calculation of the amount of Restricted Payments; (b) purchase, repurchase, redeem, legally defease, acquire or retire for value Capital Stock of the Company or Subordinated Obligations in exchange for, or 57 out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any Subsidiary for the benefit of their employees); provided, however, that -------- ------- (1) the purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall be excluded in the calculation of the amount of Restricted Payments and (2) the Capital Stock Sale Proceeds from the exchange or sale shall be excluded from the calculation pursuant to clause (c)(2) above; (c) purchase, repurchase, redeem, legally defease, acquire or retire for value any Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Permitted Refinancing Debt; provided, however, that the purchase, repurchase, -------- ------- redemption, legal defeasance, acquisition or retirement shall be excluded in the calculation of the amount of Restricted Payments; (d) pay scheduled dividends (not constituting a return on capital) on Disqualified Stock of the Company issued pursuant to and in compliance with Section 4.04; (e) permit a Restricted Subsidiary that is not a Wholly Owned Subsidiary to pay dividends to shareholders of that Restricted Subsidiary that are not the parent of that Restricted Subsidiary, so long as the Company or a Restricted Subsidiary that is the parent of that Restricted Subsidiary receives dividends on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary that is the parent of that Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis; and (f) until January 31, 2002 or the earlier termination of all of the Existing Bank Credit Facilities, permit the making of a Restricted Payment (as defined in the Existing Bank Credit Facilities, without giving effect to any waiver or amendment thereto after the Issue Date) or the transfer of assets from any Subsidiary to its parent (in each case, to the 58 extent such a payment or transfer is not permitted to be restricted or limited under Section 7.18 of each of the Existing Bank Credit Facilities, without giving effect to any waiver or amendment thereto after the Issue Date). SECTION 4.06. Limitation on Liens. The Company shall not, and ------------------- shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its Property (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any interest therein or any income or profits therefrom, unless it has made or will make effective provision whereby the Securities will be secured by that Lien equally and ratably with (or prior to) all other Debt of the Company or any Restricted Subsidiary secured by that Lien. SECTION 4.07. Limitation on Asset Sales. (a) The Company shall ------------------------- not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless: (i) the Company or the Restricted Subsidiary receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the Property subject to such Asset Sale; (ii) at least 75% of the consideration paid to the Company or the Restricted Subsidiary in connection with such Asset Sale is in the form of cash or cash equivalents or the assumption by the purchaser of liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities) as a result of which the Company and the Restricted Subsidiaries are no longer obligated with respect to such liabilities, provided, however, -------- ------- that in the case of a transaction involving a sale of any distribution center by the Company or a Restricted Subsidiary and the establishment of an outsourcing arrangement in which the purchaser assumes distribution responsibilities on behalf of the Company or the Restricted Subsidiary, any credits or other consideration the purchaser grants to the Company or the Restricted Subsidiary as part of the purchase price of the distribution center, which credits or other consideration effectively offset future payments due from the Company or the Restricted Subsidiary to the purchaser as part of the outsourcing 59 arrangement, will be considered to be cash equivalents for purposes of this clause (ii); and (iii) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Sale complies with the foregoing clauses (i) and (ii). (b) The Net Available Cash (or any portion thereof) from Asset Sales may be applied by the Company or a Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Debt): (i) to Repay Debt under the Credit Facilities, or to Repay Debt of the Company or any Restricted Subsidiary secured by a Lien pursuant to Section 4.06 on the assets subject to that Asset Sale (excluding, in any such case, any Debt owed to the Company or an Affiliate of the Company); or (ii) to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary), provided, however, that the Net Available Cash (or any -------- ------- portion thereof) from Asset Sales from the Company to any Subsidiary must be reinvested in Additional Assets of the Company. (c) Any Net Available Cash from an Asset Sale not applied in accordance with the preceding paragraph within 360 days from the date of the receipt of such Net Available Cash shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds not previously subject to a Prepayment Offer (as defined below) exceeds $10.0 million (taking into account income earned on those Excess Proceeds, if any), the Company will be required to make an offer to purchase the Securities (the "Prepayment Offer") which offer shall be in the amount of the Allocable Excess Proceeds, on a pro rata basis according to principal amount, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the procedures (including prorating in the event of oversubscription) set forth in this Indenture. To the extent that any portion of the amount of Net Available Cash remains after compliance with the preceding sentence and provided that all Holders of Securities have been given the 60 opportunity to tender their Securities for purchase in accordance with this Indenture, the Company or such Restricted Subsidiary may use the remaining amount for any purpose permitted by this Indenture and the amount of Excess Proceeds will be reset to zero. The term "Allocable Excess Proceeds" will mean the product of: (a) the Excess Proceeds and (b) a fraction, (1) the numerator of which is the aggregate principal amount of the Securities outstanding on the date of the Prepayment Offer, and (2) the denominator of which is the sum of the aggregate principal amount of the Securities outstanding on the date of the Prepayment Offer and the aggregate principal amount of other Debt of the Company outstanding on the date of the Prepayment Offer that is pari passu in right of payment with the Securities and subject to terms and conditions in respect of Asset Sales similar in all material respects to the covenant described hereunder and requiring the Company to make an offer to purchase such Debt at substantially the same time as the Prepayment Offer. (d)(1) Within five Business Days after the Company is obligated to make a Prepayment Offer as described in the preceding paragraph, the Company shall send a written notice, by first-class mail, to the Holders of Securities, accompanied by information regarding the Company and its Subsidiaries as the Company in good faith believes will enable the Holders to make an informed decision with respect to that Prepayment Offer. The notice shall state, among other things, the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 30 days nor later than 60 days from the date the notice is mailed. (2) Not later than the date upon which written notice of a Prepayment Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Prepayment Offer is 61 being made and (iii) the compliance of such allocation with the provisions of Section 4.07(b). On or before the Purchase Date, the Company shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary Cash Investments (other than in those enumerated in clause (b) of the definition of Temporary Cash Investments), maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Prepayment Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof that have been properly tendered to and are to be accepted by the Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee or the Paying Agent shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on pro rata basis for all Securities, (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in 62 principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee that are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee or the Paying Agent mails or delivers payment therefor to the surrendering Holder. (e) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. SECTION 4.08. Limitation on Restrictions on Distributions from ------------------------------------------------ Restricted Subsidiaries. The Company shall not, and shall not permit any - ------------------------ Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist any consensual restriction on the right of any Restricted Subsidiary to: (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, or pay any Debt or other obligation owed, to the Company or any other Restricted Subsidiary, (b) make any loans or advances to the Company or any other Restricted Subsidiary or (c) transfer any of its Property to the Company or any other Restricted Subsidiary. The foregoing limitations will not apply: (1) with respect to clauses (a), (b) and (c), to restrictions: (A) in effect on the Issue Date, (B) relating to Debt of a Restricted Subsidiary and existing at the time it became 63 a Restricted Subsidiary if such restriction was not created in connection with or in anticipation of the transaction or series of transactions pursuant to which that Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, (C) that result from the Refinancing of Debt Incurred pursuant to an agreement referred to in clause (1)(A) or (B) above or in clause (2)(A) or (B) below, provided that restriction is no less favorable to the Holders of Securities than those under the agreement evidencing the Debt so Refinanced, or (D) resulting from the Incurrence of any Permitted Debt described in clause (b) of the second paragraph of Section 4.04, provided that the restriction is no less favorable to the Holders of Securities than the restrictions of the same type contained in the Indenture, and (2) with respect to clause (c) only, to restrictions: (A) relating to Debt that is permitted to be Incurred and secured without also securing the notes pursuant to Section 4.04 and Section 4.06 that limit the right of the debtor to dispose of the Property securing that Debt, (B) encumbering Property at the time the Property was acquired by the Company or any Restricted Subsidiary, so long as the restriction relates solely to the Property so acquired and was not created in connection with or in anticipation of the acquisition, (C) resulting from customary provisions restricting subletting or assignment of leases or customary provisions in other agreements (including, without limitation, intellectual property licenses entered into in the ordinary course of business) that restrict assignment of the agreements or rights thereunder, or 64 (D) which are customary restrictions contained in asset sale agreements limiting the transfer of Property pending the closing of the sale. SECTION 4.09. Limitation on Transactions with Affiliates. The ------------------------------------------ Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of transactions (including the purchase, sale, transfer, assignment, lease, conveyance or exchange of any Property or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"), unless: (a) the terms of such Affiliate Transaction are: (1) set forth in writing, and (2) no less favorable to the Company or that Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company, and (b) if the Affiliate Transaction involves aggregate payments or value in excess of $10.0 million, the Board of Directors (including a majority of the disinterested members of the Board of Directors) approves the Affiliate Transaction and, in its good faith judgment, believes that the Affiliate Transaction complies with clauses (a)(1) and (2) of this paragraph as evidenced by a Board Resolution promptly delivered to the trustee. Notwithstanding the foregoing limitation, the Company or any Restricted Subsidiary may enter into or suffer to exist the following: (a) any transaction or series of transactions between the Company and one or more Restricted Subsidiaries or between two or more Restricted Subsidiaries in the ordinary course of business, provided that no more than 5% of the total voting power of the Voting Stock (on a fully diluted basis) of any such Restricted Subsidiary is owned by an Affiliate of the Company (other than a Restricted Subsidiary); (b) any Restricted Payment permitted to be made pursuant to Section 4.05 or any Permitted Investment; 65 (c) the payment of compensation (including amounts paid pursuant to employee benefit plans) for the personal services of officers, directors and employees of the Company or any of the Restricted Subsidiaries, so long as, in the case of officers and directors, the Board of Directors in good faith shall have approved the terms thereof and deemed the services theretofore or thereafter to be performed for the compensation to be fair consideration therefor; (d) loans and advances to employees made in the ordinary course of business and consistent with the past practices of the Company or that Restricted Subsidiary, as the case may be, provided that those loans and advances do not exceed $5.0 million in the aggregate at any one time outstanding; (e) any transaction effected as part of a Qualified Receivables Transaction or any transaction involving the transfer of accounts receivable of the type specified in the definition of "Credit Facility" and permitted under clause (b) of the second paragraph of Section 4.04; and (f) the Existing Policies or any transaction contemplated thereby. SECTION 4.10. Designation of Restricted and Unrestricted ------------------------------------------ Subsidiaries. The Board of Directors may designate any Subsidiary of the Company - ------------ to be an Unrestricted Subsidiary if: (a) the Subsidiary to be so designated does not own any Capital Stock or Debt of, or own or hold any Lien on any Property of, the Company or any other Restricted Subsidiary, and (b) any of the following: (1) the Subsidiary to be so designated has total assets of $1,000 or less, (2) if the Subsidiary has consolidated assets greater than $1,000, then the designation would be permitted under Section 4.05, or (3) the designation is effective immediately upon the entity becoming a Subsidiary of the Company. 66 Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company will be classified as a Restricted Subsidiary; provided, however, that the Subsidiary shall not be designated a Restricted - -------- ------- Subsidiary and shall be automatically classified as an Unrestricted Subsidiary if either of the requirements set forth in clauses (x) and (y) of the second immediately following paragraph will not be satisfied after giving pro forma effect to the classification or if the Person is a Subsidiary of an Unrestricted Subsidiary. Except as provided in the first sentence of the preceding paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. In addition, neither the Company nor any Restricted Subsidiary shall at any time be directly or indirectly liable for any Debt that provides that the holder thereof may (with the passage of time or notice or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its Stated Maturity upon the occurrence of a default with respect to any Debt, Lien or other obligation of any Unrestricted Subsidiary in existence and classified as an Unrestricted Subsidiary at the time the Company or the Restricted Subsidiary is liable for that Debt (including any right to take enforcement action against that Unrestricted Subsidiary). The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to the designation, (x) the Company could Incur at least $1.00 of additional Debt pursuant to clause (1) of the first paragraph of Section 4.04, and (y) no Default or Event of Default shall have occurred and be continuing or would result therefrom. Any designation or redesignation of this kind by the Board of Directors will be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to the designation or redesignation and an Officers' Certificate that: (a) certifies that the designation or redesignation complies with the foregoing provisions, and (b) gives the effective date of the designation or redesignation, and the filing with the Trustee to occur 67 within 45 days after the end of the fiscal quarter of the Company in which the designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal quarter of the Company's fiscal year, within 90 days after the end of that fiscal year). SECTION 4.11. Limitation on Sale and Leaseback Transactions. ---------------------------------------------- The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction with respect to any Property unless: (a) the Company or that Restricted Subsidiary would be entitled to: (1) Incur Debt in an amount equal to the Attributable Debt with respect to that Sale and Leaseback Transaction pursuant to Section 4.04, and (2) create a Lien on the Property securing that Attributable Debt without also securing the Securities pursuant to Section 4.06, and (b) the Sale and Leaseback Transaction is effected in compliance with Section 4.07. SECTION 4.12. Change of Control. ----------------- (a) Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require the Company to repurchase all or any part of such Holder's Securities pursuant to the offer described below (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") equal to 101.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). (b) Within 30 days following any Change of Control, the Company shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send, by first-class mail, with a copy to the Trustee, to each Holder of Securities, at such Holder's address appearing in the Security Register, a notice stating: (A) that a Change of Control Offer is being made pursuant to this Section 4.12 and that all Securities timely tendered will be accepted for payment; (B) the Change of Control Purchase Price and the purchase date, which shall be, subject to any contrary requirements of applicable law, 68 a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (C) the circumstances and relevant facts regarding the Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to the Change of Control); and (D) the procedures that Holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders of Securities must follow in order to withdraw an election to tender Securities (or portions thereof) for payment. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Security purchased. (d) On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Wholly Owned Subsidiaries is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal to the Change of Control Purchase Price payable to the Holders entitled thereto, to be held for payment in accordance with the provisions of this Section. On the Change of Control Payment Date, the Company shall deliver to the Trustee the Securities or portions thereof that have been properly tendered to and are to be accepted by the Company for payment. The Trustee or the Paying Agent shall, on the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Purchase Price. In the event that the aggregate Change of Control Purchase Price is less than the amount delivered by the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be, shall deliver the excess to the Company immediately after the Change of Control Payment Date. (e) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the purchase of Securities pursuant to this 69 Section. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.13. Further Instruments and Acts. Upon request of ------------------------------ the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE V Successor Company ----------------- SECTION 5.01. (a) When Company May Merge or Transfer Assets. ------------------------------------------ The Company shall not merge, consolidate or amalgamate with or into any other Person (other than a merger of a Wholly Owned Restricted Subsidiary into the Company) or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all its Property in any one transaction or series of transactions unless: (a) the Company shall be the surviving Person (the "Surviving Person") or the Surviving Person (if other than the Company) formed by that merger, consolidation or amalgamation or to which that sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (b) the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by that Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Securities, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of the Indenture to be performed by the Company; 70 (c) in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all the Property of the Company, that Property shall have been transferred as an entirety or virtually as an entirety to one Person; (d) immediately before and after giving effect to that transaction or series of transactions on a pro forma basis (and treating, for purposes of this clause (d) and clause (e) below, any Debt that becomes, or is anticipated to become, an obligation of the Surviving Person or any Restricted Subsidiary as a result of that transaction or series of transactions as having been Incurred by the Surviving Person or the Restricted Subsidiary at the time of that transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing; (e) immediately after giving effect to that transaction or series of transactions on a pro forma basis, the Company or the Surviving Person, as the case may be, would be able to Incur at least $1.00 of additional Debt under clause (1) of the first paragraph of Section 4.04, provided, however, that this clause (e) shall not be -------- ------- applicable to the Company merging, consolidating or amalgamating with or into an Affiliate incorporated solely for the purpose of reincorporating the Company in another State of the United States so long as the amount of Debt of the Company and the Restricted Subsidiaries is not increased thereby; (f) the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that the transaction and the supplemental indenture, if any, in respect thereto comply with this covenant and that all conditions precedent herein provided for relating to the transaction have been satisfied; and (g) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of the transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if that transaction had not occurred. 71 The Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of the Company under the Indenture, but the predecessor Company in the case of: (a) a sale, transfer, assignment, conveyance or other disposition (unless that sale, transfer, assignment, conveyance or other disposition is of all the assets of the Company as an entirety or virtually as an entirety), or (b) a lease, shall not be released from any obligation to pay the principal of, premium, if any, and interest on, the Securities. ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01. Events of Default. The following events shall ----------------- be "Events of Default": (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise; (3) the Company fails to comply with Article 5; (4) the Company fails to comply with any covenant or agreement in the Securities or in this Indenture (other than a failure that is the subject of the foregoing clause (1), (2) or (3)) and such failure continues for 30 days after written notice is given to the Company as specified below; (5) a default under any Debt by the Company or any Restricted Subsidiary that results in acceleration of the maturity of that Debt, or failure to pay any such Debt at maturity, in an aggregate amount greater than $25.0 million or its foreign currency equivalent at the time; 72 (6) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or (D) grants any similar relief under any foreign laws; and in each such case the order or decree remains unstayed and in effect for 30 days; or (8) any judgment or judgments for the payment of money in an aggregate amount in excess of $25.0 million, or its foreign currency equivalent at the time, that shall be rendered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any period of 30 consecutive days during which a stay of enforcement shall not be in effect. 73 The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, ------------------ or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company (and in the case of such notice by Holders, the Trustee) of the Default and the Company does not cure that Default within the time specified after receipt of such notice. The notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event that with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default with ------------ respect to any of the Securities (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) shall have occurred and be continuing, the Trustee or the registered Holders of not less than 25% in aggregate principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, declare to be immediately due and payable the principal amount of all the applicable Securities then outstanding, plus accrued but unpaid interest to the date of acceleration. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(6) or (7) with respect to the Company occurs, the principal of and accrued and unpaid interest on all the Securities shall be due and payable immediately without any declaration or other act by the Trustee or the Holder of the Securities. After any such acceleration but before a judgment or decree based on acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding 74 Securities by notice to the Trustee and the Company may rescind any declaration of acceleration if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs --------------- and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a ------------------------- majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority ------------------- in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, -------- however, that the Trustee may take any other action deemed proper by the Trustee - ------- that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to 75 reasonable indemnification against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding shall have made a written request, and such Holder or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and (3) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the Securities outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer. The foregoing limitations on the pursuit of remedies by a Securityholder shall not apply to a suit instituted by a Holder of Securities for the enforcement of payment of the principal of, and premium, if any, or interest on such Security on or after the applicable due date specified in such Security. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. ------------------------------------------- Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of ---------------------------- Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. 76 SECTION 6.09. Trustee May File Proofs of Claim. The Trustee -------------------------------- may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money ---------- or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the ----------------------- enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and 77 good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company --------------------------------- (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that 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 shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee ------- SECTION 7.01. Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture but need not confirm or 78 investigate the accuracy of any mathematical calculations or other facts stated therein. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (h) 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 and to the provisions of the TIA and the provisions of this Article VII shall apply to the Trustee in its role as Registrar, Paying Agent and Security Custodian. (i) The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (a) the Trustee has received written notice thereof from the Company 79 or any Holder or (b) a Trust Officer shall have actual knowledge thereof. SECTION 7.02. Rights of Trustee. ------------------- (a) The Trustee may conclusively rely on any document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may, however, in its discretion 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 at the expense of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct -------- ------- does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. (g) 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 security or indemnity satisfactory to 80 the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. SECTION 7.03. Individual Rights of Trustee. The Trustee in its ---------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be --------------------- responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of ------------------- Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default in payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as ----------------------------- practicable after each December 31 beginning with December 31, 2000, and in any event prior to March 31 in each year, the Trustee shall mail to each Securityholder a brief report dated as of December 31 each year that complies with TIA ss. 313(a), if and to the extent required by such subsection. The Trustee shall also comply with TIA ss. 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. 81 SECTION 7.07. Compensation and Indemnity. The Company shall --------------------------- pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder except to the extent that the Company shall have been actually prejudiced as a result of such failure. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld. All indemnifications and releases from liability granted hereunder to the Trustee shall extend to its officers, directors, employees, agents, successors and assigns. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the resignation or removal of the Trustee and the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(6) or (7) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign ---------------------- at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so 82 notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in aggregate principal amount of the Securities then outstanding and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder who has been a bona fide Holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. 83 SECTION 7.09. Successor Trustee by Merger. If the Trustee ---------------------------- consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall ----------------------------- at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b), subject to the penultimate paragraph thereof; provided, however, -------- ------- that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against --------------------------------------------- Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor - ------- relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance ---------------------------------- 84 SECTION 8.01. Discharge of Liability on Securities; Defeasance. ------------------------------------------------- (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, and 4.12 and the operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of Sections 6.01(6) and (7), with respect only to Significant Subsidiaries) and the limitations contained in clause (e) of Article 5 ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4) (with respect to the covenants of Article IV identified in the immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) or 6.01(8) (with respect only to Significant Subsidiaries in the case of Sections 6.01(6) and 6.01(7)) or because of the failure of the Company to comply with the limitations contained in clause (e) of Article 5. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. 85 (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive such satisfaction or discharge. SECTION 8.02. Conditions to Defeasance. The Company --------------------------- may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(6) or (7) occurs with respect to the Company or any other Person making the deposit that is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement or instrument binding on the Company; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the 86 date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Security-holders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall --------------------------- hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.04. Repayment to Company. The Trustee and the Paying -------------------- Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. 87 SECTION 8.05. Indemnity for Government Obligations. The ------------------------------------ Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is ------------- unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if -------- ------- the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments ---------- SECTION 9.01. Without Consent of Holders. The Company and -------------------------- the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, -------- ------- that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add Guarantees with respect to the Securities; 88 (5) to secure the Securities, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (6) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; (7) to make any change that does not adversely affect the rights of any Securityholder; or (8) to provide for the issuance of additional Securities in accordance with the Indenture. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the ------------------------ Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; (5) reduce the amount payable upon the redemption or repurchase of any Security under Article III or 89 Section 4.07 or 4.12, change the time at which any Security may be redeemed in accordance with Article III, or, at any time after a Change of Control or Asset Sale has occurred, change the time at which any Change of Control Offer or Prepayment Offer must be made or at which the Securities must be repurchased pursuant to such Change of Control Offer or Prepayment Offer; (6) make any Security payable in money other than that stated in the Security; (7) release any security interest that may have been granted in favor of the Holders other than pursuant to the terms of the agreement granting that security interest; (8) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (9) subordinate the Securities to any other obligation of the Company It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every ------------------------------------- amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A --------------------------------------------- consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective 90 upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an ------------------------------------- amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver such Security to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return such Security to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall --------------------------- sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any ------------------- Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in 91 the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Miscellaneous ------------- SECTION 10.01. Trust Indenture Act Controls. If any provision ---------------------------- of this Indenture limits, qualifies or conflicts with another provision that is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 10.02. Notices. Any notice or communication shall be ------- in writing and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and addressed as follows: if to the Company: Levi Strauss & Co. Levi's Plaza 1155 Battery Street San Francisco, CA 94111 Facsimile: (415) 501-7650 Attention of: Legal Department if to the Trustee: Citibank, N.A., 111 Wall Street, 14th Floor New York, NY 10005 Attention of: Citibank Agency and Trust Services The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration 92 books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.03. Communication by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 10.04. Certificate and Opinion as to Conditions --------------------------------------------- Precedent. Upon any request or application by the Company to the Trustee to take - --------- or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05. Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (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; 93 (3) a statement that, in the opinion of 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 or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 10.06. When Securities Disregarded. In determining ----------------------------- whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. --------------------------------------------- The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent or co-registrar may make reasonable rules for their functions. SECTION 10.08. Legal Holidays. A "Legal Holiday" is a --------------- Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 10.09. Governing Law. THIS INDENTURE AND THE --------------- SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 10.10. No Recourse Against Others. A director, -------------------------- officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such 94 obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 10.11. Successors. All agreements of the Company ---------- in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.12. Multiple Originals. The parties may sign any ------------------ number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.13. Table of Contents; Headings. The table of ----------------------------- contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 95 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. LEVI STRAUSS & CO., by ---------------------------------------- Name: Title: CITIBANK, N.A., by ---------------------------------------- Name: Title: APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES ----------------------------------------- AND EXCHANGE SECURITIES ----------------------- 1. Definitions ----------- 1.1 Definitions For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Clearstream" means Clearstream Banking, S.A., formerly known as Cedel Bank, S.A., or any successor securities clearing agency. "Definitive Security" means a certificated Initial Security or Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(d). "Depository" means The Depository Trust Company, its nominees and their respective successors. "Distributed Compliance Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Securities. "Exchange Securities" means the 11 5/8% Senior Notes due 2008 to be issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "Euroclear" means Morgan Guaranty Trust Company of New York (Brussels office) as operator of the Euroclear Clearance System or any successor securities clearing agency. "Euro Notes" means the Company's 11 5/8% Senior Notes due 2008 denominated in euros and issued pursuant to an indenture dated the date hereof between the Company and Citibank, N.A. as trustee. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. 2 "Initial Purchasers" means Salomon Smith Barney Inc., Banc of America Securities LLC, Scotia Capital (USA) Inc., Chase Securities Inc. and Banc One Capital Markets, Inc. "Initial Securities" means the 11 5/8% Senior Notes due 2008, to be issued from time to time, in one or more series as provided for in this Indenture. "Issue Date Euro Notes" means Euro Notes issued on the first date on which the Euro Notes are initially issued. "Original Securities" means Initial Securities in the aggregate principal amount of $380.0 million issued on January 18, 2001. "Private Exchange" means the offer by the Company, pursuant to Section 2 of the Registration Agreement dated January 18, 2001, or pursuant to any similar provision of any other Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means the 11 5/8% Senior Notes due 2008 to be issued pursuant to this Indenture in connection with a Private Exchange pursuant to a Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated January 12, 2001, among the Company and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any future sale of Initial Securities by the Company. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to a Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Agreement" means the Registration Rights Agreement dated January 18, 2001, among the Company and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any additional Initial Securities. 3 "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities" means the Initial Securities and the Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee. "Shelf Registration Statement" means a registration statement issued by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in THE WALL STREET JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. In determining the aggregate principal amount of Euro Notes outstanding, such amount will be treated as the U.S. Dollar Equivalent determined as of the date of issuance of such Euro Notes. 1.2 Other Definitions ----------------- Defined in Term Section: ---- ---------- "Agent Members" 2.1(b) "Global Security" 2.1(a) "IAI Global Security" 2.1(a) "Regulation S" 2.1 "Rule 144A" 2.1 "Rule 144A Global Security" 2.1(a) "Regulation S Global Security" 2.1(a) 4 2. The Securities -------------- 2.1 Form and Dating --------------- The Initial Securities will be offered and sold by the Company, from time to time, pursuant to one or more Purchase Agreements. The Initial Securities will be resold initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and in reliance on Regulation S under the Securities Act ("Regulation S"). Initial Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and IAIs under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, subject to the restrictions on transfer set forth herein. (a) Global Securities. Initial Securities initially resold ------------------ pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security"), Initial Securities initially resold pursuant to Regulation S shall be issued initially in the form of one or more global securities (collectively, the "Regulation S Global Security") and, subject to Section 2.4 hereof, Initial Securities transferred subsequent to the initial resale thereof to IAIs shall be issued initially in the form of one or more permanent global securities in definitive, fully registered form (collectively, the "IAI Global Security"), in each case without interest coupons and with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. The Rule 144A Global Security, IAI Global Security and Regulation S Global Security are collectively referred to herein as "Global Securities." The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply ---------------------- only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company, authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of 5 the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as Securities Custodian or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Definitive Securities. Except as provided in Section ---------------------- 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of Definitive Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) -------------- Original Securities for original issue in an aggregate principal amount of $380.0 million, (2) additional Initial Securities, if and when issued, in an aggregate principal amount of up to (x) $350.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company that are not Issue Date Euro Notes, and (3) the Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Agreement, for a like principal amount of Initial Securities or Private Exchange Securities, as applicable, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed (x) $850.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company, except as provided in Section 2.08 of this Indenture. 6 2.3 Transfer and Exchange. --------------------- (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) if such Definitive Securities bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act, (i) a certification to that effect and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). 7 (b) Transfer and Exchange of Global Securities. ------------------------------------------ (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such instructions with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. In the case of a transfer of a beneficial interest in a Global Security to an IAI, the transferee must furnish a signed letter to the Trustee containing certain representations and agreements in the form of Exhibit C hereto. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the 8 provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (c) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE) THAT IS ACQUIRING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER 9 THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS NOTE AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL DISTRIBUTION OF THIS SECURITY (OR ANY PREDECESSOR SECURITY), THAT IT IS AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Security that does not bear the legends set forth 10 above and rescind any restriction on the transfer of such Transfer Restricted Security, in either case, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities, as the case may be, during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, all requirements pertaining to restricted legends on such Initial Security or such Private Exchange Security will cease to apply and an Initial Security or Private Exchange Security, as the case may be, in global form without restricted legends will be available to the transferee of the beneficial interests of such Initial Securities or Private Exchange Securities. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which certain Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, Exchange Securities in global form without the restricted legends will be available to Holders or beneficial owners that exchange such Initial Securities (or beneficial interests therein) in such Registered Exchange Offer. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (d) Cancelation or Adjustment of Global Security. At such time -------------------------------------------- as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned by the Depository to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such 11 Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (e) Obligations with Respect to Transfers and Exchanges of ------------------------------------------------------ Securities. - ---------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.08 and 9.05 of this Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning 15 days before the mailing of a notice of redemption or an offer to repurchase Securities or 15 days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registraror any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (f) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or any 12 other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Securities --------------------- (a) A Global Security deposited with the Depository or with the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as a Depository for such Global Security or if at any time the Depository ceases to be a "clearing agency" registered under the Exchange Act, and a successor Depository is not appointed by the Company within 90 days of such notice, or (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, 13 notifies the Trustee in writing that it elects to cause the issuance of Definitive Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Definitive Securities issued in exchange for any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 to APPENDIX A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. [Definitive Securities Legend] IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. [FORM OF FACE OF INITIAL SECURITY] No. [up to]3$__________ 11 5/8% Senior Note due 2008 CUSIP No.[52736R AJ 1](1) [U52799 AE 0](2) ISIN No. [US52736RAJ14](1) [USU52799AE03](2) Common Code No. [012338678](1) [012338732](2) LEVI STRAUSS & CO., a Delaware corporation, promises to pay to [Cede & Co.]3, or registered assigns, the principal sum [of _____________________Dollars]4 [as set forth on the Schedule of Increases or Decreases annexed hereto](3)on January 15, 2008. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. __________________ 1 Insert for Rule 144A Global Note. 2 Insert for Reg. S Global Note. 3 Insert for Global Securities. 4 Insert for Definitive Securities. 2 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. LEVI STRAUSS & CO., by ------------------------------------ Name: Title: by ------------------------------------ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: January 18, 2001 CITIBANK, N.A., as Trustee, certifies that this is one of the Securities referred to in the Indenture. by: ------------------------------ Authorized Signatory 3 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11 5/8% Senior Note due 2008 1. Interest -------- (a) LEVI STRAUSS & CO., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on January 15 and July 15 of each year, commencing July 15, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 18, 2001. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. (b) Special Interest. The holder of this Security is entitled ---------------- to the benefits of a Registration Rights Agreement, dated as of January 18, 2001, among the Company and the Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. In the event that (i) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with the Commission on or prior to the 60th day following the date of the original issuance of the Securities, (ii) the Exchange Offer Registration Statement has not been declared effective on or prior to the 120th day following the date of the original issuance of the Securities, (iii) neither the Registered Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective on or prior to the 150th day following the date of the original issuance of the Securities, or (iv) after the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with resales of the Securities at any time that the Company is obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), interest (the "Special Interest") shall accrue (in addition to stated interest on the Securities) from and including the date on which the first such Registration Default shall occur to but excluding the date on which all Registration Defaults have 4 been cured, at a rate per annum equal to 0.25% of the principal amount of the Securities; provided, however, that such rate per annum shall increase by 0.25% -------- ------- per annum from and including the 91st day after the first such Registration Default (and each successive 91st day thereafter) unless and until all Registration Defaults have been cured; provided further, however, that in no -------- ------- ------- event shall the Special Interest accrue at a rate in excess of 1.00% per annum. The Special Interest will be payable in cash semiannually in arrears each January 15 and July 15. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the January 1 or July 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a Definitive Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case - -------- ------- of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, CITIBANK, N.A., a banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 5 4. Indenture --------- The Company issued the Securities under an Indenture dated as of January 18, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ------ ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior unsecured obligations of the Company limited to an aggregate principal amount at any one time outstanding of (x) $850.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company (subject to Sections 2.01 and 2.08 of the Indenture). [This Security is one of the Original Securities referred to in the Indenture issued in an aggregate principal amount of $380.0 million. The Securities include the Original Securities, additional Initial Securities that may be issued under the Indenture up to an aggregate principal amount of (x) $350.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company that are not Issue Date Euro Notes, and any Exchange Securities issued in exchange for Initial Securities]. [This Security is one of the additional Initial Securities issued in an aggregate principal amount of up to (x) $350.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company that are not Issue Date Euro Notes. The Securities include such additional Securities, the Original Securities in an aggregate principal amount of $380.0 million previously issued under the Indenture and any Exchange Securities issued in exchange for Initial Securities. The additional Initial Securities, the Original Securities and the Exchange Securities are treated as a single class of securities under the Indenture.] The Original Securities, such additional Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Debt, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens 6 and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company. 5. Optional Redemption ------------------- Except as set forth below, the Securities may not be redeemable prior to 2005. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after January 15 of the years set forth below: Redemption Period Price - ------ ---------- 2005 105.813% 2006 102.906% 2007 and thereafter 100.000% Notwithstanding the foregoing, on or prior to January 15, 2004, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the Securities issued with the proceeds from one or more Public Equity Offerings by the Company, at a redemption price equal to 111 5/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 66 2/3% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 75 days of such Public Equity Offering. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at 7 his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 8 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency 9 are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 10 18. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. To the extent such numbers have been issued, the Company has caused ISIN and Common Code numbers to be similarly printed on the Securities and has similarly instructed the Trustee. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: _______________________ Your Signature: ___________________________ ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to the Company; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each 12 case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore trans- action within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee or the Company); or (6) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. -------------------------------- Your Signature Signature Guarantee: Date: ------------------------------ -------------------------------- Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee - -------------------------------------------------------------------------------- 13 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ----------------------- ------------------------------------ NOTICE: To be executed by an executive officer 14 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made: Signature of Principal amount authorized Amount of decrease Amount of increase of this Global signatory of in Principal in Principal Security following Trustee or Date of Amount of this Amount of this such decrease or Securities Exchange Global Security Global Security increase Custodian - -------- ------------------ ------------------ ------------------ ------------
15 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 (Asset Sale) or 4.12 (Change of Control) of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.12 of the Indenture, state the amount: $ Date: __________________ Your Signature: ___________________________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:____________________________________________________________ Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. EXHIBIT A [FORM OF FACE OF SECURITY] No. [up to](3) $__________ 11 5/8% Senior Note due 2008 CUSIP No.[52736R AJ l](1) [U52799 AE 0](2) ISIN No. [US52736RAJ14](1) [USU52799AE03](2) Common Code No. [012338678](1) [012338732](2) LEVI STRAUSS & CO., a Delaware corporation, promises to pay to [Cede & Co.]3, or registered assigns, the principal sum [of Dollars](4) [as set forth on the Schedule of Increases or Decreases annexed hereto](3)on January 15, 2001. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. __________________ 1 Insert for Rule 144A Global Note. 2 Insert for Reg. S Global Note. 3 Insert for Global Securities. 4 Insert for Definitive Securities. 2 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. LEVI STRAUSS & CO., by -------------------------------------- Name: Title: by -------------------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: CITIBANK, N.A., as Trustee, certifies that this is one of the Securities referred to in the Indenture. by: ---------------------------------------- Authorized Signatory __________________ */ If the Security is to be issued in global form, add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 3 [FORM OF REVERSE SIDE OF SECURITY] 11 5/8% Senior Note due 2008 1. Interest. -------- LEVI STRAUSS & CO., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on January 15 and July 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 18, 2000. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the January 1 or July 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a Definitive Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case - -------- ------- of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 4 3. Paying Agent and Registrar -------------------------- Initially, CITIBANK, N.A., a banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of January 18, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ------ ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior unsecured obligations of the Company limited to an aggregate principal amount at any one time outstanding of (x) $850.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company (subject to Sections 2.01 and 2.08 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture issued in exchange for Initial Securities. The Securities include the Exchange Securities, the Original Securities in the aggregate principal amount of $380.0 million and additional Initial Securities in an aggregate principal amount of up to (x) $350.0 million less (y) the aggregate principal amount (on a U.S. Dollar Equivalent basis) of any Euro Notes issued by the Company that are not Issue Date Euro Notes. The Exchange Securities, the Original Securities and such additional Initial Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Debt, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey 5 or otherwise dispose of all or substantially all of the Property of the Company. 5. Optional Redemption ------------------- Except as set forth below, the Securities may not be redeemable prior to January 15, 2005. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after January 15 of the years set forth below: Redemption Period Price - ------ ---------- 2005 105.813% 2006 102.906% 2007 and thereafter 100.000% Notwithstanding the foregoing, on or prior to January 15, 2004, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the Securities issued with the proceeds from one or more Public Equity Offerings by the Company, at a redemption price equal to 111 5/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving -------- ------- effect to any such redemption, at least 66 2/3% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 75 days of such Public Equity Offering. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 6 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 7 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 8 14. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 9 17. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. To the extent such numbers have been issued, the Company has caused ISIN and Common Code numbers to be similarly printed on the Securities and has similarly instructed the Trustee. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 10 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ------------------------------------------------------------------------------- Date: _______________________ Your Signature: _________________________________ ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. 11 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 (ASSET SALE) OR 4.12 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: ___ / / IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.12 OF THE INDENTURE, STATE THE AMOUNT: $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY) SIGNATURE GUARANTEE:_______________________________________ SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EXHIBIT B Form of Transferee Letter of Representation [Company] In care of [ ] [ ] [ ] Ladies and Gentlemen: This certificate is delivered to request a transfer of $[ ] principal amount of the 11 5/8% Senior Notes due 2008 (the "Securities") of LEVI STRAUSS & CO. (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name:________________________ Address:_____________________ Taxpayer ID Number:__________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing 2 Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $100,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the 3 Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. TRANSFEREE:_________________, by:_______________________ EX-4.9 6 0006.txt EURO INDENTURE, DATED JANUARY 18, 2001, BETWEEN... EXECUTION COPY LEVI STRAUSS & CO. 11 5/8% Senior Notes due 2008 -------------------------- EURO INDENTURE Dated as of January 18 ,2001 -------------------------- CITIBANK, N.A., Trustee ========================================================================= TABLE OF CONTENTS Page ---- ARTICLE I Definitions and Incorporation by Reference - ------------------------------------------ SECTION 1.01. Definitions 1 SECTION 1.02. Other Definitions 41 SECTION 1.03. Incorporation by Reference of Trust Indenture Act 41 SECTION 1.04. Rules of Construction 42 ARTICLE II The Securities - ---------------------------------------------- SECTION 2.01. Amount of Securities; Issuable in Series 42 SECTION 2.02. Form and Dating 44 SECTION 2.03. Execution and Authentication 44 SECTION 2.04. Registrar and Paying Agent 45 SECTION 2.05. Paying Agent To Hold Money in Trust 46 SECTION 2.06. Securityholder Lists 46 SECTION 2.07. Replacement Securities 47 SECTION 2.08. Outstanding Securities 47 SECTION 2.09. Temporary Securities 47 SECTION 2.10. Cancellation 48 SECTION 2.11. Defaulted Interest 48 SECTION 2.12. CUSIP Numbers 48 ARTICLE III Redemption ---------- SECTION 3.01. Notices to Trustee 49 SECTION 3.02. Selection of Securities To Be Redeemed 49 SECTION 3.03. Notice of Redemption 49 SECTION 3.04. Effect of Notice of Redemption 50 SECTION 3.05. Deposit of Redemption Price 50 SECTION 3.06. Securities Redeemed in Part 51 2 ARTICLE IV Covenants - ----------------------------------------- SECTION 4.01. Covenant Suspension 51 SECTION 4.02. Payment of Securities 52 SECTION 4.03. SEC Reports 52 SECTION 4.04. Limitation on Debt 52 SECTION 4.05. Limitation on Restricted Payments 55 SECTION 4.06. Limitation on Liens 58 SECTION 4.07. Limitation on Asset Sales 58 SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries 62 SECTION 4.09. Limitation on Transactions with Affiliates 64 SECTION 4.10. Designation of Restricted and Unrestricted Subsidiaries 65 SECTION 4.11. Limitation on Sale and Leaseback Transactions 67 SECTION 4.12. Change of Control 67 SECTION 4.13. Further Instruments and Acts 69 ARTICLE V Successor Company - ------------------------------------------------- SECTION 5.01. When Company May Merge or Transfer Assets 69 ARTICLE VI Defaults and Remedies 71 - ---------------------------------------------------- SECTION 6.01. Events of Default 71 SECTION 6.02. Acceleration 74 SECTION 6.03. Other Remedies 74 SECTION 6.04. Waiver of Past Defaults 74 SECTION 6.05. Control by Majority 74 SECTION 6.06. Limitation on Suits 75 SECTION 6.07. Rights of Holders to Receive Payment 75 SECTION 6.08. Collection Suit by Trustee 75 SECTION 6.09. Trustee May File Proofs of Claim 76 SECTION 6.10. Priorities 76 SECTION 6.11. Undertaking for Costs 76 SECTION 6.12. Waiver of Stay or Extension Laws 77 3 ARTICLE VII Trustee ------- SECTION 7.01. Duties of Trustee 77 SECTION 7.02. Rights of Trustee 79 SECTION 7.03. Individual Rights of Trustee 80 SECTION 7.04. Trustee's Disclaimer 80 SECTION 7.05. Notice of Defaults 80 SECTION 7.06. Reports by Trustee to Holders 80 SECTION 7.07. Compensation and Indemnity 81 SECTION 7.08. Replacement of Trustee 82 SECTION 7.09. Successor Trustee by Merger 83 SECTION 7.10. Eligibility; Disqualification 83 SECTION 7.11. Preferential Collection of Claims Against Company 84 ARTICLE VIII Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance 84 SECTION 8.02. Conditions to Defeasance 85 SECTION 8.03. Application of Trust Money 86 SECTION 8.04. Repayment to Company 87 SECTION 8.05. Indemnity for Government Obligations 87 SECTION 8.06. Reinstatement 87 ARTICLE IX Amendments - ------------------------------------------ SECTION 9.01. Without Consent of Holders 87 SECTION 9.02. With Consent of Holders 88 SECTION 9.03. Compliance with Trust Indenture Act 89 SECTION 9.04. Revocation and Effect of Consents and Waivers 89 SECTION 9.05. Notation on or Exchange of Securities 90 SECTION 9.06. Trustee To Sign Amendments 90 SECTION 9.07. Payment for Consent 91 4 ARTICLE X Miscellaneous - ----------------------------------------------- SECTION 10.01. Trust Indenture Act Controls 91 SECTION 10.02. Notices 91 SECTION 10.03. Communication by Holders with Other Holders 92 SECTION 10.04. Certificate and Opinion as to Conditions Precedent 92 SECTION 10.05. Statements Required in Certificate or Opinion 92 SECTION 10.06. When Securities Disregarded 93 SECTION 10.07. Rules by Trustee, Paying Agent and Registrar 93 SECTION 10.08. Legal Holidays 93 SECTION 10.09. Governing Law 93 SECTION 10.10. No Recourse Against Others 94 SECTION 10.11. Successors 94 SECTION 10.12. Multiple Originals 94 SECTION 10.13. Table of Contents; Headings 94 Appendix A - Provisions Relating to Initial Securities and Exchange Securities Exhibit 1 to Appendix A - Form of Initial Security Exhibit A - Form of Exchange Security Exhibit B - Form of Transferee Letter of Representation CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- ------- 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (b) 7.08; 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312(a) 2.06 (b) N.A. (c) N.A. 313(a) 7.06 (b)(1) N.A. (b)(2) 7.06 (c) N.A. (d) 7.06 314(a) 4.02; 4.10; N.A. (b) N.A. (c)(1) N.A. (c)(2) N.A. (c)(3) N.A. (d) N.A. (e) N.A. (f) 4.10 315(a) 7.01 (b) 7.05; N.A. (c) 7.01 (d) 7.01 (e) 6.11 316(a) (last sentence) N.A. (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.05 318(a) N.A. N.A. Means Not Applicable. - ------------------ Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. INDENTURE dated as of January 18, 2001, between LEVI STRAUSS & CO., a Delaware corporation (the "Company") and CITIBANK, N.A., a national banking association duly organized and existing under the laws of the U.S.A., as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's euro denominated 11 5/8% Senior Notes due 2008, to be issued, from time to time, in one or more series as in this Indenture provided (the "Initial Securities") and, if and when issued pursuant to a registered or private exchange for the Initial Securities, the Company's 11 5/8% Senior Notes due 2008 (the "Exchange Securities" and, together with the Initial Securities, the "Securities"): ARTICLE I Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ------------ "Additional Assets" means: (a) any Property (other than cash, cash equivalents, securities and inventory) to be owned by the Company or any Restricted Subsidiary and used in a Related Business; or (b) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of that Capital Stock by the Company or another Restricted Subsidiary from any Person other than the Company or an Affiliate of the Company; provided, however, that, in the case of this clause (b), the Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means: (a) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with that specified Person, or (b) any other Person who is a director or officer of that specified Person. 2 For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of that 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. For purposes of Section 4.09 and Section 4.07 and the definition of "Additional Assets" only, "Affiliate" shall also mean any Beneficial Owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase that Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any Beneficial Owner pursuant to the first sentence hereof. "Asset Sale" means any sale, lease, transfer, issuance or other disposition (or series of related sales, leases, transfers, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), (b) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary, (c) in the case of any disposition by the Company or a Restricted Subsidiary to any Person, any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary, or (d) in the case of any disposition by the Company to a Restricted Subsidiary of the Company, any other assets of the Company, other than dispositions in the ordinary course of business of raw materials to a Restricted Subsidiary to be used in the manufacture of finished goods, of finished goods to a Restricted Subsidiary for resale by the Restricted Subsidiary or its designee or of work in process to a Restricted Subsidiary, 3 other than, in the case of clause (a), (b), (c) or (d) above, (1) any disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary, (2) any disposition that constitutes a Permitted Investment or Restricted Payment permitted by Section 4.05, (3) any disposition effected in compliance with the first paragraph in Section 5.01, (4) a sale of accounts receivables and related assets of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Entity, (5) a transfer of accounts receivables and related assets of the type specified in the definition of "Qualified Receivables Transaction" (or a fractional undivided interest therein) by a Receivables Entity in connection with a Qualified Receivables Transaction, and (6) a transfer of accounts receivable of the type specified in the definition of "Credit Facility" that is permitted under clause (b) of the second paragraph of Section 4.04. Notwithstanding the foregoing, if at any time, the aggregate Fair Market Value of assets disposed of by the Company to its Subsidiaries since the Issue Date, other than (a) Permitted Investments comprised of cash or cash equivalents, (b) dispositions pursuant to paragraphs (4), (5) and (6) above and (c) dispositions by the Company to a Restricted Subsidiary of raw materials to be used in the manufacture of finished goods, of finished goods and of work in process, exceeds 10% of Consolidated Tangible Assets, all asset dispositions in excess thereof shall be treated as Asset Sales subject to the restrictions set forth in Section 4.07. For purposes of this paragraph, the aggregate Fair Market Value of assets so transferred at any time shall be calculated by using the sum of the Fair Market Value of each asset disposition as of the date of its disposition. 4 "Attributable Debt" in respect of a Sale and Leaseback Transaction means, at any date of determination, (a) if the Sale and Leaseback Transaction is a Capital Lease Obligation, the amount of Debt represented thereby according to the definition of "Capital Lease Obligation", and (b) in all other instances, the greater of: (1) the Fair Market Value of the Property subject to the Sale and Leaseback Transaction, and (2) the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in the Sale and Leaseback Transaction (including any period for which the lease has been extended). "Average Life" means, as of any date of determination, with respect to any Debt or Preferred Stock, the quotient obtained by dividing: (a) the sum of the product of the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of that Debt or redemption or similar payment with respect to that Preferred Stock multiplied by the amount of the payment by (b) the sum of all payments of this kind. "Beneficial Owner" means a beneficial owner as defined in Rule 13d-3 under the Exchange Act, except that: (a) a Person will be deemed to be the Beneficial Owner of all shares that the Person has the right to acquire, whether that right is exercisable immediately or only after the passage of time, (b) for purposes of clause (a) of the definition of "Change of Control", Permitted Holders will be deemed to be the Beneficial Owners of any Voting Stock of a corporation or other legal entity held by any other corporation or other legal entity so long as the Permitted Holders Beneficially Own, directly or indirectly, in the aggregate a majority of the total 5 voting power of the Voting Stock of that corporation or other legal entity, and (c) for purposes of clause (b) of the definition of "Change of Control", any "person" or "group" (as those terms are defined in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, shall be deemed to be the Beneficial Owners of any Voting Stock of a corporation or other legal entity held by any other corporation or legal entity ("the parent corporation"), so long as that person or group Beneficially Owns, directly or indirectly, in the aggregate a majority of the total voting power of the Voting Stock of that parent corporation. The term "Beneficially Own" shall have a corresponding meaning. "Board of Directors" means the Board of Directors of the Company (or, in the case of Section 4.09(2), the applicable Restricted Subsidiary) or any committee thereof duly authorized to act on behalf of such 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. "Business Day" means each day that is not a Legal Holiday. "Capital Lease Obligations" means any obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; and the amount of Debt represented by that obligation shall be the capitalized amount of the obligations determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under that lease prior to the first date upon which that lease may be terminated by the lessee without payment of a penalty. For purposes of Section 4.06, a Capital Lease Obligation shall be deemed secured by a Lien on the Property being leased. 6 "Capital Stock" means, with respect to any Person, any shares or other equivalents (however designated) of any class of corporate stock or partnership interests or any other participations, rights, warrants, options or other interests in the nature of an equity interest in that Person, including Preferred Stock, but excluding any debt security convertible or exchangeable into that equity interest. "Capital Stock Sale Proceeds" means the aggregate cash proceeds received by the Company from the issuance or sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or the Subsidiary for the benefit of their employees) by the Company of its Capital Stock (other than Disqualified Stock) after the Issue Date, net of attorneys' fees, accountants' fees, initial purchasers' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with the issuance or sale and net of taxes paid or payable as a result thereof. "Change of Control" means the occurrence of any of the following events: (a) prior to the first Public Equity Offering that results in a Public Market, the Permitted Holders cease to be the Beneficial Owners, directly or indirectly, of a majority of the total voting power of the Voting Stock of the Company, whether as a result of the issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise; or (b) on or after the first Public Equity Offering that results in a Public Market, if any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of 35% or more of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders are the Beneficial Owners, directly or indirectly, in the aggregate of a lesser percentage of the total voting power of the Voting Stock of the Company than that other person or group; and provided further, that the 7 provisions of this clause (b) will not apply to Voting Trustees serving in that capacity under the Voting Trust Arrangement; or (c) the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all the assets of the Company and the Restricted Subsidiaries, considered as a whole (other than a disposition of assets as an entirety or virtually as an entirety to a Wholly Owned Restricted Subsidiary or one or more Permitted Holders) shall have occurred, or the Company merges, consolidates or amalgamates with or into any other Person (other than one or more Permitted Holders) or any other Person (other than one or more Permitted Holders) merges, consolidates or amalgamates with or into the Company, in any event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other Property, other than transaction where: (1) the outstanding Voting Stock of the Company is reclassified into or exchanged for other Voting Stock of the Company or for Voting Stock of the surviving corporation or transferee, and (2) the Holders of the Voting Stock of the Company immediately prior to the transaction own, directly or indirectly, not less than a majority of the Voting Stock of the Company or the surviving corporation or transferee immediately after the transaction and in substantially the same proportion as before the transaction; or (d) during any period of two consecutive years, individuals who at the beginning of that period constituted the Board of Directors (together with any new directors whose election or appointment by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of not less than three-fourths of the directors then still in office who were either directors at the beginning of that period or whose election or nomination for election was previously so approved or by a vote of the Voting Trustees pursuant to the terms of the Voting Trust Arrangement) cease for any reason to constitute a majority of the Board of Directors then in office; or 8 (e) the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Price Protection Agreement" means, in respect of a Person, any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in commodity prices. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Current Liabilities" means, as of any date of determination, the aggregate amount of liabilities of the Company and its consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating: (a) all intercompany items between the Company and any Restricted Subsidiary or between Restricted Subsidiaries, and (b) all current maturities of long-term Debt. "Consolidated Fixed Charges" means, for any period, the total interest expense (net of interest income) of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, (a) interest expense attributable to leases constituting part of a Sale and Leaseback Transaction and to Capital Lease Obligations, (b) amortization of debt discount and debt issuance cost, including commitment fees, (c) capitalized interest, (d) non-cash interest expense, 9 (e) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (f) net costs associated with Interest Rate Agreements (including amortization of fees), (g) Disqualified Stock Dividends, (h) Preferred Stock Dividends, (i) interest Incurred in connection with Investments in discontinued operations, (j) interest accruing on any Debt of any other Person to the extent that Debt is Guaranteed by the Company or any Restricted Subsidiary, and (k) the cash contributions to any employee stock ownership plan or similar trust to the extent those contributions are used by the plan or trust to pay interest or fees to any Person (other than the Company) in connection with Debt Incurred by the plan or trust. Notwithstanding anything to the contrary contained herein, commissions, discounts, yield and other fees and charges Incurred in connection with any transaction (including, without limitation, any Qualified Receivables Transaction) pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets of the type specified in the definition of "Qualified Receivables Transaction" shall be included in Consolidated Fixed Charges. "Consolidated Fixed Charges Coverage Ratio" means, as of any date of determination, the ratio of: (a) the aggregate amount of EBITDA for the most recent four consecutive fiscal quarters ending at least 45 days prior to such determination date to (b) Consolidated Fixed Charges for those four fiscal quarters; provided, however, that: - -------- ------- (1) if (A) since the beginning of that period the Company or any Restricted Subsidiary has 10 Incurred any Debt that remains outstanding or Repaid any Debt, or (B) the transaction giving rise to the need to calculate the Consolidated Fixed Charges Coverage Ratio involves an Incurrence or Repayment of Debt, Consolidated Fixed Charges for that period shall be calculated after giving effect on a pro forma basis to that Incurrence or Repayment as if the Debt was Incurred or Repaid on the first day of that period, provided that, in the event of any Repayment of Debt, EBITDA for that period shall be calculated as if the Company or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to Repay such Debt, and (2) if (A) since the beginning of that period the Company or any Restricted Subsidiary shall have made any Asset Sale or an Investment (by merger or otherwise) in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of Property which constitutes all or substantially all of an operating unit of a business, (B) the transaction giving rise to the need to calculate the Consolidated Fixed Charges Coverage Ratio involves an Asset Sale, Investment or acquisition, or (C) since the beginning of that period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of that period) shall have made such an Asset Sale, Investment or acquisition, EBITDA for that period shall be calculated after giving pro forma effect to the Asset Sale, Investment or acquisition as if the Asset Sale, Investment or acquisition occurred on the first day of that period. If any Debt bears a floating rate of interest and is being given pro forma effect, the interest expense on that Debt shall be calculated as if the base interest rate 11 in effect for the floating rate of interest on the date of determination had been the applicable base interest rate for the entire period (taking into account any Interest Rate Agreement applicable to that Debt if the applicable Interest Rate Agreement has a remaining term in excess of 12 months). In the event the Capital Stock of any Restricted Subsidiary is sold during the period, the Company shall be deemed, for purposes of clause (1) above, to have Repaid during that period the Debt of that Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for that Debt after the sale. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; provided, -------- however, that there shall not be included in such Consolidated Net Income: - ------- (a) any net income (loss) of any Person (other than the Company) if that Person is not a Restricted Subsidiary, except that: (1) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of any such Person for that period shall be included in such Consolidated Net Income up to the aggregate amount of cash distributed by that Person during that period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (c) below), and (2) the Company's equity in a net loss of that Person other than an Unrestricted Subsidiary for the specified period shall be included in determining such Consolidated Net Income, (b) for purposes of Section 4.05 only, any net income (loss) of any Person acquired by the Company or any of its consolidated Subsidiaries in a pooling of interests transaction for any period prior to the date of the acquisition, (c) any net income (loss) of any Restricted Subsidiary if the Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of 12 dividends or the making of distributions, directly or indirectly, to the Company, except that: (1) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of the Restricted Subsidiary for the period shall be included in Consolidated Net Income up to the aggregate amount that would have been permitted at the date of determination to be dividended to the Company or another Restricted Subsidiary by that Restricted Subsidiary without prior approval by a third party (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and government regulations applicable to that Restricted Subsidiary or its shareholders, during that period as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Restricted Subsidiary, to the limitation contained in this clause), and (2) the Company's equity in a net loss of the Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (d) any gain (but not loss) realized upon the sale or other disposition of any Property of the Company or any of its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business, (e) any extraordinary gain or loss, (f) the cumulative effect of a change in accounting principles, (g) any unrealized gains or losses of the Company or its consolidated Subsidiaries on any Hedging Obligations, and (h) any non-cash compensation expense realized for grants of performance shares, stock options or other rights to officers, directors and employees of the Company or any Restricted Subsidiary, provided that those shares, options or other rights can be redeemed at the option of the holder only for Capital Stock of the Company (other than Disqualified Stock). 13 Notwithstanding the foregoing, for purposes of Section 4.05 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent the dividends, repayments or transfers increase the amount of Restricted Payments permitted under that covenant pursuant to clause (c)(4) thereof. "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries as the total assets (less accumulated depreciation, amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries, after giving effect to purchase accounting and after deducting therefrom Consolidated Current Liabilities and, to the extent otherwise included, the amounts of (without duplication): (a) the excess of cost over fair market value of assets or businesses acquired; (b) any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Company immediately preceding the Issue Date as a result of a change in the method of valuation in accordance with GAAP; (c) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (d) minority interests in consolidated Subsidiaries held by Persons other than the Company or any Restricted Subsidiary; (e) treasury stock; (f) cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and (g) Investments in and assets of Unrestricted Subsidiaries. 14 "Consolidated Tangible Assets" means, as of any date of determination, the sum of the amounts of Consolidated Net Tangible Assets and Consolidated Current Liabilities as of such date. "Credit Facilities" means, with respect to the Company or any Restricted Subsidiary, one or more debt or commercial paper facilities (including related Guarantees) with banks, investment banks, insurance companies, mutual funds or other institutional lenders (including our Existing Bank Credit Facilities), providing for revolving credit loans, term loans, receivables or inventory financing (including through the sale of receivables or inventory to institutional lenders or to special purpose, bankruptcy remote entities formed to borrow from institutional lenders against those receivables or inventory) or trade or standby letters of credit, in each case together with any Refinancings thereof by a lender or syndicate of lenders; provided that, in the case of a transaction in which any accounts receivable are sold, conveyed or otherwise transferred by the Company or any of its subsidiaries to another Person other than a Receivables Entity, then that transaction must satisfy the following three conditions: (a) if the transaction involves a transfer of accounts receivable with Fair Market Value equal to or greater than $25.0 million, the Board of Directors shall have determined in good faith that the transaction is economically fair and reasonable to the Company or the Subsidiary that sold, conveyed or transferred the accounts receivable, (b) the sale, conveyance or transfer of accounts receivable by the Company or the Subsidiary is made at Fair Market Value and (c) the financing terms, covenants, termination events and other provisions of the transaction shall be market terms (as determined in good faith by the Board of Directors if Board approval is required under clause (a)). "Currency Exchange Protection Agreement" means, in respect of a Person, any foreign exchange contract, currency swap agreement, currency option or other similar agreement or arrangement designed to protect that Person against fluctuations in currency exchange rates. 15 "Debt" means, with respect to any Person on any date of determination (without duplication): (a) the principal of and premium (if any) in respect of: (1) debt of the Person for money borrowed, and (2) debt evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Person is responsible or liable; (b) all Capital Lease Obligations of the Person and all Attributable Debt in respect of Sale and Leaseback Transactions entered into by the Person; (c) all obligations of the Person issued or assumed as the deferred purchase price of Property, all conditional sale obligations of the Person and all obligations of the Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (d) all obligations of the Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (a) through (c) above) entered into in the ordinary course of business of the Person to the extent those letters of credit are not drawn upon or, if and to the extent drawn upon, the drawing is reimbursed no later than the third Business Day following receipt by the Person of a demand for reimbursement following payment on the letter of credit); (e) the amount of all obligations of the Person with respect to the Repayment of any Disqualified Stock or, with respect to any Subsidiary of the Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (f) all obligations of the type referred to in clauses (a) through (e) of other Persons and all dividends of other Persons for the payment of which, in either case, the Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; 16 (g) all obligations of the type referred to in clauses (a) through (f) of other Persons secured by any Lien on any Property of the Person (whether or not such obligation is assumed by the Person), the amount of such obligation being deemed to be the lesser of the value of that Property or the amount of the obligation so secured; and (h) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Debt of any Person at any date shall be the outstanding balance at that date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at that date. The amount of Debt represented by a Hedging Obligation shall be equal to: (1) zero if the Hedging Obligation has been Incurred pursuant to clause (e), (f) or (g) of the second paragraph of Section 4.04, or (2) if the Hedging Obligation is not Incurred pursuant to clauses (e), (f) or (g) of the second paragraph of Section 4.04, then 105% of the aggregate net amount, if any, that would then be payable by the Company and any Restricted Subsidiary on a per counter-party basis pursuant to Section 6(e) of the ISDA Master Agreement (Multicurrency-Cross Border) in the form published by the International Swaps and Derivatives Association in 1992 (the "ISDA Form"), as if the date of determination were a date that constitutes or is substantially equivalent to an Early Termination Date, as defined in the ISDA Form, with respect to all transactions governed by the ISDA Form, plus the equivalent amount under the terms of any other Hedging Obligations that are not Incurred pursuant to clauses (e), (f) or (g) of the second paragraph of Section 4.04, each such amount to be estimated in good faith by the Company. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it 17 is exchangeable, in either case at the option of the holder thereof) or otherwise: (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable at the option of the holder thereof for Debt or Disqualified Stock, on or prior to, in the case of clause (a), (b) or (c), the first anniversary of the Stated Maturity of the Securities. "Disqualified Stock Dividends" means all dividends with respect to Disqualified Stock of the Company held by Persons other than a Wholly Owned Restricted Subsidiary. The amount of any dividend of this kind shall be equal to the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the Company. "Dollar Notes" means the Company's 11 5/8% Senior Notes due 2008 denominated in U.S. dollars and issued pursuant to an indenture dated the date hereof between the Company and Citibank, N.A. as trustee. "EBITDA" means, for any period, an amount equal to, for the Company and its consolidated Restricted Subsidiaries: (a) the sum of Consolidated Net Income for that period, plus the following to the extent reducing Consolidated Net Income for that period: (1) the provision for taxes based on income or profits or utilized in computing net loss, (2) Consolidated Fixed Charges, (3) depreciation, (4) amortization of intangibles, (5) any other non-cash items (other than any non-cash item to the extent that it represents an accrual of or reserve for cash expenditures in any future period), and 18 (6) any one-time, non-recurring expenses relating to, or arising from, any closures of manufacturing facilities on or after the Issue Date, in each case incurred within 12 months after such closure, minus (b) all non-cash items increasing Consolidated Net Income for that period (other than any such non-cash item to the extent that it will result in the receipt of cash payments in any future period). Notwithstanding the foregoing clause (a), the provision for taxes and the depreciation, amortization and non-cash items of a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of that Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by that Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its shareholders. "Equipment Financing Transaction" means any arrangement (together with any Refinancings thereof) with any Person pursuant to which the Company or any Restricted Subsidiary Incurs Debt secured by a Lien on equipment or equipment related property of the Company or any Restricted Subsidiary. "Event of Default" has the meaning set forth in Section 6.01 "Exchange Act" means the Securities Exchange Act of 1934. "Existing Bank Credit Facilities" means: (a) the Bridge Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York and Bank One, N.A., as amended as of July 31, 2000 and September 29, 2000, (b) the Amended and Restated 1999 180 Day Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, 19 collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated and Morgan Guaranty Trust Company of New York, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000, (c) the Amended and Restated 1997 364 Day Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York, Commerzbank AG, Credit Lyonnais, Bank One, N.A., The Sumitomo Bank, Ltd., ABN AMRO Bank N.V., Banca Commerciale Italiana, Banque Nationale de Paris, Criplo-Cassa di Risparmio delle Provincie Lombarde S.p.A., Societe Generale, Mellon Bank National Association, KBC Bank N.V., UniCredito Italiano S.p.A., Deutsche Bank Aktiengesellschaft, Wachovia Bank N.A., Bankers Trust Company and First Hawaiian Bank, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000. (d) the 1997 Second Amended and Restated Credit Agreement, dated as of January 31, 2000, among the Company, Bank of America, N.A. as administrative agent, collateral agent and lender, The Bank of Nova Scotia, Citicorp U.S.A. Incorporated, Morgan Guaranty Trust Company of New York, Commerzbank AG, Credit Lyonnais, The Chase Manhattan Bank, Bank One, N.A., The Sumitomo Bank, Ltd., ABN AMRO Bank N.V., Banca Commerciale Italiana, Banque Nationale de Paris, Cariplo-Cassa di Risparmio delle Provincie Lombarde S.p.A., CIBC Inc., The Royal Bank of Canada, The Sanwa Bank, Limited, The Toronto-Dominion Bank, KBC Bank N.V., PNC Bank N.A., Societe Generale, BankBoston N.A., The Industrial Bank of Japan, Limited, Mellon Bank National Association, The Tokai Bank Limited, The Bank of Tokyo-Mitsubishi Limited, Union Bank of California, N.A. Banca Monte dei Paschi di Siena S.p.A., UniCredito Italiano S.p.A., Deutsche Bank Aktiengesellschaft, San Paolo IMI S.p.A., Cooperative Centrale Raiffeisent--Boerenleenbank B.A., UBS AG, Wachovia Bank N.A., Bankers Trust Company and First Hawaiian Bank, as amended as of July 31, 2000, September 29, 2000 and October 13, 2000. "Existing Policies" means (1) the Company's estate tax repurchase policy under which the Company repurchases a portion of a deceased stockholder's shares to generate funds for payment of estate taxes and (2) the Company's valuation policy under which the Company obtains an annual valuation of the Company's Voting Trust Certificates, as both policies exist at the Issue Date or as they may exist from time to 20 time, provided that if either of these policies is materially amended after the Issue Date in a manner less favorable to the Company than the policy as existing on the Issue Date, then that amended policy shall be deemed not to be an Existing Policy. "Fair Market Value" means, with respect to any Property, the price that could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. For purposes of Section 4.05 and Section 4.07 and the definitions of "Qualified Receivables Transaction" and "Credit Facilities", Fair Market Value shall be determined, except as otherwise provided, (a) if the Property has a Fair Market Value equal to or less than $25.0 million, by any Officer of the Company, or (b) if the Property has a Fair Market Value in excess of $25.0 million, by a majority of the Board of Directors and evidenced by a Board Resolution, dated within 12 months of the relevant transaction, delivered to the Trustee. "Foreign Restricted Subsidiary" means any Restricted Subsidiary which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means United States generally accepted accounting principles as in effect from time to time, including those set forth: (a) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) in the statements and pronouncements of the Financial Accounting Standards Board, (c) in other statements by another entity as approved by a significant segment of the accounting profession, and (d) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements 21 in staff accounting bulletins and similar written statements from the accounting staff of the Commission. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of that Person: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) the Debt of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include: - -------- ------- (1) endorsements for collection or deposit in the ordinary course of business, or (2) a contractual commitment by one Person to invest in another Person for so long as the Investment is reasonably expected to constitute a Permitted Investment under clause (a), (b) or (i) of the definition of "Permitted Investment". The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligation" of any Person means any obligation of that Person pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement, Commodity Price Protection Agreement or any other similar agreement or arrangement. "Holder" or "Securityholder" means the Person in whose name the Security is registered on the Security register described in Section 2.04. "Incur" means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of that Debt or other obligation or the recording, as required pursuant to GAAP or 22 otherwise, of any Debt or obligation on the balance sheet of that Person (and "Incurrence" and "Incurred" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of that - -------- ------- Person that exists at such time, and is not theretofore classified as Debt, becoming Debt shall not be deemed an Incurrence of that Debt; provided further, ---------------- however, that any Debt or other obligations of a Person existing at the time the - ------- Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by that Subsidiary at the time it becomes a Subsidiary; and provided further, however, that solely for purposes of ---------------- ------- determining compliance with Section 4.04, amortization of debt discount or premium shall not be deemed to be the Incurrence of Debt, provided that in the case of Debt sold at a discount or at a premium, the amount of the Debt Incurred shall at all times be the aggregate principal amount at Stated Maturity. "Indenture" means this Indenture as amended or supplemented from time to time. "Independent Financial Advisor" means an investment banking firm of national standing or any third party appraiser of national standing, provided that the firm or appraiser is not an Affiliate of the Company. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate option agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates. "Investment" by any Person means any direct or indirect loan (other than advances to customers and suppliers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of that Person), advance or other extension of credit or capital contribution (by means of transfers of cash or other Property to others or payments for Property or services for the account or use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person. For purposes of Section 4.05, Section 4.10 and the definition of "Restricted Payment", Investment shall include the portion (proportionate to the Company's equity interest in the Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that the Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a -------- ------- redesignation of that Subsidiary as a Restricted Subsidiary, the Company shall be 23 deemed to continue to have a permanent Investment in an Unrestricted Subsidiary of an amount (if positive) equal to: (a) the Company's Investment in that Subsidiary at the time of such redesignation, less (b) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of that Subsidiary at the time of such redesignation. In determining the amount of any Investment made by transfer of any Property other than cash, the Property shall be valued at its Fair Market Value at the time of the Investment. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P. "Issue Date" means the first date on which the Securities are initially issued. "Issue Date Dollar Notes" means Dollar Notes issued on the first date on which the Dollar Notes are initially issued. "Lien" means, with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to that Property (including any Capital Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction). "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Available Cash" from any Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the 24 acquiring Person of Debt or other obligations relating to the Property that is the subject of that Asset Sale or received in any other non-cash form), in each case net of: (a) all legal, title and recording tax expenses, commissions and other fees (including, without limitation, brokers' or investment bankers' commissions or fees) and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of the Asset Sale, (b) all payments made on any Debt that is secured by any Property subject to the Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to that Property, or which must by its terms, or in order to obtain a necessary consent to the Asset Sale, or by applicable law, be repaid out of the proceeds from the Asset Sale, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of the Asset Sale, and (d) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the Property disposed in the Asset Sale and retained by the Company or any Restricted Subsidiary after the Asset Sale. "Officer" means the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or the Assistant Treasurer of the Company. "Officers' Certificate" means a certificate signed by two Officers of the Company, at least one of whom shall be the principal executive officer or principal financial officer of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means the holders of Voting Stock as of the Issue Date, together with any Voting Trustee and any Person who is a "Permitted Transferee" of the holders, as that term is defined in the Stockholders Agreement dated as of April 15, 1996 between the Company and the stockholders of the Company party thereto as that 25 Stockholders Agreement was in effect on the Issue Date, except that transferees pursuant to Section 2.2(a)(x) of that Stockholders Agreement shall not be deemed to be Permitted Transferees for purposes of the Indenture. "Permitted Investment" means any Investment by the Company or a Restricted Subsidiary in: (a) any Restricted Subsidiary or any Person that will, upon the making of such Investment, become a Restricted Subsidiary, provided that the primary business of the Restricted Subsidiary is a Related Business; (b) any Person if as a result of the Investment that Person is merged or consolidated with or into, or transfers or conveys all or substantially all its Property to, the Company or a Restricted Subsidiary, provided that the Person's primary business is a Related Business; (c) Temporary Cash Investments; (d) receivables owing to the Company or a Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that those trade terms may include such -------- ------- concessionary trade terms as the Company or the Restricted Subsidiary deems reasonable under the circumstances; (e) payroll, travel and similar advances to cover matters that are expected at the time of those advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (f) loans and advances to employees made in the ordinary course of business consistent with past practices of the Company or the applicable Restricted Subsidiary, as the case may be, provided that those loans and advances do not exceed $5.0 million at any one time outstanding; (g) stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or a Restricted Subsidiary or in satisfaction of judgments; 26 (h) any Person to the extent the Investment represents the non-cash portion of the consideration received in connection with an Asset Sale consummated in compliance with Section 4.07; (i) a Receivables Entity or any Investment by a Receivables Entity in any other Person in connection with a Qualified Receivables Transaction, including Investments of funds held in accounts permitted or required by the arrangements governing that Qualified Receivables Transaction or any related Indebtedness; provided that any Investment in a Receivables Entity is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest; (j) customers or suppliers of the Company or any of its subsidiaries in the form of extensions of credit or transfers of property, to the extent otherwise constituting an Investment, and in the ordinary course of business and any Investments received in the ordinary course of business in satisfaction or partial satisfaction thereof; (k) any Person if the Investments are outstanding on the Issue Date and not otherwise described in clauses (a) through (j) above; and (l) any Person made for Fair Market Value that do not exceed $100.0 million outstanding at any one time in the aggregate. "Permitted Liens" means: (a) Liens (including, without limitation and to the extent constituting a Lien, negative pledges) to secure Debt permitted to be Incurred under clause (b) of the second paragraph of Section 4.04, regardless of whether the Company and the Restricted Subsidiaries are actually subject to the covenant contained in Section 4.04 at the time the Lien is Incurred; (b) Liens (including, without limitation and to the extent constituting a Lien, negative pledges) to secure Debt permitted to be Incurred under clause (h) of the second paragraph of Section 4.04, regardless of whether the Company and the Restricted Subsidiaries are actually subject to the covenant contained in Section 4.04 at the time the Lien is Incurred, provided that any Lien of this kind may not extend to any Property of the Company or any Restricted Subsidiary, other than the Property acquired, constructed or leased 27 with the proceeds of that Debt and any improvements or accessions to that Property; (c) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (d) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens and other similar Liens, on the Property of the Company or any Restricted Subsidiary arising in the ordinary course of business and securing payment of obligations that are not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (e) Liens on the Property of the Company or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice, including banker's liens and rights of set-off, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property and which do not in the aggregate impair in any material respect the use of Property in the operation of the business of the Company and the Restricted Subsidiaries taken as a whole; (f) Liens on Property at the time the Company or any Restricted Subsidiary acquired the Property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that any Lien of this kind -------- ------- may not extend to any other Property of the Company or any Restricted Subsidiary; provided further, however, that the Liens shall not have ---------------- ------- been Incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which the Property was acquired by the Company or any Restricted Subsidiary; 28 (g) Liens on the Property of a Person at the time that Person becomes a Restricted Subsidiary; provided, however, that any Lien of -------- ------- this kind may not extend to any other Property of the Company or any other Restricted Subsidiary that is not a direct Subsidiary of that Person; provided further, however, that the Lien was not Incurred in ---------------- ------- anticipation of or in connection with the transaction or series of transactions pursuant to which the Person became a Restricted Subsidiary; (h) pledges or deposits by the Company or any Restricted Subsidiary under worker's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company or any Restricted Subsidiary or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary, or deposits for the payment of rent, in each case Incurred in the ordinary course of business; (i) Liens (including, without limitation and to the extent constituting Liens, negative pledges), assignments and pledges of rights to receive premiums, interest or loss payments or otherwise arising in connection with worker's compensation loss portfolio transfer insurance transactions or any insurance or reinsurance agreements pertaining to losses covered by insurance, and Liens (including, without limitation and to the extent constituting Liens, negative pledges) in favor of insurers or reinsurers on pledges or deposits by the Company or any Restricted Subsidiary under workmen's compensation laws, unemployment insurance laws or similar legislation; (j) utility easements, building restrictions and such other encumbrances or charges against real Property as are of a nature generally existing with respect to properties of a similar character; (k) Liens arising out of judgments or awards against the Company or a Restricted Subsidiary with respect to which the Company or the Restricted Subsidiary shall then be proceeding with an appeal or other proceeding for review; (l) Liens in favor of surety bonds or letters of credit issued pursuant to the request of and for the account of the Company or a Restricted Subsidiary in 29 the ordinary course of its business, provided that these letters of credit do not constitute Debt; (m) leases or subleases of real property granted by the Company or a Restricted Subsidiary to any other Person in the ordinary course of business and not materially impairing the use of the real property in the operation of the business of the Company or the Restricted Subsidiary; (n) Liens (including, without limitation and to the extent constituting Liens, negative pledges) on intellectual property arising from intellectual property licenses entered into in the ordinary course of business; (o) Liens or negative pledges attaching to or related to joint ventures engaged in a Related Business, restricting Liens on interests in those joint ventures; (p) Liens existing on the Issue Date not otherwise described in clauses (a) through (o) above; (q) Liens not otherwise described in clauses (a) through (p) above on the Property of any Restricted Subsidiary to secure any Debt permitted to be Incurred by the Restricted Subsidiary pursuant to Section 4.04; (r) Liens on the Property of the Company or any Restricted Subsidiary to secure any Refinancing, in whole or in part, of any Debt secured by Liens referred to in clause (b), (e), (f), (g), (k) or (l) above; provided, however, that any Lien of this kind shall be limited -------- ------- to all or part of the same Property that secured the original Lien (together with improvements and accessions to such Property) and the aggregate principal amount of Debt that is secured by the Lien shall not be increased to an amount greater than the sum of: (1) the outstanding principal amount, or, if greater, the committed amount, of the Debt secured by Liens described under clause (b), (e), (f), (g), (k) or (l) above, as the case may be, at the time the original Lien became a Permitted Lien under the indenture, and (2) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, 30 incurred by the Company or the Restricted Subsidiary in connection with the Refinancing; (s) Liens not otherwise permitted by clauses (a) through (r) above that are Liens permitted by the Existing Bank Credit Facilities as they exist on the Issue Date; and (t) Liens not otherwise permitted by clauses (a) through (s) above encumbering assets having an aggregate Fair Market Value not in excess of 5.0% of Consolidated Net Tangible Assets, as determined based on the consolidated balance sheet of the Company as of the end of the most recent fiscal quarter ending at least 45 days prior to the date the Lien shall be Incurred. "Permitted Refinancing Debt" means any Debt that Refinances any other Debt, including any successive Refinancings, so long as: (a) the new Debt is in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) not in excess of the sum of: (1) the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding of the Debt being Refinanced, and (2) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to the Refinancing, (b) the Average Life of the new Debt is equal to or greater than the Average Life of the Debt being Refinanced, (c) the Stated Maturity of the new Debt is no earlier than the Stated Maturity of the Debt being Refinanced, and (d) the new Debt shall not be senior in right of payment to the Debt that is being Refinanced; provided, however, that Permitted Refinancing Debt shall not include: - -------- ------- (x) Debt of a Subsidiary that Refinances Debt of the Company or 31 (y) Debt of the Company or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary. "Person" means any individual, corporation, company (including any limited liability company), association, partnership, joint venture, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of that Person, over shares of any other class of Capital Stock issued by that Person. "Preferred Stock Dividends" means all dividends with respect to Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Restricted Subsidiary. The amount of any dividend of this kind shall be equal to the quotient of the dividend divided by the difference between one and the maximum statutory federal income rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of the Preferred Stock. "principal" of any Debt (including the Securities) means the principal amount of such Debt plus the premium, if any, on such Debt. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation performed in accordance with Article 11 of Regulation S-X promulgated under the Securities Act, as interpreted in good faith by the Board of Directors after consultation with the independent certified public accountants of the Company, or otherwise a calculation made in good faith by the Board of Directors after consultation with the independent certified public accountants of the Company, as the case may be. "Property" means, with respect to any Person, any interest of that Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock in, and other securities of, any other Person. For purposes of any calculation required pursuant to the indenture, the value of any Property shall be its Fair Market Value. "Public Equity Offering" means an underwritten public offering of common stock of the Company pursuant to 32 an effective registration statement under the Securities Act. "Public Market" means any time after: (a) a Public Equity Offering has been consummated,and (b) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Purchase Money Debt" means Debt: (a) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds, in each case where the maturity of the Debt does not exceed the anticipated useful life of the Property being financed, and (b) Incurred to finance the acquisition, construction or lease by the Company or a Restricted Subsidiary of the Property, including additions and improvements thereto; provided, however, that the Debt is Incurred within 180 days after the - -------- ------- acquisition, construction or lease of the Property by the Company or Restricted Subsidiary. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to: (a) a Receivables Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Receivables Entity), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing those accounts receivable, all contracts and all Guarantees or other obligations in respect of those accounts 33 receivable, proceeds of those accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable; provided that: (1) if the transaction involves a transfer of accounts receivable with Fair Market Value equal to or greater than $25.0 million, the Board of Directors shall have determined in good faith that the Qualified Receivables Transaction is economically fair and reasonable to the Company and the Receivables Entity, (2) all sales of accounts receivable and related assets to or by the Receivables Entity are made at Fair Market Value and (3) the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by the Board of Directors). The grant of a security interest in any accounts receivable of the Company or any of its Restricted Subsidiaries to secure the Credit Facilities shall not be deemed a Qualified Receivables Transaction. "Rating Agencies" mean Moody's and S&P. "Real Estate Financing Transaction" means any arrangement with any Person pursuant to which the Company or any Restricted Subsidiary Incurs Debt secured by a Lien on real property of the Company or any Restricted Subsidiary and related personal property together with any Refinancings thereof. "Receivables Entity" means a Wholly Owned Subsidiary of the Company (or another Person formed for the purposes of engaging in a Qualified Receivables Transaction with the Company in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Company and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to that business, and (with respect to any Receivables Entity formed after the Issue Date) which is 34 designated by the Board of Directors (as provided below) as a Receivables Entity and (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (1) is Guaranteed by the Company or any Subsidiary of the Company (excluding Guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (2) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (3) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or the Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve the entity's financial condition or cause the entity to achieve certain levels of operating results other than pursuant to Standard Securitization Undertakings. Any designation of this kind by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to the designation and an Officers' Certificate certifying that the designation complied with the foregoing conditions. "Refinance" means, in respect of any Debt, to refinance, extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or to issue other Debt, in exchange or replacement for, that Debt. 35 "Refinanced" and "Refinancing" shall have correlative meanings. "Related Business" means any business that is related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Repay" means, in respect of any Debt, to repay, prepay, repurchase, redeem, legally defease or otherwise retire that Debt. "Repayment" and "Repaid" shall have correlative meanings. For purposes of Section 4.07 and Section 4.04 and the definition of "Consolidated Fixed Charges Coverage Ratio", Debt shall be considered to have been Repaid only to the extent the related loan commitment, if any, shall have been permanently reduced in connection therewith. "Restricted Payment" means: (a) any dividend or distribution (whether made in cash, securities or other Property) declared or paid on or with respect to any shares of Capital Stock of the Company or any Restricted Subsidiary (including any payment in connection with any merger or consolidation with or into the Company or any Restricted Subsidiary), except for any dividend or distribution that is made to the Company or the parent of the Restricted Subsidiary or any dividend or distribution payable solely in shares of Capital Stock (other than Disqualified Stock) of the Company; (b) the purchase, repurchase, redemption, acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary (other than from the Company or a Restricted Subsidiary) or any securities exchangeable for or convertible into Capital Stock of the Company or any Restricted Subsidiary, including the exercise of any option to exchange any Capital Stock (other than for or into Capital Stock of the Company that is not Disqualified Stock); (c) the purchase, repurchase, redemption, acquisition or retirement for value, prior to the date for any scheduled maturity, sinking fund or amortization or other installment payment, of any Subordinated Obligation (other than the purchase, repurchase or other acquisition of any Subordinated Obligation purchased in anticipation of satisfying a scheduled maturity, sinking fund or amortization or 36 other installment obligation, in each case due within one year of the date of acquisition); (d) any Investment (other than Permitted Investments) in any Person; or (e) the issuance, sale or other disposition of Capital Stock of any Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary if the result thereof is that the Restricted Subsidiary shall cease to be a Restricted Subsidiary, in which event the amount of the "Restricted Payment" shall be the Fair Market Value of the remaining interest, if any, in the former Restricted Subsidiary held by the Company and the other Restricted Subsidiaries. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Service or any successor to the rating agency business thereof. "Sale and Leaseback Transaction" means any direct or indirect arrangement relating to Property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers that Property to another Person and the Company or a Restricted Subsidiary leases it from that other Person together with any Refinancings thereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933. "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are customary in an accounts receivable securitization transaction involving a comparable company. "Stated Maturity" means, with respect to any security, the date specified in the security as the fixed date on which the payment of principal of the security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of the security at the option of the 37 holder thereof upon the happening of any contingency beyond the control of the issuer unless that contingency has occurred). "Subordinated Obligation" means any Debt of the Company (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" means, in respect of any Person, any corporation, company (including any limited liability company), association, partnership, joint venture or other business entity of which a majority of the total voting power of the Voting Stock is at the time owned or controlled, directly or indirectly, by: (a) that Person, (b) that Person and one or more Subsidiaries of that Person, or (c) one or more Subsidiaries of that Person. "Temporary Cash Investments" means any of the following: (a) Investments in U.S. Government Obligations maturing within 365 days of the date of acquisition thereof; (b) Investments in time deposit accounts, banker's acceptances, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company organized under the laws of the United States of America or any state thereof having capital, surplus and undivided profits aggregating in excess of $500 million or issued by a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development having total assets in excess of $500 million (or its foreign currency equivalent at the time), and in any case whose long-term debt is rated "A-3" or "A-" or higher according to Moody's or S&P (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)); 38 (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) entered into with: (1) a bank meeting the qualifications described in clause (b) above, or (2) any primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (d) Investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any other country that is a member of the Organization for Economic Cooperation and Development, and in any case with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or"A-1" (or higher) according to S&P (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act); and (e) direct obligations (or certificates representing an ownership interest in such obligations) of any state of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of such state is pledged and which are not callable or redeemable at the issuer's option, provided that: (1) the long-term debt of the state is rated "A-3" or "A-" or higher according to Moody's or S&P (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), and (2) the obligations mature within 180 days of the date of acquisition thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. ------ 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, -------- ------- that, in the event the TIA is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendments, the Trust Indenture Act of 1939 as so amended. 39 "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means any officer within the Corporate Trust Administration department of the Trustee (or any successor group of the trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means: (a) any Subsidiary of the Company that is designated after the Issue Date as an Unrestricted Subsidiary as permitted or required pursuant to Section 4.10 and is not thereafter redesignated as a Restricted Subsidiary as permitted pursuant thereto; and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in THE WALL STREET JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. In determining the aggregate principal amount (on a U.S. Dollar Equivalent basis) of Securities outstanding, such amount will be treated as the U.S. Dollar Equivalent determined as of the date of issuance of such Securities. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of any Person means all classes of Capital Stock or other interests (including partnership 40 interests, and in the case of the Company, Voting Trust Certificates) of that Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Voting Trust Arrangement" means the Voting Trust Arrangement entered into as of April 15, 1996 by and among Robert D. Haas; Peter E. Haas, Sr.; Peter E. Haas, Jr.; and F. Warren Hellman as the Voting Trustees and the stockholders of the Company who are parties thereto. "Voting Trust Certificates" means those certificates issued pursuant to the Voting Trust Arrangement. "Voting Trustees" means the persons entitled to act as voting trustees under the Voting Trust Arrangement. "Wholly Owned Restricted Subsidiary" means, at any time, a Restricted Subsidiary all the Voting Stock of which (except directors' qualifying shares) is at that time owned, directly or indirectly, by the Company and its other Wholly Owned Subsidiaries. 41 SECTION 1.02. Other Definitions. ------------------ Defined in Term Section ---- ------- "Affiliate Transaction" 4.09 "Bankruptcy Law" 6.01 "Change of Control Offer" 4.12 "Change of Control Payment Date" 4.12 "Change of Control Purchase Price" 4.12 "covenant defeasance option" 8.01 "Custodian" 6.01 "Event of Default" 6.01 "Exchange Security" Appendix A "Global Security" Appendix A "legal defeasance option" 8.01 "Legal Holiday" 10.08 "Offer Amount" 4.07 "Offer Period" 4.07 "Original Securities" 2.01 "Paying Agent" 2.04 "Prepayment Offer" 4.07 "Registered Exchange Offer" Appendix A "Registrar" 2.04 "Shelf Registration statement" Appendix A "Surviving Person" 5.01 SECTION 1.03. Incorporation by Reference of Trust Indenture ----------------------------------------------- Act. This Indenture is subject to the mandatory provisions of the TIA, which are - --- incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. 42 "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context ------------------------ otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Debt shall not be deemed to be subordinate or junior to secured Debt merely by virtue of its nature as unsecured Debt; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (8) the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock. ARTICLE II The Securities -------------- SECTION 2.01. Amount of Securities; Issuable in Series. The ------------------------------------------ aggregate principal amount of Securities (on a U.S. Dollar Equivalent basis) which may be authenticated and delivered under this Indenture is (x) $850.0 million less (y) the aggregate principal amount of any Dollar Notes issued by the Company. All Securities shall be identical in 43 all respects other than issue prices and issuance dates. The Securities may be issued in one or more series; provided, however, that any Securities issued with -------- ------- original issue discount ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Securities that are issued with a different amount of OID or are not issued with OID. All Securities of any one series shall be substantially identical except as to denomination. Subject to Section 2.03, the Trustee shall authenticate Securities for original issue on the Issue Date in the aggregate principal amount of 125,000,000 euro dollars (the "Original Securities"). With respect to any securities issued after the Issue Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A), there shall be established in or pursuant to a resolution of the Board of Directors, and subject to Section 2.03, 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 such Securities: (1) whether such Securities shall be issued as part of a new or existing series of Securities and the title of such Securities (which shall distinguish the Securities of the series from Securities of any other series); (2) the aggregate principal amount of such Securities that may be authenticated and delivered under this Indenture, which shall be in an aggregate principal amount (on a U.S. Dollar Equivalent basis) not to exceed (x) $350.0 million less (y) the aggregate principal amount of any Dollar Notes issued by the Company that are not Issue Date Dollar Notes (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the same series pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and except for Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (3) the issue price and issuance date of such Securities, including the date from which interest on such Securities shall accrue; (4) if applicable, that such Securities shall be issuable in whole or in part in the form of one or more 44 Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends that shall be borne by any such Global Security in addition to or in lieu of that set forth in Exhibit 1 to Appendix A and any circumstances in addition to or in lieu of those set forth in Section 2.3 of Appendix A 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 depository for such Global Security or a nominee thereof; and (5) if applicable, that such Securities shall not be issued in the form of Initial Securities subject to Appendix A, but shall be issued in the form of Exchange Securities as set forth in Exhibit A. If any of the terms of any series are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate or the trust indenture supplemental hereto setting forth the terms of the series. SECTION 2.02. Form and Dating. Provisions relating to the ----------------- Initial Securities of each series and the Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities of each series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities of each series may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. Each Security shall be dated the date of its authentication. The terms of the Securities of each series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.03. Execution and Authentication. Two Officers ------------------------------- shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be 45 impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. 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 written order of the Company in the form of an Officers' Certificate for the authentication and delivery of such Securities, and the Trustee in accordance with such written order of the Company shall authenticate and deliver such Securities. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee hereby appoints, Citibank, N.A., London Office of 5 Carmelite Street, London, EC4Y OPA as authenticating agent to authenticate the Securities (the "Authentication Agent"). The Authentication Agent may authenticate the Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authentication Agent. The Authentication Agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Registrar and Paying Agent. The Company shall ---------------------------- maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The obligations of the Paying Agent and the Registrar shall be several and not joint. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The 46 Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the London Office of Citibank, N.A. as Registrar and Paying Agent in connection with the Securities. SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to ------------------------------------ each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent immediately available and freely transferable funds in euro to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. The Company shall, prior to 12 noon (London Time) on the second Business Day immediately preceding the payment date under this Section 2.05 send to the Paying Agent a confirmation that payment will be made and the details of the bank through which the issuer is to make the payment due pursuant to this Section 2.05. Unless the Paying Agent has received payment from the Company, it shall not be obliged, but may, make payment pursuant to this Section 2.05. If the Paying Agent makes such payment on behalf of the Company under this Section 2.05, the Company shall be liable on demand by the Paying Agent to the Paying Agent the amount so paid. If the Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Securityholder Lists. The Trustee shall preserve --------------------- in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date 47 as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.07. Replacement Securities. If a mutilated Security ----------------------- is surrendered to the Registrar or if the Holder of a Security claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding ------------------------ at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive ----------------------- Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall 48 prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancellation. The Company at any time may ------------- deliver Securities to the Registrar for cancellation. The agents shall forward to the Registrar any Securities surrendered to them for registration of transfer, exchange or payment. Unless the Trustee and the Company direct otherwise, the Registrar and no one else shall cancel and dispose of all Securities surrendered for registration of transfer, exchange, payment or cancellation in its customary manner. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Company defaults in a ------------------- payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the --------------- Securities may use "CUSIP", "ISIN" or "Common Code" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP", "ISIN" and "Common Code" numbers in notices of redemption as a convenience to Holders; provided, -------- however, that neither the Company nor the Trustee shall have any responsibility - -------- for any defect in the "CUSIP", "ISIN" or "Common Code" number that appears on any Security, check, advice of payment or redemption notice, and any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in such numbers. 49 ARTICLE III Redemption ---------- SECTION 3.01. Notices to Trustee. If the Company elects to ------------------- redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee (with a copy to the Registrar) in writing of the redemption date, the principal amount of Securities to be redeemed and that such redemption is being made pursuant to paragraph 5 of the Securities. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer --------------------------------------- than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than 1,000 euro dollars. Securities and portions of them the Trustee selects shall be in amounts of 1,000 euro dollars or a whole multiple of 1,000 euro dollars. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not --------------------- more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed and to the Paying Agent and Registrar. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; 50 (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------- redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the ------------------------------- redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Registrar for cancellation. 51 SECTION 3.06. Securities Redeemed in Part. Upon surrender of a ---------------------------- Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV Covenants --------- SECTION 4.01. Covenant Suspension. During any period of time -------------------- that: (a) the Securities have Investment Grade Ratings from both Rating Agencies and (b) no Default or Event of Default has occurred and is continuing under the Indenture, the Company and the Restricted Subsidiaries will not be subject to the following Sections of the Indenture: Section 4.04, Section 4.05, Section 4.07, Section 4.08, clause (x) of the third paragraph (and as referred to in the first paragraph) of Section 4.10, and clause (e) of the first paragraph of Article 5. (collectively, the "Suspended Covenants"). In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, one or both of the Rating Agencies withdraws its rating or downgrades the rating assigned to the Securities below the required Investment Grade Rating or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants for all periods after that withdrawal, downgrade, Default or Event of Default and, furthermore, compliance with the provisions of Section 4.05 with respect to Restricted Payments made after the time of the withdrawal, downgrade, Default or Event of Default will be calculated in accordance with the terms of that covenant as though that covenant had been in effect during the entire period of time from the Issue Date, provided that there will not be deemed to have occurred a Default or Event of Default with respect to that covenant during the time that the Company and the Restricted Subsidiaries were not subject to the Suspended Covenants (or after that time based solely on events that occurred during that time). 52 SECTION 4.02. Payment of Securities. The Company shall ------------------------ promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. SECTION 4.03. SEC Reports. Notwithstanding that the Company ------------ may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Commission and provide the Trustee and Holders of Securities with annual reports and information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to those Sections, and the information, documents and reports to be so filed and provided at the times specified for the filing of the information, documents and reports under those Sections; provided, -------- however, that the Company shall not be so obligated to file the information, - ------- documents and reports with the Commission if the Commission does not permit those filings. The Company shall also comply with the other provisions of TIA ss. 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates). SECTION 4.04. Limitation on Debt. The Company shall not, and ------------------- shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Debt unless, after giving effect to the application of the proceeds thereof, no Default or Event of Default would occur as a consequence of the Incurrence or be continuing following the Incurrence and either: (1) the Debt is Debt of the Company and after giving effect to the Incurrence of the Debt and the application of the proceeds thereof, the Consolidated Fixed Charges Coverage Ratio would be greater than 2.00 53 to 1.00 if the Debt is Incurred from the Issue Date through January 15, 2004, and 2.50 to 1.00 if the Debt is Incurred thereafter, or (2) the Debt is Permitted Debt. The term "Permitted Debt" is defined to include the following: (a) Debt of the Company evidenced by the Original Securities; (b) Debt of the Company or a Restricted Subsidiary under any Credit Facilities, Incurred by the Company or a Restricted Subsidiary pursuant to a Real Estate Financing Transaction, a Sale and Leaseback Transaction or an Equipment Financing Transaction, or Incurred by a Receivables Entity in a Qualified Receivables Transaction that is not recourse to the Company or any other Restricted Subsidiary of the Company (except for Standard Securitization Undertakings), provided that the aggregate principal amount of all Debt of this kind at any one time outstanding shall not exceed the greater of: (1) $1.6 billion, which amount shall be permanently reduced by the amount of Net Available Cash used to Repay Debt under the Credit Facilities pursuant to Section 4.07 and (2) the sum of the amounts equal to: (A) 50% of the book value of the inventory of the Company and the Restricted Subsidiaries and (B) 85% of the book value of the accounts receivable of the Company and the Restricted Subsidiaries, in the case of each of clauses (A) and (B) as of the most recently ended quarter of the Company for which financial statements of the Company have been provided to the Holders of Securities; (c) Debt of the Company owing to and held by any Restricted Subsidiary and Debt of a Restricted Subsidiary owing to and held by the Company or any Restricted Subsidiary; provided, however, that (1) any -------- ------- subsequent issue or transfer of Capital Stock or other event that results in any Restricted Subsidiary ceasing 54 to be a Restricted Subsidiary or any subsequent transfer of that Debt (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of that Debt by the issuer thereof, and (2) if the Company is the obligor on that Indebtedness, the Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities; (d) Debt of a Restricted Subsidiary outstanding on the date on which that Restricted Subsidiary was acquired by the Company or otherwise became a Restricted Subsidiary (other than Debt Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which that Restricted Subsidiary became a Subsidiary of the Company or was otherwise acquired by the Company), provided that at the time that Restricted Subsidiary was acquired by the Company or otherwise became a Restricted Subsidiary and after giving effect to the Incurrence of that Debt, the Company would have been able to Incur $1.00 of additional Debt pursuant to clause (1) of the first paragraph of this covenant; (e) Debt under Interest Rate Agreements entered into by the Company or a Restricted Subsidiary for the purpose of limiting interest rate risk in the ordinary course of the financial management of the Company or that Restricted Subsidiary and not for speculative purposes, provided that the obligations under those agreements are related to payment obligations on Debt otherwise permitted by the terms of this covenant; (f) Debt under Currency Exchange Protection Agreements entered into by the Company or a Restricted Subsidiary for the purpose of limiting currency exchange rate risks directly related to transactions entered into by the Company or that Restricted Subsidiary in the ordinary course of business and not for speculative purposes; (g) Debt under Commodity Price Protection Agreements entered into by the Company or a Restricted Subsidiary in the ordinary course of the financial management of the Company or that Restricted Subsidiary and not for speculative purposes; (h) Debt Incurred in respect of Capital Lease Obligations and Purchase Money Debt, provided that the aggregate principal amount of all Debt of this kind 55 does not exceed the Fair Market Value, on the date of Incurrence thereof, of the Property acquired, constructed or leased, and provided further, that the aggregate principal amount outstanding of all Debt of this kind at any one time, together with all Permitted Refinancing Debt Incurred and outstanding in respect of these Capital Lease Obligations and Purchase Money Debt, does not exceed $50.0 million; (i) Debt outstanding on the Issue Date not otherwise described in clauses (a) through (h) above; (j) Debt of the Company or a Restricted Subsidiary in an aggregate principal amount outstanding at any one time not to exceed $100.0 million; and (k) Permitted Refinancing Debt Incurred in respect of Debt Incurred pursuant to clause (1) of the first paragraph of this covenant and clauses (a), (d), (h) and (i) above. SECTION 4.05. Limitation on Restricted Payments. The Company ---------------------------------- shall not make, and shall not permit any Restricted Subsidiary to make, directly or indirectly, any Restricted Payment if at the time of, and after giving effect to, the proposed Restricted Payment, (a) a Default or Event of Default shall have occurred and be continuing, (b) the Company could not Incur at least $1.00 of additional Debt pursuant to clause (1) of the first paragraph of Section 4.04 or (c) the aggregate amount of that Restricted Payment and all other Restricted Payments declared or made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of: (1) 50% of the aggregate amount of Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter ending at least 45 days prior to the date of the Restricted Payment (or if the aggregate amount of Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), plus 56 (2) Capital Stock Sale Proceeds, plus (3) the sum of: (A) the aggregate net cash proceeds received by the Company or any Restricted Subsidiary from the issuance or sale after the Issue Date of convertible or exchangeable Debt that has been converted into or exchanged for Capital Stock (other than Disqualified Stock) of the Company, and (B) the aggregate amount by which Debt of the Company or any Restricted Subsidiary is reduced on the Company's consolidated balance sheet on or after the Issue Date upon the conversion or exchange of any Debt issued or sold on or prior to the Issue Date that is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company, excluding, in the case of clause (A) or (B): (x) any Debt issued or sold to the Company or a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any Subsidiary for the benefit of their employees, and (y) the aggregate amount of any cash or other Property distributed by the Company or any Restricted Subsidiary upon any such conversion or exchange, plus (4) an amount equal to the sum of: (A) the net reduction in Investments in any Person other than the Company or a Restricted Subsidiary resulting from dividends, repayments of loans or advances or other transfers of Property, in each case to the Company or any Restricted Subsidiary from that Person, less the cost of the disposition of those Investments, and (B) the lesser of the net book value or the Fair Market Value of the Company's equity interest in an Unrestricted Subsidiary at the time the Unrestricted Subsidiary is 57 designated a Restricted Subsidiary; provided, -------- however, that the foregoing sum shall not exceed, in ------- the case of any Person, the amount of Investments previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in that Person. Notwithstanding the foregoing limitation, the Company may: (a) pay dividends on its Capital Stock within 60 days of the declaration thereof if, on said declaration date, the dividends could have been paid in compliance with the Indenture; provided, however, -------- ------- that at the time of the payment of the dividend, no other Default or Event of Default shall have occurred and be continuing (or result therefrom); provided further, however, that the dividend shall be ----------------- ------- included in the calculation of the amount of Restricted Payments; (b) purchase, repurchase, redeem, legally defease, acquire or retire for value Capital Stock of the Company or Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any Subsidiary for the benefit of their employees); provided, however, that -------- ------- (1) the purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall be excluded in the calculation of the amount of Restricted Payments and (2) the Capital Stock Sale Proceeds from the exchange or sale shall be excluded from the calculation pursuant to clause (c)(2) above; (c) purchase, repurchase, redeem, legally defease, acquire or retire for value any Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Permitted Refinancing Debt; provided, however, that the purchase, repurchase, -------- ------- redemption, legal defeasance, acquisition or retirement shall be excluded in the calculation of the amount of Restricted Payments; (d) pay scheduled dividends (not constituting a return on capital) on Disqualified Stock of the Company issued pursuant to and in compliance with Section 4.04; 58 (e) permit a Restricted Subsidiary that is not a Wholly Owned Subsidiary to pay dividends to shareholders of that Restricted Subsidiary that are not the parent of that Restricted Subsidiary, so long as the Company or a Restricted Subsidiary that is the parent of that Restricted Subsidiary receives dividends on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary that is the parent of that Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis; and (f) until January 31, 2002 or the earlier termination of all of the Existing Bank Credit Facilities, permit the making of a Restricted Payment (as defined in the Existing Bank Credit Facilities, without giving effect to any waiver or amendment thereto after the Issue Date) or the transfer of assets from any Subsidiary to its parent (in each case, to the extent such a payment or transfer is not permitted to be restricted or limited under Section 7.18 of each of the Existing Bank Credit Facilities, without giving effect to any waiver or amendment thereto after the Issue Date). SECTION 4.06. Limitation on Liens. The Company shall not, and -------------------- shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its Property (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any interest therein or any income or profits therefrom, unless it has made or will make effective provision whereby the Securities will be secured by that Lien equally and ratably with (or prior to) all other Debt of the Company or any Restricted Subsidiary secured by that Lien. SECTION 4.07. Limitation on Asset Sales. (a) The Company -------------------------- shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless: (i) the Company or the Restricted Subsidiary receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the Property subject to such Asset Sale; (ii) at least 75% of the consideration paid to the Company or the Restricted Subsidiary in connection with such Asset Sale is in the form of cash or cash equivalents or the assumption by the purchaser of 59 liabilities of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities) as a result of which the Company and the Restricted Subsidiaries are no longer obligated with respect to such liabilities, provided, however, -------- ------- that in the case of a transaction involving a sale of any distribution center by the Company or a Restricted Subsidiary and the establishment of an outsourcing arrangement in which the purchaser assumes distribution responsibilities on behalf of the Company or the Restricted Subsidiary, any credits or other consideration the purchaser grants to the Company or the Restricted Subsidiary as part of the purchase price of the distribution center, which credits or other consideration effectively offset future payments due from the Company or the Restricted Subsidiary to the purchaser as part of the outsourcing arrangement, will be considered to be cash equivalents for purposes of this clause (ii); and (iii) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Sale complies with the foregoing clauses (i) and (ii). (b) The Net Available Cash (or any portion thereof) from Asset Sales may be applied by the Company or a Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Debt): (i) to Repay Debt under the Credit Facilities, or to Repay Debt of the Company or any Restricted Subsidiary secured by a Lien pursuant to Section 4.06 on the assets subject to that Asset Sale (excluding, in any such case, any Debt owed to the Company or an Affiliate of the Company); or (ii) to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary), provided, however, that the Net Available Cash (or any -------- ------- portion thereof) from Asset Sales from the Company to any Subsidiary must be reinvested in Additional Assets of the Company. (c) Any Net Available Cash from an Asset Sale not applied in accordance with the preceding paragraph within 360 days from the date of the receipt of such Net Available Cash shall constitute "Excess Proceeds". 60 When the aggregate amount of Excess Proceeds not previously subject to a Prepayment Offer (as defined below) exceeds $10.0 million (taking into account income earned on those Excess Proceeds, if any), the Company will be required to make an offer to purchase the Securities (the "Prepayment Offer") which offer shall be in the amount of the Allocable Excess Proceeds, on a pro rata basis according to principal amount, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the procedures (including prorating in the event of oversubscription) set forth in this Indenture. To the extent that any portion of the amount of Net Available Cash remains after compliance with the preceding sentence and provided that all Holders of Securities have been given the opportunity to tender their Securities for purchase in accordance with this Indenture, the Company or such Restricted Subsidiary may use the remaining amount for any purpose permitted by this Indenture and the amount of Excess Proceeds will be reset to zero. The term "Allocable Excess Proceeds" will mean the product of: (a) the Excess Proceeds and (b) a fraction, (1) the numerator of which is the aggregate principal amount of the Securities outstanding on the date of the Prepayment Offer, and (2) the denominator of which is the sum of the aggregate principal amount of the Securities outstanding on the date of the Prepayment Offer and the aggregate principal amount of other Debt of the Company outstanding on the date of the Prepayment Offer that is pari passu in right of payment ---- ----- with the Securities and subject to terms and conditions in respect of Asset Sales similar in all material respects to the covenant described hereunder and requiring the Company to make an offer to purchase such Debt at substantially the same time as the Prepayment Offer. (d)(1) Within five Business Days after the Company is obligated to make a Prepayment Offer as described in the preceding paragraph, the Company shall send a written notice, by first-class mail, to the Holders of 61 Securities, accompanied by information regarding the Company and its Subsidiaries as the Company in good faith believes will enable the Holders to make an informed decision with respect to that Prepayment Offer. The notice shall state, among other things, the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 30 days nor later than 60 days from the date the notice is mailed. (2) Not later than the date upon which written notice of a Prepayment Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Prepayment Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.07(b). On or before the Purchase Date, the Company shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary Cash Investments (other than in those enumerated in clause (b) of the definition of Temporary Cash Investments), maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Prepayment Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof that have been properly tendered to and are to be accepted by the Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee or the Paying Agent shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if 62 the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on pro rata basis for all Securities, (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of 1,000 euro dollars, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee that are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee or the Paying Agent mails or delivers payment therefor to the surrendering Holder. (5) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. SECTION 4.08. Limitation on Restrictions on Distributions from ------------------------------------------------ Restricted Subsidiaries. The Company shall not, and shall not permit any - ------------------------- Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist any consensual restriction on the right of any Restricted Subsidiary to: (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital 63 Stock, or pay any Debt or other obligation owed, to the Company or any other Restricted Subsidiary, (b) make any loans or advances to the Company or any other Restricted Subsidiary or (c) transfer any of its Property to the Company or any other Restricted Subsidiary. The foregoing limitations will not apply: (1) with respect to clauses (a), (b) and (c), to restrictions: (A) in effect on the Issue Date, (B) relating to Debt of a Restricted Subsidiary and existing at the time it became a Restricted Subsidiary if such restriction was not created in connection with or in anticipation of the transaction or series of transactions pursuant to which that Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, (C) that result from the Refinancing of Debt Incurred pursuant to an agreement referred to in clause (1)(A) or (B) above or in clause (2)(A) or (B) below, provided that restriction is no less favorable to the Holders of Securities than those under the agreement evidencing the Debt so Refinanced, or (D) resulting from the Incurrence of any Permitted Debt described in clause (b) of the second paragraph of Section 4.04, provided that the restriction is no less favorable to the Holders of Securities than the restrictions of the same type contained in the Indenture, and (2) with respect to clause (c) only, to restrictions: (A) relating to Debt that is permitted to be Incurred and secured without also securing the notes pursuant to Section 4.04 and Section 4.06 that limit the right of the debtor to dispose of the Property securing that Debt, 64 (B) encumbering Property at the time the Property was acquired by the Company or any Restricted Subsidiary, so long as the restriction relates solely to the Property so acquired and was not created in connection with or in anticipation of the acquisition, (C) resulting from customary provisions restricting subletting or assignment of leases or customary provisions in other agreements (including, without limitation, intellectual property licenses entered into in the ordinary course of business) that restrict assignment of the agreements or rights thereunder, or (D) which are customary restrictions contained in asset sale agreements limiting the transfer of Property pending the closing of the sale. SECTION 4.09. Limitation on Transactions with Affiliates. The ------------------------------------------- Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of transactions (including the purchase, sale, transfer, assignment, lease, conveyance or exchange of any Property or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"), unless: (a) the terms of such Affiliate Transaction are: (1) set forth in writing, and (2) no less favorable to the Company or that Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company, and (b) if the Affiliate Transaction involves aggregate payments or value in excess of $10.0 million, the Board of Directors (including a majority of the disinterested members of the Board of Directors) approves the Affiliate Transaction and, in its good faith judgment, believes that the Affiliate Transaction complies with clauses (a)(1) and (2) of this paragraph as evidenced by a Board Resolution promptly delivered to the trustee. 65 Notwithstanding the foregoing limitation, the Company or any Restricted Subsidiary may enter into or suffer to exist the following: (a) any transaction or series of transactions between the Company and one or more Restricted Subsidiaries or between two or more Restricted Subsidiaries in the ordinary course of business, provided that no more than 5% of the total voting power of the Voting Stock (on a fully diluted basis) of any such Restricted Subsidiary is owned by an Affiliate of the Company (other than a Restricted Subsidiary); (b) any Restricted Payment permitted to be made pursuant to Section 4.05 or any Permitted Investment; (c) the payment of compensation (including amounts paid pursuant to employee benefit plans) for the personal services of officers, directors and employees of the Company or any of the Restricted Subsidiaries, so long as, in the case of officers and directors, the Board of Directors in good faith shall have approved the terms thereof and deemed the services theretofore or thereafter to be performed for the compensation to be fair consideration therefor; (d) loans and advances to employees made in the ordinary course of business and consistent with the past practices of the Company or that Restricted Subsidiary, as the case may be, provided that those loans and advances do not exceed $5.0 million in the aggregate at any one time outstanding; (e) any transaction effected as part of a Qualified Receivables Transaction or any transaction involving the transfer of accounts receivable of the type specified in the definition of "Credit Facility" and permitted under clause (b) of the second paragraph of Section 4.04; and (f) the Existing Policies or any transaction contemplated thereby. SECTION 4.10. Designation of Restricted and Unrestricted ---------------------------------------------- Subsidiaries. The Board of Directors may designate any Subsidiary of the Company - ------------- to be an Unrestricted Subsidiary if: (a) the Subsidiary to be so designated does not own any Capital Stock or Debt of, or own or hold any 66 Lien on any Property of, the Company or any other Restricted Subsidiary, and (b) any of the following: (1) the Subsidiary to be so designated has total assets of $1,000 or less, (2) if the Subsidiary has consolidated assets greater than $1,000, then the designation would be permitted under Section 4.05, or (3) the designation is effective immediately upon the entity becoming a Subsidiary of the Company. Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company will be classified as a Restricted Subsidiary; provided, however, that the Subsidiary shall not be designated a Restricted - -------- ------- Subsidiary and shall be automatically classified as an Unrestricted Subsidiary if either of the requirements set forth in clauses (x) and (y) of the second immediately following paragraph will not be satisfied after giving pro forma effect to the classification or if the Person is a Subsidiary of an Unrestricted Subsidiary. Except as provided in the first sentence of the preceding paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. In addition, neither the Company nor any Restricted Subsidiary shall at any time be directly or indirectly liable for any Debt that provides that the holder thereof may (with the passage of time or notice or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its Stated Maturity upon the occurrence of a default with respect to any Debt, Lien or other obligation of any Unrestricted Subsidiary in existence and classified as an Unrestricted Subsidiary at the time the Company or the Restricted Subsidiary is liable for that Debt (including any right to take enforcement action against that Unrestricted Subsidiary). The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to the designation, (x) the Company could Incur at least $1.00 of additional Debt pursuant to clause (1) of the first paragraph of Section 4.04, and 67 (y) no Default or Event of Default shall have occurred and be continuing or would result therefrom. Any designation or redesignation of this kind by the Board of Directors will be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to the designation or redesignation and an Officers' Certificate that: (a) certifies that the designation or redesignation complies with the foregoing provisions, and (b) gives the effective date of the designation or redesignation, and the filing with the Trustee to occur within 45 days after the end of the fiscal quarter of the Company in which the designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal quarter of the Company's fiscal year, within 90 days after the end of that fiscal year). SECTION 4.11. Limitation on Sale and Leaseback Transactions. ----------------------------------------------- The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction with respect to any Property unless: (a) the Company or that Restricted Subsidiary would be entitled to: (1) Incur Debt in an amount equal to the Attributable Debt with respect to that Sale and Leaseback Transaction pursuant to Section 4.04, and (2) create a Lien on the Property securing that Attributable Debt without also securing the Securities pursuant to Section 4.06, and (b) the Sale and Leaseback Transaction is effected in compliance with Section 4.07. SECTION 4.12. Change of Control. (a) Upon the occurrence of a ------------------ Change of Control, each Holder of Securities shall have the right to require the Company to repurchase all or any part of such Holder's Securities pursuant to the offer described below (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") equal to 101.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant 68 record date to receive interest due on the relevant interest payment date). (b) Within 30 days following any Change of Control, the Company shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send, by first-class mail, with a copy to the Trustee, to each Holder of Securities, at such Holder's address appearing in the Security Register, a notice stating: (A) that a Change of Control Offer is being made pursuant to this Section 4.12 and that all Securities timely tendered will be accepted for payment; (B) the Change of Control Purchase Price and the purchase date, which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (C) the circumstances and relevant facts regarding the Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to the Change of Control); and (D) the procedures that Holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders of Securities must follow in order to withdraw an election to tender Securities (or portions thereof) for payment. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Security purchased. (d) On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Wholly Owned Subsidiaries is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal to the Change of Control Purchase Price payable to the Holders entitled thereto, to be held for payment in accordance with the provisions of this Section. On the Change of Control Payment Date, the Company shall deliver to the Trustee the Securities or portions thereof that have been properly 69 tendered to and are to be accepted by the Company for payment. The Trustee or the Paying Agent shall, on the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Purchase Price. In the event that the aggregate Change of Control Purchase Price is less than the amount delivered by the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be, shall deliver the excess to the Company immediately after the Change of Control Payment Date. (e) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the purchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.13. Further Instruments and Acts. Upon request of ------------------------------- the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE V Successor Company ----------------- SECTION 5.01. (a) When Company May Merge or Transfer Assets. ------------------------------------------- The Company shall not merge, consolidate or amalgamate with or into any other Person (other than a merger of a Wholly Owned Restricted Subsidiary into the Company) or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all its Property in any one transaction or series of transactions unless: (a) the Company shall be the surviving Person (the "Surviving Person") or the Surviving Person (if other than the Company) formed by that merger, consolidation or amalgamation or to which that sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; 70 (b) the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by that Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Securities, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of the Indenture to be performed by the Company; (c) in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all the Property of the Company, that Property shall have been transferred as an entirety or virtually as an entirety to one Person; (d) immediately before and after giving effect to that transaction or series of transactions on a pro forma basis (and treating, for purposes of this clause (d) and clause (e) below, any Debt that becomes, or is anticipated to become, an obligation of the Surviving Person or any Restricted Subsidiary as a result of that transaction or series of transactions as having been Incurred by the Surviving Person or the Restricted Subsidiary at the time of that transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing; (e) immediately after giving effect to that transaction or series of transactions on a pro forma basis, the Company or the Surviving Person, as the case may be, would be able to Incur at least $1.00 of additional Debt under clause (1) of the first paragraph of Section 4.04, provided, however, that this clause (e) shall not be -------- ------- applicable to the Company merging, consolidating or amalgamating with or into an Affiliate incorporated solely for the purpose of reincorporating the Company in another State of the United States so long as the amount of Debt of the Company and the Restricted Subsidiaries is not increased thereby; (f) the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that the transaction and the supplemental indenture, if any, in respect thereto comply with this covenant and that all conditions precedent herein provided for relating to the transaction have been satisfied; and 71 (g) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of the transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if that transaction had not occurred. The Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of the Company under the Indenture, but the predecessor Company in the case of: (a) a sale, transfer, assignment, conveyance or other disposition (unless that sale, transfer, assignment, conveyance or other disposition is of all the assets of the Company as an entirety or virtually as an entirety), or (b) a lease, shall not be released from any obligation to pay the principal of, premium, if any, and interest on, the Securities. ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01. Events of Default. The following events shall be ------------------ "Events of Default": (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise; (3) the Company fails to comply with Article 5; (4) the Company fails to comply with any covenant or agreement in the Securities or in this Indenture (other than a failure that is the subject of the foregoing clause (1), (2) or (3)) and such failure continues for 30 days after written notice is given to the Company as specified below; 72 (5) a default under any Debt by the Company or any Restricted Subsidiary that results in acceleration of the maturity of that Debt, or failure to pay any such Debt at maturity, in an aggregate amount greater than $25.0 million or its foreign currency equivalent at the time; (6) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or (D) grants any similar relief under any foreign laws; and in each such case the order or decree remains unstayed and in effect for 30 days; or (8) any judgment or judgments for the payment of money in an aggregate amount in excess of $25.0 million, or its foreign currency equivalent at the time, that shall be rendered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any period of 30 consecutive 73 days during which a stay of enforcement shall not be in effect. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company (and in the case of such notice by Holders, the Trustee) of the Default and the Company does not cure that Default within the time specified after receipt of such notice. The notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event that with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default with ------------- respect to any of the Securities (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) shall have occurred and be continuing, the Trustee or the registered Holders of not less than 25% in aggregate principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, declare to be immediately due and payable the principal amount of all the applicable Securities then outstanding, plus accrued but unpaid interest to the date of acceleration. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(6) or (7) with respect to the Company occurs, the principal of and accrued and unpaid interest on all the Securities shall be due and payable immediately without any declaration or other act by the Trustee or the Holder of the Securities. After any such 74 acceleration but before a judgment or decree based on acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee and the Company may rescind any declaration of acceleration if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs ---------------- and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a -------------------------- majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority -------------------- in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, -------- however, that the Trustee may take any other action deemed proper by the Trustee - ------- that is 75 not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to reasonable indemnification against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not -------------------- pursue any remedy with respect to this Indenture or the Securities unless: (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding shall have made a written request, and such Holder or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and (3) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the Securities outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer. The foregoing limitations on the pursuit of remedies by a Securityholder shall not apply to a suit instituted by a Holder of Securities for the enforcement of payment of the principal of, and premium, if any, or interest on such Security on or after the applicable due date specified in such Security. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. -------------------------------------------- Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of ----------------------------- Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together 76 with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee --------------------------------- may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money ----------- or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee, to the Authentication Agent, the Registrar and the Paying Agent for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the ------------------------ enforcement of any right or remedy under this Indenture or in any suit against the Trustee, Authentication Agent, Registrar or Paying Agent for any action taken or omitted by it as Trustee, Authentication Agent, Registrar or 77 Paying Agent, as applicable, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company ---------------------------------- (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that 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 shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee ------- SECTION 7.01. Duties of Trustee. (a) If an Event of Default ------------------ has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions 78 furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (h) 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 and to the provisions of the TIA and the provisions of this Article VII shall apply to the Trustee, Registrar, Paying Agent and Common Depository. 79 (i) The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (a) the Trustee has received written notice thereof from the Company or any Holder or (b) a Trust Officer shall have actual knowledge thereof. SECTION 7.02. Rights of Trustee. (a) The Trustee may -------------------- conclusively rely on any document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may, however, in its discretion 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 at the expense of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not -------- ------- constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this 80 Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. SECTION 7.03. Individual Rights of Trustee. The Trustee in its ----------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be ---------------------- responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of -------------------- Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default in payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as ------------------------------ practicable after each December 31 beginning with December 31, 2000, and in any event prior to March 31 in each year, the Trustee shall mail to each Securityholder a brief report dated as of December 31 each year that complies with TIA ss. 313(a), if and to the extent required by such subsection. The Trustee shall also comply with TIA ss. 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever 81 the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall ---------------------------- pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder except to the extent that the Company shall have been actually prejudiced as a result of such failure. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld. All indemnifications and releases from liability granted hereunder to the Trustee shall extend to its officers, directors, employees, agents, successors and assigns. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the resignation or removal of the Trustee and the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(6) or (7) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. 82 SECTION 7.08. Replacement of Trustee. The Trustee may resign ----------------------- at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in aggregate principal amount of the Securities then outstanding and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder who has been a bona fide Holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 83 Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. If the Registrar or Paying Agent resigns, and a successor Registrar or Paying Agent is not appointed by the Company within 60 days after the retiring Registrar or Paying Agent resigns, the retiring Registrar or Paying Agent shall have the right to appoint a successor Registrar or Paying Agent, as applicable, which Registrar or Paying Agent shall be approved by the Company, such approval not to be unreasonably withheld. SECTION 7.09. Successor Trustee by Merger. If the Trustee ----------------------------- consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall ------------------------------ at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b), subject to the penultimate paragraph thereof; provided, however, -------- ------- that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are 84 outstanding if the requirements for such exclusion set forth in TIA ss.310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; ---------------------------------------------- Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding - ----------- Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, and 4.12 and the operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of Sections 6.01(6) and (7), with respect only to Significant Subsidiaries) and the limitations contained in clause (e) of Article 5 ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities 85 may not be accelerated because of an Event of Default specified in Sections 6.01(4) (with respect to the covenants of Article IV identified in the immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) or 6.01(8) (with respect only to Significant Subsidiaries in the case of Sections 6.01(6) and 6.01(7)) or because of the failure of the Company to comply with the limitations contained in clause (e) of Article 5. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive such satisfaction or discharge. SECTION 8.02. Conditions to Defeasance. The Company may --------------------------- exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(6) or (7) occurs with respect to the Company or any other Person making the deposit that is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement or instrument binding on the Company; 86 (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Security-holders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall ---------------------------- hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. 87 SECTION 8.04. Repayment to Company. The Trustee and the Paying --------------------- Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The ---------------------------------------- Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is -------------- unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if -------- ------- the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments ---------- SECTION 9.01. Without Consent of Holders. The Company and the --------------------------- Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; 88 (2) to comply with Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add Guarantees with respect to the Securities; (5) to secure the Securities, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (6) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; (7) to make any change that does not adversely affect the rights of any Securityholder; or (8) to provide for the issuance of additional Securities in accordance with the Indenture. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the ------------------------- Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; 89 (3) reduce the principal of or extend the Stated Maturity of any Security; (4) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; (5) reduce the amount payable upon the redemption or repurchase of any Security under Article III or Section 4.07 or 4.12, change the time at which any Security may be redeemed in accordance with Article III, or, at any time after a Change of Control or Asset Sale has occurred, change the time at which any Change of Control Offer or Prepayment Offer must be made or at which the Securities must be repurchased pursuant to such Change of Control Offer or Prepayment Offer; (6) make any Security payable in money other than that stated in the Security; (7) release any security interest that may have been granted in favor of the Holders other than pursuant to the terms of the agreement granting that security interest; (8) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (9) subordinate the Securities to any other obligation of the Company It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every ---------------------------------------- amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. ----------------------------------------------- A consent to an amendment or a waiver by a 90 Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an --------------------------------------- amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver such Security to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return such Security to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall ---------------------------- sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an 91 Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any -------------------- Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Miscellaneous ------------- SECTION 10.01. Trust Indenture Act Controls. If any provision ----------------------------- of this Indenture limits, qualifies or conflicts with another provision that is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 10.02. Notices. Any notice or communication shall be -------- in writing and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and addressed as follows: if to the Company: Levi Strauss & Co. Levi's Plaza 1155 Battery Street San Francisco, CA 94111 Facsimile: (415) 501-7650 Attention of: Legal Department if to the Trustee: Citibank, N.A., 111 Wall Street, 14th Floor New York, NY 10005 Attention of: Citibank Agency and Trust Services 92 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.03. Communication by Holders with Other Holders. --------------------------------------------- Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 10.04. Certificate and Opinion as to Conditions --------------------------------------------- Precedent. Upon any request or application by the Company to the Trustee to take - ---------- or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05. Statements Required in Certificate or Opinion. ---------------------------------------------- Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; 93 (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 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 or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 10.06. When Securities Disregarded. In determining ------------------------------ whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. ---------------------------------------------- The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent or co-registrar may make reasonable rules for their functions. SECTION 10.08. Legal Holidays. A "Legal Holiday" is a ---------------- Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 10.09. Governing Law. THIS INDENTURE AND THE ------------------------- SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 94 SECTION 10.10. No Recourse Against Others. A director, ------------------------------- officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 10.11. Successors. All agreements of the Company in ----------- this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.12. Multiple Originals. The parties may sign any ------------------- number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.13. Table of Contents; Headings. The table of ------------------------------ contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 95 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. LEVI STRAUSS & CO., by --------------------------------- Name: Title: CITIBANK, N.A., by --------------------------------- Name: Title: CITIBANK, N.A., LONDON, as Registrar and Paying Agent by -------------------------------- Name: Title: APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES ----------------------------------------- AND EXCHANGE SECURITIES ----------------------- 1. Definitions ----------- 1.1 Definitions ----------- For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Clearstream" means Clearstream Banking, S.A., formerly known as Cedel Bank, S.A., or any successor securities clearing agency. "Common Depository" means Citibank, N.A., London. "Definitive Security" means a certificated Initial Security or Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(d). "Depository" means Clearstream, Euroclear, their respective nominees and their respective successors. "Distributed Compliance Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Securities. "Dollar Notes" means the Company's 11 5/8% Senior Notes due 2008 denominated in U.S. dollars and issued pursuant to an indenture dated the date hereof between the Company and Citibank, N.A. as trustee. "Euroclear" means Euroclear Bank as operator of the Euroclear System or any successor securities clearing agency. "Exchange Securities" means the 11 5/8% Senior Notes due 2008 to be issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. 2 "Initial Purchasers" means Salomon Smith Barney Inc., Banc of America Securities LLC, Scotia Capital (USA) Inc., Chase Securities Inc. and Banc One Capital Markets, Inc. "Initial Securities" means the 11 5/8% Senior Notes due 2008, to be issued from time to time, in one or more series as provided for in this Indenture. "Issue Date Dollar Notes" means Dollar Notes issued on the first date on which the Dollar Notes are initially issued. "Original Securities" means Initial Securities in the aggregate principal amount of 125.0 million euro dollars issued on January 18, 2001. "Private Exchange" means the offer by the Company, pursuant to Section 2 of the Registration Agreement dated January 18, 2001, or pursuant to any similar provision of any other Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means the 11 5/8% Senior Notes due 2008 to be issued pursuant to this Indenture in connection with a Private Exchange pursuant to a Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated January 12, 2001, among the Company and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any future sale of Initial Securities by the Company. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to a Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Agreement" means the Registration Rights Agreement dated January 18, 2001, among the Company and the Initial Purchasers relating to the Original 3 Securities, or any similar agreement relating to any additional Initial Securities. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities" means the Initial Securities and the Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration Statement" means a registration statement issued by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. "U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in THE WALL STREET JOURNAL in the "Exchange Rates" column under the heading "Currency Trading" on the date two Business Days prior to such determination. In determining the aggregate principal amount (on a U.S. Dollar Equivalent basis) of Securities outstanding, such amount will be treated as the U.S. Dollar Equivalent determined as of the date of issuance of such Securities. 1.2 Other Definitions ----------------- Defined in ---------- Term Section: ---- ------- "Agent Members" .......................... 2.1(b) "Global Security" ....................... 2.1(a) "IAI Global Security" ................... 2.1(a) "Regulation S" ........................... 2.1 "Rule 144A" .............................. 2.1 "Rule 144A Global Security" ............. 2.1(a) "Regulation S Global Security" ............ 2.1(a) 4 2. The Securities -------------- 2.1 Form and Dating --------------- The Initial Securities will be offered and sold by the Company, from time to time, pursuant to one or more Purchase Agreements. The Initial Securities will be resold initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and in reliance on Regulation S under the Securities Act ("Regulation S"). Initial Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and IAIs under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, subject to the restrictions on transfer set forth herein. (a) Global Securities. Initial Securities initially resold ------------------- pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security"), Initial Securities initially resold pursuant to Regulation S shall be issued initially in the form of one or more global securities (collectively, the "Regulation S Global Security") and, subject to Section 2.4 hereof, Initial Securities transferred subsequent to the initial resale thereof to IAIs shall be issued initially in the form of one or more permanent global securities in definitive, fully registered form (collectively, the "IAI Global Security"), in each case without interest coupons and with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Common Depository, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. The Rule 144A Global Security, IAI Global Security and Regulation S Global Security are collectively referred to herein as "Global Securities." The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or a nominee of the Depository as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply ----------------------- only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company, authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities 5 or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as Common Depository. Members of, participants in, or account holders in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as Common Depository or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of the Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Definitive Securities. Except as provided in Section 2.3 ---------------------- or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of Definitive Securities. 2.2 Authentication. The Trustee shall authenticate and --------------- deliver: (1) Original Securities for original issue in an aggregate principal amount of 125.0 million euro dollars, (2) additional Initial Securities, if and when issued, in an aggregate principal amount (on a U.S. Dollar Equivalent basis) of up to(x)$350.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company that are not Issue Date Dollar Notes, and (3) the Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Agreement, for a like principal amount of Initial Securities or Private Exchange Securities, as applicable, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time (on a U.S. Dollar Equivalent basis) may not exceed (x) $850.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company, except as provided in Section 2.08 of this Indenture. 6 2.3 Transfer and Exchange. (a) Transfer and Exchange of ---------------------- --------------------------- Definitive Securities. When Definitive Securities are presented to the Registrar - ---------------------- or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or - -------- ------- exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) if such Definitive Securities bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act, (i) a certification to that effect and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). 7 (b) Transfer and Exchange of Global Securities. -------------------------------------------------------- (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Registrar, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Registrar's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such instructions with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. In the case of a transfer of a beneficial interest in a Global Security to an IAI, the transferee must furnish a signed letter to the Trustee containing certain representations and agreements in the form of Exhibit C hereto. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the transferee or transferor, as the case may be, shall furnish to the Registrar such certificates required to ensure such transfer complies with Rule 144A or Regulation S, as the case may be, and the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of a Registered 8 Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (c) Legend. ------- (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE) THAT IS ACQUIRING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE 9 WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS NOTE AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL DISTRIBUTION OF THIS SECURITY (OR ANY PREDECESSOR SECURITY), THAT IT IS AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, 10 the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, in either case, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities, as the case may be, during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, all requirements pertaining to restricted legends on such Initial Security or such Private Exchange Security will cease to apply and an Initial Security or Private Exchange Security, as the case may be, in global form without restricted legends will be available to the transferee of the beneficial interests of such Initial Securities or Private Exchange Securities. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which certain Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, Exchange Securities in global form without the restricted legends will be available to Holders or beneficial owners that exchange such Initial Securities (or beneficial interests therein) in such Registered Exchange Offer. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (d) Cancelation or Adjustment of Global Security. At such time --------------------------------------------- as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned by the Depository to the Registrar for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities 11 represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Common Depository for such Global Security) with respect to such Global Security, by the Trustee or the Common Depository, to reflect such reduction. (e) Obligations with Respect to Transfers and Exchanges of --------------------------------------------------------- Securities. ----------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.08 and 9.05 of this Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning 15 days before the mailing of a notice of redemption or an offer to repurchase Securities or 15 days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. 12 (f) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, a participant in, or account holder in the Depository or any other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant, member or account holder thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, account holder, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants, account holders and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members, account holders or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Securities --------------------- (a) A Global Security deposited with the Depository or with the Trustee as Common Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as a Depository for such Global Security and the 13 Company is unable to locate a qualified successor within 90 days or (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Registrar, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Definitive Securities issued in exchange for any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of 1,000 euro dollars and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 to APPENDIX A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE EUROCLEAR CLEARANCE SYSTEM ("EUROCLEAR") OR CLEARSTREAM BANKING, SOCIETE ANONYME ("CLEARSTREAM"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CITIVIC NOMINEES LIMITED OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CLEARSTREAM OR EUROCLEAR, AS THE CASE MAY BE (AND ANY PAYMENT IS MADE TO CITIVIC NOMINEES LIMITED, OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CLEARSTREAM OR EUROCLEAR, AS THE CASE MAY BE), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CITIVIC NOMINEES LIMITED, HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CLEARSTREAM OR EUROCLEAR, AS THE CASE MAY BE, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE 2 OF THIS NOTE), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND TRUSTEE,(5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS NOTE AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL DISTRIBUTION OF THIS SECURITY (OR ANY PREDECESSOR SECURITY), THAT IT IS AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. [Definitive Securities Legend] IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. [FORM OF FACE OF INITIAL SECURITY] No. [up to](3)[English Pound Symbol Appears Here] --------- 11 5/8% Senior Note due 2008 CUSIP No. [52736R AH 5](1) [U52799 AD 2](2) ISIN No. [XS0123432725](1) [XS0123430604](2) Common Code No.[012343272](1) [012343060](2) LEVI STRAUSS & CO., a Delaware corporation, promises to pay to [Citivic Nominees Limited](3), or registered assigns, the principal sum [of Euros] (3) [as set forth on the Schedule of Increases or Decreases annexed hereto](3)on January 15, 2008. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. - ---------------------- (1) Insert for Rule 144A Global Note. (2) Insert for Reg. S Global Note. (3) Insert for Definitive Securities. 2 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. LEVI STRAUSS & CO., by -------------------------------- Name: Title: by -------------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: January 18, 2001 CITIBANK, N.A., as Trustee, certifies that this is one of the Securities referred to in the Indenture. by: ----------------------------- Authorized Signatory 3 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11 5/8% Senior Note due 2008 1. Interest -------- (a) LEVI STRAUSS & CO., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on January 15 and July 15 of each year, commencing July 15, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 18, 2001. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. (b) Special Interest. The holder of this Security is entitled ----------------- to the benefits of a Registration Rights Agreement, dated as of January 18, 2001, among the Company and the Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. In the event that (i) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with the Commission on or prior to the 60th day following the date of the original issuance of the Securities, (ii) the Exchange Offer Registration Statement has not been declared effective on or prior to the 120th day following the date of the original issuance of the Securities, (iii) neither the Registered Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective on or prior to the 150th day following the date of the original issuance of the Securities, or (iv) after the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with resales of the Securities at any time that the Company is obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), interest (the "Special Interest") shall accrue (in addition to stated interest on the Securities) from and including the date on which the first such Registration Default shall occur to but excluding the date on which all Registration Defaults have 4 been cured, at a rate per annum equal to 0.25% of the principal amount of the Securities; provided, however, that such rate per annum shall increase by 0.25% per annum from and including the 91st day after the first such Registration Default (and each successive 91st day thereafter) unless and until all Registration Defaults have been cured; provided further, however, that in no event shall the Special Interest accrue at a rate in excess of 1.00% per annum. The Special Interest will be payable in cash semiannually in arrears each January 15 and July 15. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the January 1 or July 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in euro or any successor money of the European Union that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the Euroclear Clearance System or Clearstream Banking, S.A. The Company will make all payments in respect of a Definitive Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least 1,000,000 euro dollars aggregate principal amount of Securities, by wire transfer to a euro account maintained by the payee with a bank in a member state of the European Union if such Holder elects payment by wire transfer by giving written notice to the Trustee and the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, CITIBANK, N.A., a banking association, London Office, 5 Carmelite Street, London, EC4Y OPA (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 5 4. Indenture --------- The Company issued the Securities under an Indenture dated as of January 18, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ------ ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior unsecured obligations of the Company limited to an aggregate principal amount (on a U.S. Dollar Equivalent basis) at any one time outstanding of (x) $850.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company (subject to Sections 2.01 and 2.08 of the Indenture). [This Security is one of the Original Securities referred to in the Indenture issued in an aggregate principal amount of 125.0 million euro dollars. The Securities include the Original Securities, additional Initial Securities that may be issued under the Indenture in an aggregate principal amount (on a U.S. Dollar Equivalent basis) of up to (x) $350.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company that are not Issue Date Dollar Notes, and any Exchange Securities issued in exchange for Initial Securities]. [This Security is one of the additional Initial Securities in an aggregate principal amount (on a U.S. Dollar Equivalent basis) of up to (x) $350.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company that are not Issue Date Dollar Notes. The Securities include such additional Securities, the Original Securities in an aggregate principal amount of 125.0 million euro dollars previously issued under the Indenture and any Exchange Securities issued in exchange for Initial Securities. The additional Initial Securities, the Original Securities and the Exchange Securities are treated as a single class of securities under the Indenture.] The Original Securities, such additional Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distribu- tions, incur Debt, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens 6 and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company. 5. Optional Redemption ------------------- Except as set forth below, the Securities may not be redeemable prior to January 15, 2005. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date 7 to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after January 15 of the years set forth below: Redemption Period Price - ------ ----- 2005 .......................... 105.813% 2006 .......................... 102.906% 2007 and thereafter ........... 100.000% Notwithstanding the foregoing, on or prior to January 15, 2004, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the Securities issued with the proceeds from one or more Public Equity Offerings by the Company, at a redemption price equal to 111 5/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 66 2/3% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 75 days of such Public Equity Offering. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than 1,000 euro dollars may be redeemed in part but only in whole multiples of 1,000 euro dollars. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of 1,000 euro dollars and whole multiples of 1,000 euro dollars. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the 9 Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice 10 to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 11 20. CUSIP, ISIN and Common Code Numbers ----------------------------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. To the extent such numbers have been issued, the Company has caused ISIN and Common Code numbers to be similarly printed on the Securities and has similarly instructed the Trustee. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 12 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ------------------------------------------------------------ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to the Company; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each 13 case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee or the Company); or (6) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. -------------------------- Your Signature Signature Guarantee: Date: ------------------- -------------------------- Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee - ------------------------------------------------------------------------------- 14 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: --------------------- -------------------------------- NOTICE: To be executed by an executive officer 15 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is [ ] euro dollars. The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized Amount of this Amount of this Security following signatory of Global Security Global Security such decrease or Trustee or Common increase Depository
16 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.07 (Asset Sale) or 4.12 (Change of Control) of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.07 or 4.12 of the Indenture, state the amount: Euro dollars Date: Your Signature: --------------------- ------------------------------- (Sign exactly as your name appears on the other side of the Security) Signature Guarantee: ---------------------------------------------------------- Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY] No. [up to](3) Euro dollars --- ------------- 11 5/8% Senior Note due 2008 CUSIP No. [52736R AH 5](1) [U52799 AD 2](2) ISIN No. [XS0123432725](1) [XS0123430604](2) Common Code No.[012343272](1) [012343060](2) LEVI STRAUSS & CO., a Delaware corporation, promises to pay to [Citivic Nominees Limited]3, or registered assigns, the principal sum [of Euros](4) [as set forth on the Schedule of Increases or Decreases annexed hereto](3)on January 15, 2008. Interest Payment Dates: January 15 and July 15. Record Dates: January 1 and July 1. Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. LEVI STRAUSS & CO., by ------------------------ Name: Title: by ------------------------ Name: Title: - ----------------------- (1) Insert for Rule 144 A Global. (2) Insert for Reg. S Global Note. (3) Insert for Global Securities. (4) Insert for Definitive Securities 2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: January 18, 2001 CITIBANK, N.A., as Trustee, certifies that this is one of the Securities referred to in the Indenture. by: ------------------------------ Authorized Signatory - ------------------------ */ If the Security is to be issued in global form, add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 3 [FORM OF REVERSE SIDE OF SECURITY] 11 5/8% Senior Note due 2008 1. Interest -------- LEVI STRAUSS & CO. a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on January 15 and July 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 18, 2001. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the January 1 or July 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in euro or any successor money of the European Union that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the Euroclear Clearance System or Clearstream Banking, S.A. The Company will make all payments in respect of a Definitive Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least 1,000,000 euro dollars aggregate principal amount of Securities, by wire transfer to a euro account maintained by the payee with a bank in a member state of the European Union if such Holder elects payment by wire transfer by giving written notice to the Trustee and the Paying Agent to such effect designating such account no later than 30 days 4 immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, CITIBANK, N.A., a banking association, London Office, 5 Carmelite Street, London, EC4Y OPA (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of January 18, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ------ ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior unsecured obligations of the Company limited to an aggregate principal amount (on a U.S. Dollar Equivalent basis) at any one time outstanding of (x) $850.0 million aggregate principal amount less (y) the aggregate principal amount of Dollar Notes issued by the Company (subject to Sections 2.01 and 2.08 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture issued in exchange for Initial Securities. The Securities include the Exchange Securities, the Original Securities in the aggregate principal amount of 125.0 million euro dollars and additional Initial Securities in an aggregate principal amount (on a U.S. Dollar Equivalent basis) of up to (x) $350.0 million less (y) the aggregate principal amount of Dollar Notes issued by the Company that are not Issue Date Dollar Notes. The Exchange Securities, the Original Securities and such additional Initial Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distribu- tions, incur Debt, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of such Restricted 5 Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company. 5. Optional Redemption ------------------- Except as set forth below, the Securities may not be redeemable prior to January 15, 2005. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date 6 to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after January 15 of the years set forth below: Redemption Period Price - ------ ----- 2005 .................................. 105.813% 2006 .................................. 102.906% 2007 and thereafter ................... 100.000% Notwithstanding the foregoing, on or prior to January 15, 2003, the Company may redeem up to 33 1/3% of the original aggregate principal amount of the Securities issued with the proceeds from one or more Public Equity Offerings by the Company, at a redemption price equal to 111 5/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 66 2/3% of the original aggregate principal amount of the Securities remains outstanding. Any such redemption shall be made within 75 days of such Public Equity Offering. 6. Sinking Fund ------------ The Securities are not subject to any sinking fund. 7. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than 1,000 euro dollars may be redeemed in part but only in whole multiples of 1,000 euro dollars. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7 8. Repurchase of Securities at the Option of Holders upon Change of Control ------------------------------------------------------------------------ Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of 1,000 euro dollars and whole multiples of 1,000 euro dollars. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the 8 Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice 9 to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 10 20. CUSIP, ISIN and Common Code Numbers ----------------------------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. To the extent such numbers have been issued, the Company has caused ISIN and Common Code numbers to be similarly printed on the Securities and has similarly instructed the Trustee. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------ Date: Your Signature: ------------------- ---------------------- - ----------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. 12 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 (ASSET SALE) OR 4.12 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: [ ] IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.07 OR 4.12 OF THE INDENTURE, STATE THE AMOUNT: Euro Dollars DATE: YOUR SIGNATURE: ------------ ----------------------------------- (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY) SIGNATURE GUARANTEE: -------------------------------------------------- SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EXHIBIT B Form of Transferee Letter of Representation [Company] In care of [ ] [ ] [ ] Ladies and Gentlemen: This certificate is delivered to request a transfer of [ ] euro dollars principal amount of the 11 5/8% Senior Notes due 2008 (the "Securities") of LEVI STRAUSS & CO. (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name: ---------------------------- Address: ------------------------- Taxpayer ID Number: -------------- The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on 2 behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $100,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the 3 Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. TRANSFEREE: -----------------------, by: ------------------------------ EX-10.42 7 0007.txt AMENDMENT TO DEFERRED COMPENSATION PLAN FOR .... LEVI STRAUSS & CO. DEFERRED COMPENSATION PLAN FOR EXECUTIVES AMENDMENT WHEREAS, LEVI STRAUSS & CO. ("LS&CO.") maintains the Levi Strauss & Co. Deferred Compensation Plan for Executives (the "Plan"); WHEREAS, Article 10 of the Plan provides that the Board of Directors of LS&CO. is authorized to amend the Plan; WHEREAS, LS&CO. desires to amend the Plan to add a fixed eleven percent (11%) interest measurement standard under Article 5 of the Plan effective as of March 1, 2000; WHEREAS, by resolutions duly adopted on April 23, 1996, the Board of Directors of LS&CO. authorized Robert D. Haas, Chairman of the Board, to adopt certain amendments to the Plan and to delegate to certain other officers of LS&CO. the authority to adopt certain amendments to the Plan; and WHEREAS, on December 2, 1996, Robert D. Haas delegated to Donna J. Goya, Senior Vice President of Global Human Resources, the authority to amend the Plan, subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, the Plan is hereby amended as follows, effective as of the dates set forth below: 1. Paragraph (b)(1) of Article 5 of the Plan is hereby amended, effective as of March 1, 2000, by adding the following to the end thereof: "Notwithstanding the foregoing, if a Participant does not select an investment fund under subparagraph (a), above, with respect to Deferred Compensation under the Plan, income on the entire balance of a Participant's account shall be tracked and valued on a monthly basis as follows: (i) for any month prior to March 1, 2000, at the applicable rate as specified under the prior Plan document, on the last day of the calendar month on which the interest is valued, (ii) for any month beginning on or after March 1, 2000: (A) with respect to any amounts deferred under the Plan prior to March 1, 2000 and eligible to be tracked and valued at one-twelfth (1/12) of the annual rate charged for commercial loans, as most recently announced by Bank of America in San Francisco, California, effective on the last day of the calendar month on which the interest is valued, plus one-twelfth (1/12) of two percent (2%) per annum (referred to herein as the "Prime Plus 2% Tracking Option"), at the greater of: (i) one-twelfth (1/12) of eleven percent (11%) per annum; or (ii) the Prime Plus 2% Tracking Option. (B) with respect to any amounts deferred under the Plan but not eligible to be tracked and valued at the Prime Plus 2% Tracking Option, at one-twelfth (1/2) of eleven percent (11%) per annum. * * * * * IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on this ___ day of March, 2000. LEVI STRAUSS & CO. ------------------------------------ Donna J. Goya Senior Vice President EX-10.43 8 0008.txt AMENDMENTS TO EMPLOYEE INVESTMENT PLAN EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS & CO. AMENDMENTS WHEREAS, LEVI STRAUSS & CO.("LS&CO.") maintains the Employee Investment Plan of Levi Strauss & Co. (the "EIP"); and WHEREAS, Section 18 of the EIP provides that LS&CO. may amend the EIP at any time and for any reason; and WHEREAS, LS&CO. desires to amend the EIP effective April 3, 2000 to eliminate the one year service requirement for employee contributions; and WHEREAS, by resolutions duly adopted on April 23, 1996, the Board of Directors of LS&CO. authorized Robert D. Haas, Chairman of the Board, to adopt certain amendments to the EIP and to delegate to certain other officers of LS&CO. the authority to adopt certain amendments to the EIP; and WHEREAS, on December 2, 1996, Robert D. Haas delegated to Donna J. Goya, Senior Vice President for Global Human Resources, the authority to amend the EIP, subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREOF, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, the EIP is hereby amended as follows, effective as of the dates set forth below: 1. Effective as of April 3, 2000, the second to last sentence of Section 2.66 of the EIP is hereby amended to read as follows: "All Service will be aggregated, whether or not such Service is performed consecutively, and every partial month will be deemed to be one full month of Service, except that only full calendar months will be taken into account for purposes of eligibility for (a) becoming a Member under Section 3.1 and, (b) the Matching Contribution under Section 5.1." 2. Effective as of April 3, 2000, Section 3.1 of the EIP is hereby amended in its entirety to read as follows: "3.1 Commencement of Membership. Each Employee who was a Member in the Plan on the Effective Date will continue to be a Member. Prior to April 3, 2000, each Employee who was not a Member in the Plan on the Effective Date, will become a Member in the Plan on the first day of the pay period coinciding with or next following the day on which he or she completes a Year of Service. Effective as of April 3, 2000, each Employee will become a Member in the Plan on the first day of the pay period coinciding with or next following the date such Employees performs one Hour of Service. Upon becoming a Member, an Employee will designate a Beneficiary under Section 2.8 and Section 14." 3. Effective as of April 3, 2000, the first sentence of Section 5.1 of the EIP is hereby amended to read as follows: "Except as provided below, for each period (an "Accumulated Period") during a Plan Year with respect to the pay period coinciding with or next following the day on which a Member completes a Year of Service, the Company will make a Matching Contribution to the Plan in an amount equal to 50% of each Member's Contributions for the Accumulation Period." * * * IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on March ____, 2000. LEVI STRAUSS & CO. --------------------------------- Donna J. Goya Senior Vice President EX-10.44 9 0009.txt AMENDMENTS TO CAPITAL ACCUMULATION PLAN CAPITAL ACCUMULATION PLAN OF LEVI STRAUSS & CO. AMENDMENTS WHEREAS, LEVI STRAUSS & CO.("LS&CO.") maintains the Capital Accumulation Plan of Levi Strauss & Co. (the "CAP"); and WHEREAS, Part 2, Q&A-33 of the CAP provides that LS&CO. may amend the CAP at any time and for any reason; and WHEREAS, LS&CO. desires to amend the CAP effective April 3, 2000 to eliminate the one year service requirement for employee contributions; and WHEREAS, by resolutions duly adopted on April 23, 1996, the Board of Directors of LS&CO. authorized Robert D. Haas, Chairman of the Board, to adopt certain amendments to the CAP and to delegate to certain other officers of LS&CO. the authority to adopt certain amendments to the CAP; and WHEREAS, on December 2, 1996, Robert D. Haas delegated to Donna J. Goya, Senior Vice President for Global Human Resources, the authority to amend the CAP, subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREOF, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, the CAP is hereby amended as follows, effective as of the dates set forth below: 1. Effective as of April 3, 2000, the first bullet of Part 1 of the CAP is hereby amended in its entirety to read as follows: "Prior to April 3, 2000, Home Office payroll employees are eligible to participate in the Plan if they have completed at least one year of service and would be eligible to participate in the Employee Investment Plan ("EIP") if not for that plan's exclusion of employees whose compensation exceeds the applicable maximum limitation. Effective as of April 3, 2000, Home Office payroll employees are eligible to participate in the Plan if they have completed at least one hour of service and would be eligible to participate in the EIP if not for that plan's exclusion of employees whose compensation exceeds the applicable maximum limitation." 2. Effective as of April 3, 2000, the fourth sentence of Part 2, Q&A-3 of the CAP is hereby amended to read as follows: "In order to otherwise have been eligible to participate in the EIP, you must (1) have at least one year of service as an employee of the Company or any subsidiary of the Company; except that effective as of April 3, 2000, you must have only one hour of service as an employee of the Company or any subsidiary of the Company, and (2) currently be paid on the Home Office payroll and employed by the Company or any subsidiary of the Company that has adopted the EIP." 3. Effective as of April 3, 2000, Part 2, Q&A-5 of the CAP is hereby amended in its entirety to read as follows: "Prior to April 3, 2000, you may enroll and begin participation in the Plan effective on the first day of any payroll period after you have completed one year of service (whether before or after the effective date of the Plan) if you otherwise are an eligible employee at that time. Effective as of April 3, 2000, you may enroll and begin your participation in the Plan effective on the first day of any payroll period coinciding with or following the date you perform one hour of service, if you otherwise are an eligible employee at that time." 4. Effective as of April 3, 2000, the first sentence of Part 2, Q&A-7 of the CAP is hereby amended to read as follows: "After you have completed one year of service, your contributions deducted from each paycheck and AIP payment under the Plan earn the Match, which is an employer payment equal to 75% of your contributions under the Plan." * * * IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on March ____, 2000. LEVI STRAUSS & CO. --------------------------------- Donna J. Goya Senior Vice President EX-10.45 10 0010.txt AMENDMENT TO DEFERRED COMPENSATION PLAN FOR....... LEVI STRAUSS & CO. DEFERRED COMPENSATION PLAN FOR EXECUTIVES (AS AMENDED AND RESTATED EFFECTIVE AUGUST 1, 2000) (INCLUDING AMENDMENTS THROUGH MARCH 1, 2000) ARTICLE 1 INTRODUCTION ------------ 1.1 PURPOSE OF PLAN. In 1971, the Board of Directors of Levi --------------- Strauss & Co. ("LS&CO.") adopted the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (the "Plan") to provide a means by which certain eligible employees of LS&CO. and its participating subsidiaries may elect to defer receipt of a portion of their compensation, and to defer all or a portion of certain bonuses to save for retirement. 1.2 STATUS OF PLAN. The Plan is intended to be an unfunded plan -------------- maintained by LS&CO. "primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2), 301(a)(3), and 401(a)(4) of ERISA, and shall be interpreted and administered consistent with this intent. 1.3 EFFECTIVE DATE. Since the Plan's inception in 1971, the Plan --------------- has been amended and restated from time to time. Effective as of August 1, 2000, LS&CO. hereby amends and restates the Plan and further renames the Plan the "Levi Strauss & Co. Deferred Compensation Plan for Executives." ARTICLE 2 DEFINITIONS ----------- 2.1 ACCOUNT means an account established for the benefit of a ------- Participant under Section 5.1. 2.2 ADMINISTRATOR means the entity or individual(s) responsible for ------------- the administration of the Plan under Article 8. The Administrative Committee of the Retirement Plans (the "Administrative Committee") or its delegate shall serve as the Administrator. 2.3 AIP means the Levi Strauss & Co. Annual Incentive Plan, as --- amended from time to time. 2.4 BENEFICIARY means beneficiary or beneficiaries designated by a ----------- Participant or otherwise under Article 7 to receive an amount, if any, payable from such Participant's Account upon the death of the Participant. 2.5 BONUS DEFERRAL(S) means all or a portion of Bonuses that is ----------------- deferred by a Participant under Section 4.2 with respect to a Plan Year. 2.6 BONUSES means the bonuses eligible for Bonus Deferrals, and ------- includes payments made under (i) the AIP, (ii) the LTIP, (iii) the LTPP, (iv) the Leadership Shares Plan of Levi Strauss & Co., as amended from time to time, (v) any regularly paid bonus program of LS&CO., and (vi) any non-recurring special bonus that the Administrator designates, in writing, as eligible for Bonus Deferrals. 2.7 BRP means the Levi Strauss & Co. Excess Benefit Restoration Plan --- or the Levi Strauss & Co. Supplemental Benefit Restoration Plan, as each is amended from time to time, to the extent that benefits payable thereunder result from Code limitations applicable to the HOPP. 2.8 CODE means the Internal Revenue Code of 1986, as amended from ---- time to time, and the regulations and rulings issued thereunder. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements, or replaces such section or subsection. 2.9 COMPENSATION means the base salary payable by the Employer to the ------------ Eligible Employee for services performed during any Plan Year, which would be includible in gross income, before deductions made to this Plan and the EIP. Compensation shall exclude: (i) payments or contributions made to LS&CO.'s Long Term Disability Plan, (ii) payments or contributions made to any other group insurance or employee benefit plan maintained by LS&CO., and (iii) Bonus Deferrals under this Plan. With respect to Eligible Employees on expatriate assignment, Compensation shall be adjusted for appropriate expatriate-related deductions and allowances, as determined by the Administrator in its discretion. 2.10 DISABILITY means "Total and Permanent Disability" (or any ---------- successor term) as defined in the HOPP. 2 2.11 EFFECTIVE DATE means August 1, 2000, the date of this amendment -------------- and restatement. 2.12 EIP means the Employee Investment Plan of Levi Strauss & Co., --- as amended from time to time, or any successor plan. 2.13 ELECTIVE DEFERRAL means the portion of Compensation that is ------------------ deferred by a Participant under Section 4.1 with respect to a Plan Year. 2.14 ELIGIBLE EMPLOYEE means, as of the Effective Date, any employee ------------------ of the Employer employed under home office payroll of LS&CO. and who (i)customarily works 20 or more hours per week, (ii) is paid on a salaried basis, and (iii) is classified as either a Home Office Grade 9 employee or a "Banded" employee. The following employees shall not be eligible to participate in the Plan: (i) employees who are paid on a commission basis, and (ii) employees who are precluded from participation in the Plan under the terms of an agreement governing his or her employment with an Employer. Prior to the Effective Date, Eligible Employee shall have the meaning as specified under the prior Plan document. 2.15 EMPLOYER means LS&CO. or a domestic subsidiary of LS&CO., -------- including a wholly-owned subsidiary of a wholly-owned subsidiary of LS&CO. 2.16 ERISA means the Employee Retirement Income Security Act of 1974, ----- as amended from time to time, and the regulations and rulings issued thereunder. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection. 2.17 HOPP means the Revised Home Office Pension Plan of Levi Strauss ---- & Co., as amended from time to time, or any successor plan. 2.18 LS&CO. means Levi Strauss & Co. ------ 2.19 LTIP means the Levi Strauss & Co. Long-Term Incentive Plan, as ---- amended from time to time. 2.20 LTPP means the Levi Strauss & Co. Long-Term Performance Plan, as ---- amended from time to time. 2.21 PARTICIPANT means any Eligible Employee or former Eligible ----------- Employee who participates in the Plan in accordance with Article 3. 2.22 PENSION MAKE-UP DEFERRED COMPENSATION means an amount equal to the difference between (i) the amount of benefits that would have been payable to or for the Eligible Employee under the HOPP or the BRP but for the deferral of Compensation and Bonuses under the Plan, and (ii) the amount of benefits actually payable to or for the Eligible Employee under the HOPP or the BRP. The Pension Make-Up Deferred Compensation shall be vested only to the extent such amounts would be vested under such plans, as applicable. 3 2.23 PLAN means the Levi Strauss & Co. Deferred Compensation Plan ---- for Executives, as amended from time to time. 2.24 PLAN YEAR means the calendar year. --------- 2.25 RETIREMENT means any termination of an Eligible Employee's ---------- employment with an Employer with the right to an immediate benefit payable under the HOPP. If an Eligible Employee is not a participant in the HOPP at the time of his or her termination of employment, retirement shall be determined as if the Eligible Employee had been a participant in the HOPP at such time and was eligible for an immediate benefit under the HOPP. 4 ARTICLE 3 PARTICIPATION ------------- 3.1 COMMENCEMENT OF PARTICIPATION. An Eligible Employee shall ------------------------------ become a Participant in the Plan on the first date on which an Elective Deferral or Bonus Deferral is credited to his or her Account. 3.2 CONTINUED PARTICIPATION. A Participant in the Plan shall ------------------------ continue to be a Participant as long as any amount remains credited to his o her Account. 5 ARTICLE 4 DEFERRALS --------- 4.1 ELECTIVE DEFERRALS. With respect to any Plan Year, an Eligible ------------------- Employee may irrevocably elect to defer a percentage of his or her Compensation, subject to a minimum Elective Deferral of 5% and a maximum Elective Deferral of 33-1/3%. 4.2 BONUS DEFERRALS. With respect to any Plan Year, an Eligible ---------------- Employee may irrevocably elect to defer all or part of his or her Bonuses, subject to a minimum Bonus Deferral of $5,000 or 5% (whichever is greater) of each type of Bonus and a maximum of 100% (but reduced by any applicable taxes required to be withheld under Section 10.8) of each type of Bonus Deferral. 4.3 PENSION MAKE-UP DEFERRED COMPENSATION. Each Eligible Employee -------------------------------------- may be credited with a Pension Make-Up Deferred Compensation as determined by the Administrator, in its discretion. The Pension Make-Up Deferred Compensation is automatically deferred based on the Eligible Employee's Elective and Bonus Deferrals and paid in accordance with Section 6.3. 4.4 ELECTIONS. --------- (a) TIME FOR FILING ELECTIONS. (i) ELECTIVE DEFERRALS. Generally, an election to defer Compensation paid in a Plan Year must be filed with the Administrator by mid-December of the preceding Plan Year. The Administrator will notify each Eligible Employee of the applicable deadline for filing elections. (ii) NEWLY ELIGIBLE EMPLOYEE. In the case of (A) an Eligible Employee in his or her first year of employment, and (B) an individual who becomes an Eligible Employee after a Plan Year commences, an election to defer Compensation must be made within thirty (30) days after the Eligible Employee either commences employment or becomes an Eligible Employee, as applicable, and at least two (2) weeks before the commencement of the first payroll period to which the election is effective. Notwithstanding the foregoing, such elections are not permitted after November 15 for current year Compensation. Such elections are effective only with respect to Compensation received after the effective date of the election. (iii) BONUS DEFERRALS. Elections to defer any Bonus must be made at least 12 months preceding the date the particular Bonus would otherwise vest. (b) ELECTION FORMS. Elections to defer Compensation and Bonuses must be timely filed on forms provided by the Administrator and must specify the time and form of 6 payment in accordance with the provisions of Article 6. All deferral elections made pursuant to this Article 4 shall be irrevocable from and after the last date permitted for making such elections. An Eligible Employee may change a prior election up to the date established under Section 4.4(a). (c) NO ELECTION. If no election to defer Compensation or Bonuses is filed for a given Plan Year, the election form filed for the immediately preceding year shall not apply for subsequent Plan Years, and no deferrals will be made for such Plan Year. 7 ARTICLE 5 ACCOUNTS -------- 5.1 ACCOUNTS. The Administrator shall establish an Account for each -------- Participant to reflect Elective Deferrals and Bonus Deferrals made for the Participant's benefit together with any adjustments for income, gain or loss, and any payments made from the Participant's Account. Except as provided in Section 5.2, a separate Account shall be established for Elective Deferrals and each type of Bonus Deferral for each Participant for each Plan Year. The Accounts are established solely for the purpose of tracking Elective Deferrals, Bonus Deferrals, and any income adjustments thereto. The Accounts shall not be used to segregate assets for payment of any amounts deferred under the Plan. 5.2 INCOME TRACKING. Elective Deferrals and Bonus Deferrals in an --------------- Account shall be credited with income, gain or loss, as reflected by the performance of investments offered by the Administrator. Such income, gain or loss shall be computed as of the last day of each calendar month on the undistributed balance of each Account at the end of such calendar month. Participants may select an investment fund or funds that shall be tracked for purposes of valuing and crediting income on the balance of each Participant's Account. For purposes of tracking performance, a Participant must select a single investment with respect to 100% of Elective Deferrals for a given Plan Year and 100% of each type of Bonus Deferral for a given Plan Year. Participants may not apportion their Elective Deferrals or each type of Bonus Deferral for a given year among different investment funds. If a Participant makes identical elections (including, but not limited to, the amount or percentage of deferral, payment options, death payment options, Beneficiary designations, and investment funds) with respect to Elective Deferrals in consecutive Plan Years, such Elective Deferrals will be treated as a single Account for purposes of income tracking. If a Participant makes identical elections (including, but not limited to, the amount or percentage of deferral, payment options, death payment options, Beneficiary designations, and investment funds) with respect to a particular type of Bonus Deferral in consecutive Plan Years, such Bonus Deferrals will be treated as a single Account for purposes of income tracking. The Pension Make-Up Deferred Compensation shall not be eligible for the crediting of income, gain or loss, under this Section 5.2. If a Participant does not select an investment fund, the default income standard, described below, shall apply. (a) INVESTMENT FUNDS. The Administrator, in its sole discretion, shall offer to Participants one or more investment funds, which may be changed, added or eliminated from time to time, without an amendment to the Plan. The investment funds may include alternatives that are diversified and have different risk and return characteristics. (b) DEFAULT INCOME STANDARD. If a Participant does not select an investment fund under subparagraph (a), above, with respect to Elective and Bonus Deferrals under the Plan in accordance with the procedures established by 8 the Administrator, income on the entire balance of a Participant's Account shall be tracked and valued on a monthly basis as follows: (i) for any month prior to March 1, 2000, at the applicable rate as specified under the prior Plan document, on the last day of the calendar month on which the interest is valued, (ii) for any month beginning on or after March 1, 2000: (A) with respect to any amounts deferred under the Plan that as of March 1, 2000 were being tracked and valued at one-twelfth (1/12) of the annual rate charged for commercial loans, as most recently announced by Bank of America in San Francisco, California, effective on the last day of the calendar month on which the interest is valued, plus one-twelfth (1/12) of two percent (2%) per annum (referred to herein as the "Prime Plus 2% Tracking Option"), at the greater of: (i) one-twelfth (1/12) of eleven percent (11%) per annum; or (ii) the Prime Plus 2% Tracking Option. (B) with respect to any amounts deferred under the Plan that as of March 1, 2000 were not being tracked and valued at the Prime Plus 2% Tracking Option, at one-twelfth (1/12) of eleven percent (11%) per annum. 5.3 CHANGING INCOME TRACKING ELECTIONS. During any Plan Year, a ---------------------------------- Participant may elect to change the investment fund used to track and value his or her Account. Any election change received by LS&CO. on or before the last day of any calendar month shall be effective as of the first day of the following month. Any election change received by LS&CO. after the last day of any calendar month shall be effective as of the first day of the second following month. For purposes of this Section 5.3, a Participant must select a single investment with respect to 100% of his or her Account. 9 ARTICLE 6 PAYMENTS -------- 6.1 ELECTION AS TO TIME AND FORM OF PAYMENT (ELECTIVE AND BONUS ----------------------------------------------------------- DEFERRALS). ---------- (a) GENERAL PAYMENT OPTIONS. A Participant may irrevocably elect any one of the following payment options applicable to his or her Elective and Bonus Deferrals made for any given Plan Year: (i) Monthly installments over a ten (10) year period commencing at age 70-1/2 or, if later, termination of employment (for any reason, including by reason of death or involuntary discharge); (ii) Monthly installments over a period that is not less than five (5) years and no longer than ten (10) years to start at a specific date or age; or (iii) A lump sum payment at any future date, as selected by the Participant. If a Participant fails to elect a payment option for Elective and Bonus Deferrals made in a given Plan Year in accordance with the procedures established by the Administrator, payment of such Deferrals shall be made in accordance with Section 6.1(a)(i). Except as provided in Section 6.1(c), in no event shall payment of a Participant's Elective and Bonus Deferrals begin before a Participant terminates employment with the Employer. Except as provided in Section 6.2, an election under this Section 6.1(a), including the default election under Section 6.1(a)(i), shall be irrevocable from and after the last date permitted for making such election. (b) PAYMENT OPTIONS UPON DEATH. A Participant may elect one of the following payment options applicable to his or her Elective and Bonus Deferrals made for any given Plan Year in the event the Participant dies before terminating employment, or after terminating employment but before payments have commenced: (i) Monthly installments over a ten (10) year period commencing at the date the Participant pant would have attained age 70-1/2 or, if later, the date of the Participant's death; (ii) Monthly installments over a period that is not less than five (5) years and no longer than ten (10) years commencing after the date of the Participant's death; or 10 (iii) A lump sum payment at any designated time within five (5) years after the date of the Participant's death, as selected by the Participant. If a Participant fails to elect a payment option under for Elective and Bonus Deferrals made in a given Plan Year in accordance with the procedures established by the Administrator, payment of such Deferrals shall be made to the Participant's Beneficiary in accordance with Section 6.1(b)(i). A Participant can modify or revoke his or her payment options under this Section 6.1(b) at any time prior to his or her date of death without the consent of the Beneficiary by filing a new "Designation of Beneficiary Form," or such other form as prescribed by the Administrator. The last such designated payment option with respect to an Elective or Bonus Deferral shall control; provided, however, that no designation, modification or revocation thereof shall be effective unless received by the Administrator prior to the Participant's death and in no event shall it be effective as of a date prior to such receipt. In the event that a Participant dies after terminating employment and after payments have commenced, but before all payments have been made, the remaining payments shall continue to be made to such Participant's Beneficiary in the same time and form as the Participant's payment option immediately prior to the date of the Participant's death. (c) IN-SERVICE PAYMENTS. In addition to the above payment options, a Participant may elect to have amounts representing a particular Bonus for a given Plan Year deferred under the Plan to be paid as follows: (i) 20% of the Bonus paid as soon as administratively practicable after such Bonus is determined by the awarding Employer, and (ii) the remaining 80% of the Bonus paid in four annual installments (as determined by the Plan Administrator) beginning in the following year. If a Participant terminates employment for any reason other than death or retires prior to receiving the entire amount of the Bonus, payments shall continue to be made to such Participant in annual installments. In the event a Participant dies prior to receiving the entire amount of the Bonus, payments shall continue to be made to such Participant's Beneficiary in annual installments. A Participant must elect this payment option at the time he or she files his or her Bonus Deferrals election in accordance with Article 4. (d) SCOPE OF ELECTIONS. Except as provided in Section 6.1(b), the elections under this Section 6.1 shall apply to Elective Deferrals and Bonus Deferrals for the Plan Year for which the election form is filed. A Participant may elect different payment options for deferrals made in subsequent Plan Years in accordance with this Article 6. (e) PRIOR ELECTIONS. Notwithstanding the foregoing and subject to any election made during an open election period, if an individual was a Participant on 11 October 1, 1985, and prior to October 1, 1985 filed with the Administrator a confirmation of each prior election, such Participant shall have his or her Elective and Bonus Deferrals paid pursuant to such elections. 6.2 ACCELERATION OF PAYMENTS. With respect to Elective Deferrals -------------------------- and Bonus Deferrals that are to be paid in accordance with Section 6.1(a)(i) or Section 6.1(b)(i) and for which payment has not commenced, a Participant who has terminated his or her employment with the Employer or, in the event of such Participant's death, his or her Beneficiary may request to accelerate payment of such Deferrals in accordance with this Section 6.2. With respect to Elective Deferrals and Bonus Deferrals that are paid in accordance with Section 6.1(a)(i) and for which payment has not commenced, the Participant may request (i) to receive a lump sum payment at a time designated by the Participant, or (ii) to begin monthly or annual installments on an earlier date, payable over a period of not less than one (1) year but no more than ten (10) years after a specific date or age. With respect to Elective Deferrals and Bonus Deferrals that are paid in accordance with Section 6.1(b)(i) and for which payment has not commenced prior to the date of a Participant's death, the Participant's Beneficiary may request (i) to receive a lump sum payment at a time designated by the Beneficiary, or (ii) to begin monthly or annual installments on an earlier date, payable over a period of not less than one (1) year but no more than ten (10) years after the date of Participant's death. To request an acceleration of payments pursuant to this Section 6.2, a Participant or a Beneficiary shall file a written petition with the U.S. Retirement Benefits Department of LS&CO. setting forth the reasons for the acceleration. The U.S. Retirement Benefits Department will submit the petition to the Administrative Committee for consideration. The Administrative Committee, or its delegate, in its sole discretion, shall make its determination to accelerate payments based on the facts and circumstances of each individual case. The Administrative Committee, or its delegate, shall consider the following factors (which shall be applied in an objective and nondiscriminatory manner): (i) The availability of the funds necessary to satisfy the amount of the payment without adversely affecting LS&CO.'s liquidity position; and (ii) The existence of any other factors that indicate the acceleration of payment would not be in the best interest of LS&CO. and the Participant or Beneficiary, or would adversely affect the ability of other Participants or Beneficiaries to defer Compensation and Bonuses under the Plan. 6.3 TIME AND FORM OF PAYMENT FOR PENSION MAKE-UP DEFERRED ----------------------------------------------------- COMPENSATION. ------------ (a) TIME FOR PAYMENT. The Pension Make-Up Deferred Compensation shall be paid at the same time and form as benefits paid under the HOPP or the BRP, as applicable. If the Pension Make-Up Deferred Compensation is attributable to two or more such plans, the time and form of each component of the Pension Make-Up Deferred 12 Compensation shall be determined in accordance with the applicable plan. (b) INVOLUNTARY DISTRIBUTION. Notwithstanding the foregoing, if (i) the Participant is not entitled to receive a benefit under the BRP, and (ii) the present value of the vested Pension Make-Up Deferred Compensation is $50,000 or less, such amount shall be paid to the Participant or his or her Beneficiary in a lump sum as soon as administratively practicable following termination of employment with the Employer. For purposes of this Section 6.3, the Administrator shall determine the present value of the Pension Make-Up Deferred Compensation in a uniform and nondiscriminatory manner. A payment pursuant to this Section 6.3 shall extinguish such Participant's or Beneficiary's right to the Pension Make-Up Deferred Compensation with respect to employment prior to the date of such payment. 6.4 WITHDRAWAL DUE TO HARDSHIP. -------------------------- (a) HARDSHIP. If a Participant or, in the case of a Participant's death, a Beneficiary suffers an immediate "hardship" (as defined in this Section 6.4), the Administrative Committee, in its sole discretion, may pay to the Participant or Beneficiary a lump sum amount from his or her Account necessary to alleviate or satisfy the hardship, provided such hardship cannot be relieved by another source, including but not limited to the liquidation of the Participant's or Beneficiary's assets or a loan from a commercial source on commercial terms, but only to the extent such liquidation or loan would not cause hardship. A Participant or Beneficiary (as the case may be) shall make a written request to the Administrative Committee, on a form prescribed by the Administrative Committee, and shall provide such additional information as the Administrative Committee may require. The following are deemed "hardships:" (i) Expenses for medical care either previously incurred by the Participant, the Participant's spouse or any of his or her dependents (as defined in Code Section 152), or necessary for such individuals to obtain medical care (as described in Code Section 213(d)); (ii) Costs directly related to the purchase of a principal residence for the Participant; (iii) Payment of tuition, related educational fees, and room and board expenses for the next 12 months of post-secondary education for the Participant, the Participant's spouse or any of his or her children or dependents (as defined in Code Section 152); 13 (iv) Payments necessary to prevent eviction of the Participant from his or her principal residence or foreclosure on the mortgage of that residence; (v) Payment of funeral expenses for a family member or relative of the Participant; and (vi) Payment for such other needs, circumstances or events which the Administrative Committee in its sole discretion, determines are consistent with the goals of LS&CO. for the Plan. (b) CANCELLATION OF ELECTIVE DEFERRALS. In the event the Administrative Committee approves a hardship distribution to a Participant under this Section 6.4, all Elective Deferrals shall automatically cease for a period of three (3) months, beginning no later than the second payroll period following the date on which the hardship request is approved by the Administrative Committee. 6.5 INVOLUNTARY DISTRIBUTION. Notwithstanding anything in this ------------------------ Article 6 to the contrary, if a Participant's employment is terminated for any reason, and the aggregate balance of his or her Accounts are $50,000 or less at the time of such termination, a lump sum payment of the Account balance shall be made as soon as administratively practicable following termination of employment with the Employer. The balance of such Participant's Account shall be determined without regard to any election for in-service payments of a Participant's Bonus made in accordance with Section 6.1(c) and shall be valued as of the last day of the month during which the Participant's employment is terminated. This provision shall not require payment to be made with respect to elections made prior to January 1, 1983 and reaffirmed prior to June 15, 1985. 14 ARTICLE 7 BENEFICIARIES ------------- 7.1 DESIGNATION BY PARTICIPANT. Each Participant shall designate one or more persons as his or her Beneficiary for each Account by notifying the Administrator, in writing, at any time before the Participant's death, on a form prescribed by the Administrator. In addition, a Participant may modify or revoke his or her Beneficiary designation under this Section 7.1 at any time prior to his or her death without the consent of any prior Beneficiary by filing a new "Designation of Beneficiary Form," or such other form as prescribed by the Administrator. The last such designation with respect to a particular Account shall control; provided, however, that no designation, modification or revocation thereof shall be effective unless received by the Administrator prior to the Participant's death and in no event shall it be effective as of a date prior to such receipt. 7.2 LACK OF DESIGNATION. If no beneficiary is designated at the time of a Participant's death, or no designated Beneficiary survives the Participant, then payment of a Participant's Account balance shall be made to the following persons in the order listed: (i) To the Participant's surviving spouse, if any; (ii) If the Participant has no surviving spouse, then to his or her living children; (iii) If the Participant has no living children, then to his or her living parents; (iv) If the Participant has no living parents, then to his or her living brothers and sisters; or (v) If the Participant has no living brothers and sisters, then to his or her estate. The Administrator, in its sole and absolute discretion, shall determine the right of such persons to receive the benefit payable with respect to a Participant, if any. If the Administrator is in doubt as to the right of any person to receive such payment, the Administrator may, in its discretion, direct the Employer (i) to retain such amount, without liability for any interest, until the rights to a Participant's Account balance are determined, or (ii) to pay such amount into any court of appropriate jurisdiction, and such payment shall completely discharge the liability of the Plan and the Employer. 15 ARTICLE 8 PLAN ADMINISTRATION ------------------- 8.1 PLAN ADMINISTRATION AND INTERPRETATION. Except as indicated -------------------------------------- otherwise in the Plan, the Administrative Committee of the Retirement Plans or its delegate shall be the Administrator of the Plan. The Administrator's interpretations and constructions of the Plan and actions taken pursuant to its authority, except as otherwise determined by the Board of Directors of LS&CO. shall be binding and conclusive on all persons for all purposes. 8.2 INFORMATION REQUIRED. Each Participant shall provide the --------------------- Administrator with such pertinent information concerning him or her, and his or her Beneficiary relating to Plan administration or participation as specified or required by the Administrator. No Eligible Employee or Beneficiary or other person shall have any rights or be entitled to any benefits under the Plan unless such information is provided. 8.3 INCAPACITY. If the Administrator finds that any person entitled ---------- to payment under the Plan is unable to care for his or her affairs because of illness, accident, or because he or she is a minor, then any payment due (unless a prior claim has been made by a duly appointed guardian, committee or other legal representative), in the Administrator's sole discretion, may be paid to his or her spouse, a child, a parent, a sibling, or any other person deemed by the Administrator to have incurred expenses for such person, in such manner and proportions as the Administrator may determine. Any such payment shall constitute a complete discharge of the Employer's liability under the Plan. 8.4 CLAIMS PROCEDURE. ---------------- STEP 1: Filing a Claim -------------- If a Participant does not agree that the provisions of this Plan have been applied correctly such Participant may file a claim in writing with the Administrator in care of the U.S. Retirement Benefits, Manager, Human Resources. Such claim shall be submitted to the U.S. Retirement Benefits, Manager, Human Resources, Levi Strauss & Co., P.O. Box 7215, San Francisco, CA 94120. STEP 2: Claim Denial (90 to 180 days) ----------------------------- If the claim is denied in whole or in part, the Administrator will send the Participant a letter explaining why his or her claim was denied and will include the following information: (i) specific references to Plan provisions that apply, (ii) whether any further information is needed to review the Participant's claim, and (iii) an explanation as to how to file an appeal. The Administrator will send the Participant a claim denial within ninety (90) days after such Participant files his or her claim, unless special circumstances require a longer period of time to review such claim. If an extension is required, the Administrator will send the Participant a notice explaining why the extension is needed and the date by which the Administrator expects to make its decision. In no case, however, will a Participant receive the Administrator's claim denial letter later than one-hundred eighty (180) days after such Participant filed his or her claim. If a Participant does not receive a claim denial or notice of extension from the Administrator within ninety (90) 16 days after the Participant filed his or her claim, such claim will be deemed denied and the Participant may file a written appeal. STEP 3: Appealing a Claim Denial (60 days) ---------------------------------- If a Participant disagrees with the claim denial, he or she may appeal to the Administrator in writing within sixty (60) days after receiving a claim denial. If the Participant fails to file a written appeal within sixty (60) days, the original decision of the Administrator will become final. An appeal shall be submitted to the Administrator in care of the U.S. Retirement Benefits, Manager, Human Resources, Levi Strauss & Co., P.O. Box 7215, San Francisco, CA 94120. A Participant filing an appeal shall include all related facts to support his or her right to Plan benefits and the reasons why such Participant believes the Administrator's denial is wrong. A Participant may hire an attorney or use other legal assistance, at his or her own expense, in preparing the written appeal and may examine any related Plan documents. STEP 4: Final Decision (60 to 120 days) ------------------------------- Upon receipt of a Participant's written appeal, the Administrator will re-examine the facts and come to a final decision as to whether the claim denial is correct. The Administrator will notify such Participant of its decision within sixty (60) days after receipt of his or her written appeal, unless there are special circumstances (such as a hearing) that would require a longer review period. The Administrator will notify the Participant if there are special circumstances and an extension is required. In no case, however, will a Participant receive the Administrator's decision later than one-hundred twenty (120) days after such Participant filed his or her written appeal. If a Participant does not receive a claim denial or notice of extension from the Administrator within sixty (60) days after the Participant filed his or her appeal, such appeal will be deemed denied. The Administrator's final decision will include the following information: (i) specific reasons for the Administrator's decision, and (ii) reference to Plan provisions on which the denial is based. If the Administrator overrules the claim denial, in whole or in part, the Participant will receive any Plan benefits owed based on the Administrator's determination. 17 ARTICLE 9 AMENDMENT AND TERMINATION ------------------------- The Board of Directors of LS&CO. or its delegate shall have the right to amend, suspend, or terminate the Plan, in whole or in part. In no event shall any action pursuant to this Article 9 adversely affect the rights of any person with respect to amounts that have been credited to his or her Account prior to the date of such action, as determined by the Administrator. 18 ARTICLE 10 MISCELLANEOUS ------------- 10.1 NO FUNDING. ---------- (a) The Plan constitutes a promise by the Employer to make payments in accordance with the terms of the Plan. The Plan shall be unfunded and all payments made under the Plan shall be made in cash from the general assets of the Employer. Nothing in the Plan shall be construed to give any employee or of any other person rights to any specific assets of the Employer or of any other person. Participants and beneficiaries under the Plan shall have the status of general unsecured creditors of the Employer. In all events, it is the intent of the Employer that the Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA. (b) Except as provided in Article 5, the Employer shall not establish a separate fund, trust or account in the name of any Participant or Beneficiary to hold assets payable to a Participant. Any sponsor of a financial entity that is used for purposes of income tracking shall not be responsible for any payments under the Plan, and Participants shall not have an account established with such entity in connection with their participation in the Plan. If LS&CO. establishes an account with such financial entity for purposes of income tracking, any increases to or distributions from such account shall remain the property of LS&CO. (c) Nothing contained herein shall be construed to create a trust of any kind or a fiduciary relationship between an Employer or the Administrator and any employee or other person. 10.2 EFFECT ON OTHER PLANS. Except as otherwise provided under any --------------------- qualified retirement plans maintained by the Employer, Compensation and Bonuses deferred under this Plan shall not be included in "covered compensation" for the crediting of benefits or contributions to any qualified retirement plans maintained by the Employer, including but not limited to any pension plan, profit-sharing plan, stock purchase plan, employee savings plan, or employee stock ownership plan. Other benefit plans shall not be affected by Elective and Bonus Deferrals under this Plan. 10.3 NON-ASSIGNABILITY. ----------------- (a) NO ASSIGNMENT. Except as provided in Article 7 or otherwise in this Section 10.3, none of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to any claim of any creditor of any Participant or Beneficiary, and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor of such Participant or Beneficiary. In addition, no Participant or Beneficiary shall have any right to alienate, anticipate, commute, pledge, encumber or 19 assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise under the Plan. Any (i) attempt by a Participant or Beneficiary to alienate, anticipate, commute, pledge, encumber or assign any amounts payable under the Plan, or by reason of his or her bankruptcy, or (ii) other event that makes such payment subject to his or her debts or liabilities or would otherwise devolve upon anyone else, the Administrator may, in its sole discretion, terminate such person's interest in any such payment and direct that such payment be held and applied to or for the benefit of such person, his or her spouse, children or other dependents, or in such other manner as the Administrator may deem proper. (b) QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding any provision in the Plan to the contrary, a Participant's benefits under the Plan shall be payable to any "alternate payee" (as defined in Code Section 414(p)(8)), as provided in any qualified domestic relations order within the meaning of Code Section 414(p)(1)(A) as if the Plan were subject to Code Section 414(p). The Administrator, in its sole discretion, or its designee, shall make all relevant determinations, including, but not limited to, whether the order constitutes a qualified domestic relations order within the meaning of Code Section 414(p)(1)(A). The rights of any alternate payee hereunder are subject to the provisions of the Plan, and the Administrator may require an alternate payee to acknowledge that his or her rights are subject to such provisions. 10.4 NOTICES AND COMMUNICATIONS. All notices, statements, reports --------------------------- and other communications from the Administrator to any employee, Participant, Beneficiary, or other person required or permitted under the Plan shall be deemed to have been duly given when personally delivered to, when transmitted using facsimile or other electronic media, or when mailed first-class mail, postage prepaid and addressed to, such employee, Participant, Beneficiary or other person at his or her address last appearing on the records of the Company. All elections, designations, requests, notices, instructions and other communications from a Participant, Beneficiary, or other person to the Administrator required or permitted under the Plan shall be in such form as is prescribed from time to time by the Administrator, and shall be mailed by first-class mail, transmitted by facsimile, electronic media, or delivered to such location as shall be specified by the Administrator. Such communication shall be deemed to have been given and delivered only upon actual receipt by the Administrator at such location. 10.5 LIMITATION OF PARTICIPANT'S RIGHTS. Nothing contained in the Plan ---------------------------------- shall be construed to confer upon any person the right to be employed or continue in the employ of the Employer, or to interfere, in any way, with the Employer's right to terminate the employment of a Participant in the Plan at any time, with or without cause. 10.6 PARTICIPANTS BOUND. Any action with respect to the Plan taken by ------------------ the Administrator or any action authorized by or taken at the direction of the Administrator or the Employer shall be conclusive upon all Participants and 20 Beneficiaries entitled to benefits under the Plan. 10.7 RECEIPT AND RELEASE. Any payment to any Participant or -------------------- Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Employer and the Administrator, and the Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or Beneficiary is determined by the Administrator to be incompetent by reason of physical or mental disability or other legal disability (including minority) to give a valid receipt and release, the Administrator may cause the payment or payments becoming due to such person to be made to another person for his or her benefit without responsibility on the part of the Administrator or the Employer to follow the application of such funds. 10.8 WITHHOLDING OF TAXES. LS&CO. shall withhold from all deferrals --------------------------- and distributions made under the Plan any taxes required to be withheld by any law or regulations of the federal, state, or local government. 10.9 HEADINGS. All headings and subheadings in the Plan are provided -------- for convenience only and are not to be considered in the construction of the provisions in the Plan. 10.10 GOVERNING LAW AND SEVERABILITY. The Plan shall be governed, ------------------------------ administered and construed in all respects under and by the laws of the State of California. If any provision is held or found by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions shall continue to be fully effective. * * * IN WITNESS WHEREOF, the undersigned officer of LS&CO. has executed this document to certify its adoption effective as of this ___ day of ____________, 2000. LEVI STRAUSS & CO. ------------------------------------ Fred D. Paulenich Senior Vice President of Worldwide Human Resources 21 TABLE OF CONTENTS ________________________________________________________________________________ SECTION PAGE ________________________________________________________________________________ ARTICLE 1 INTRODUCTION........................................................1 1.1 PURPOSE OF PLAN......................................................1 1.2 STATUS OF PLAN.......................................................1 1.3 EFFECTIVE DATE.......................................................1 ARTICLE 2 DEFINITIONS.........................................................2 2.1 ACCOUNT..............................................................2 2.2 ADMINISTRATOR........................................................2 2.3 AIP..................................................................2 2.4 BENEFICIARY..........................................................2 2.5 BONUS DEFERRAL(S)....................................................2 2.6 BONUSES..............................................................2 2.7 BRP..................................................................2 2.8 CODE.................................................................2 2.9 COMPENSATION.........................................................2 2.10 DISABILITY...........................................................2 2.11 EFFECTIVE DATE.......................................................3 2.12 EIP..................................................................3 2.13 ELECTIVE DEFERRAL....................................................3 2.14 ELIGIBLE EMPLOYEE....................................................3 2.15 EMPLOYER.............................................................3 2.16 ERISA................................................................3 2.17 HOPP.................................................................3 2.18 LS&CO................................................................3 2.19 LTIP.................................................................3 2.20 LTPP.................................................................3 2.21 PARTICIPANT..........................................................3 2.22 PENSION MAKE-UP DEFERRED COMPENSATION................................3 2.23 PLAN.................................................................4 2.24 PLAN YEAR............................................................4 2.25 RETIREMENT...........................................................4 ARTICLE 3 PARTICIPATION.......................................................5 3.1 COMMENCEMENT OF PARTICIPATION........................................5 3.2 CONTINUED PARTICIPATION..............................................5 ARTICLE 4 DEFERRALS...........................................................6 4.1 ELECTIVE DEFERRALS...................................................6 4.2 BONUS DEFERRALS......................................................6 4.3 PENSION MAKE-UP DEFERRED COMPENSATION................................6 4.4 ELECTIONS............................................................6 ARTICLE 5 ACCOUNTS............................................................8 5.1 ACCOUNTS.............................................................8 5.2 INCOME TRACKING......................................................8 5.3 CHANGING INCOME TRACKING ELECTIONS...................................9 i ARTICLE 6 PAYMENTS...........................................................10 6.1 ELECTION AS TO TIME AND FORM OF PAYMENT (ELECTIVE AND BONUS DEFERRALS)..........................................................10 6.2 ACCELERATION OF PAYMENTS............................................12 6.3 TIME AND FORM OF PAYMENT FOR PENSION MAKE-UP DEFERRED COMPENSATION..12 6.4 WITHDRAWAL DUE TO HARDSHIP..........................................13 6.5 INVOLUNTARY DISTRIBUTION............................................14 ARTICLE 7 BENEFICIARIES......................................................15 7.1 DESIGNATION BY PARTICIPANT..........................................15 7.2 LACK OF DESIGNATION.................................................15 ARTICLE 8 PLAN ADMINISTRATION................................................16 8.1 PLAN ADMINISTRATION AND INTERPRETATION..............................16 8.2 INFORMATION REQUIRED................................................16 8.3 INCAPACITY..........................................................16 8.4 CLAIMS PROCEDURE....................................................16 ARTICLE 9 AMENDMENT AND TERMINATION..........................................18 ARTICLE 10 MISCELLANEOUS.....................................................19 10.1 NO FUNDING..........................................................19 10.2 EFFECT ON OTHER PLANS...............................................19 10.3 NON-ASSIGNABILITY...................................................19 10.4 NOTICES AND COMMUNICATIONS..........................................20 10.5 LIMITATION OF PARTICIPANT'S RIGHTS..................................20 10.6 PARTICIPANTS BOUND..................................................20 10.7 RECEIPT AND RELEASE.................................................21 10.8 WITHHOLDING OF TAXES................................................21 10.9 HEADINGS............................................................21 10.10 GOVERNING LAW AND SEVERABILITY......................................21 ii LEVI STRAUSS & CO. DEFERRED COMPENSATION PLAN FOR EXECUTIVES (AS AMENDED AND RESTATED EFFECTIVE AUGUST 1, 2000) (INCLUDING AMENDMENTS THROUGH MARCH 1, 2000) EX-10.46 11 0011.txt AMENDMENT TO EMPLOYEE INVESTMENT PLAN EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS & CO. AMENDMENT WHEREAS, LEVI STRAUSS & CO. ("LS&CO.") maintains the Employee Investment Plan of Levi Strauss & Co. (the "EIP"); and WHEREAS, Section 18 of the EIP provides that LS&CO. may amend the EIP at any time and for any reason; and WHEREAS, LS&CO. desires to amend the EIP to provide an additional method of distribution after the death of a Participant; and WHEREAS, by resolutions duly adopted on June 22, 2000, the Board of Directors of LS&CO. authorized Philip A. Marineau, President and Chief Executive Officer, to adopt amendments to the EIP and to delegate to certain other officers of LS&CO. the authority to adopt amendments to the EIP; and WHEREAS, on June 22, 2000, Philip A. Marineau delegated to any Senior Vice President, Human Resources, including Fred D. Paulenich, Senior Vice President of Worldwide Human Resources, the authority to amend the EIP (subject to specified limits) and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within such limits to the delegated authority of Fred D. Paulenich; NOW, THEREFORE, effective of the date set forth below, Section 11.7 of the EIP is hereby amended in its entirety as follows: "11.7 Death Benefit. ------------- (a) If a Member dies on or after the commencement of a distribution of his or her Plan Benefit in accordance with Section 11.5(a) but before the entire interest of his or her Plan Benefit is distributed, the remaining portion of such Member's Plan Benefit will be distributed to the Member's Beneficiary in a single lump sum payment as soon as reasonably practicable after the Member's death. (b) Subject to Section 11.6, if a Member dies before the commencement of a distribution of his or her Plan Benefit in accordance with Section 11.5(a), then the Member's Beneficiary will be entitled to receive the Member's Plan Benefit as soon as reasonably practical after the Beneficiary files a claim with the Administrative Committee on the prescribed form. Regardless of whether the Beneficiary files a claim with the Administrative Committee on the prescribed form, except as provided below, such Member's entire interest in his or her Plan Benefit will be distributed to the Member's Beneficiary on or before the December 31 of the calendar year which contains the fifth anniversary of the date of such Member's death. Notwithstanding the foregoing sentence, if a Member dies before the commencement of a distribution of his or her Plan Benefit in accordance with Section 11.5(a) and if (i) any portion of such Plan Benefit is payable to or for the benefit of a "Designated Beneficiary," as defined under section 401(a)(9) of the Code, and (ii) such portion will be distributed (in accordance with Regulations prescribed by the IRS) over the life of such Designated Beneficiary (or over a period not extending beyond the life expectancy of such Designated Beneficiary), then: (i) in the event that such Designated Beneficiary is not the Member's Surviving Spouse, the distribution of such portion will commence on or before the December 31 of the calendar year immediately following the calendar year in which the Member died; and (ii) in the event that such Designated Beneficiary is the Member's Surviving Spouse, the distribution of such portion will commence on or before the later of: (A) the December 31 of the calendar year immediately following the calendar year in which the Member dies; and (B) the December 31 of the calendar year in which the Member would have attained age 70-1/2. In the event that such Designated Beneficiary is the Member's Surviving Spouse, but such Surviving Spouse dies before the distribution to him or her begin, this Section 11.7(b) shall be applied as if the Surviving Spouse were the Member. Any payment of a Member's Plan Benefit under this Section 11.7 shall be in accordance with section 401(a)(9) of the Code." * * * IN WITNESS WHEREOF, LS&CO. has caused this instrument to be executed by its duly authorized officer this _____ day of ____________________, 2000. LEVI STRAUSS & CO. -------------------------------------------------- Fred D. Paulenich Senior Vice President of Worldwide Human Resources EX-10.47 12 0012.txt AMENDMENTS TO CAPITAL ACCUMULATION PLAN,.......... CAPITAL ACCUMULATION PLAN OF LEVI STRAUSS & CO. ------------------ LEVI STRAUSS & CO. SUPPLEMENTAL BENEFIT RESTORATION PLAN ------------------------------------- EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS & CO. ------------------ AMENDMENTS WHEREAS, LEVI STRAUSS & CO. ("LS&CO.") maintains the Capital Accumulation Plan of Levi Strauss & Co. (the "CAP"), the Levi Strauss & Co. Supplemental Benefit Restoration Plan (the "SBRP"), and the Employee Investment Plan of Levi Strauss & Co. (the "EIP") (collectively referred to as the "Plans"); and WHEREAS, Q&A-33 of Part 2 of the CAP provides that LS&CO. may amend the CAP at any time and for any reason; and WHEREAS, LS&CO. desires to amend and restate the CAP in its entirety effective January 1, 2001; and WHEREAS, Section VIII of the SBRP provides that LS&CO. may amend the SBRP, in whole or in part; and WHEREAS, LS&CO. desires to amend the SBRP, effective January 1, 2001, to eliminate future benefits under the SBRP relating to defined contribution plans; and WHEREAS, Section 18 of the EIP provides that LS&CO. may amend the EIP at any time and for any reason; WHEREAS, LS&CO. desires to amend the EIP, effective January 1, 2001, to clarify that participants who transfer to the CAP during any Plan Year will not be eligible to re-enter the EIP until the first pay period of January of the next Plan Year; and WHEREAS, by resolutions duly adopted on June 22, 2000, the Board of Directors of LS&CO. authorized Philip A. Marineau, President and Chief Executive Officer, to take certain actions with respect to the Plans and to further delegate the authority to take certain actions with respect to the Plans; and WHEREAS, on June 22, 2000, Philip A. Marineau delegated to any Senior Vice President, Human Resources, including Fred D. Paulenich, Senior Vice President of Worldwide Human Resources, the authority to take certain actions with respect to the Plans and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within the delegated authority of Fred D. Paulenich; NOW THEREFORE, effective as of January 1, 2001, the Plans are hereby amended as follows: 1. The CAP is hereby amended and restated, in its entirety, as set forth in the Exhibit attached hereto. 2. The first sentence of the second paragraph of the Preamble to the SBRP is hereby amended in its entirety to read as follows: "The Plan is intended to (i) supplement benefits under the Revised Home Office Pension Plan of Levi Strauss & Co. and the Levi Strauss & Co. Revised Employee Retirement Plan (the "Qualified Plans") maintained by Levi Strauss & Co. (the "Company") to the extent such benefits are reduced due to the limits of section 401(a)(17) of the Code, and (ii) provide benefits pursuant to the 1999 Enhancement that cannot be paid under the Qualified Plans due to nondiscrimination rules under the Code." 3. Section II of the SBRP is hereby amended in its entirety to read as follows: "Each employee whose benefits under the Qualified Plans are reduced as a result of the limitations on benefits imposed by section 401(a)(17) of the Code or as a result of the application of the nondiscrimination rules under the Code to benefits under the 1999 Enhancement, shall participate in the Plan unless he shall elect not to participate in the Plan by written notice to the Committee whereby he waives all present and future rights to benefits under the Plan." 4. The first sentence of Section III of the SBRP is hereby amended in its entirety to read as follows: "Subject to paragraph (c) below, the amount of the benefit payable to or in respect of an Eligible Employee hereunder shall be the sum of the amounts described in paragraphs (a) and (b):" 5. Current paragraphs (b) and (c) of Section III of the SBRP and any references thereto are hereby deleted in their entirety. 6. Current paragraphs (d) and (e) of Section III of the SBRP and any references thereto are hereby redesignated as paragraphs (b) and (c), respectively. 7. Subparagraphs (2) and (3) of paragraph (a) of Section IV and any references thereto are hereby deleted in their entirety. 8. Section 4.2 of the EIP is hereby amended by adding the following sentence to the end thereof to read as follows: "If any Member is affected by this limitation, the Member will not be permitted to make any Member Contributions to the Plan until the first pay period of the January following the end of the Plan Year in which such Member is affected by this limitation." * * * IN WITNESS WHEREOF, LS&CO. has caused this instrument to be executed by its duly authorized officer this ___ day of _______________________, 20____. LEVI STRAUSS & CO. --------------------------------- Fred D. Paulenich Senior Vice President of Worldwide Human Resources EX-10.48 13 0013.txt AMENDMENTS TO EMPLOYEE INVESTMENT PLAN EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS & CO. AMENDMENTS WHEREAS, LEVI STRAUSS & CO. ("LS&CO.") maintains the Employee Investment Plan of Levi Strauss & Co. (the "EIP"); and WHEREAS, Section 18 of the EIP provides that LS&CO. may amend the EIP at any time and for any reason; and WHEREAS, LS&CO. desires to amend the EIP to permit all highly compensated employees to participate in the EIP effective January 1, 2001; and WHEREAS, because all highly compensated employees will become eligible to participate in the EIP effective January 1, 2001, LS&CO. desires to amend the EIP effective January 1, 2001 to exclude certain compensation from being taken into account for deferral purposes; WHEREAS, LS&CO. desires to amend the EIP effective January 1, 2001 to increase the percentage of pre-tax and post-tax contributions of non-highly compensated members from ten percent of their compensation to fifteen percent; and WHEREAS, LS&CO. desires to amend the EIP effective January 1, 2001 to limit the total contributions a member can make in any plan year to ten percent of the compensation limit under section 401(a)(17) of the Internal Revenue Code; and WHEREAS, LS&CO. desires to amend the EIP to reflect various administrative changes, such as granting the Investment Committee full discretion to select investment funds offered under the EIP, changing the default investment option in the event a member fails to file a proper investment direction, and changing the procedure relating to how undeliverable checks are reinvested; and WHEREAS, LS&CO. desires to amend the EIP effective April 3, 2000 to clarify that, similar to newly hired employees, the one year of service requirement with respect to eligibility to participate was eliminated for rehired and transferred employees; and WHEREAS, by resolutions duly adopted on June 22, 2000, the Board of Directors of LS&CO. authorized Philip A. Marineau, President and Chief Executive Officer, to take certain actions with respect to the EIP and to further delegate the authority to take certain actions with respect to the EIP; and WHEREAS, on June 22, 2000, Philip A. Marineau delegated to any Senior Vice President, Human Resources, including Fred D. Paulenich, Senior Vice President of Worldwide Human Resources, the authority to take certain actions with respect to the EIP and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within the delegated authority of Fred D. Paulenich; NOW THEREFORE, effective as of the dates set forth herein, LS&CO. amends the EIP as follows: 1. Effective as of January 1, 2001, the second sentence of Section 2.14 of the EIP is hereby amended by deleting the phrase ", and amounts deferred under the Company's Deferred Compensation Plan for executives." 2. Effective as of January 1, 2001, paragraph (l) of Section 2.17 of the EIP is hereby amended in its entirety to read as follows: "(l) A Highly Compensated Employee, with respect to the eligibility to make Member Contributions or receive an allocation of Matching Contributions, Nonelective Contributions, Profit Sharing Contributions and Forfeitures only, except as other provided under Section 3.5(b)." 3. Effective as of April 3, 2000, Section 3.2 of the EIP is hereby amended in its entirety to read as follows: "3.2 REHIRED AND TRANSFERRED EMPLOYEES. Effective as of April 3, 2000, a former Employee who is rehired will be eligible to begin or resume membership in the Plan on the first Membership Date coincident with or next following the date he or she attains or returns to the status of an Employee. Prior to April 3, 2000, a former Employee who is rehired will be eligible to begin or resume membership in the Plan on the first Membership Date coinciding with or next following the date he or she attains or returns to the status of an Employee and has completed a Year of Service. Effective as of April 3, 2000, if an employee of the Company or an Affiliated Company transfers employment either to the Company or to another employment classification and as a result qualifies as an Employee, then such Employee will begin membership in the Plan on the first Membership Date coincident with or next following the date he or she attains the status of an Employee. Prior to April 3, 2000, if an employee of the Company or an Affiliated Company transfers employment either to the Company or to another employment classification and as a result qualifies as an Employee, then such Employee will begin membership in the Plan on the first Membership Date coincident with or next following the date he or she attains the status of an Employee and has completed a Year of Service." 4. Effective as of January 1, 2001, Section 2.23 of the EIP is hereby amended by adding the following before the last paragraph thereof: "Notwithstanding the foregoing, effective for Plan Years beginning after December 31, 1996, the term Highly Compensated Employee means any Employee who: (c) Was a five percent (5%) owner of the Company or an Affiliated Company (as defined in section 416(i)(1) of the Code) at any time during the Plan Year or the preceding Plan Year; or (d) For the preceding Plan Year received 'compensation' (as defined below) from the Company or an Affiliated Company in excess of eighty thousand dollars ($80,000), as adjusted under Regulations or rulings issued by the IRS." 5. Effective as of January 1, 2001, the EIP is hereby amended by deleting Appendix E in its entirety. 6. Effective as of January 1, 2001, paragraph (b) of Section 3.5 of the EIP is hereby amended in its entirety to read as follows: "(b) Eligible Highly Compensated Employees. Notwithstanding Section 3.5(a), a Highly Compensated Employee who satisfies the eligibility requirements of Section 3.1 may participate in the Plan for all or a portion of a Plan Year as a Member provided that he or she is included in an eligible category of Highly Compensated Employees described in paragraphs (b)(i) or (b)(ii), below: (i) For any Plan Year ending in or after the 1996 calendar year, Highly Compensated Employees whose compensation (as determined pursuant to Section 2.23) for the prior Plan Year did not exceed ninety five thousand dollars ($95,000); or (ii) Effective as of January 1, 2001, all Highly Compensated Employees." 7. Effective as of January 1, 2001, Section 4.1 of the EIP is hereby amended in its entirety to read as follows: "4.1 ELECTION TO MAKE CONTRIBUTIONS. A Member whose membership ------------------------------ is not suspended under Sections 3.3 or 3.5 may elect, as of the first day of any pay period in any month, to begin making Member Contributions to the Plan in one percent (1%) increments of his or her Compensation, without regard to the compensation limit under section 401(a)(17) of the Code, up to a maximum of ten percent (10%) (or effective as of January 1, 2001, fifteen percent (15%) with respect to those Members who are not Highly Compensated Employees). The Member may elect to make such Member Contributions either as Pre-Tax Contributions, Post-Tax Contributions, or any combination thereof. A Member's election to make Pre-Tax Contributions will constitute an election (for federal tax purposes and, wherever permitted, for state and local tax purposes) to have his or her taxable Compensation reduced by the amount of all Pre-Tax Contributions." 8. Effective as of January 1, 2001, Section 4.2 of the EIP is hereby amended in its entirety to read as follows: "4.2 MAXIMUM PRE-TAX CONTRIBUTIONS AND MEMBER CONTRIBUTIONS. -------------------------------------------------------- The sum of a Member's Pre-Tax Contributions to the Plan for any calendar year and the portion of the Member's Profit Sharing Contribution which the Member could have received in cash during such calendar year (if the Member does not elect to receive such portion under Section 6.2) will not exceed seven thousand dollars ($7,000), as adjusted from time to time under section 402(g)(5) of the Code for cost of living adjustments. If any Member's Pre-Tax Contributions are affected by this limitation, the Member will continue to make such contributions as Post-Tax Contributions to the Plan unless such Member elects to suspend such contributions as provided in Section 4.3. Notwithstanding any provision in the Plan to the contrary, effective as of January 1, 2001, the sum of a Member's Pre-Tax Contributions and Post-Tax Contributions for any Plan Year and the portion of the Member's Profit Sharing Contribution which the Member could have received in cash during such Plan Year (if the Member does not elect to receive such portion under Section 6.2) will not exceed ten percent (10%) of the compensation limit for such Plan Year under section 401(a)(17) of the Code, as adjusted from time to time under section 401(a)(17) of the Code for cost of living adjustments." 9. Effective as of January 1, 2001, Section 4.3 of the EIP is hereby amended in its entirety to read as follows: "4.3 CHANGE OR SUSPENSION OF CONTRIBUTIONS. A Member, at any -------------------------------------- time, may change the rate of his or her Member Contributions within the percentage limitation described in Section 4.1 or may change the nature of such Member Contributions as Pre-Tax Contributions or Post-Tax Contributions by filing the prescribed form with the Administrative Committee, or by utilizing such other notification procedure as is prescribed by the Administrative Committee. A Member may suspend all Member Contributions by filing the prescribed form with the Administrative Committee, or by utilizing such other notification procedure as is prescribed by the Administrative Committee. Such changes in rate or nature of Member Contributions or suspension of Member Contributions will become effective as soon as reasonably practicable after the date the form is filed with or notice is received by the Administrative Committee. Notwithstanding the foregoing, effective January 1, 2001, with respect to a Member who transfers from the status of a Highly Compensated Employee to a non-Highly Compensated Employee at the end of a Plan Year, such Member may elect to increase his or her Member Contributions for the following Plan Year up to fifteen percent (15%) of his or her Compensation, without regard to the compensation limit under section 401(a)(17), with such increase in the Member Contributions becoming effective with the pay period beginning as soon as reasonably practicable following the end of such Plan Year. Further, effective January 1, 2001, with respect to a Member who transfers from the status of a non-Highly Compensated Employee to a Highly Compensated Employee at the end of a Plan Year, such Member's prior election will automatically be decreased (beginning with such Member's Post-Tax Contributions, if any) to ten percent (10%) of his or her Compensation, without regard to the compensation limit under section 401(a)(17), in the event that his or her election prior to becoming a Highly Compensated Employee was greater than ten percent (10%), with such decrease in the Member Contributions becoming effective with the pay period beginning as soon as reasonably practicable following the end of such Plan Year." 10. Effective as of January 1, 2001, the first paragraph of Section 5.1 of the EIP is hereby amended in its entirety to read as follows: "5.1 MATCHING CONTRIBUTIONS. Except as provided below, for ----------------------- each period (an 'Accumulation Period') during a Plan Year, beginning with the pay period coinciding with or next following the day on which a Member completes a Year of Service, the Company will make a Matching Contribution to the Plan in an amount equal to fifty percent (50%) of such Member's Member Contributions for the Accumulation Period, provided that Member Contributions in excess of ten percent (10%) of such Member's Compensation, without regard to the compensation limit under section 401(a)(17) of the Code, shall not be matched. The Matching Contribution will be reduced by any amount which cannot be allocated to the Member because of the contribution limitation described in Section 12.1. The Board of Directors may determine in its sole discretion that:" 11. Effective as of the date this amendment is adopted, the EIP is hereby amended by deleting Appendix C in its entirety. 12. Effective as of the date this amendment is adopted, Section 7.1(a) of the EIP is hereby amended in its entirety to read as follows: "(a) In General. All contributions to the Plan will be held by the Trustee for investment and reinvestment as part of the Trust Fund under the Trust Agreement. The Trust Fund will consist of Funds or other investment vehicles designated by the Investment Committee, as may be amended from time to time in the sole discretion of the Investment Committee." 13. Effective as of the date this amendment is adopted, the last two sentences of the first paragraph of Section 7.2 of the EIP are hereby amended to read as follows: "If the Member fails to file any investment directions, his or her share of any Profit Sharing Contribution allocated to his or her Profit Sharing 401(k) Account and Profit Sharing Regular Account, his or her Member Contributions, Matching Contributions, and Nonelective Contributions will be deposited in a Fund designated from time to time by the Investment Committee in its sole discretion." 14. Effective as of November 15, 1999, Section 11.9 of the EIP is hereby amended to read as follows: "11.9 UNDELIVERABLE CHECKS. In the event that a Benefit cannot -------------------- be delivered, the Account of the Member (or Beneficiary, as applicable) shall be recredited with the amount of the Benefit which cannot be delivered. Such Benefit shall be reinvested in the Fidelity Retirement Money Market Fund (or such as the Investment Committee, in its sole discretion, determines is most similar to a money market fund with respect to its risk characteristics), except that the Benefit relating to any undeliverable check returned after November 15, 1999 shall be reinvested in the same Fund(s) from which it was withdrawn based on both the Member's (or Beneficiary's, if applicable) prior investment allocation percentage and the Funds(s) net asset value as of the applicable reinvestment date." * * * IN WITNESS WHEREOF, LS&CO. has caused this instrument to be executed by its duly authorized officer this _____ day of _______________________, 2000. LEVI STRAUSS & CO. -------------------------------------------- Fred D. Paulenich Senior Vice President of Worldwide Human Resources EX-10.49 14 0014.txt AMENDMENT TO CAPITAL ACCUMULATION PLAN, PLAN...... EXHIBIT 10.49 CAPITAL ACCUMULATION PLAN OF LEVI STRAUSS & CO. (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) PLAN DOCUMENT AND EMPLOYEE BOOKLET __________________________________ CAPITAL ACCUMULATION PLAN OF LEVI STRAUSS & CO. (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) PLAN DOCUMENT AND EMPLOYEE BOOKLET INTRODUCTION Beginning in 1996, Levi Strauss & Co. ("LS&CO.") established the Capital Accumulation Plan of Levi Strauss & Co. (the "Plan"). The Plan provides a vehicle by which certain eligible employees of LS&CO. or its subsidiaries that participate under the Employee Investment Plan (the "EIP") (collectively, the "Company") can supplement their retirement savings by contributing a portion of their eligible compensation through after-tax payroll deduction upon reaching the maximum contribution amount allowed under the EIP. Eligible after-tax contributions under the Plan are deposited into an individual retail brokerage account offered by Charles Schwab & Co., Inc. (the "Account"), which must be established through LS&CO. In addition, after completing one year of service with the Company, each eligible employee who contributes under the Plan through after-tax payroll deduction will receive a Company matching contribution in his or her Account equal to 75% of his or her contribution. The benefits and other provisions described in this Plan Document and Employee Booklet are effective only if you are eligible to participate and become a participant in the Plan. THE COMPANY DOES NOT ENDORSE, RECOMMEND OR GUARANTEE ANY INVESTMENT OR SERVICE OFFERED, PROVIDED OR PROMISED BY CHARLES SCHWAB & CO., INC. ("CHARLES SCHWAB") OR ANY OTHER OFFEROR OF INVESTMENTS. BECAUSE THE ACCOUNT IS A REGULAR INDIVIDUAL RETAIL BROKERAGE ACCOUNT, YOU ARE SOLELY RESPONSIBLE FOR SELECTING AND MONITORING YOUR INVESTMENT CHOICES, PAYING RELATED COMMISSIONS AND CHARGES, AND FOR INVESTMENT RESULTS FROM PARTICIPATING IN THE PLAN. COMPANY INVOLVEMENT IS LIMITED TO ESTABLISHING YOUR AFTER-TAX PAYROLL DEDUCTION AND MAKING THE MATCHING CONTRIBUTION. ALL FUNDS CONTRIBUTED BY YOU AND THE COMPANY UNDER THE PLAN ARE DEPOSITED INTO YOUR ACCOUNT. NEITHER THE COMPANY NOR ANY TRUST HOLDS ANY OF THESE FUNDS. WHO IS ELIGIBLE TO During any "Plan Year," as defined PARTICIPATE IN THE below, you are eligible to participate PLAN? in the Plan if you are currently employed by the Company and meet ALL of the following requirements: [ ] You were eligible to participate and elected to participate in the EIP during the Plan Year; and [ ] You contributed the maximum amount permitted under the EIP during the Plan Year. For example, for the Plan Year ending in November 2001, the maximum amount that you could contribute to the EIP was $17,000. The "Plan Year" for the Plan is LS&CO.'s fiscal year, which ends on the last Sunday of each November. HOW CAN I ENROLL IN THE PLAN? If you are eligible to participate in the Plan and have an existing Account, then you will be automatically enrolled in the Plan. In the event that you do not have an existing Account, you must submit a completed and signed "Charles Schwab & Co., Inc. account application form" to U.S. Retirement Benefits (and NOT to Charles Schwab) to enroll in the Plan. Please send the form to: Levi Strauss & Co., U.S. Retirement Benefits, 1155 Battery Street KO/1, San Francisco, CA 94111. WHEN WILL I BECOME A PARTICIPANT? If you are eligible to participate and become enrolled in the Plan, you will be- come a participant in the Plan as of the date on which your after-tax contributions are credited to your Account. If you properly set up your Account by the pay period in which you contributed the maximum amount under the EIP, your after-tax contributions will begin to be credited to your Account as of the following pay period. If you do not have an existing Account at the time you become eligible, your after-tax contributions will usually begin to be credited to your Account within three or four weeks after your Account is established. PLEASE NOTE THAT YOU WILL NOT BE PERMITTED TO MAKE ANY RETROACTIVE CONTRIBUTIONS TO THE PLAN. HOW LONG CAN I PARTICIPATE IN THE You can continue to participate in the PLAN? Plan through the last pay period in December of each year, provided that you continue to be paid on the Home Office payroll of LS&CO. through such date. If you cease being paid on the Home Office payroll before such date, then your participation under the Plan will cease as of the last pay period in which you are paid on the Home Office payroll of LS&CO. EXAMPLE. JEAN IS PAID ON THE HOME OFFICE PAYROLL OF LS&CO. DURING THE 2001 AND 2002 PLAN YEARS. JEAN PARTICIPATED IN THE EIP DURING THE 2001 PLAN YEAR AND CONTRIBUTED 10% OF HER EIP COVERED COMPENSATION. IN THE FIRST PAY PERIOD OF APRIL 2001, JEAN REACHED THE MAXIMUM CONTRIBUTION AMOUNT UNDER THE EIP FOR THAT PLAN YEAR (I.E., $17,000) AND HAD AN EXISTING ACCOUNT. BEGINNING WITH THE NEXT PAY PERIOD OF APRIL 2001, SHE BECAME A PARTICIPANT IN THE PLAN. JEAN MAY CONTINUE PARTICIPATING IN THE PLAN UNTIL THE LAST PAY PERIOD IN DECEMBER 2001. AS OF THE FIRST PAY PERIOD IN JANUARY 2002, JEAN WILL AGAIN BE ELIGIBLE TO MAKE PRE-TAX CONTRIBUTIONS UNDER THE EIP. IF JEAN CONTRIBUTES THE MAXIMUM AMOUNT PERMITTED UNDER THE EIP DURING 2002, SHE WILL AGAIN BECOME ELIGIBLE TO PARTICIPATE IN THE PLAN THROUGH THE LAST PAY PERIOD IN DECEMBER 2002. If you cease being paid on the Home Office payroll while you participate in the Plan, you will not be permitted to make any additional contributions to the Plan through payroll deduction and you will not be entitled to receive the Company match. However, if you resume being paid on the Home Office payroll before the last pay period of December in the year in which you participated in the Plan and have an existing Account, then you will be eligible to recommence your participation in the Plan. If you do not have an existing Account when you resume being paid on Home Office payroll, then you will be eligible to recommence your participation in the Plan as of the first pay period after you reestablish your Account. Please note that your after-tax contributions to your Account will usually restart within three or four weeks after your Account is reestablished. AGAIN, PLEASE REMEMBER THAT YOU WILL NOT BE PERMITTED TO MAKE ANY RETROACTIVE CONTRIBUTIONS TO THE PLAN. HOW MUCH MAY I You may contribute up to 10% (in 1% CONTRIBUTE TO THE increments) of your "covered compensa- PLAN DURING EACH PAY tion," as defined below, to your Account PERIOD? during each pay period that you are eligible to participate in the Plan. Unless you specify otherwise, your CAP contribution percentage will be the percentage you elected under the EIP (up to 10%). If your covered compensation increases during the year, the amount of your payroll deduction to the Plan will also increase because your deduction is based on your designated contribution percentage. Likewise, if your covered compensation decreases during the year, the amount of your payroll deduction to the Plan will also decrease. "Covered compensation" means your base salary, AIP bonus, including deferrals of such amounts under the Deferred Compensation Plan for Executives. CAN I CHANGE MY PAYROLL DEDUCTION? You may increase (up to 10%), decrease, or stop your payroll deductions to the Plan at any time. Your request will become effective as soon as practicable following the date you submit your request. Generally, your request will take at least two pay periods to become effective. WHAT HAPPENS TO MY PAYROLL DEDUCTION? The amount deducted from your paycheck, along with the Company match, will be sent to Charles Schwab and automatically deposited into a money market fund in your Account. You may then contact Charles Schwab directly to request that your funds be redirected to other investments offered through Charles Schwab. BESIDES PAYROLL DEDUCTIONS, IS THERE Generally, you are permitted to contri- ANY OTHER WAY TO CONTRIBUTE TO THE bute up to 10% of your covered PLAN? compensation to your Account only through payroll deductions. However, there are two important exceptions to this general rule. [ ] You may transfer funds from non-payroll sources to your Account at any time by sending a hand-drawn personal check directly to Charles Schwab and NOT to the Company. Because you own your Account, you are permitted to make these contributions to your Account at any time. HOWEVER, SUCH OUTSIDE FUNDS WILL NOT BE ELIGIBLE FOR THE 75% COMPANY MATCH. [ ] If you receive your AIP bonus in the same pay period that you contributed the maximum amount permitted under the EIP, then you will be permitted to do a one-time retroactive "make-up" contribution to your Account by submitting a hand-drawn personal check to U.S. Retirement Benefits, PROVIDED that you have an existing Account AND U.S. Retirement Benefits receives your check no later than 30 days after it sends you notification of your right to do such make-up contribution. Your maximum AIP make-up contribution will be limited to 10% of that portion of your AIP bonus (including AIP deferrals under the Deferred Compensation Plan for Executives) that cannot be taken into account as covered compensation under the EIP. If you have completed one year of service with the Company, your eligible AIP make-up contribution will also receive the 75% Company match; however, appropriate taxes will be withheld from the Company match. SEE SECTION, BELOW, ENTITLED "WHAT IS THE AMOUNT OF THE MATCHING CONTRIBUTION?" EXAMPLE. CHRIS PARTICIPATED IN THE EIP DURING THE 2001 PLAN YEAR AND ELECTED TO CONTRIBUTE 10% OF HIS EIP COVERED COMPENSATION. BY THE FIRST PAY PERIOD OF FEBRUARY 2001, HE HAD CONTRIBUTED $16,500 TO THE EIP. IN THAT SAME PAY PERIOD, CHRIS RECEIVED HIS AIP BONUS OF $60,000. ONLY $5,000 OF CHRIS' $60,000 AIP BONUS WAS TAKEN INTO ACCOUNT AS COVERED COMPENSATION UNDER THE EIP BECAUSE HE REACHED THE EIP'S $17,000 MAXIMUM CONTRIBUTION LIMIT FOR 2001. THIS IS THE CASE BECAUSE 10% OF $5,000 IF $500, WHICH IS THE AMOUNT HE NEEDED TO REACH THE $17,000 LIMIT. THUS, ASSUMING THAT CHRIS BECOMES A PARTICIPANT IN THE PLAN AS OF THE SECOND PAY PERIOD OF FEBRUARY 2001 AND THAT HE HAS COMPLETED ONE YEAR OF SERVICE WITH THE COMPANY AS OF SUCH DATE, HE WILL BE PERMITTED TO DO A MAKE-UP CONTRIBUTION TO THE PLAN UP TO $5,500 (I.E., $55,000 X 10%). THIS $5,500 CONTRIBUTION TO THE PLAN WILL ALSO BE ELIGIBLE FOR THE 75% COMPANY MATCH. WHAT IS THE AMOUNT OF THE MATCHING Upon completion of one year of service CONTRIBUTION? with the Company, the Company matches 75% of your payroll and eligible AIP make-up contributions to the Plan. Because the Company match is immediately taxable income, appropriate taxes will be with- held from your regular pay so that the entire Company match can go into your Account. However, if you make an eligible AIP make-up contribution to the Plan, your hand-drawn personal check and Company match (after appropriate taxes are withheld from such match) will be deposited into your Account. IN WHOSE NAME WILL MY ACCOUNT BE Your Account will be a regular REGISTERED? individual brokerage account registered in your name with Charles Schwab. Unlike the EIP, you (not a trust) will own the investments directly and in your name. No funds are set aside in a trust or held by the Company. HOW CAN I INVEST THE FUNDS IN MY You will need to contact Charles Schwab ACCOUNT? directly and select how to invest the funds in your Account. Charles Schwab offers various investment options for you to choose from. Because your Account is a regular individual brokerage account you have sole responsibility to make and monitor your investments under the Plan. Your investments through the Account can go up or down, and any risk of loss is borne by you. The Company's only involve- ment is limited to making the match and depositing your payroll and eligible AIP make-up contributions to the Plan. ALSO, YOU SHOULD BE AWARE THAT CHARLES SCHWAB MAY HAVE REQUIREMENTS, LIMITATIONS, COMMISSIONS, CONDITIONS, AND FEES WITH RESPECT TO THE INVESTMENT OF FUNDS CONTRIBUTED TO YOUR ACCOUNT. SUCH MATTERS ARE SOLELY WITHIN THE CONTROL OF CHARLES SCHWAB AND NOT THE COMPANY. FULFILLMENT OR COMPLIANCE WITH ANY OF THESE REQUIREMENTS, LIMITATIONS OR CONDITIONS AND PAYMENT OF ANY COMMISSIONS AND FEES IS YOUR PERSONAL RESPONSIBILITY. DOES THE COMPANY PROTECT ME AND MY The Company will not protect or guarantee INVESTMENTS IF MY INVESTMENTS your Account in any way. Thus, for LOSE MONEY? example, if your investments lose money, the stock markets crash, or Charles Schwab files bankruptcy or is otherwise unable to cover the funds credited to your Account, you alone will assume the risk of loss on your investments. SINCE EACH INVESTMENT OPTION PRESENTS VARYING DEGREES OF RISK AND RETURN CHARACTER- ISTICS, YOU SHOULD CONSULT WITH YOUR FINANCIAL ADVISOR BEFORE SELECTING WHICH INVESTMENT OPTIONS ARE RIGHT FOR YOU. WILL I RECEIVE ACCOUNT STATEMENTS? Charles Schwab will send you periodic statements regarding your Account balance and transaction confirmations. The frequency and content of any information regarding your Account are the sole responsibility of Charles Schwab, and not the Company. MAY I WITHDRAW FUNDS FROM MY ACCOUNT Because you own your Account, you are WHILE I AM EMPLOYED BY THE COMPANY? permitted to withdraw funds at any time. However, please remember that if you with draw your funds and close your Account, you will need to timely re-open your Account in order to avoid any interrup- tion in your payroll and eligible AIP make-up contributions to the Plan if you reach the EIP maximum contribution limit. WHAT ARE MY OPTIONS WITH RESPECT TO After your separation from employment MY ACCOUNT AFTER MY SEPARATION FROM with the Company, you are permitted to EMPLOYMENT WITH THE COMPANY? request a withdrawal from your Account at any time. The Company has no involve- ment with your Account after you separate from employment. However, if a Company match is mistakenly made to your Account following your separation from employment, the Company has a right to obtain a refund of that money. WHAT ARE THE TAX CONSEQUENCES OF The federal income tax laws are complex PARTICIPATING IN THE PLAN? and change from time to time. The follow- ing description is based on the current federal income tax laws and does not discuss tax consequences of participating in the Plan under any local, state, or foreign tax laws. Also, the following description is intended solely to be general and should not be relied upon as specific tax advice. BECAUSE EACH INDIVIDUAL'S SITUATION IS UNIQUE, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR ABOUT THE SPECIFIC TAX CONSEQUENCES OF PARTICIPATING IN THE PLAN. The Plan is a voluntary investment program. There is no identifiable tax benefit to you by participating in the Plan. Specifically, you should be aware of the following: [ ] Your payroll deduction contributions are made on an after-tax basis. This means that your contributions are included in your gross income and are subject to federal income, employment (including Social Security) and other taxes. [ ] You will have taxable income upon the payment of the Company match. The Company is required to withhold specific amounts of tax in connection with the match. [ ] Buying and selling securities and other investments in your Account may generate taxable income, either as capital gains or ordinary income. It will be your responsibility to report this income and pay any applicable taxes. [ ] In order for you to correctly report and pay any taxes with respect to the investment of your Account, you must accurately record your basis in any investment. YOU SOLELY BEAR THE RESPONSIBILITY TO ASCERTAIN ANY REPORTABLE INCOME WITH RESPECT TO YOUR ACCOUNT, AND REPORT SUCH INCOME AND PAY ANY APPLICABLE TAXES. FOR INFORMATION RELATING TO ANY TAX FOR WHICH YOU ARE LIABLE WITH RESPECT TO YOUR ACCOUNT, YOU SHOULD CONTACT EITHER CHARLES SCHWAB, ANY OTHER OFFEROR OF INVESTMENTS HELD IN YOUR ACCOUNT, AND/OR YOUR TAX ADVISOR. IS THIS A TAX-QUALIFIED PLAN? The Plan is a non-qualified retirement plan, which means that the Plan is not qualified under Sections 401(a), 401(k), or 423 of the Internal Revenue Code. Thus, the benefits offered under such Sections of the Code, including but not limited to deferral of taxes on contribu- tions or investment earnings, are not available to you by participating in the Plan. IS THIS AN ERISA PLAN? The Plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, including but not limited to the reporting, disclosure, and fiduciary responsibility rules. CAN THE PLAN BE AMENDED OR LS&CO. reserves the right to amend, TERMINATED? suspend or terminate the Plan at any time and for any reason, in whole or in part, including the existence, timing, or amount of the Company match, the suspension rules or the brokerage firm. The Plan may be amended in writing by the Board of Directors of LS&CO. or by any person to whom the Board of Directors has delegated such authority. In addition, Charles Schwab may change its rules, policies, investment choices and fee and commissions structure. Those changes, and any communications describing such changes, are the sole responsibility of Charles Schwab. WHO ADMINISTERS THE PLAN? The Plan is administered by the Administrative Committee for Retirement Plans, to the extent described below. The Administrative Committee, or its delegate is responsible for administration of the Plan in the following respects: [ ] Determination of eligibility to participate; [ ] Interpretation of the Plan; and [ ] The provision of forms relating to participation in the Plan, excluding any forms required by Charles Schwab in connection with your Account. WHAT ARE CHARLES SCHWAB'S With respect to the Plan, Charles RESPONSIBILITIES UNDER THE PLAN? Schwab is responsible for the following: [ ] The investments offered to Plan participants; [ ] The provision of information to Plan participants regarding Accounts, including but not limited to information regarding assets held in your Account, dividends paid with respect to Account investments, gains or losses on transactions involving your Account investments, and taxes for which you may be liable with respect to your Account or its investments; and [ ] The execution of your investment instructions with respect to your Account. CHARLES SCHWAB HAS SOLE RESPONSIBILITY WITH RESPECT TO YOUR ACCOUNT. THE COMPANY IS NOT RESPONSIBLE FOR ANY REQUIREMENTS, CONDITIONS, INVESTMENT OPTIONS OR OTHER DECISIONS BY CHARLES SCHWAB, OR FOR THE CONTENT OR TIMING OF ANY COMMUNICATIONS OR REPORTS FROM CHARLES SCHWAB. WHO DO I CONTACT FOR ADDITIONAL If you have any questions about the INFORMATION ABOUT THE PLAN? Plan, please contact U.S. Retirement Benefits: U.S. Retirement Benefits Levi Strauss & Co. P.O. Box 7215 San Francisco, CA 94120 Phone: (415) 501-1532 The Company may from time to time distribute information about the Plan via hard copy, email, or voicemail. EX-10.50 15 0015.txt SECOND AMENDMENT TO BRIDGE CREDIT AGREEMENT....... LEVI STRAUSS & CO. SECOND AMENDMENT TO BRIDGE CREDIT AGREEMENT AND LIMITED WAIVER This SECOND AMENDMENT TO BRIDGE CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of September 29, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Administrative Agent for Banks ("ADMINISTRATIVE AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Bridge Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Bridge Credit Agreement and Limited Waiver dated as of July 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Co-Syndication Agents; the financial institution party thereto as Documentation Agent; Administrative Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agree- ment as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS ----------------------------------------------- A. Sections 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement are hereby amended to read in their entirety as follows: "[intentionally omitted]" B. Section 6.11(c) of the Credit Agreement is hereby amended to read in its entirety as follows: "Derivative/FX Contracts. Company shall use its reasonable ------------------------- efforts to deliver to Administrative Agent executed copies of amendments to the existing master agreements pursuant to which Lender Derivative/FX Contracts are issued providing that the obligations of Company and FinServ under such agreements will be secured by the Collateral Documents." 1 1.2 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS ---------------------------------------------- A. Section 7.1(f) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$25,000,000" therefor. B. Section 7.1(t) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$10,000,000" therefor. C. Section 7.2(r) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. D. Section 7.2 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of clause (t) thereof; (ii) deleting the period at the end of clause (u) thereof and substituting the phrase "; and" therefor; and (iii) adding the following as new clause (v) thereof: "(v) Negative Pledges with respect to property of Company and its Subsidiaries contained in documentation for any Capital Markets Transaction permitted by Section 7.1(m) provided such Negative Pledges (i) expressly permit Liens in favor of Administrative Agent and Liens on equipment subject to Equipment Financing Transactions, real property subject to Real Estate Financing Transactions, accounts receivable subject to Permitted Foreign Receivables Purchase Facilities and property subject to any other Lien permitted by Section 7.2 and (ii) do not require the Securities issued in such Capital Markets Transactions to be secured by such permitted Liens." E. Section 7.3(m) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. SECTION 2. WAIVER 2.1 WAIVER OF SECTION 6.11(C) ------------------------- The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(c) of the Credit Agreement for the period commencing on August 31, 2000 to and including the date of this Amendment. 2.2 LIMITATION OF WAIVER -------------------- Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Section 6.11(c) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.11(c) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Administrative Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. 2 SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. 3 (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ------------------------------------------------- Title: ---------------------------------------------- BANK OF AMERICA, N.A., as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- THE BANK OF NOVA SCOTIA, as a Co-Syndication Agent and a Bank By: ------------------------------------------------- Title: ---------------------------------------------- CITICORP U.S.A. INCORPORATED, as a Co-Syndication Agent and as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent and as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- S-1 BANK ONE, N.A., as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------------------------- Title: ---------------------------------------------- BANK OF AMERICA, N.A., as Collateral Agent By: ------------------------------------------------- Title: ---------------------------------------------- ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-2 LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-3 EX-10.51 16 0016.txt SECOND AMENDMENT TO AMENDED AND RESTATED 1997..... LEVI STRAUSS & CO. SECOND AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT AND LIMITED WAIVER This SECOND AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of September 29, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1997 364 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver dated as of July 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agree- ment as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE II: THE CREDITS ------------------------------------- A. Sections 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement are hereby amended to read in their entirety as follows: "[intentionally omitted]" B. Section 6.11(c) of the Credit Agreement is hereby amended to read in its entirety as follows: "Derivative/FX Contracts. Company shall use its reasonable ------------------------ efforts to deliver to Agent executed copies of amendments to the existing master agreements pursuant to which 1 Lender Derivative/FX Contracts are issued providing that the obligations of Company and FinServ under such agreements will be secured by the Collateral Documents (as defined in the Bridge Credit Agreement)." 1.2 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS ---------------------------------------------- A. Section 7.1(f) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$25,000,000" therefor. B. Section 7.1(t) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$10,000,000" therefor. C. Section 7.2(r) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. D. Section 7.2 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of clause (t) thereof; (ii) deleting the period at the end of clause (u) thereof and substituting the phrase "; and" therefor; and (iii) adding the following as new clause (v) thereof: "(v) Negative Pledges with respect to property of Company and its Subsidiaries contained in documentation for any Capital Markets Transaction permitted by Section 7.1(m) provided such Negative Pledges (i) expressly permit Liens in favor of Agent and Liens on equipment subject to Equipment Financing Transactions, real property subject to Real Estate Financing Transactions, accounts receivable subject to Permitted Foreign Receivables Purchase Facilities and property subject to any other Lien permitted by Section 7.2 and (ii) do not require the Securities issued in such Capital Markets Transactions to be secured by such permitted Liens." E. Section 7.3(m) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. SECTION 2. WAIVER 2.1 WAIVER OF SECTION 6.11(c) ------------------------- The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(c) of the Credit Agreement for the period commencing on August 31, 2000 to and including the date of this Amendment. 2.2 LIMITATION OF WAIVER -------------------- Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Section 6.11(c) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.11(c) of the Credit Agreement in any other instance or (ii) any other term, provision or 2 condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and deli- very of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 3 SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ALLSTATE LIFE INSURANCE COMPANY By:____________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A. By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BNP PARIBAS (formerly BANQUE NATIONALE DE PARIS) By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: FRANKLIN CLO I LIMITED By: ----------------------------------------- Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IIA LIMITED By: ----------------------------------------- Name: Title: KBC BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: ML CLO XV PILGRIM AMERICA By: ----------------------------------------- Name: Title: ML CLO XX PILGRIM AMERICA (CAYMAN) LTD. By:_____________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: PIMCO HIGH YIELD FUND By: ----------------------------------------- Name: Title: SEQUILS-PILGRIM I LTD. By:____________________________ Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-10.52 17 0017.txt SECOND AMENDMENT TO AMENDED AND RESTATED 199 180.. LEVI STRAUSS & CO. SECOND AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT AND LIMITED WAIVER This SECOND AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of September 29, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Administrative Agent for Banks ("ADMINISTRATIVE AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1999 180 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver dated as of July 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Co-Documentation Agents; Administrative Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE I: DEFINITIONS ------------------------------------ A. Sections 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement are hereby amended to read in their entirety as follows: "[intentionally omitted]" B. Section 6.11(c) of the Credit Agreement is hereby amended to read in its entirety as follows: "Derivative/FX Contracts. Company shall use its reasonable ------------------------ efforts to deliver to Administrative Agent executed copies of amendments to the existing master agreements 1 pursuant to which Lender Derivative/FX Contracts are issued providing that the obligations of Company and FinServ under such agreements will be secured by the Collateral Documents (as defined in the Bridge Credit Agreement)." 1.2 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS ---------------------------------------------- A. Section 7.1(f) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$25,000,000" therefor. B. Section 7.1(t) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$10,000,000" therefor. C. Section 7.2(r) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. D. Section 7.2 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of clause (t) thereof; (ii) deleting the period at the end of clause (u) thereof and substituting the phrase "; and" therefor; and (iii) adding the following as new clause (v) thereof: "(v) Negative Pledges with respect to property of Company and its Subsidiaries contained in documentation for any Capital Markets Transaction permitted by Section 7.1(m) provided such Negative Pledges (i) expressly permit Liens in favor of Administrative Agent and Liens on equipment subject to Equipment Financing Transactions, real property subject to Real Estate Financing Transactions, accounts receivable subject to Permitted Foreign Receivables Purchase Facilities and property subject to any other Lien permitted by Section 7.2 and (ii) do not require the Securities issued in such Capital Markets Transactions to be secured by such permitted Liens." E. Section 7.3(m) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. SECTION 2. WAIVER 2.1 WAIVER OF SECTION 6.11(c) ------------------------- The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(c) of the Credit Agreement for the period commencing on August 31, 2000 to and including the date of this Amendment. 2.2 LIMITATION OF WAIVER -------------------- Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Section 6.11(c) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.11(c) of the Credit Agreement in any other instance or (ii) any other term, provision or 2 condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Administrative Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and deli- very of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 3 SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ------------------------------------------------- Title: ---------------------------------------------- BANK OF AMERICA, N.A., as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- THE BANK OF NOVA SCOTIA, as a Co-Documentation Agent and as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- CITICORP U.S.A. INCORPORATED, as a Co-Documentation Agent and as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Documentation Agent and as a Bank By: ------------------------------------------------- Title: ---------------------------------------------- S-1 BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------------------------- Title: ---------------------------------------------- BANK OF AMERICA, N.A., as Collateral Agent By: ------------------------------------------------- Title: ---------------------------------------------- ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-2 LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ S-3 EX-10.53 18 0018.txt SECOND AMENDMENT TO 1997 SECOND AMENDED AND....... LEVI STRAUSS & CO. SECOND AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER This SECOND AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER (this "AMENDMENT") is dated as of September 29, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("COMPANY"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain 1997 Second Amended and Restated Credit Agreement dated as of January 31, 2000, as amended by First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver dated as of July 31, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below; and WHEREAS, Company has requested Banks to waive certain provisions of the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO ARTICLE VI: AFFIRMATIVE COVENANTS ------------------------------------------------ A. Sections 6.11(a)(ii) and 6.11(a)(iii) of the Credit Agreement are hereby amended to read in their entirety as follows: "[intentionally omitted]" B. Section 6.11(c) of the Credit Agreement is hereby amended to read in its entirety as follows: "Derivative/FX Contracts. Company shall use its reasonable ------------------------ efforts to deliver to Agent executed copies of amendments to the existing master agreements pursuant to which 1 Lender Derivative/FX Contracts are issued providing that the obligations of Company and FinServ under such agreements will be secured by the Collateral Documents (as defined in the Bridge Credit Agreement)." 1.2 AMENDMENTS TO ARTICLE VII: NEGATIVE COVENANTS ---------------------------------------------- A. Section 7.1(f) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$25,000,000" therefor. B. Section 7.1(t) of the Credit Agreement is hereby amended by deleting the reference to "$5,000,000" contained therein and substituting "$10,000,000" therefor. C. Section 7.2(r) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. D. Section 7.2 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of clause (t) thereof; (ii) deleting the period at the end of clause (u) thereof and substituting the phrase "; and" therefor; and (iii) adding the following as new clause (v) thereof: "(v) Negative Pledges with respect to property of Company and its Subsidiaries contained in documentation for any Capital Markets Transaction permitted by Section 7.1(m) provided such Negative Pledges (i) expressly permit Liens in favor of Agent and Liens on equipment subject to Equipment Financing Transactions, real property subject to Real Estate Financing Transactions, accounts receivable subject to Permitted Foreign Receivables Purchase Facilities and property subject to any other Lien permitted by Section 7.2 and (ii) do not require the Securities issued in such Capital Markets Transactions to be secured by such permitted Liens." E. Section 7.3(m) of the Credit Agreement is hereby amended by deleting the reference to "$2,000,000" contained therein and substituting "$10,000,000" therefor. SECTION 2. WAIVER 2.1 WAIVER OF SECTION 6.11(c) ------------------------- The undersigned Banks, constituting Majority Banks under the Credit Agreement, hereby waive compliance with the provisions of Section 6.11(c) of the Credit Agreement for the period commencing on August 31, 2000 to and including the date of this Amendment. 2.2 LIMITATION OF WAIVER -------------------- Without limiting the generality of the provisions of Section 10.1 of the Credit Agreement, the waiver set forth herein shall be limited precisely as written and relates solely to a waiver of compliance by Company with the provisions of Section 6.11(c) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by Company with respect to (i) Section 6.11(c) of the Credit Agreement in any other instance or (ii) any other term, provision or 2 condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that Agent, Collateral Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and deli- very of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 3 SECTION 4. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ARCHIMEDES FUNDING III LTD. By:___________________________ Name: Title: ARCHIMEDES FUNDING LLC By:___________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANCA MONTE DEI PASCHI DI SIENA SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A. By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BNP PARIBAS By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CAPTIVA III FINANCE LTD. By:____________________________ Name: Title: CAPTIVA IV FINANCE LTD. By:_____________________________ Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CIBC INC. By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CYPRESS MANAGEMENT PARTNERSHIP By:_____________________________ Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FERNWOOD ASSOCIATES L.P. By:____________________________ Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: FLEET NATIONAL BANK (f/k/a BANKBOSTON, N.A.) By: ----------------------------------------- Name: Title: FRANKLIN FLOATING RATE TRUST By:____________________________ Name: Title: GALAXY CLO 1999-1, LTD. By:____________________________ Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ----------------------------------------- Name: Title: INDOSUEZ CAPITAL FUNDING III LIMITED, BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IV L.P., BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING VI LIMITED By: ----------------------------------------- Name: Title: KZH SOLEIL LLC By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: NEMEAN CLO, LTD. By: ----------------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEN- BANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: SALOMON BROTHERS HOLDING COMPANY INC. By:______________________________ Name: Title: THE SANWA BANK, LIMITED By: ----------------------------------------- Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: THE TOKAI BANK LIMITED By: ----------------------------------------- Name: Title: UBS AG, STAMFORD BRANCH By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-10.54 19 0019.txt THIRD AMENDMENT TO AMENDED AND RESTATED 1999 ..... LEVI STRAUSS & CO. THIRD AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT This THIRD AMENDMENT TO AMENDED AND RESTATED 1999 180 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 13, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("Company"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Administrative Agent for Banks ("ADMINISTRATIVE AGENT"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1999 180 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver dated as of July 31, 2000 and Second Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver dated as of September 29, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Co-Documentation Agents; Administrative Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE II: THE CREDITS ------------------------------------ A. Section 2.6(a) of the Credit Agreement is hereby amended by adding the following as the penultimate sentence thereof: "Company may, if so specified in the applicable notice of Commitment reduction, request that any reduction of Commitments pursuant to this Section 2.6 be applied to reduce the Commitment reductions under Section 2.8(b) in forward chronological order; PROVIDED that (A) the amount of such voluntary Commitment reduction is equal to the Three Facility Commitment Reduction Fraction times the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, (B) Company simultaneously makes a voluntary prepayment of loans outstanding under the 1997 Second Amended and Restated Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, 1 and (C) Company simultaneously makes a voluntary prepayment of loans outstanding under the Amended and Restated 1997 364 Day Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph; PROVIDED FURTHER that the prepayments and commitment reductions set forth in subclauses (B) and (C) above are applied to reduce scheduled principal payments and commitment reductions under the applicable credit agreements in forward chronological order." SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 2 SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By:_________________________________________________ Title:______________________________________________ BANK OF AMERICA, N.A., as a Bank By:_________________________________________________ Title:______________________________________________ THE BANK OF NOVA SCOTIA, as a Co-Documentation Agent and as a Bank By:_________________________________________________ Title:______________________________________________ CITICORP U.S.A. INCORPORATED, as a Co-Documentation Agent and as a Bank By:_________________________________________________ Title:______________________________________________ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Documentation Agent and as a Bank By:_________________________________________________ Title:______________________________________________ S-1 BANK OF AMERICA, N.A., as Administrative Agent By:_________________________________________________ Title:______________________________________________ BANK OF AMERICA, N.A., as Collateral Agent By:_________________________________________________ Title:______________________________________________ ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By:___________________________________________________ Title:________________________________________________ LEVI STRAUSS FINANCIAL CENTER CORPORATION By:___________________________________________________ Title:________________________________________________ LEVI STRAUSS FUNDING, LLC By:___________________________________________________ Title:________________________________________________ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By:___________________________________________________ Title:________________________________________________ LEVI STRAUSS GLOBAL OPERATIONS, INC. By:___________________________________________________ Title:________________________________________________ S-2 LEVI STRAUSS INTERNATIONAL By:___________________________________________________ Title:________________________________________________ LEVI STRAUSS LATIN AMERICA, INC. By:___________________________________________________ Title:________________________________________________ LEVI'S ONLY STORES, INC. By:___________________________________________________ Title:________________________________________________ NF INDUSTRIES, INC. By:___________________________________________________ Title:________________________________________________ S-3 EX-10.55 20 0020.txt THIRD AMENDMENT TO AMENDED AND RESTATED 1997 ..... LEVI STRAUSS & CO. THIRD AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT This THIRD AMENDMENT TO AMENDED AND RESTATED 1997 364 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 13, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("Company"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("Agent"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain Amended and Restated 1997 364 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver dated as of July 31, 2000 and Second Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver dated as of September 29, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE II: THE CREDITS ------------------------------------ A. Section 2.5(a) of the Credit Agreement is hereby amended by adding the following as the final sentence thereof: "Company may, if so specified in the applicable notice of prepayment, request that any prepayment of Loans pursuant to this Section 2.5 be applied to reduce the principal amounts payable and corresponding Commitment reductions under Section 2.7 in forward chronological order; PROVIDED that (A) the amount of such voluntary prepayment is equal to the Three Facility Commitment Reduction Fraction TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, (B) Company simultaneously makes a voluntary prepayment of loans outstanding under the 1997 Second Amended and Restated Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, and 1 (C) Company simultaneously makes a voluntary commitment reduction under the Amended and Restated 1999 180 Day Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph; PROVIDED FURTHER that the prepayments and commitment reductions set forth in subclauses (B) and (C) above are applied to reduce scheduled principal payments and commitment reductions under the applicable credit agreements in forward chronological order." SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 2 SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ALLSTATE LIFE INSURANCE COMPANY By:____________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A. By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BNP PARIBAS (formerly BANQUE NATIONALE DE PARIS) By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: FRANKLIN CLO I LIMITED By: ----------------------------------------- Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IIA LIMITED By: ----------------------------------------- Name: Title: KBC BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: ML CLO XV PILGRIM AMERICA By: ----------------------------------------- Name: Title: ML CLO XX PILGRIM AMERICA (CAYMAN) LTD. By:_____________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: PIMCO HIGH YIELD FUND By: ----------------------------------------- Name: Title: SEQUILS-PILGRIM I LTD. By:____________________________ Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-10.56 21 0021.txt THIRD AMENDEMENT TO 1997 SECOND AMENDED AND ...... LEVI STRAUSS & CO. THIRD AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT This THIRD AMENDMENT TO 1997 SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 13, 2000 and entered into by and among Levi Strauss & Co., a Delaware corporation ("Company"); the financial institutions party hereto ("BANKS"); Bank of America, N.A. as Agent for Banks ("Agent"); and Bank of America, N.A. as Collateral Agent for Banks ("COLLATERAL AGENT"), and is made with reference to that certain 1997 Second Amended and Restated Credit Agreement dated as of January 31, 2000, as amended by First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver dated as of July 31, 2000 and Second Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver dated as of September 29, 2000 (the "CREDIT AGREEMENT"), by and among Company; Banks; the several financial institutions party thereto as Senior Managing Agents; the several financial institutions party thereto as Managing Agents; the several financial institutions party thereto as Co-Agents; Agent; and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Banks desire to amend the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO ARTICLE II: THE CREDITS A. Section 2.8(a) of the Credit Agreement is hereby amended by adding the following as the final sentence thereof: "Company may, if so specified in the applicable notice of prepayment, request that any prepayment of Loans pursuant to this Section 2.8 be applied to reduce the principal amounts payable and corresponding Commitment reductions under Section 2.10 in forward chronological order; PROVIDED that (A) the amount of such voluntary prepayment is equal to the Three Facility Commitment Reduction Fraction TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, (B) Company simultaneously makes a voluntary prepayment of loans outstanding under the Amended and Restated 1997 364 Day Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph, and 1 (C) Company simultaneously makes a voluntary commitment reduction under the Amended and Restated 1999 180 Day Credit Agreement in an amount equal to the Three Facility Commitment Reduction Fraction (as defined therein) TIMES the aggregate amount of prepayments and commitment reductions made pursuant to subclauses (A), (B) and (C) of this paragraph; PROVIDED FURTHER that the prepayments and commitment reductions set forth in subclauses (B) and (C) above are applied to reduce scheduled principal payments and commitment reductions under the applicable credit agreements in forward chronological order." SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Bank that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. NO CONFLICT. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any of its Organization Documents or any order, judgment or decree of any court or other Governmental Authority binding on Company, (ii) conflict with, result in a breach of, constitute a default under, or require the termination of, any Contractual Obligation of Company, except where such conflicts, breaches, defaults and terminations, in the aggregate, would not have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Company (other than pursuant to the Collateral Documents) or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company except where the failure to obtain such approvals and consents would not, in the aggregate, have a Material Adverse Effect. D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, whether enforcement is sought in a proceeding at law or in equity. 2 SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. C. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Majority Banks and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By: ----------------------------------------- Name: Title: ABN AMRO BANK N.V. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: AIMCO CDO SERIES 2000-A By: ----------------------------------------- Name: Title: ARCHIMEDES FUNDING III LTD. By:___________________________ Name: Title: ARCHIMEDES FUNDING LLC By:___________________________ Name: Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANCA MONTE DEI PASCHI DI SIENA SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A. By: ----------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ----------------------------------------- Name: Title: BANK ONE, N.A. By: ----------------------------------------- Name: Title: BANKERS TRUST COMPANY By: ----------------------------------------- Name: Title: BNP PARIBAS By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CAPTIVA III FINANCE LTD. By:____________________________ Name: Title: CAPTIVA IV FINANCE LTD. By:_____________________________ Name: Title: CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CIBC INC. By: ----------------------------------------- Name: Title: CITICORP U.S.A. INCORPORATED By: ----------------------------------------- Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: CYPRESS MANAGEMENT PARTNERSHIP By:_____________________________ Name: Title: DEUTSCHE BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: FERNWOOD ASSOCIATES L.P. By:____________________________ Name: Title: FIRST HAWAIIAN BANK By: ----------------------------------------- Name: Title: FLEET NATIONAL BANK (f/k/a BANKBOSTON, N.A.) By: ----------------------------------------- Name: Title: FRANKLIN FLOATING RATE TRUST By:____________________________ Name: Title: GALAXY CLO 1999-1, LTD. By:____________________________ Name: Title: GOLDMAN SACHS & COMPANY By:___________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ----------------------------------------- Name: Title: INDOSUEZ CAPITAL FUNDING III LIMITED, BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING IV L.P., BY INDOSUEZ CAPITAL AS PORTFOLIO ADVISOR By:_____________________________ Name: Title: INDOSUEZ CAPITAL FUNDING VI LIMITED By: ----------------------------------------- Name: Title: KZH SOLEIL LLC By: ----------------------------------------- Name: Title: MELLON BANK, N.A. By: ----------------------------------------- Name: Title: NEMEAN CLO, LTD. By: ----------------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ----------------------------------------- Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: SALOMON BROTHERS HOLDING COMPANY INC. By:______________________________ Name: Title: THE SANWA BANK, LIMITED By: ----------------------------------------- Name: Title: SOCIETE GENERALE NEW YORK BRANCH By: ----------------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By: ----------------------------------------- Name: Title: THE TOKAI BANK LIMITED By: ----------------------------------------- Name: Title: UBS AG, STAMFORD BRANCH By: ----------------------------------------- Name: Title: UNICREDITO ITALIANO S.P.A. By: ----------------------------------------- Name: Title: By: ----------------------------------------- Name: Title: WACHOVIA BANK N.A. By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By: ----------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Collateral Agent By: ----------------------------------------- Name: Title: ACKNOWLEDGED: BATTERY STREET ENTERPRISES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FINANCIAL CENTER CORPORATION By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS FUNDING, LLC By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS GLOBAL OPERATIONS, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS INTERNATIONAL By: --------------------------------------------------- Title: ------------------------------------------------ LEVI STRAUSS LATIN AMERICA, INC. By: --------------------------------------------------- Title: ------------------------------------------------ LEVI'S ONLY STORES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ NF INDUSTRIES, INC. By: --------------------------------------------------- Title: ------------------------------------------------ EX-10.57 22 0022.txt CREDIT AGREEMENT CREDIT AGREEMENT CREDIT AGREEMENT dated as of February 1, 2001 among LEVI STRAUSS & CO., a Delaware corporation (the "BORROWER"), the banks, financial institutions and other institutional lenders listed on the signature pages hereof under the caption "INITIAL LENDERS" (the "INITIAL LENDERS"), the banks listed on the signature pages hereof under the caption "INITIAL ISSUING BANKS" (the "INITIAL ISSUING BANKS"), BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as the provider of Swing Line Advances (as hereinafter defined) hereunder (the "SWING LINE BANK"), BANC OF AMERICA SECURITIES LLC ("BAS") and SALOMON SMITH BARNEY INC. ("SSB"), as co-lead arrangers and joint book managers (the "CO-LEAD ARRANGERS") for the Facilities (as hereinafter defined) hereunder, CITICORP USA, INC., as the syndication agent (the "SYNDICATION AGENT"), THE BANK OF NOVA SCOTIA, as the documentation agent (the "DOCUMENTATION AGENT"), and BANK OF AMERICA, N.A., as the administrative and collateral agent (together with any successor thereto appointed pursuant to Article VII, the "ADMINISTRATIVE AGENT") for the Lender Parties (as hereinafter defined). PRELIMINARY STATEMENTS (i) The Borrower is a party to (a) that certain Bridge Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Bridge Credit Agreement and Limited Waiver dated as of July 31, 2000 and Second Amendment to Bridge Credit Agreement and Limited Waiver dated as of September 29, 2000; (b) that certain Amended and Restated 1999 180 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver dated as of July 31, 2000, Second Amendment to Amended and Restated 1999 180 Day Credit Agreement and Limited Waiver dated as of September 29, 2000 and Third Amendment to Amended and Restated 1999 180 Day Credit Agreement dated as of October 13, 2000; (c) that certain Amended and Restated 1997 364 Day Credit Agreement dated as of January 31, 2000, as amended by First Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver dated as of July 31, 2000, Second Amendment to Amended and Restated 1997 364 Day Credit Agreement and Limited Waiver dated as of September 29, 2000 and Third Amendment to Amended and Restated 1997 364 Day Credit Agreement dated as of October 13, 2000; and (d) that certain 1997 Second Amended and Restated Credit Agreement dated as of January 31, 2000, as amended by First Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver dated as of July 31, 2000, Second Amendment to 1997 Second Amended and Restated Credit Agreement and Limited Waiver dated as of September 29, 2000 and Third Amendment to 1997 Second Amended and Restated Credit Agreement dated as of October 13, 2000 (collectively, the "EXISTING CREDIT AGREEMENTS"). (ii) The Borrower and the Initial Lenders wish to refinance all obligations of the Borrower under the Existing Credit Agreements. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01 Certain Defined Terms. As used in this Agreement, the ----------------------- following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined): "ADMINISTRATIVE AGENT" has the meaning specified in the recital of parties to this Agreement. "ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the Administrative Agent maintained by the Administrative Agent with Bank of America at its office at 1850 Gateway Boulevard, 5th Floor, CA4-706-05-09, Concord, California 94520, ABA No. 111-000-012, Account No. 3750836479, Reference: Levi Strauss, Attention: Agency Services West, or such other account maintained by the Administrative Agent and designated by the Administrative Agent as such in a written notice to the Borrower and each of the Lender Parties. "ADVANCE" means a Tranche A Term Advance, a Tranche B Term Advance, a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance, as the context may require. "AFFILIATE" means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise. "AGENTS" means, collectively, the Administrative Agent, the Co-Lead Arrangers, the Syndication Agent, the Documentation Agent and each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 7.01(b). "AGGREGATE UNUSED REVOLVING CREDIT COMMITMENTS" means, at any time, (a) the aggregate Revolving Credit Commitments at such time MINUS (b) the sum, without duplication, of (i) the aggregate principal amount of all Revolving Credit Advances and Letter of Credit Advances (in respect of Domestic Letters of Credit) outstanding at such time, (ii) the aggregate Available Amount of all Domestic Letters of Credit outstanding at such time, (iii) the aggregate principal amount of all Swing Line Advances outstanding at such time, and (iv) the Foreign Letter of Credit Sublimit. For purposes of this definition, any amount described in the preceding sentence which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. "AGREEMENT VALUE" means, with respect to each Hedge Agreement on any date of determination, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreement, an amount equal to the termination value, expressed in Dollars, as determined by the Borrower; PROVIDED, HOWEVER, that in the event that two Lenders determine that the mark-to-market value, expressed in Dollars, for any Hedge Agreement, as 2 determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedge Agreement, is greater than the termination value for such Hedge Agreement determined by the Borrower, the Agreement Value of such Hedge Agreement shall be the amount determined by such Lenders; PROVIDED FURTHER that any such determination shall have no evidentiary value for purposes of determining the amount owed to the applicable Hedge Bank. "APPLICABLE LENDING OFFICE" means (a) with respect to each Issuing Bank and the Swing Line Bank, such Issuing Bank's or the Swing Line Bank's Base Rate Lending Office for all purposes of this Agreement and (b) with respect to each other Lender Party, such Lender Party's Base Rate Lending Office in the case of a Base Rate Advance and such Lender Party's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "APPLICABLE MARGIN" means (a) at any time during the period from the date of this Agreement through July 31, 2001, a rate equal to 2.25% per annum for Base Rate Advances and 3.50% per annum for Eurodollar Rate Advances and (b) at any time and from time to time thereafter, a rate per annum equal to the percentage set forth below opposite the applicable Performance Level listed below at such time:
======================= ========================================== ======================== ======================== PERFORMANCE LEVERAGE EURODOLLAR RATE LEVEL RATIO BASE RATE ADVANCES ADVANCES - ----------------------- ------------------------------------------ ------------------------ ------------------------ I less than 2.75:1.00 1.25% 2.50% - ----------------------- ------------------------------------------ ------------------------ ------------------------ II greater than or equal to 2.75:1.00 but 1.50% 2.75% less than 3.00:1.00 - ----------------------- ------------------------------------------ ------------------------ ------------------------ III greater than or equal to 3.00:1.00 but 1.75% 3.00% less than 3.25:1.00 - ----------------------- ------------------------------------------ ------------------------ ------------------------ IV greater than or equal to 3.25:1.00 but 2.00% 3.25% less than 3.50:1.00 - ----------------------- ------------------------------------------ ------------------------ ------------------------ V greater than or equal to 3.50:1.00 2.25% 3.50% ======================= ========================================== ======================== ========================
For purposes of clause (b) of the immediately preceding sentence, at any date of determination, the Applicable Margin for each Base Rate Advance and each Eurodollar Rate Advance shall be determined by reference to the Leverage Ratio for the most recently completed Measurement Period. The first Measurement Period shall be the four consecutive Fiscal Quarters ending May 27, 2001. For purposes of determining the applicable Performance Level at any date of determination, no change in the Performance Level shall be effective until three Business Days after the date on which the Administrative Agent receives the Required Financial Information reflecting such change; PROVIDED, HOWEVER, that if the Borrower has not submitted to the Administrative Agent all of the Required Financial Information within three Business Days after the date on which such information is otherwise required under Section 5.03(b) or 5.03(c), as the case may be, the Performance Level shall be deemed to be at Performance Level V for so long as such information has not been submitted. "APPROPRIATE LENDER" means, at any time, (a) with respect to the Tranche A Term Facility, the Tranche B Term Facility or the Revolving Credit Facility, a Lender that has a 3 Commitment with respect to such Facility at such time, (b) with respect to any Letter of Credit, (i) any Issuing Bank and (ii) if the Revolving Credit Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such Revolving Credit Lender, and (c) with respect to Swing Line Advances, the Swing Line Bank. "APPROVED FUND" means, with respect to any Lender that is a fund that invests in bank loans or other commercial loans, any other fund that also invests in such loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent and, if applicable, the Borrower, in accordance with Section 8.07 and in substantially the form of Exhibit C hereto. "AVAILABLE AMOUNT" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "BANK OF AMERICA" has the meaning specified in the recital of parties to this Agreement. "BAS" has the meaning specified in the recital of parties to this Agreement. "BASE RATE" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate PLUS 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such rate is a rate set by Bank of America based upon various factors including Bank of America'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 Base Rate resulting from a change in the prime rate established by Bank of America shall become effective on the Business Day on which such change in the prime rate is announced by Bank of America. "BASE RATE ADVANCE" means an Advance that bears interest as provided in Sections 2.07(a)(i)(A) and 2.07(a)(ii)(A). "BASE RATE LENDING OFFICE" means, with respect to each of the Lender Parties, the office of such Lender Party specified as its "Base Rate Lending Office" opposite its name on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent for such purpose. "BORROWER" has the meaning specified in the recital of parties to this Agreement. "BORROWER'S ACCOUNT" means the account of the Borrower maintained by the Borrower with Bank of America at its office at 1850 Gateway Boulevard, 5th Floor, CA4-706-05-09, Concord, California 94520, ABA No. 111-000-012, Account No. 12335-02255, Reference: Levi Strauss & Co. Secured Credit Facility, Attention: Treasurer or such other account of such 4 Borrower as is agreed from time to time in writing between the Borrower and the Administrative Agent. "BORROWING" means a Tranche A Term Borrowing, a Tranche B Term Borrowing, a Revolving Credit Borrowing, a Swing Line Borrowing or an L/C Borrowing, as the context may require. "BUSINESS DAY" means a day of the year on which banks are not required or authorized by law to close in New York, New York or San Francisco, California and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in Dollar deposits in the London interbank market. "CAPITAL ASSETS" means, with respect to any Person, all equipment, fixed assets and real property or improvements of such Person, or replacements or substitutions therefor or additions thereto, that, in accordance with GAAP, have been or should be reflected as additions to property, plant or equipment on the balance sheet of such Person or that have a useful life of more than one year. "CAPITAL EXPENDITURES" means, with respect to any Person for any period, (a) all expenditures made directly or indirectly by such Person during such period for Capital Assets (whether paid in cash or other consideration or accrued as a liability and including, without limitation, all expenditures for maintenance and repairs which are required, in accordance with GAAP, to be capitalized on the books of such Person) and (b) solely to the extent not otherwise included in clause (a) of this definition, the aggregate principal amount of all Debt (including, without limitation, Obligations in respect of Capitalized Leases) assumed or incurred during such period in connection with any such expenditures for Capital Assets. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount by which such purchase price exceeds the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be. "CAPITAL MARKETS TRANSACTION" means an issuance or sale of Debt by the Borrower through a public or private placement (other than Debt expressly permitted to be incurred or issued pursuant to Section 5.02(b) (other than Section 5.02(b)(i)(C)). "CAPITALIZED LEASE" means any lease with respect to which the lessee is required to recognize concurrently the acquisition of property or an asset and the incurrence of a liability in accordance with GAAP. "CASH COLLATERAL ACCOUNT" has the meaning specified in Section 11 of the Pledge and Security Agreement. "CASH DISTRIBUTIONS" means, with respect to any Person for any period, all dividends and other distributions on any of the outstanding Equity Interests in such Person, all purchases, redemptions, retirements, defeasances or other acquisitions of any of the outstanding Equity Interests in such Person and all returns of capital to the stockholders, partners or members (or the 5 equivalent Persons) of such Person, in each case to the extent paid in cash by or on behalf of such Person during such period. "CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency; (iii) commercial paper maturing no more than 270 days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) time deposits, certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States, any state thereof or an OECD country having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the Borrower) or by a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (v) repurchase agreements with financial institutions organized under the laws of the United States, any state thereof or an OECD country having, at such date, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency (except as otherwise approved by the Treasurer of the Borrower) or with a primary government securities dealer reporting to the Market Reports Division of the Federal Reserve Bank of New York; (vi) Dollar denominated floating rate notes, foreign currency denominated floating rate notes and foreign indexed notes, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A or A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (vii) auction rate notes maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A or A-1 from S&P or the equivalent thereof from another nationally recognized rating agency; (viii) money market preferred funds maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least AA from S&P or the equivalent thereof from another nationally recognized rating agency; and (ix) money market funds maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A- from S&P or the equivalent thereof from another nationally recognized rating agency; provided such investments are limited to $25,000,000 for each such fund and $100,000,000 in the aggregate for all such funds, such funds are open-end funds with total assets of more than $1,000,000,000 and an expressed goal of maintaining a net asset value of $1.00 per share and such funds limit their investments to the prime credit instruments allowed in this definition with average weighted maturity of less than 90 days. "CLOSING DATE" means the first date on which all of the conditions precedent to the Initial Extension of Credit set forth in Article III are satisfied, which date shall occur on or prior to February 1, 2001. "CO-LEAD ARRANGERS" has the meaning specified in the recital of parties to this Agreement. 6 "COLLATERAL" means all of the "COLLATERAL" referred to in the Collateral Documents and all of the other property and assets that are or are intended under the terms of the Collateral Documents to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties. "COLLATERAL DOCUMENTS" means, collectively, the Pledge and Security Agreement, the Foreign Pledge Agreements, the Mortgages, each of the mortgages, collateral assignments, security agreements, pledge agreements or other similar agreements delivered to the Administrative Agent and the Lender Parties pursuant to Sections 5.01(i) and 5.01(l), and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties. "COMMITMENT" means a Tranche A Term Commitment, a Tranche B Term Commitment or a Revolving Credit Commitment, as the context may require. "COMMITMENT FEE" has the meaning specified in Section 2.08(a). "CONFIDENTIAL INFORMATION" means information that is furnished to the Administrative Agent or any Lender Party by or on behalf of the Borrower in a writing that either is conspicuously marked as confidential or that a reasonable Person would believe is confidential or proprietary in nature, but does not include any such information that (a) is or becomes generally available to the public or (b) is or becomes available to the Administrative Agent or any such Lender Party from a source other than the Borrower that is not, to the Administrative Agent's or such Lender Party's knowledge, acting in violation of a confidentiality agreement with the Borrower; PROVIDED, HOWEVER, that neither the Administrative Agent nor any Lender Party shall have any obligation to inquire or determine whether such a confidentiality agreement exists. "CONSOLIDATED" refers to the consolidation of accounts in accordance with GAAP. "CONSOLIDATED EBITDA" means, for any period, (a) Consolidated Net Income for such period PLUS (b) the sum of each of the following expenses that have been deducted in the determination of the Consolidated Net Income for such period: (i) Consolidated Interest Expense for such period, (ii) all income tax expense (whether federal, state, local, foreign or otherwise) of the Borrower and its Subsidiaries for such period, (iii) all depreciation expense of the Borrower and its Subsidiaries for such period, (iv) all amortization expense of the Borrower and its Subsidiaries for such period, and (v) all nonoperating expense of the Borrower and its Subsidiaries for such period MINUS all nonoperating income of the Borrower and its Subsidiaries for such period. "CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if positive) equal to Consolidated EBITDA for such period MINUS the sum, without duplication, of the amounts for such period of (a) voluntary and scheduled repayments of Debt (excluding repayments of Revolving Credit Advances except to the extent Revolving Credit Commitments are permanently reduced in connection with such prepayments) by the Borrower and its Subsidiaries, (b) Capital Expenditures (net of any proceeds of any related financings with respect to such expenditures) made by the Borrower and its Subsidiaries, (c) Consolidated Interest Expense and (d) all income 7 tax expense (whether federal, state, local, foreign or otherwise) of the Borrower and its Subsidiaries. "CONSOLIDATED INTEREST EXPENSE" means, for any period, for the Borrower and its Subsidiaries on a Consolidated basis, all interest (net of all interest income), premium payments, fees, charges and related expenses payable by the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP. "CONSOLIDATED NET INCOME" means, for any period, for the Borrower and its Subsidiaries on a Consolidated basis, the net income (or loss) of the Borrower and its Subsidiaries determined in accordance with GAAP for that period. "CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Borrower but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower), and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Borrower and computed in accordance with generally accepted accounting principles. "CONSTITUTIVE DOCUMENTS" means, with respect to any Person, the certificate of incorporation or registration (including, if applicable, certificate of change of name), articles of incorporation or association, memorandum of association, charter, bylaws, certificate of limited partnership, partnership agreement, trust agreement, joint venture agreement, certificate of formation, articles of organization, limited liability company operating or members agreement, joint venture agreement or one or more similar agreements, instruments or documents constituting the organization or formation of such Person. "CONTINGENT OBLIGATION" means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain revolving credit or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the 8 primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith. "CONTINUATION", "CONTINUE", "CONTINUED" and "CONTINUING" each refer to a continuation of a Eurodollar Rate Advance as a Eurodollar Rate Advance pursuant to Section 2.09. "CONVERSION", "CONVERT", "CONVERTED" and "CONVERTING" each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.09 or 2.10. "DEBT" means, with respect to any Person (without duplication for purposes of calculating financial ratios and compliance with Section 5.02(b)) (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, or upon which interest payments are customarily made, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference PLUS accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (i) all Obligations of such Person under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing classified as an operating lease in accordance with GAAP, if such Obligations would give rise to a claim against such Person in a proceeding referred to in Section 6.01(f), (j) all Contingent Obligations, and (k) all indebtedness and other payment Obligations referred to in clauses (a) through (j) above of another Person secured by (or for which the holder of such indebtedness or other payment Obligations has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations. "DEFAULT" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "DEFAULTED ADVANCE" means, with respect to any Lender Party at any time, the portion of any Advance required to be made by such Lender Party to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time that has not been made by such Lender Party or by the Administrative Agent for the account of such Lender Party pursuant to Section 2.02(e) as of such 9 time. In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.16(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Advance so deemed made in part. "DEFAULTED AMOUNT" means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to the Administrative Agent or any other Lender Party hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion of a Swing Line Advance made by the Swing Line Bank, (b) any Issuing Bank pursuant to Section 2.03(c) to purchase a portion of an L/C Borrowing, (c) the Administrative Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for the amount of any Advance made by the Administrative Agent for the account of such Lender Party, (d) any other Lender Party pursuant to Section 2.14 to purchase any participation in Advances owing to such other Lender Party and (e) the Administrative Agent or any Issuing Bank pursuant to Section 7.05 to reimburse the Administrative Agent or such Issuing Bank for such Lender Party's ratable share of any amount required to be paid by the Lender Parties to the Administrative Agent or such Issuing Bank as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.16(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part. "DEFAULTING LENDER" means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(f). "DISCLOSED LITIGATION" has the meaning specified in Section 3.01(d). "DISQUALIFIED STOCK" has the meaning set forth in that certain U.S. Dollar Indenture dated as of January 18, 2001 between the Borrower and Citibank, N.A., as trustee, and that certain Euro Indenture dated as of January 18, 2001 between the Borrower and Citibank, N.A., as trustee. "DOCUMENTATION AGENT" has the meaning specified in the recital of parties to this Agreement. "DOLLARS" and "$" each mean lawful money of the United States. "DOMESTIC LETTERS OF CREDIT" has the meaning specified in Section 2.01(e). "DOMESTIC RECEIVABLES" means all obligations of any obligor (whether now existing or hereafter arising) under a contract for sale of goods or services by Domestic Subsidiaries, which includes any obligation of such obligor (whether now existing or hereafter arising) to pay interest, finance charges or amounts with respect thereto, and, with respect to any of the foregoing receivables or obligations, (a) all of the interest of the Borrower or its Domestic Subsidiaries in the goods (including returned goods) the sale of which gave rise to such receivable or obligation after the passage of title thereto to any obligor, (b) all other Liens and 10 property subject thereto from time to time purporting to secure payment of such receivables or obligations, (c) all guaranties, insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such receivables or obligations, (d) all books and records relating to the foregoing, lockbox accounts containing primarily proceeds of the foregoing, and other similar related assets customarily transferred (or in which security interests are customarily granted) to purchasers in receivables purchase transactions that are treated as sales under GAAP, (e) all rights of the Borrower or its Domestic Subsidiaries to refunds on account of value added tax in respect of goods sold to an obligor, any receivable from whom is or becomes a defaulted receivable, and (f) proceeds of or judgments relating to any of the foregoing, any debts represented thereby and all rights of action against any Person in connection therewith. "DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower that is incorporated or organized in the United States, any state thereof or the District of Columbia. "ELIGIBLE ASSIGNEE" means (a) with respect to the Revolving Credit Facility, (i) a Revolving Credit Lender; (ii) a Lender (other than a Revolving Credit Lender) or an Affiliate or an Approved Fund of a Lender approved by the Issuing Banks and the Swing Line Bank; or (iii) any other Person approved by (A) the Administrative Agent, (B) the Issuing Banks and the Swing Line Bank and (C) so long as no Event of Default has occurred and is continuing at the time the related assignment is effected pursuant to Section 8.07, the Borrower (in any case, such approval not to be unreasonably withheld or delayed and, in the case of the Borrower, such approval to be deemed to have been given if no objection thereto is received by the Administrative Agent and the assigning Lender within five Business Days after the date on which notice of the proposed assignment is provided to the Borrower); (b) with respect to the Tranche A Term Facility, (i) a Lender; (ii) an Affiliate or an Approved Fund of a Lender; or (iii) any other Person approved by (A) the Administrative Agent and (B) so long as no Event of Default has occurred and is continuing at the time the related assignment is effected pursuant to Section 8.07, the Borrower (in either case, such approval not to be unreasonably withheld or delayed and, in the case of the Borrower, such approval to be deemed to have been given if no objection thereto is received by the Administrative Agent and the assigning Lender within five Business Days after the date on which notice of the proposed assignment is provided to the Borrower); and (c) with respect to the Tranche B Term Facility (i) a Lender; (ii) an Affiliate or an Approved Fund of a Lender; or (iii) any other Person approved by the Administrative Agent; PROVIDED, HOWEVER, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition. "ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter, claim, notice of noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement under any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Governmental Authority or any other Person for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. 11 "ENVIRONMENTAL LAW" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "ENVIRONMENTAL PERMIT" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "EQUIPMENT FINANCING TRANSACTION" means any financing with any Person of equipment which will be treated as Debt. "EQUITY INTERESTS" means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code). "ERISA EVENT" means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of paragraph (1) of Section 4043(b) of ERISA (without regard to paragraph (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA occurs with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the partial or complete withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA which would reasonably be expected to result in liability to the Borrower or any of its Subsidiaries of more than $10,000,000; (f) the imposition of a Lien under Section 302(f) of ERISA with respect to any Plan; (g) the adoption of 12 an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA, which would reasonably be expected to constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each of the Lenders, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender, as the case may be (or, if no such office is specified, its Base Rate Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent for such purpose. "EURODOLLAR RATE" means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, or (b) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, or (c) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period. 13 "EURODOLLAR RATE ADVANCE" means an Advance that bears interest as provided in Sections 2.07(a)(i)(B) and 2.07(a)(ii)(B). "EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EVERGREEN LETTER OF CREDIT" has the meaning specified in Section 2.01(e)(ii). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. "EXCHANGE RATE" means, on any date when an amount expressed in a currency other than Dollars is to be determined with respect to any Letter of Credit, the nominal rate of exchange of the applicable Issuing Bank in the New York foreign exchange market for the purchase by such Issuing Bank (by cable transfer) of such currency in exchange for Dollars at 12:00 noon (New York time) two Business Days prior to such date, expressed as a number of units of such currency per one Dollar. "EXISTING CREDIT AGREEMENTS" has the meaning specified in the Preliminary Statements to this Agreement. "EXISTING LETTERS OF CREDIT" means those letters of credit listed on Schedule 1.01(b) hereto. "FACILITY" means the Tranche A Term Facility, the Tranche B Term Facility or the Revolving Credit Facility, as the context may require. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward 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 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 Bank of America on such day on such transactions as determined by the Administrative Agent. 14 "FINSERV" means Levi Strauss & Co. Financial Services, S.A., a Belgium corporation, and any successors. "FISCAL QUARTER" means, with respect to the Borrower or any of its Subsidiaries, the period commencing on the Monday immediately following the fourth Sunday in November in any Fiscal Year and ending on the fourth Sunday of the next succeeding February, the period commencing on the Monday immediately following the fourth Sunday in February in any Fiscal Year and ending on the fourth Sunday of the next succeeding May, the period commencing on the Monday immediately following the fourth Sunday in May in any Fiscal Year and ending on the fourth Sunday of the next succeeding August or the period commencing on the Monday immediately following the fourth Sunday in August in any Fiscal Year and ending on the fourth Sunday of the next succeeding November, as the context may require, or, if any such Subsidiary was not in existence on the first day of any such period, the period commencing on the date on which such Subsidiary is incorporated, organized, formed or otherwise created and ending on the last day of such period. "FISCAL YEAR" means, with respect to the Borrower or any of its Subsidiaries, the period commencing on the Monday immediately following the fourth Sunday in November in any calendar year and ending on the fourth Sunday of the next succeeding November or, if any such Subsidiary was not in existence on such day in November in any calendar year, the period commencing on the date on which such Subsidiary is incorporated, organized, formed or otherwise created and ending on the fourth Sunday of the next succeeding November. "FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of (a) (i) Consolidated EBITDA for such period, LESS (ii) the sum of (A) the aggregate amount of all Capital Expenditures made by the Borrower and its Subsidiaries during such period PLUS (B) all income tax expense (whether federal, state, local, foreign or otherwise) of the Borrower and its Subsidiaries for such period to (b) the sum of (i) Consolidated Interest Expense for such period, (ii) the aggregate principal amount (or the equivalent thereto) of all Required Principal Payments of the Borrower and its Subsidiaries for such period and (iii) the aggregate amount of all Cash Distributions made by or on behalf of the Borrower during such period. "FOREIGN AFFILIATE ISSUING BANK" means (a) an Affiliate of an Issuing Bank organized under the laws of a country other than the United States or (b) a branch of an Issuing Bank doing business in a country other than the United States. "FOREIGN GOVERNMENT SCHEME OR ARRANGEMENT" has the meaning specified in Section 4.01(o). "FOREIGN LETTERS OF CREDIT" has the meaning specified in Section 2.01(e). "FOREIGN LETTER OF CREDIT SUBLIMIT" means, at any time, an amount designated by the Borrower on the most recent Foreign Letter of Credit Sublimit Notice. As of the Closing Date, the Foreign Letter of Credit Sublimit is $43,000,000. "FOREIGN LETTER OF CREDIT SUBLIMIT NOTICE" has the meaning specified in Section 2.01(e)(i). 15 "FOREIGN PLAN" has the meaning specified in Section 4.01(o). "FOREIGN PLEDGE AGREEMENT" means each pledge agreement or similar instrument governed by the laws of a country other than the United States, executed and delivered by the Borrower or any Material Domestic Subsidiary that owns Equity Interests of one or more Pledged Foreign Subsidiaries organized in such country, in form and substance satisfactory to Administrative Agent. "FOREIGN RECEIVABLES" means all obligations of any obligor (whether now existing or hereafter arising) under a contract for sale of goods or services by Foreign Subsidiaries, which includes any obligation of such obligor (whether now existing or hereafter arising) to pay interest, finance charges or amounts with respect thereto, and, with respect to any of the foregoing receivables or obligations, (a) all of the interest of Foreign Subsidiaries in the goods (including returned goods) the sale of which gave rise to such receivable or obligation after the passage of title thereto to any obligor, (b) all other Liens and property subject thereto from time to time purporting to secure payment of such receivables or obligations, (c) all guaranties, insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such receivables or obligations, (d) all books and records relating to the foregoing, lockbox accounts containing primarily proceeds of the foregoing, and other similar related assets customarily transferred (or in which security interests are customarily granted) to purchasers in receivables purchase transactions that are treated as sales under GAAP, (e) all rights of Foreign Subsidiaries to refunds on account of value added tax in respect of goods sold to an obligor, any receivable from whom is or becomes a defaulted receivable, and (f) proceeds of or judgments relating to any of the foregoing, any debts represented thereby and all rights of action against any Person in connection therewith. "FOREIGN SUBSIDIARY" means any Subsidiary of the Borrower, other than a Domestic Subsidiary. "FUNDED CURRENT LIABILITY PERCENTAGE" means "funded current liability percentage" within the meaning of Section 412(1)(8)(B) of the Internal Revenue Code. "FUNDED DEBT" of any Person means, at any date of determination, all Debt of such Person that would (or would be required to) appear as liabilities on a Consolidated balance sheet of such Person. "GAAP" has the meaning specified in Section 1.03. "GOVERNMENTAL AUTHORITY" means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board or similar body, whether federal, state, provincial, territorial, local or foreign. "GOVERNMENTAL AUTHORIZATION" means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority. 16 "GRANTING LENDER" has the meaning specified in Section 8.07(j). "GUARANTEED OBLIGATIONS" has the meaning specified in Section 1 of the Subsidiary Guaranty, as the context may require. "HAZARDOUS MATERIALS" means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "HEDGE AGREEMENTS" means (a) any and all interest rate swaps, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swaps, cross-currency rate swaps, currency options, spot contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., the International Foreign Exchange Master Agreement, or any other master agreement, including any such obligations or liabilities under any such agreement. "HEDGE BANK" means Bank of America, Citibank, N.A., The Bank of Nova Scotia, Morgan Guaranty Trust Company of New York, Bank One, NA, Fleet Bank, N.A. or any of their respective Affiliates, in its capacity as a party to a Hedge Agreement. "HEDGE BANK HEDGE AGREEMENT" means any Ordinary Course Hedge Agreement that is entered into by and between the Borrower or FinServ and any Hedge Bank that is subject to a legally enforceable netting agreement between the Borrower or FinServ, as the case may be, and such Hedge Bank. "HONOR DATE" has the meaning specified in Section 2.03(c). "INDEMNIFIED COSTS" has the meaning specified in Section 7.05(a). "INDEMNIFIED PARTY" has the meaning specified in Section 8.04(b). "INDENTURES" means that certain Indenture dated as of November 6, 1996 between the Borrower and Citibank, N.A., as trustee, and that certain Fiscal Agency Agreement dated as of November 22, 1996 between Company and Citibank, N.A., as fiscal agent. "INELIGIBLE SECURITIES" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as amended. 17 "INFORMATION MEMORANDUM" means the information memorandum dated December 2000 used by the Co-Lead Arrangers in connection with the syndication of the Commitments. "INITIAL EXTENSION OF CREDIT" means, collectively, the initial Borrowings under one or more of the Facilities, and/or the initial issuances of one or more Letters of Credit, made on the Closing Date. "INITIAL ISSUING BANKS" has the meaning specified in the recital of parties to this Agreement. "INITIAL LENDERS" has the meaning specified in the recital of parties to this Agreement. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INSURANCE RECEIPT" means any cash received by or paid to or for the account of any Person as proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings) and condemnation awards (and payments in lieu thereof); PROVIDED, HOWEVER, that so long as no Event of Default shall have occurred and be continuing, an Insurance Receipt shall not include cash receipts received from proceeds of insurance or condemnation awards (or payments in lieu thereof) to the extent that such proceeds or awards (a) in respect of loss or damage to equipment, fixed assets or real property are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets or real property in respect of which such proceeds were received in accordance with the terms of the Loan Documents, or (b) are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto. "INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of the Borrower and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of the Borrower and its Subsidiaries, taken as a whole. "INTEREST COVERAGE RATIO" means, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 9:00 A.M. (San Francisco, California time) on the third Business Day prior to the first day of such Interest Period, select; PROVIDED, HOWEVER, that: 18 (a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance under a Facility that ends after any principal repayment installment date for such Facility unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances and of Eurodollar Rate Advances having Interest Periods that end on or prior to such principal repayment installment date for such Facility shall be at least equal to the aggregate principal amount of Advances under such Facility due and payable on or prior to such date; (b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; PROVIDED, HOWEVER, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; (c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and (d) no Interest Period shall extend beyond the Termination Date. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. "INVESTMENT" means, with respect to any Person, any loan or advance to such Person, any purchase or other acquisition of Equity Interests in or Debt of, or the property and assets comprising a division or business unit or all or a substantial part of the business of, such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation (or similar transaction) and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (j) or (k) of the definition of "DEBT" set forth in this Section 1.01 in respect of such Person. The amount of any Investment shall be the original cost of such Investment PLUS the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write downs or write-offs with respect to such Investment (other than adjustments for the repayment of, or the refund of capital with respect to, the original principal amount of any such Investment). "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Internal Revenue Code. "ISSUING BANK FOREIGN LETTER OF CREDIT SUBLIMIT" means, at any date of determination and for each Issuing Bank, the amount designated by the Borrower on the most recent Foreign Letter of Credit Sublimit Notice for such Issuing Bank. As of the Closing Date, the Issuing Bank Foreign Letter of Credit Sublimits are as follows: -------------------------------- ------------------ Bank of America $20,000,000 -------------------------------- ------------------ 19 -------------------------------- ------------------ Citibank $19,000,000 -------------------------------- ------------------ -------------------------------- ------------------ ABN AMRO $4,000,000 -------------------------------- ------------------ "ISSUING BANKS" means, collectively, the Initial Issuing Banks, the Foreign Affiliate Issuing Banks and any other commercial bank organized under the laws of the United States and designated by the Borrower to the Administrative Agent from time to time. "L/C BORROWING" means a borrowing resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing. "L/C CASH COLLATERAL ACCOUNT" has the meaning specified in Section 11 of the Pledge and Security Agreement. "L/C RELATED DOCUMENTS" has the meaning specified in Section 2.03(c)(v). "LENDER PARTY" means any Lender, any Issuing Bank or the Swing Line Bank. "LENDERS" means, collectively, the Initial Lenders and each Person that becomes a Lender pursuant to Section 8.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement. "LETTERS OF CREDIT" has the meaning specified in Section 2.01(e). "LETTER OF CREDIT ADVANCE" means, with respect to each Revolving Credit Lender, such Revolving Credit Lender's participation in any L/C Borrowing in accordance with its Pro Rata Share. "LETTER OF CREDIT AGREEMENT" has the meaning specified in Section 2.03(a). "LETTER OF CREDIT SUBLIMIT" means, at any time, an amount equal to $250,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.05. "LEVERAGE RATIO" means, at any date of determination, the ratio of (a) all Funded Debt of the Borrower and its Subsidiaries on such date to (b) Consolidated EBITDA for the most recently completed Measurement Period prior to such date for which the Required Financial Information has been delivered under Section 5.03(b) or (c), as the case may be. "LIEN" means, with respect to any Person, (a) any mortgage, lien (statutory or other), pledge, hypothecation, security interest, charge or other preferential arrangement or encumbrance of any kind (including, without limitation, any agreement to give any of the foregoing), (b) any sale of accounts receivable or chattel paper, or any assignment, deposit arrangement or lease intended as, or having the effect of, security, (c) any easement, right of way or other encumbrance on title to real property or (d) any other interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title 20 retention agreement or any Capitalized Lease or upon or with respect to any property or asset of such Person (including, in the case of Equity Interests (other than Equity Interests in the Borrower), voting trust agreements and other similar arrangements). "LOAN DOCUMENTS" means, collectively, (a) for purposes of this Agreement and the Notes and any amendment, supplement or other modification hereof or thereof and for all other purposes other than for purposes of the Subsidiary Guaranty and the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the Subsidiary Guaranty, (iv) the Collateral Documents and (v) each Letter of Credit Agreement and (b) for purposes of the Subsidiary Guaranty and the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the Subsidiary Guaranty, (iv) the Collateral Documents, (v) each Letter of Credit Agreement and (vi) each Hedge Bank Hedge Agreement, in each case as amended, supplemented or otherwise modified hereafter from time to time in accordance with the terms thereof and Section 8.01. "LOAN PARTIES" means, collectively, the Borrower and each of the Material Domestic Subsidiaries of the Borrower party to the Subsidiary Guaranty or any of the Collateral Documents. "LOS/DOS BUSINESS" means the ownership and operation by the Borrower or a Subsidiary of the Borrower, whether directly or through joint ventures with third parties in partnership, corporate or other form, of businesses engaged solely in selling apparel and accessories and related products including, without limitation, selling through retail stores, outlet stores, telephone sales, catalog or other mail orders, and electronic sales. LOS/DOS Business shall not include any business engaging in manufacturing or in selling and in manufacturing. "LSFCC" means Levi Strauss Financial Center Corporation, a California corporation, formerly Levi Strauss Credit Corp., a California corporation, and any successors. "LSFLLC" means Levi Strauss Funding, LLC, a Delaware limited liability company, and any successors. "MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MATERIAL ADVERSE CHANGE" means any material adverse change in the business, assets, liabilities (actual or contingent), operations, performance, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, assets, liabilities (actual or contingent), operations, performance, properties, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party. "MATERIAL DOMESTIC SUBSIDIARY" means any Domestic Subsidiary that is a Material Subsidiary. 21 "MATERIAL FOREIGN SUBSIDIARY" means any Foreign Subsidiary that is a Material Subsidiary. "MATERIAL SUBSIDIARY" means (a) any Subsidiary of the Borrower, (i) the net book value of which is $5,000,000 or more or (ii) the annual gross revenue of which is $15,000,000 or more and (b) any other Subsidiary of the Borrower designated by the Borrower to be a "MATERIAL SUBSIDIARY" for purposes of this Agreement. "MEASUREMENT PERIOD" means, at any date of determination, the most recently completed four consecutive Fiscal Quarters of the Borrower on or immediately prior to such date. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGES" has the meaning specified in Section 3.01(a)(iii). "MORTGAGE POLICIES" has the meaning specified in Section 3.01(a)(iii). "MULTIEMPLOYER PLAN" means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" means a single employer plan (as defined in Section 4001(a)(15) of ERISA) that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could reasonably be expected to have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NET CASH PROCEEDS" means, with respect to any sale, lease, transfer or other disposition of any property or asset, or the incurrence or issuance of any Debt, or the sale or issuance of any Equity Interests (including any capital contribution) in any Person, or any Insurance Receipt received by or paid to or for the account of any Person, as the case may be, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person for its own account in connection with any such transaction, after deducting therefrom only (without duplication): (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions; (b) the amount of taxes payable in connection with or as a result of such transaction; and (c) in the case of any sale, lease, transfer or other disposition of any property or asset, the outstanding principal amount of, the premium or penalty, if any, on, and any accrued and unpaid interest on, any Debt (other than the Debt outstanding under the Loan Documents) that is secured by a Lien on the property and assets subject to such sale, 22 lease, transfer or other disposition and is required to be repaid under the terms thereof as a result of such sale, lease, transfer or other disposition. in each case to the extent, but only to the extent, that the amounts so deducted are properly attributable to such transaction or to the property or asset that is the subject thereof and (i) in the case of clauses (a) and (c) of this definition, are actually paid at the time of receipt of such cash to a Person that is not an Affiliate of such Person or any Loan Party or of any Affiliate of any Loan Party and (ii) in the case of clause (b) of this definition, are actually paid at the time of receipt of such cash to a Person that is not an Affiliate of such Person or any Loan Party or of any Affiliate of any Loan Party or, so long as such Person is not otherwise indemnified therefor, are reserved for in accordance with GAAP at the time of receipt of such cash based upon such Person's reasonable estimate of such taxes; PROVIDED, HOWEVER, that if, at the time such taxes are actually paid or otherwise satisfied, the amount of the reserve therefor exceeds the amount paid or otherwise satisfied, then the Borrower shall reduce the Commitments in accordance with the terms of Section 2.06(b), and shall prepay the outstanding Advances in accordance with the terms of Section 2.06(b), in an amount equal to the amount of such excess reserve. "NON-BANK NON-US LENDER PARTY" has the meaning specified in Section 2.13(e). "NON-US LENDER PARTY" has the meaning specified in Section 2.13(e). "NONRENEWAL NOTICE DATE" has the meaning specified in Section 2.01(e). "NOTE" means a Tranche A Term Note, a Tranche B Term Note or a Revolving Credit Note, as the context may require. "NOTICE OF BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF DEFAULT" has the meaning specified in Section 7.03. "NOTICE OF CONVERSION/CONTINUATION" has the meaning specified in Section 2.09(a). "NOTICE OF ISSUANCE" has the meaning specified in Section 2.03(a). "OBLIGATION" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "OECD" means the Organization for Economic Cooperation and Development. 23 "OFFICER" means, with respect to the Borrower or any of its Subsidiaries, a Responsible Officer or any other officer, partner or member (or Person performing similar functions) of the Borrower or any such Subsidiary responsible for overseeing the administration of, or reviewing compliance with, all or any portion of this Agreement or any of the other Loan Documents. "OPERATING LEASE" means any lease (including leases that may be terminated by the lessee at any time) of any property that is not a Capitalized Lease. "ORDINARY COURSE HEDGE AGREEMENTS" means any and all interest rate swaps, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swaps, cross-currency rate swaps, currency options, spot contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, in each case that are (or were) entered into by any Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person and not for purposes of speculation or taking a "market view" and that do not contain any provision ("walk-away" provision) exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party. "ORIGINAL CURRENCY" has the meaning specified in Section 8.15. "OTHER CURRENCY" has the meaning specified in Section 8.15. "OTHER TAXES" has the meaning specified in Section 2.13(b). "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PERMITTED DOMESTIC RECEIVABLES TRANSACTION" means any arrangement of the Borrower or its Domestic Subsidiaries providing for sales, transfers or conveyances of, or granting of security interests in, Domestic Receivables that do not provide, directly or indirectly, for recourse against the seller of such Domestic Receivables (or against any of such seller's Affiliates) by way of a guaranty or any other support arrangement, with respect to the amount of such Domestic Receivables (based on the financial condition or circumstances of the obligor thereunder), other than such limited recourse as is reasonable given market standards for receivables purchase transactions that are treated as sales under GAAP, taking into account such factors as historical bad debt loss experience and obligor concentration levels. "PERMITTED FOREIGN RECEIVABLES TRANSACTION" means any arrangement of Foreign Subsidiaries providing for sales, transfers or conveyances of, or granting of security interests in, Foreign Receivables that do not provide, directly or indirectly, for recourse against the seller of such Foreign Receivables (or against any of such seller's Affiliates) by way of a guaranty or any other support arrangement, with respect to the amount of such Foreign Receivables (based on the financial condition or circumstances of the obligor thereunder), other than such limited recourse as is reasonable given market standards for receivables purchase transactions that are treated as 24 sales under GAAP, taking into account such factors as historical bad debt loss experience and obligor concentration levels. "PERMITTED LIENS" means each of the following: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b); (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations (other than Debt for borrowed money) (i) that are not overdue or (ii) the amount, applicability or validity of which are being contested in good faith and by appropriate proceedings diligently conducted and with respect to which the Borrower or any of its Subsidiaries, as the case may be, has established reserves in accordance with GAAP; (c) pledges or deposits to secure obligations under workers' compensation laws, unemployment insurance or similar legislation (other than in respect of employee benefit plans subject to ERISA) or to secure public or statutory obligations; (d) Liens securing the performance of, or payment in respect of, bids, tenders, government contracts (other than for the repayment of borrowed money), surety and appeal bonds and other obligations of a similar nature incurred in the ordinary course of business; (e) any interest or title of a lessor or sublessor and any restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject that is incurred in the ordinary course of business and, either individually or when aggregated with all other Permitted Liens in effect on any date of determination, could not be reasonably expected to have a Material Adverse Effect; (f) Liens in favor of customs and revenue authorities arising as a matter of law or pursuant to a bond to secure payment of customs duties in connection with the importation of goods; (g) Liens arising out of judgments or awards that do not constitute an Event of Default under Section 6.01(g) or 6.01(h) and in respect of which the Borrower or any of its Subsidiaries subject thereto shall be prosecuting an appeal or proceedings for review in good faith and, pending such appeal or proceedings, shall have secured within 30 days after the entry thereof a subsisting stay of execution and shall be maintaining reserves, in accordance with GAAP, with respect to any such judgment or award; (h) leases or subleases granted to others in the ordinary course of business not interfering with the ordinary conduct of the business of the grantor thereof; (i) easements, rights of way, zoning restrictions and other encumbrances on title to real property that were not incurred in connection with and do not secure Debt and do not, either individually or in the aggregate, interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries, taken as a whole; (j) Liens arising solely by virtue of any statutory or common law provision relating to banker's Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Borrower or any of its Subsidiaries owning the affected deposit account or other funds maintained with a creditor depository institution in excess of those set forth by regulations promulgated by the Federal Reserve Board or any foreign regulatory agency performing an equivalent function, and (ii) such deposit account is not intended by the Borrower or any of its Subsidiaries to provide collateral to the depository institution; and (k) Liens, assignments and pledges of rights to receive premiums, interest or loss payments or otherwise arising in connection with worker's compensation loss portfolio transfer insurance transactions or any insurance or reinsurance agreements pertaining to losses covered by insurance, and Liens (including, without limitation and to the extent constituting Liens, negative pledges) in favor of insurers or reinsurers on pledges or deposits by the Borrower or any 25 Subsidiary under workmen's compensation laws, unemployment insurance laws or similar legislation. "PERMITTED TRANSFEREES" has the meaning specified in the Stockholders Agreement dated as of April 15, 1996 between the Borrower and the stockholders of the Borrower party thereto as in effect as of the Closing Date, except that transferees pursuant to Section 2.2(a)(x) thereof shall not be deemed to be Permitted Transferees for purposes of this Agreement. "PERSON" means an individual, partnership, corporation (including a business trust), limited liability company, unlimited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PLEDGE AND SECURITY AGREEMENT" has the meaning specified in Section 3.01(a)(i). "PLEDGED DEBT" has the meaning specified in Section 1(e) of the Pledge and Security Agreement. "PLEDGED FOREIGN SUBSIDIARY" means a Foreign Subsidiary no more than 65% of the Equity Interests of which is pledged to Administrative Agent. "PLEDGED INTERESTS" has the meaning specified in Section 1(e) of the Pledge and Security Agreement. "PREFERRED INTERESTS" means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person's property and assets, whether by dividend or upon liquidation. "PRIMARY OBLIGATION" has the meaning specified in the definition of "CONTINGENT OBLIGATION" set forth in this Section 1.01. "PRIMARY OBLIGOR" has the meaning specified in the definition of "CONTINGENT OBLIGATION" set forth in this Section 1.01. "PRINCIPAL PROPERTY" means any contiguous or proximate parcel of real property owned by, or leased to, the Borrower or any of its Restricted Subsidiaries, and any equipment located at or comprising a part of any such property, having a gross book value (without deduction of any depreciation reserves), as of the date of determination, in excess of 1% of Consolidated Net Tangible Assets; PROVIDED, HOWEVER, that in the event that the Indentures, or the limitations regarding Liens granted by the Borrower or Restricted Subsidiaries contained in the Indentures, are no longer binding on the Borrower, no property shall be a Principal Property. "PRO RATA SHARE" of any amount means, with respect to any of the Lenders at any time, the product of (a) a fraction the numerator of which is the amount of such Lender's Commitment(s) under the applicable Facility or Facilities at such time (or, if the Commitments 26 shall have been terminated pursuant to Section 2.05 or 6.01 at or prior to such time, such Lender's Commitment(s) under the applicable Facility or Facilities as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of such Facility or Facilities at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01 at or prior to such time, the applicable Facility or Facilities as in effect immediately prior to such termination) MULTIPLIED BY (b) such amount. "REAL ESTATE FINANCING TRANSACTIONS" means any arrangement with any Person pursuant to which the Borrower or any of its Subsidiaries incurs Debt secured by a Lien on real property of the Borrower or any of its Subsidiaries and related personal property. "RECEIVABLES TRANSFER AGREEMENTS" means that certain Receivables Purchase and Sale Agreement dated as of January 28, 2000 among the Borrower, LSFCC, Levi Strauss Funding Corp. and LSFLLC and that certain Third Amended and Fully Restated Receivables Purchase and Sale Agreement between LSFCC and the Borrower effective January 28, 2000. "REDEEMABLE" means, with respect to any Equity Interest, Debt or other right or Obligation, any such Equity Interest, Debt or other right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "REDUCTION AMOUNT" has the meaning specified in Section 2.06(b)(vi). "REGISTER" has the meaning specified in Section 8.07(d). "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REQUIRED FINANCIAL INFORMATION" means, at any date of determination, the Consolidated financial statements of the Borrower and its Subsidiaries most recently delivered to the Administrative Agent and the Lender Parties on or prior to such date pursuant to, and satisfying all of the requirements of, Section 5.03(b) or 5.03(c) and accompanied by the certificates and other information required to be delivered therewith. "REQUIRED LENDERS" means, (a) at any time when the Commitments are in effect, Lenders holding at least a majority in interest of the aggregate of the Tranche A Term Commitments, the Tranche B Term Commitments and the Revolving Credit Commitments at such time and (b) at any time after the termination of the Commitments, Lenders owed at least a majority in interest of the sum of (i) the aggregate principal amount of the Advances outstanding at such time and (ii) the aggregate Available Amount of all Letters of Credit outstanding at such time; PROVIDED, HOWEVER, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the Commitments of such Lender at such time or (B) the sum of (1) the aggregate principal amount of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time and (2) such Lender's Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time, as the case may be. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and the Available Amount of each Letter of Credit 27 shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. "REQUIRED PRINCIPAL PAYMENTS" means, with respect to any Person for any period, the sum of all regularly scheduled principal payments or redemptions of outstanding Funded Debt made during such period. "REQUIREMENTS OF LAW" means, with respect to any Person, all laws, constitutions, statutes, treaties, ordinances, rules and regulations, all orders, writs, decrees, injunctions, judgments, determinations or awards of an arbitrator, a court or any other Governmental Authority, and all Governmental Authorizations, binding upon or applicable to such Person or to any of its properties, assets or businesses. "RESPONSIBLE OFFICER" means, with respect to the Borrower or any of its Subsidiaries, the chief executive officer, the president, the chief financial officer, the principal accounting officer, the treasurer or any assistant treasurer (or the equivalent of any of the foregoing). "RESTRICTED SUBSIDIARY" means any Subsidiary of the Borrower which owns or leases a Principal Property; PROVIDED, HOWEVER, that in the event that the Indentures, or the limitations regarding Liens granted by or on the Equity Interests or Debt of Restricted Subsidiaries contained in the Indentures, are no longer binding on the Borrower, no Subsidiary of the Borrower shall be a Restricted Subsidiary. "REVOLVING CREDIT ADVANCE" has the meaning specified in Section 2.01(c). "REVOLVING CREDIT BORROWING" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Revolving Credit Lenders. "REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving Credit Lender at any time, the amount set forth opposite such Revolving Credit Lender's name on Schedule 1.01(a) hereto under the caption "REVOLVING CREDIT COMMITMENT" or, if such Revolving Credit Lender has entered into one or more Assignments and Acceptances, the amount set forth for such Revolving Credit Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(d) as such Revolving Credit Lender's "REVOLVING CREDIT COMMITMENT", as such amount may be reduced at or prior to such time pursuant to Section 2.05 or 2.06. "REVOLVING CREDIT FACILITY" means, at any time, the aggregate amount of the Revolving Credit Lenders' Revolving Credit Commitments at such time. "REVOLVING CREDIT LENDER" means, at any time, any Lender that has a Revolving Credit Commitment at such time. "REVOLVING CREDIT NOTE" means a promissory note of the Borrower payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the Borrower to such Revolving Credit Lender resulting from the Revolving Credit Advances made by such Revolving Credit Lender. 28 "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "SECURED OBLIGATIONS" has the meaning specified in Section 2 of the Pledge and Security Agreement. "SECURED PARTIES" means, collectively, the Agents, the Lender Parties, and the Hedge Banks. "SENIOR SECURED LEVERAGE RATIO" means, at any date of determination, the ratio of (a) all Senior Secured Funded Debt of the Borrower and its Subsidiaries on such date to (b) Consolidated EBITDA for the most recently completed Measurement Period prior to such date for which the Required Financial Information has been delivered under Section 5.03(b) or (c), as the case may be. "SENIOR SECURED FUNDED DEBT" of any Person means, at any date of determination, all secured Debt of such Person that would (or would be required to) appear as liabilities on a consolidated balance sheet of such Person that is not subordinated in right of payment to the Obligations under the Loan Documents. "SINGLE EMPLOYER PLAN" means a single employer plan (as defined in Section 4001(a)(15) of ERISA) that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "SPC" has the meaning specified in Section 8.07(j). "SOLVENT" and "SOLVENCY" mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "SSB" has the meaning specified in the recital of parties to this Agreement. "STANDBY LETTER OF CREDIT" means any Letter of Credit issued hereunder, other than a Trade Letter of Credit. "SUBSIDIARY GUARANTY" has the meaning specified in Section 3.01(a)(ii). 29 "SUBSIDIARY" of any Person means any corporation, partnership, joint venture, limited liability company, unlimited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture, limited liability company or unlimited liability company or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "SWING LINE ADVANCE" means an advance made by the Swing Line Bank pursuant to Section 2.01(d). "SWING LINE BANK" means Bank of America. "SWING LINE BORROWING" means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank. "SWING LINE NOTE" means a promissory note of the Borrower payable to the order of the Swing Line Bank, in substantially the form of Exhibit A-4 hereto, evidencing the aggregate indebtedness of the Borrower to the Swing Line Bank resulting from the Swing Line Advances made by the Swing Line Bank. "SWING LINE SUBLIMIT" means, at any time, an amount equal to $50,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.05. "SYNDICATION AGENT" has the meaning specified in the recital of parties to this Agreement. "TAXES" has the meaning specified in Section 2.13(a). "TERMINATION DATE" means the earlier of (a) August 29, 2003 and (b) the date of termination in whole of the Tranche A Term Commitments, the Tranche B Term Commitments and the Revolving Credit Commitments pursuant to Section 2.05 or 6.01. "TRADE LETTER OF CREDIT" means any Letter of Credit that is issued hereunder for the benefit of a supplier of inventory to the Borrower or any of its Subsidiaries to effect payment for such inventory, the conditions to drawing under which include the presentation to the Issuing Bank that issued such Letter of Credit of shipping documents, invoices and related documents. "TRANCHE A TERM ADVANCE" has the meaning specified in Section 2.01(a). "TRANCHE A TERM BORROWING" means a borrowing consisting of simultaneous Tranche A Term Advances of the same Type made by the Tranche A Term Lenders. "TRANCHE A TERM COMMITMENT" means, with respect to any Tranche A Term Lender at any time, the amount set forth opposite such Lender's name on Schedule 1.01(a) hereto under the caption "TRANCHE A TERM COMMITMENT" or, if such Lender has entered into one or more 30 Assignments and Acceptances, the amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(d) as such Tranche A Term Lender's "TRANCHE A TERM COMMITMENT", as such amount may be reduced at or prior to such time pursuant to Section 2.05 or 6.01. "TRANCHE A TERM FACILITY" means, at any time, the aggregate Tranche A Term Commitments of all Tranche A Term Lenders at such time. "TRANCHE A TERM LENDER" means, at any time, any Lender that has a Tranche A Term Commitment at such time. "TRANCHE A TERM NOTE" means a promissory note of the Borrower payable to the order of any Tranche A Term Lender, in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to such Tranche A Term Lender resulting from the Tranche A Term Advance made by such Tranche A Term Lender. "TRANCHE B TERM ADVANCE" has the meaning specified in Section 2.01(b). "TRANCHE B TERM BORROWING" means a borrowing consisting of simultaneous Tranche B Term Advances of the same Type made by the Tranche B Term Lenders. "TRANCHE B TERM COMMITMENT" means, with respect to any Tranche B Term Lender at any time, the amount set forth opposite such Lender's name on Schedule 1.01(a) hereto under the caption "TRANCHE B TERM COMMITMENT" or, if such Lender has entered into one or more Assignments and Acceptances, the amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(d) as such Tranche B Term Lender's "TRANCHE B TERM COMMITMENT", as such amount may be reduced at or prior to such time pursuant to Section 2.05 or 6.01. "TRANCHE B TERM FACILITY" means, at any time, the aggregate Tranche B Term Commitments of all Tranche B Term Lenders at such time. "TRANCHE B TERM LENDER" means, at any time, any Lender that has a Tranche B Term Commitment at such time. "TRANCHE B TERM NOTE" means a promissory note of the Borrower payable to the order of any Tranche B Term Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Tranche B Term Lender resulting from the Tranche B Term Advance made by such Tranche B Term Lender. "TYPE" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "UNPLEDGED FOREIGN SUBSIDIARIES" means Foreign Subsidiaries none of the Equity Interests of which is pledged to Administrative Agent. "UNREIMBURSED AMOUNT" has the meaning specified in Section 2.03(c). 31 "UNUSED REVOLVING CREDIT COMMITMENTS" means, with respect to any Revolving Credit Lender at any time, (a) such Revolving Credit Lender's Revolving Credit Commitment at such time MINUS (b) the sum, without duplication, of (i) the aggregate principal amount of all Revolving Credit Advances and Letter of Credit Advances (in respect of Domestic Letters of Credit) made by such Revolving Credit Lender (in its capacity as a Lender) and outstanding at such time, (ii) such Revolving Credit Lender's Pro Rata Share of the aggregate Available Amount of all Domestic Letters of Credit outstanding at such time, (iii) in the case of the Swing Line Bank, the aggregate principal amount of all Swing Line Advances outstanding at such time, and (iv) such Revolving Credit Lender's Pro Rata Share of the Foreign Letter of Credit Sublimit. For purposes of this definition, any amount described in the preceding sentence which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. "VOTING INTERESTS" means shares of capital stock issued by a corporation, or equivalent Equity 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. "VOTING TRUST AGREEMENT" means the Voting Trust Agreement entered into as of April 15, 1996 by and among Robert D. Haas; Peter E. Haas, Sr.; Peter E. Haas, Jr.; and F. Warren Hellman as the Voting Trustees and the stockholders of the Borrower (as successor to LSAI Holding Corp.) who are parties thereto. "WELFARE PLAN" means a welfare plan (as defined in Section 3(1) of ERISA) that is maintained for employees of any Loan Party or in respect of which any Loan Party could reasonably be expected to have liability. "WITHDRAWAL LIABILITY" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. Section 1.02 Computation of Time Periods; OTHER DEFINITIONAL ------------------------------- PROVISIONS. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". References in the Loan Documents to any agreement or contract "as amended" shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any Loan Document. Section 1.03 Accounting Terms. All accounting terms not specifically ----------------- defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the Consolidated financial statements of the Borrower and its Subsidiaries referred to in Section 4.01(g) ("GAAP"). Section 1.04 Change in Accounting Principles. If any change in GAAP --------------------------------- occurs or takes effect after the Closing Date which would result in a change in any quantity reported to 32 the Lenders hereunder which provides the basis for any covenant, performance obligation or standard of measurement used in this Agreement, the parties hereto agree to enter into negotiations in order to amend such covenant, performance obligation or standard of performance so as to reflect such change with the result that the criteria for evaluating compliance with such covenant, performance obligation or standard of performance shall be the same after the change as if the change had not been made. Until the parties hereto agree to such amendment, all covenants, performance obligations and standards of performance shall be calculated without giving effect to the change in GAAP. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT Section 2.01 The Advances and the Letters of Credit. -------------------------------------- (a) The Tranche a Term Advances. Each Tranche A Term Lender severally --------------------------- agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "TRANCHE A TERM ADVANCE") in Dollars to the Borrower on the Closing Date in an amount not to exceed the Tranche A Term Commitment of such Tranche A Term Lender at such time. The Tranche A Term Borrowing shall consist of Tranche A Term Advances made simultaneously by the Tranche A Term Lenders in accordance with their respective Pro Rata Shares of the Tranche A Term Facility. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. (b) The Tranche B Term Advances. Each Tranche B Term Lender severally --------------------------- agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "TRANCHE B TERM ADVANCE") in Dollars to the Borrower on the Closing Date in an amount not to exceed the Tranche B Term Commitment of such Tranche B Term Lender at such time. The Tranche B Term Borrowing shall consist of Tranche B Term Advances made simultaneously by the Tranche B Term Lenders in accordance with their respective Pro Rata Shares of the Tranche B Term Facility. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. (c) The Revolving Credit Advances. Each Revolving Credit Lender -------------------------------- severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "REVOLVING CREDIT ADVANCE") in Dollars to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date, in each case in an amount not to exceed the Unused Revolving Credit Commitment of such Revolving Credit Lender at such time. Each Revolving Credit Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Swing Line Advances or outstanding L/C Borrowings) or, if less, the amount of the Aggregate Unused Revolving Credit Commitments at such time. Each Revolving Credit Borrowing shall consist of Revolving Credit Advances made simultaneously by the Revolving Credit Lenders in accordance with their respective Pro Rata Shares of the Revolving Credit Facility. Within the limits of each Revolving Credit Lender's Unused Revolving Credit Commitment in effect from time to time, the Borrower may borrow 33 under this Section 2.01(c), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c). (d) The Swing Line Advances. The Borrower may request the Swing Line ------------------------ Bank to make, and the Swing Line Bank may, if in its sole discretion it elects to do so, make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed the Swing Line Sublimit at any time outstanding and (ii) in an amount for each such Swing Line Borrowing not to exceed the Aggregate Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $1,000,000 or an integral multiple of $500,000 in excess thereof. Within the limits of the first sentence of this Section 2.01(d), so long as the Swing Line Bank, in its sole discretion, elects to make Swing Line Advances, the Borrower may borrow under this Section 2.01(d), repay pursuant to Section 2.04(d) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(d). (e) Letters of Credit. ----------------- (i) Each Issuing Bank severally agrees, in reliance upon the agreements of the Lenders set forth in Section 2.03 and on the terms and conditions hereinafter set forth, to (A) issue letters of credit ("DOMESTIC LETTERS OF CREDIT") for the account of the Borrower from time to time on any Business Day during the period from the date hereof until 60 days before the scheduled Termination Date in an aggregate Available Amount for all Domestic Letters of Credit not to exceed the lesser of (1) the Letter of Credit Sublimit at such time MINUS the Foreign Letter of Credit Sublimit at such time and (2) the Aggregate Unused Revolving Credit Commitments at such time and (B) issue, or cause their respective Foreign Affiliate Issuing Banks to issue, letters of credit that constitute Trade Letters of Credit ("FOREIGN LETTERS OF CREDIT" and, together with Domestic Letters of Credit, "LETTERS OF CREDIT") for the account of the Borrower from time to time during the period from the date hereof until 60 days before the scheduled Termination Date in an aggregate Available Amount for all Foreign Letters of Credit issued by such Issuing Bank and Affiliates of such Issuing Bank not to exceed the Issuing Bank Foreign Letter of Credit Sublimit for such Issuing Bank. The Borrower shall have the right to change the Foreign Letter of Credit Sublimit and the Issuing Bank Foreign Letter of Credit Sublimits by delivering to the Administrative Agent a notice (the "FOREIGN LETTER OF CREDIT SUBLIMIT NOTICE") on the first Business Day of any Fiscal Quarter. No Trade Letter of Credit shall have an expiration date later than 180 days after the issuance thereof. No Standby Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary of such Standby Letter of Credit to require renewal) later than one year after the date of issuance thereof, but any such Standby Letter of Credit may by its terms be renewable annually on the terms set forth in clause (ii) of this Section 2.03(e). If any Letter of Credit remains outstanding after the Termination Date, the Borrower shall, not later than the Termination Date, deposit an amount equal to the aggregate Available Amount of all Letters of Credit outstanding at such time in the L/C Cash Collateral Account. Within the limits of the Letter of Credit Sublimit, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(e)(i) to replace Letters of Credit that have expired or been drawn upon and reimbursed. All Existing 34 Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof. (ii) If the Borrower so requests in any applicable Letter of Credit Agreement, the Issuing Bank may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an "EVERGREEN LETTER OF CREDIT"); provided that any such Evergreen Letter of Credit must permit the Issuing Bank to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the "NONRENEWAL NOTICE DATE") in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the Issuing Bank, the Borrower shall not be required to make a specific request to the Issuing Bank for any such renewal. Once an Evergreen Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the Issuing Bank to permit the renewal of such Letter of Credit at any time to a date not later than the day that is seven days prior to the Termination Date (or if such day is not a Business Day, the next preceding Business Day); PROVIDED, HOWEVER, that the Issuing Bank shall not permit any such renewal if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof, or (B) it has received notice in writing on or before the Business Day immediately preceding the Nonrenewal Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such renewal or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 3.02 is not then satisfied. Notwithstanding anything to the contrary contained herein, the Issuing Bank shall have no obligation to permit the renewal of any Evergreen Letter of Credit at any time. (iii) No Issuing Bank shall be required to issue any Letter of Credit if: (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Requirements of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; (B) the issuance of such Letter of Credit would violate one or more generally applicable policies of the Issuing Bank; or (C) in the judgment of the Issuing Bank, the foreign currency in which such Letter of Credit is requested to be denominated is not readily and freely available. (iv) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the Issuing Bank and the Borrower when a Letter of Credit is issued (including any such 35 agreement applicable to an Existing Letter of Credit), (i) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the "ICC") at the time of issuance (including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro)) shall apply to each Trade Letter of Credit. Section 2.02 Making the Advances. ------------------- (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing (other than an L/C Borrowing or a Swing Line Borrowing) shall be made on notice, given not later than 9:00 A.M. (San Francisco, California time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing comprised of Eurodollar Rate Advances, or on the first Business Day prior to the date of the proposed Borrowing in the case of a Borrowing comprised of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give prompt notice thereof to each Appropriate Lender by telex or telecopier. Each notice of a Borrowing (a "NOTICE OF BORROWING") shall be by telephone, confirmed immediately in writing, or by telex or telecopier, in substantially the form of Exhibit B-1 hereto, shall be duly executed by a Responsible Officer of the Borrower, and shall specify therein: (i) the requested date of such Borrowing (which shall be a Business Day); (ii) the Facility under which such Borrowing is requested to be made; (iii) the Type of Advances requested to comprise such Borrowing; (iv) the requested aggregate amount of such Borrowing; and (v) in the case of a Borrowing comprised of Eurodollar Rate Advances, the requested duration of the initial Interest Period for each such Advance. Each Appropriate Lender shall, before 11:00 A.M. (San Francisco, California time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's Pro Rata Share of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower's Account; provided, HOWEVER, that, in the case of any Revolving Credit Borrowing, the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances made by the Swing Line Bank and any Letter of Credit Advances made by any Revolving Credit Lender and outstanding on the date of such Revolving Credit Borrowing, PLUS accrued and unpaid interest thereon to and as of such date, available to the Swing Line Bank and such Revolving Credit Lenders for repayment of such Swing Line Advances and Letter of Credit Advances. (b) (i) Each Swing Line Borrowing shall be made on notice, given not later than 11:00 A.M. (San Francisco, California time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent. Each Notice of Borrowing shall be by telephone, confirmed immediately in writing, or by telex or telecopier, shall be duly executed by a Responsible Officer of the Borrower, and shall specify therein: (A) the requested date of such Borrowing (which shall be a Business Day); (B) the requested amount of such Borrowing; and (C) the requested maturity of such Borrowing (which maturity shall be no later than the 14th day after the requested date of such Borrowing). If, in its sole discretion it 36 elects to make the requested Swing Line Borrowing, the Swing Line Bank will make the amount thereof available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower's Account. Immediately upon the making of each Swing Line Borrowing, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Bank a participation in such Swing Line Borrowing in an amount equal to the product of such Revolving Credit Lender's Pro Rata Share TIMES the amount of such Swing Line Borrowing. (ii) Upon demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent (which shall give prompt notice thereof to each Revolving Credit Lender), each Revolving Credit Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such Revolving Credit Lender, such Revolving Credit Lender's Pro Rata Share of such outstanding Swing Line Borrowing as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account for the account of the Swing Line Bank, in same day funds, an amount in Dollars equal to such Pro Rata Share. Promptly after receipt of such funds, the Administrative Agent shall transfer such funds to the Swing Line Bank at its Applicable Lending Office. Each Revolving Credit Lender hereby agrees to purchase its Pro Rata Share of an outstanding Swing Line Borrowing on (A) the Business Day on which demand therefor is made by the Swing Line Bank so long as notice of such demand is given not later than 12:00 Noon (San Francisco, California time) on such Business Day or (B) the first Business Day next succeeding such demand if notice of such demand is given after such time. If and to the extent that any Revolving Credit Lender shall not have so made its Pro Rata Share of any applicable Swing Line Borrowing available to the Administrative Agent in accordance with the foregoing provisions of this Section 2.02(b)(ii), such Revolving Credit Lender hereby agrees to pay to the Administrative Agent forthwith on demand the amount of its Pro Rata Share, together with interest thereon, for each day from the date of demand by the Swing Line Bank therefor until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Revolving Credit Lender shall pay to the Administrative Agent the amount of its Pro Rata Share for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Revolving Credit Advance made by such Revolving Credit Lender on such Business Day for all purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. (iii) The Obligation of each Revolving Credit Lender to purchase its Pro Rata Share of each outstanding Swing Line Borrowing upon demand by the Swing Line Bank therefor pursuant to clause (ii) of this Section 2.02(b) shall be absolute, unconditional and irrevocable, and shall be made strictly in accordance with the terms of clause (ii) of this Section 2.02(b) under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto; 37 (B) the existence of any claim, set-off, defense or other right that such Revolving Credit Lender may have at any time against the Swing Line Bank, the Borrower or any other Person, whether in connection with the transactions contemplated by the Loan Documents or any unrelated transaction; (C) the occurrence and continuance of any Default or Event of Default; or (D) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing. (c) Anything in subsection (a) of this Section 2.02 to the contrary notwithstanding, the Borrower may not select Eurodollar Rate Advances for the initial Borrowing of Tranche B Term Advances hereunder and no Tranche B Term Advance may be made as a Eurodollar Rate Advance and no Tranche B Term Loan Base Rate Advance may be converted into a Eurodollar Rate Advance until the tenth day after the Closing Date. In addition, Advances may not be outstanding as part of more than 24 separate Borrowings. (d) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender if for any reason a Borrowing of any Eurodollar Rate Advance does not occur on the date specified therefor in such Notice of Borrowing or a Conversion to or Continuation of any Eurodollar Rate Advance does not occur on a date specified therefor in a Notice of Conversion/Continuation therefor, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Administrative Agent such Lender's Pro Rata Share of such Borrowing, the Administrative Agent may assume that such Lender has made the amount of such Pro Rata Share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) or (b) of this Section 2.02, as applicable, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made the amount of such Pro Rata Share available to the Administrative Agent, such Lender and the Borrower severally agree to repay or to pay to the Administrative Agent forthwith on demand such corresponding amount, together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender's Advance as part of such Borrowing for all purposes under this Agreement. 38 (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03 Issuance of and Drawings and Reimbursement Under Letters ---------------------------------------------------------- of Credit. - --------- (a) Request for Issuance. -------------------- (i) Each Domestic Letter of Credit shall be issued upon notice, given not later than 1:00 P.M. (San Francisco, California time) on the Business Day prior to the date of the proposed issuance of such Domestic Letter of Credit (or such later day as the applicable Issuing Bank in its sole discretion shall agree), by the Borrower to any Issuing Bank, which shall give to the Administrative Agent and each Revolving Credit Lender prompt notice thereof by telex or telecopier. Each notice of issuance of a Letter of Credit (a "NOTICE OF ISSUANCE") shall be by telephone, confirmed immediately in writing, or by telex or telecopier, shall be duly executed by a Responsible Officer of the Borrower, and shall specify therein: (A) the requested date of such issuance (which shall be a Business Day); (B) the requested Available Amount of such Domestic Letter of Credit; (C) the requested expiration date of such Letter of Credit (which shall comply with the requirements of Section 2.01(e)); (D) the name and address of the proposed beneficiary of such Letter of Credit; (E) the currency in which such Domestic Letter of Credit is requested to be denominated; and (F) the proposed form of such Domestic Letter of Credit, and shall be accompanied by such application and agreement for letters of credit as such Issuing Bank may specify to the Borrower for use in connection with such requested Domestic Letter of Credit (a "LETTER OF CREDIT AGREEMENT"). If the requested form of such Domestic Letter of Credit is acceptable to such Issuing Bank in its sole discretion, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 8.02 or as otherwise agreed with the Borrower in connection with the issuance of such Letter of Credit. If and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (ii) Each Foreign Letter of Credit shall be issued in accordance with the usual and customary business practices of the Issuing Bank or Foreign Affiliate Issuing Bank issuing such Foreign Letter of Credit. (iii) Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank a participation in such Letter of Credit in an amount equal to the product of such Lender's Pro Rata Share TIMES the amount of such Letter of Credit. (b) Procedure for Issuance. ---------------------- (i) Promptly after receipt of any Notice of Issuance for a Domestic Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) 39 that the Administrative Agent has received a copy of such Notice of Issuance from the Borrower and, if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Upon receipt by the Issuing Bank of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue a Domestic Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the Issuing Bank's usual and customary business practices. (ii) Promptly after its delivery of any Domestic Letter of Credit or any amendment to a Domestic Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Issuing Bank will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Domestic Letter of Credit or amendment. (c) Drawing and Reimbursement. ------------------------- (i) Upon any drawing under any Letter of Credit, the Issuing Bank shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 A.M. (San Francisco, California time) on the date of any payment by the Issuing Bank under a Letter of Credit (each such date, an "HONOR DATE"), the Borrower shall reimburse the Issuing Bank through the Administrative Agent in an amount equal to the amount of such drawing in Dollars (which amount, in the case of a payment under a Letter of Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the applicable Exchange Rate). If the Borrower fails to so reimburse the Issuing Bank by such time, the Administrative Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (the "UNREIMBURSED AMOUNT"), and such Lender's Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Revolving Credit Advance of Base Rate Loans in Dollars (which amount, in the case of a payment under a Letter of Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the applicable Exchange Rate) to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.01(c) for the principal amount of Base Rate Loans, but subject to the amount of the Aggregate Unused Revolving Credit Commitments and the conditions set forth in Section 3.02 (other than the delivery of a Notice of Borrowing). Any notice given by the Issuing Bank or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (ii) Each Revolving Credit Lender (including the Revolving Credit Lender acting as Issuing Bank) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent in Dollars for the account of the Issuing Bank at the Administrative Agent's Account in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 P.M. (San Francisco, California time) on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Revolving Credit Advance to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Issuing Bank. 40 (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Advance because the conditions set forth in Section 3.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Eurodollar Rate Advances pursuant to clause (i) of Section 2.07(a). In such event, each Lender's payment to the Administrative Agent for the account of the Issuing Bank pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute a Letter of Credit Advance from such Revolving Credit Lender in satisfaction of its participation obligation under this Section 2.03. (iv) Until each Revolving Credit Lender funds its Revolving Credit Advance or Letter of Credit Advance pursuant to this Section 2.03(c) to reimburse the Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender's Pro Rata Share of such amount shall be solely for the account of the Issuing Bank. (v) The Obligation of each Revolving Credit Lender to make Revolving Loans or Letter of Credit Advances upon demand by any Issuing Bank therefor pursuant to clause (i) of this Section 2.03(c) shall be absolute, unconditional and irrevocable, and shall be made strictly in accordance with the terms of clause (i) of this Section 2.03(c) under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (collectively, the "L/C RELATED Documents"); (B) the existence of any claim, set-off, defense or other right that such Revolving Credit Lender may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Issuing Bank, the Borrower or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (C) the occurrence and continuance of any Default or Event of Default; or (D) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. (d) Failure to Make Letter of Credit Advances. The failure of any -------------------------------------------- Revolving Credit Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Revolving Credit Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Revolving Credit Lender shall be responsible for the failure of any other Revolving Credit Lender to make the Letter of Credit Advance to be made by such other Revolving Credit Lender on such date. 41 Section 2.04 Repayment of Advances --------------------- (a) Tranche a Term Advances. The Borrower shall repay to the -------------------------- Administrative Agent for the ratable account of the Tranche A Term Lenders the aggregate principal amount of all Tranche A Term Advances outstanding on the following dates in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Sections 2.05 and 2.06):
DATE AMOUNT ---- ------ August 23, 2001 $10,000,000 November 21, 2001 10,000,000 February 21, 2002 10,000,000 May 23, 2002 10,000,000 August 22, 2002 10,000,000 November 20, 2002 12,500,000 February 20, 2003 12,500,000 May 22, 2003 12,500,000 August 29, 2003 12,500,000
; PROVIDED, HOWEVER, that the final principal repayment installment of the Tranche A Term Advances shall be repaid on the Termination Date and in any event shall be in an amount equal to the aggregate principal amount of all Tranche A Term Advances outstanding on such date. (b) Tranche B Term Advances. The Borrower shall repay to the -------------------------- Administrative Agent for the ratable account of the Tranche B Term Lenders the aggregate principal amount of all Tranche B Term Advances outstanding on the following dates in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Sections 2.05 and 2.06):
DATE AMOUNT ---- ------ August 23, 2001 $10,000,000 November 21, 2001 10,000,000 February 21, 2002 10,000,000 May 23, 2002 10,000,000 August 22, 2002 10,000,000 November 20, 2002 10,000,000 February 20, 2003 10,000,000 May 22, 2003 90,000,000 August 29, 2003 90,000,000
; PROVIDED, HOWEVER, that the final principal repayment installment of the Tranche B Term Advances shall be repaid on the Termination Date and in any event shall be in an amount equal to the aggregate principal amount of all Tranche B Term Advances outstanding on such date. 42 (c) Revolving Credit Advances. The Borrower shall repay to the --------------------------- Administrative Agent for the ratable account of the Revolving Credit Lenders on the Termination Date the aggregate principal amount of all Revolving Credit Advances outstanding on such date. (d) Swing Line Advances. The Borrower shall repay to the Administrative ------------------- Agent for the account of the Swing Line Bank on the earlier of (i) the maturity date for each Swing Line Advance (as specified in the applicable Notice of Swing Line Borrowing) and (ii) the Termination Date the principal amount of each Swing Line Advance made by the Swing Line Bank outstanding on such date. (e) Letter of Credit Advances. The Obligations of the Borrower to -------------------------- reimburse the Issuing Bank for each drawing under each Letter of Credit and to repay each Letter of Credit Advance and each drawing under a Letter of Credit that is refinanced by Revolving Credit Advances shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement or other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any L/C Related Document; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by any Issuing Bank in good faith under a Letter of Credit against presentation of a draft, certificate or other document that does not strictly comply with the terms of such Letter of Credit; (vi) any exchange, release or nonperfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Subsidiary Guaranty or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. 43 Section 2.05 Termination or Reduction of the Commitments. ----------------------------------------------------- (a) Optional. The Borrower may, upon at least three Business Days' -------- notice to the Administrative Agent, terminate in whole or reduce in part the Aggregate Unused Revolving Credit Commitments; PROVIDED, HOWEVER, that each partial reduction of such Facility shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof or, if less, the aggregate amount of such Facility. (b) Mandatory. --------- (i) The Tranche A Term Facility and the Tranche B Term Facility shall be automatically and permanently reduced from time to time upon each repayment or prepayment of the outstanding Tranche A Term Advances or Tranche B Term Advances, as the case may be, by an amount equal to the amount by which (A) the Tranche A Term Facility or Tranche B Term Facility, as the case may be, immediately prior to such reduction exceeds (B) the aggregate principal amount of all Tranche A Term Advances or Tranche B Term Advances, as the case may be, outstanding at such time. (ii) The Revolving Credit Facility shall be automatically and permanently reduced on each date on which the prepayment of Revolving Credit Advances outstanding thereunder is required to be made pursuant to Section 2.06(b)(i) by an amount equal to the applicable Reduction Amount. (iii) The Letter of Credit Sublimit shall be automatically and permanently reduced on the date of each reduction in the Revolving Credit Facility by an amount equal to the amount, if any, by which (A) the Letter of Credit Sublimit on such date exceeds (B) the Revolving Credit Facility on such date, after giving effect to such reduction of the Revolving Credit Facility. (c) Application of Commitment Reductions. Upon each reduction of a -------------------------------------- Facility pursuant to this Section 2.05, the Commitment of each Appropriate Lender under such Facility shall be reduced by such Lender's Pro Rata Share of the amount by which such Facility is reduced. Section 2.06 Prepayments. ----------- (a) Optional. The Borrower may, upon at least one Business Day's notice -------- in the case of Base Rate Advances and three Business Days' notice in the case of Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the aggregate principal amount of the Advances comprising part of the same Borrowing and outstanding on such date, in whole or ratably in part; PROVIDED, HOWEVER, that (i) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) if any such prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period therefor, the Borrower shall also pay any amounts owing in respect of such Eurodollar Rate Advance pursuant to Section 2.11(d). The Borrower may on any Business Day prepay Swing Line Advances in an aggregate principal amount of $1,000,000 or an integral multiple of $500,000 in excess thereof. Each prepayment pursuant to 44 this subsection (a), other than any prepayment of Revolving Credit Advances, shall be applied to prepay the Tranche A Term Advances and Tranche B Term Advances on a pro rata basis (in accordance with the respective outstanding principal amounts thereof) and to reduce the principal repayment installments thereof in order of maturity. (b) Mandatory. --------- (i) The Borrower shall (A) on the date of receipt of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from the sale, lease, transfer or other disposition of any property or assets of the Borrower or any of its Subsidiaries (other than any property or assets expressly permitted to be sold, leased, transferred or otherwise disposed of pursuant to clause (i), (ii), (iii), (iv), (ix), (x), (xii), (xiii) or (xiv) of Section 5.02(e) and property or assets to the extent that the aggregate value of such property and assets disposed of in any single transaction or related series of transactions does not exceed $500,000), (B) no later than five days following the receipt of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from any Equipment Financing Transaction, Permitted Foreign Receivables Transaction, or Real Estate Financing Transaction, (C) on the date of receipt of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from any Permitted Domestic Receivables Transaction, and (D) on the date of receipt of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from any Insurance Receipt received by or paid to or for the account of the Borrower or any of its Subsidiaries (other than the Net Cash Proceeds of any Insurance Receipt with respect to property subject to an Equipment Financing Transaction, a Real Estate Financing Transaction or a Lien permitted under Section 5.02(a)(iv)), prepay an aggregate principal amount of the Advances comprising part of the same Borrowings equal to 100% of the amount of such Net Cash Proceeds. Each prepayment of Advances pursuant to this clause (i) shall be applied to prepay the Tranche A Term Advances and the Tranche B Term Advances and reduce the Revolving Credit Facility on a pro rata basis; PROVIDED, HOWEVER, that notwithstanding the foregoing provisions of this clause (i) and Section 2.06(b)(vi), in no event shall the Revolving Credit Facility be reduced pursuant to this clause (i), to less than $500,000,000, and any amounts that otherwise would have been applied to reduce the Revolving Credit Facility shall be applied to the further prepayment of the Tranche A Term Loans and the Tranche B Term Loans on a pro rata basis. Each prepayment of Tranche A Term Advances and Tranche B Term Advances pursuant to this clause (i) shall be applied to reduce the principal repayment installments thereof in inverse order of maturity. (ii) The Borrower shall, no later than three Business Days following the receipt of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from (A) the incurrence or issuance by the Borrower or any of its Subsidiaries of any Debt (other than Debt expressly permitted to be incurred or issued pursuant to Section 5.02(b) (other than Section 5.02(b)(i)(C)) and (B) the issuance or sale by the Borrower or any of its Subsidiaries of any Equity Interests therein, prepay an aggregate principal amount of the Tranche A Term Advances and Tranche B Term Advances comprising part of the same Borrowings equal to 100% of the amount of such Net Cash Proceeds. Each prepayment of Tranche A Term Advances and Tranche B Term Advances pursuant to this clause (ii) shall be applied to prepay the Tranche A Term Advances and Tranche B Term Advances on a pro rata basis (in accordance with the respective outstanding principal amounts thereof) and to reduce the principal repayment installments thereof in inverse order of maturity. In the event that there are no outstanding 45 Tranche A Term Advances or Tranche B Term Advances on the date of receipt of any such Net Cash Proceeds, no prepayment shall be required. (iii) The Borrower shall, on the tenth day following the date on which the Borrower delivers to the Administrative Agent the Required Financial Information for any Fiscal Year pursuant to Section 5.03(b), commencing with the Fiscal Year ending November 25, 2001, prepay an aggregate principal amount of Tranche A Term Advances and Tranche B Term Advances equal to 50% of the amount of Consolidated Excess Cash Flow for such Fiscal Year; PROVIDED, HOWEVER, that the sum of (A) the mandatory prepayments required to be made under this Section 2.06(b)(iii) for Fiscal Years 2001 and 2002, (B) the repayments required to be made under Sections 2.04(a) and (b) during such Fiscal Years, and (C) any payments made under Sections 2.06(a) and 2.06(b)(v) during such Fiscal Years shall not exceed $200,000,000 during any such Fiscal Year. Each prepayment of Tranche A Term Advances and Tranche B Term Advances pursuant to this clause (iii) shall be applied to prepay the Tranche A Term Advances and Tranche B Term Advances on a pro rata basis (in accordance with the respective outstanding principal amounts thereof) and to reduce the principal repayment installments thereof in inverse order of maturity. In the event that there are no outstanding Tranche A Term Advances or Tranche B Term Advances on the date of receipt of any such Net Cash Proceeds, no prepayment shall be required. (iv) Notwithstanding the foregoing, in the case of any mandatory prepayment of the Tranche B Term Advances pursuant to clause (i)(B), clause (i)(C) or clause (ii) of this Section 2.06(b), the Tranche B Term Lenders shall, so long as there are outstanding Tranche A Term Advances, have the option to waive the right to receive the amount of such mandatory prepayment of the Tranche B Term Advances. In the event that there are no outstanding Tranche A Term Advances on the date of any mandatory prepayment, the Tranche B Term Lenders shall have no option to waive the right to receive such prepayment. Upon the receipt of any such mandatory prepayment, the Administrative Agent shall notify each Tranche B Term Lender of such receipt. In the event any Tranche B Term Lender desires to waive such Tranche B Term Lender's right to receive such mandatory prepayment, such Tranche B Term Lender shall so advise the Administrative Agent in writing no later than the close of business on the third Business Day following receipt of such notice from the Administrative Agent and, within five Business Days of the receipt by Administrative Agent of such mandatory prepayment, the Administrative Agent shall apply the amount that otherwise would have been applied to mandatorily prepay the Tranche B Term Advances of all Tranche B Term Lenders waiving their right to receive such mandatory prepayment to the further prepayment of the Tranche A Term Advances to the extent any are then outstanding. (v) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances, and, if applicable, deposit an amount into the L/C Cash Collateral Account equal to the amount by which (A) the sum of (1) the aggregate principal amount of all Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding on such Business Day and (2) the aggregate Available Amount of all Letters of Credit outstanding on such Business Day exceeds (B) the Revolving Credit Facility on such Business Day (after giving effect to any permanent reduction thereof pursuant to Section 2.05 on such Business Day) on such Business Day. 46 (vi) Prepayments of the Revolving Credit Facility made pursuant to clause (i) or (v) of this Section 2.06(b), first, shall be applied to prepay Letter of Credit Advances outstanding at such time until all such Letter of Credit Advances are paid in full, second, shall be applied to prepay Swing Line Advances outstanding at such time until all such Swing Line Advances are paid in full, third, shall be applied to prepay Revolving Credit Advances comprising part of the same Borrowings and outstanding at such time until all such Revolving Credit Advances are paid in full and, fourth shall be deposited into the L/C Cash Collateral Account to cash collateralize 100% of the Available Amount of all Letters of Credit outstanding at such time; and, in the case of prepayments of the Revolving Credit Facility required pursuant to clause (i) of this Section 2.06(b), the amount remaining, if any, after the prepayment in full of all Advances outstanding at such time and the 100% cash collateralization of the aggregate Available Amount of all Letters of Credit outstanding at such time (the sum of such prepayment amounts, cash collateralization amounts and remaining amount being, collectively, the "REDUCTION AMOUNT") may be retained by the Borrower for use in the ordinary course of its business, and the Revolving Credit Facility shall be automatically and permanently reduced as set forth in Section 2.05(b)(iii). Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the applicable Issuing Bank or the Revolving Credit Lenders, as applicable. (c) Prepayments to Include Accrued Interest, Etc. All prepayments under -------------------------------------------- this Section 2.06 shall be made together with (i) accrued and unpaid interest to the date of such prepayment on the principal amount so prepaid and (ii) in the case of any such prepayment of a Eurodollar Rate Advance on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Eurodollar Rate Advance pursuant to Section 2.11(d). Section 2.07 Interest. -------- (a) Scheduled Interest. The Borrower shall pay interest on the unpaid ------------------- principal amount of each Advance owing to each Lender Party from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Revolving Credit Advances and Tranche A Term Advances. (A) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time and (B) the Applicable Margin for such Advance in effect from time to time, payable in arrears quarterly on the fifth Business Day after the end of each Fiscal Quarter during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (B) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Advance for such Interest Period and (B) the Applicable Margin for such Advance in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest 47 Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (ii) Tranche B Term Advances. (A) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of the Base Rate in effect from time to time and 2.00%, payable in arrears quarterly on the fifth Business Day after the end of each Fiscal Quarter during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (B) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Eurodollar Rate and 3.25%, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (iii) Swing Line Advances. During such periods as such Advance is a Swing Line Advance, a rate per annum at all times equal to the rate quoted by Swing Line Bank, payable in arrears on the date such Swing Line Advance is paid in full. (b) Default Interest. Upon the occurrence and during the continuance of ---------------- an Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender Party, payable in arrears on the dates referred to in clause (i), (ii) or (iii) of Section 2.07(a), as applicable, and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (i), (ii) or (iii) of Section 2.07(a), as applicable, and (ii) to the fullest extent permitted by applicable law, the amount of any interest, fee or other amount payable under this Agreement or any other Loan Document to any Agent or any Lender Party that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (i), (ii) or (iii) of Section 2.07(a), as applicable, and, in all other cases, on Base Rate Advances pursuant to clause (i) of Section 2.07(a). (c) Notice of Interest Rate. Promptly after receipt of a Notice of ------------------------- Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give notice to the Borrower and each Appropriate Lender of the applicable interest rate determined by the Administrative Agent for purposes of clause (i) or (ii) of Section 2.07(a), as applicable. Section 2.08 Fees. ---- (a) Commitment Fee. The Borrower shall pay to the Administrative Agent -------------- for the account of the Revolving Credit Lenders a commitment fee (the "COMMITMENT FEE"), from the date hereof in the case of each Initial Lender and from the effective date specified in the 48 Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until, in each case, the Termination Date, payable in arrears quarterly on the fifth Business Day after the end of each Fiscal Quarter, commencing February 25, 2001, and on the Termination Date, at the rate of 0.50% per annum on the sum of the average daily Unused Revolving Credit Commitment of each Revolving Credit Lender; PROVIDED, HOWEVER, that any Commitment Fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Commitment Fee shall otherwise have been due and payable by the Borrower prior to such time; and PROVIDED FURTHER that no Commitment Fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. (b) Domestic Letter of Credit Fees, Etc. ------------------------------------ (i) The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commission, payable in arrears quarterly on the fifth Business Day after the end of each Fiscal Quarter, and on the earliest to occur of the full drawing, expiration, termination or cancellation of any such Domestic Letter of Credit and on the Termination Date, on such Revolving Credit Lender's Pro Rata Share of the average daily aggregate Available Amount of all Domestic Letters of Credit outstanding from time to time during such Fiscal Quarter at the Applicable Margin for Eurodollar Rate Advances under the Revolving Credit Facility. Upon the occurrence and during the continuance of an Event of Default, the amount of commission payable by the Borrower under this clause (b)(i) shall be increased by 2% per annum. (ii) The Borrower shall pay to each Issuing Bank, for its own account, (A) an issuance fee for each Domestic Letter of Credit issued by such Issuing Bank (other than Existing Letters of Credit) in an amount equal to 0.125% of the Available Amount of such Domestic Letter of Credit on the date of issuance of such Domestic Letter of Credit, payable on such date, and (B) such other customary documentary and processing charges and other fees and charges in connection with the issuance or administration of each Domestic Letter of Credit as the Borrower and such Issuing Bank shall agree. (iii) For purposes of calculating any fees payable under clauses (i) and (ii) of this Section 2.08(b), any amount described in such clauses which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. (c) Foreign Letter of Credit Fees. The Borrower shall pay to the -------------------------------- Administrative Agent for the account of each Revolving Credit Lender a fee, payable in arrears quarterly on the fifth Business Day after the end of each Fiscal Quarter, equal to the Foreign Letter of Credit Sublimit for such Fiscal Quarter MULTIPLIED by 50% of the Applicable Margin for Eurodollar Rate Advances under the Revolving Credit Facility. Upon the occurrence and during the continuance of an Event of Default, the amount of the fee payable by the Borrower under this clause (c) shall be increased by 2% per annum. 49 (d) Agent's Fees. The Borrower shall pay to the Administrative Agent ------------ for the account of the Administrative Agent such fees as may from time to time be agreed between the Borrower and the Administrative Agent. Section 2.09 Conversion and Continuation of Advances. --------------------------------------- (a) Optional. The Borrower may on any Business Day, upon notice given -------- to the Administrative Agent not later than 9:00 A.M. (San Francisco, California time) time on the third Business Day prior to the date of the proposed Conversion or Continuation, and subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing equal to at least $10,000,000 into Advances of the other Type or Continue all or any portion of the Eurodollar Rate Advances comprising the same Borrowing equal to at least $10,000,000 as Eurodollar Rate Advances; PROVIDED, HOWEVER, that: (i) any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances; (ii) any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be made only if no Event of Default shall have occurred and be continuing; (iii) no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c); and (iv) each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made among the Appropriate Lenders in accordance with their respective Pro Rata Shares of such Borrowing. Each notice of a Conversion/Continuation (a "NOTICE OF CONVERSION/CONTINUATION") shall be delivered by telephone, confirmed immediately in writing, or by telex or telecopier, in substantially the form of Exhibit B-2 hereto, shall be duly executed by a Responsible Officer of the Borrower, and shall, within the restrictions set forth in the immediately preceding sentence, specify therein: (A) the requested date of such Conversion or Continuation (which shall be a Business Day); (B) the Advances requested to be Converted or Continued; and (C) if such Conversion is into Eurodollar Rate Advances or Eurodollar Rate Advances are to be Continued, the requested duration of the Interest Period for such Eurodollar Rate Advances; PROVIDED, HOWEVER, that in the event the Borrower fails to select the duration of the Interest Period for any Conversion into Eurodollar Rate Advances or the Continuation of any Eurodollar Rate Advances, the Borrower shall be deemed to have requested an Interest Period of one month. The Administrative Agent shall give each of the Appropriate Lenders prompt notice of each Notice of Conversion/Continuation received by it, by telex or telecopier. Each Notice of Conversion/Continuation shall be irrevocable and binding on the Borrower. In the event the 50 Borrower fails to deliver a Notice of Conversion/Continuation on or prior to the third Business Day prior to the last day of an Interest Period for a Eurodollar Rate Advance, the Borrower shall be deemed to have requested that such Eurodollar Rate Advance be Continued as a Eurodollar Rate Advance with an Interest Period of one month. (b) Mandatory. --------- (i) In the event that the amount of any outstanding Eurodollar Rate Advance shall be less than $10,000,000, such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (ii) Upon the occurrence and during the continuance of any Event of Default, (A) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (B) the obligation of the Lenders to make, Continue or Convert Advances into, Eurodollar Rate Advances shall be suspended. . Section 2.10 Increased Costs, Etc. -------------------- (a) If, after the date hereof, the adoption of any applicable Requirement of Law, or any change in any applicable Requirement of Law, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or 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 Eurodollar Rate Advances, any of its Notes, or its obligation to make any Eurodollar Rate Advances, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or any of its Notes in respect of any Eurodollar Rate Advances (other than, for purposes of this Section 2.10, any such increased costs resulting from (A) Taxes or Other Taxes (as to which Section 2.13 shall govern), and (B) changes in the basis of taxation of overall net income or overall gross income by the United States or the jurisdiction under the laws of which such Lender Party has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than any change by way of the imposition of or increase in reserve requirements included in the Eurodollar Rate Reserve Percentage) 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 Commitments of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Agreement or its Note or any of such extensions of credit or liabilities or commitments; 51 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 or maintaining any Eurodollar Rate Advances or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or its Note with respect to any Eurodollar Rate Advances, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. Each Lender shall promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 2.10(a) 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 2.10(a) shall furnish to the Borrower and the Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder, which shall be conclusive and binding, absent manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. If any Lender requests compensation by the Borrower under this Section 2.10(a), the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or Convert Eurodollar Rate Advances, or to Convert Base Rate Advances into Eurodollar Rate Advances, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 2.10(e) 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 Requirement of Law 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 the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 2.10(b) 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 2.10(b) shall furnish to the Borrower and the Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder, which shall be conclusive and binding, absent manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. (c) If, on or prior to the first day of any Interest Period for any Eurodollar Rate Advance under either the Tranche A Term Facility, the Tranche B Term Facility or the Revolving Credit Facility, Lenders owed or holding not less than a majority in interest of the 52 aggregate principal amount of all Advances outstanding under such Facility at any time notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately and fairly reflect the cost to the Appropriate Lenders of funding their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall promptly so notify the Borrower and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under such Facility will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower (promptly following notice from the Appropriate Lenders) that such Lenders have determined that the circumstances causing such suspension no longer exist. (d) 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 Eurodollar Rate Advances hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make Eurodollar Rate Advances and to Convert Base Rate Advances into Eurodollar Rate Advances shall be suspended until such time as such Lender may again make, maintain and fund Eurodollar Rate Advances (in which case the provisions of Section 2.10(e) shall be applicable). (e) If the obligation of any Lender to make a Eurodollar Rate Advance or to Convert Base Rate Advances into Eurodollar Rate Advances shall be suspended pursuant to any other provision of this Section 2.10, such Lender's suspended Eurodollar Rate Advances shall be automatically Converted into Base Rate Advances on the last day(s) of the then current Interest Period(s) therefor (or, in the case of a Conversion required by Section 2.10(d), on such earlier date as such Lender may specify to the Borrower with a copy to the Administrative Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in such other provision of this Section 2.10 that gave rise to such Conversion no longer exist: (i) to the extent that such Lender's suspended Eurodollar Rate Advances have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's suspended Eurodollar Rate Advances shall be applied instead to its Base Rate Advances; and (ii) all Eurodollar Rate Advances that would otherwise be made or Converted by such Lender shall be made instead as (or shall remain as) Base Rate Advances. If such Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances otherwise specified in this Section 2.10 that gave rise to the suspension of the making of Eurodollar Rate Advances by such Lender no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Rate Advances by other Lenders with Commitments under the same Facility are outstanding, such Lender's Base Rate Advances shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) therefor, to the extent necessary into Eurodollar Rate Advances. 53 Section 2.11 Payments and Computations ------------------------- (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim, deduction or set-off (except as otherwise provided in Section 2.16), not later than 11:00 A.M. (San Francisco, California time) on the day when due in Dollars to the Administrative Agent at the Administrative Agent's Account in immediately available funds, with payments received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the accounts of their respective Applicable Lending Offices in accordance with their respective Pro Rata Shares of the amounts of such respective Obligations payable to such Lender Parties at such time and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder solely to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes Administrative Agent to charge its accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose) unless the Administrative Agent receives written notice from the Borrower withdrawing such authorization at least five Business Days prior to the date of any scheduled payment. (c) All computations of interest (other than in respect of Base Rate Advances calculated on the basis of Bank of America's "prime rate"), fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days and all computations of interest in respect of Base Rate Advances calculated on the basis of Bank of America's prime rate shall be made by the Administrative Agent on the basis of a year of 365/366 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon 54 demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. Any Lender Party claiming reimbursement or compensation pursuant to this Section 2.11(d) shall deliver to the Borrower (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to the Lender Party hereunder and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error. Each certificate submitted under this Section may not claim reimbursement or compensation for a period earlier than 60 days prior to the date of such certificate unless interpretation of the law or regulation or the guideline or request in question is retroactive in effect in which case the certificate can cover such retroactive period. (e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or Commitment Fees or Letter of Credit commissions or fees, as the case may be; PROVIDED, HOWEVER, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day. (f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount due such Lender Party on such date. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party, together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate. (g) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Agents and the Lender Parties under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Agents and the Lender Parties in the following order of priority: (i) first, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Agents (solely in their respective capacities as Agents) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Agents on such date; 55 (ii) second, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Issuing Banks and the Swing Line Bank (solely in their respective capacities as such) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Issuing Banks and the Swing Line Bank on such date; (iii) third, to the payment of all of the indemnification payments, costs and expenses that are due and payable to the Lenders under Section 8.04 hereof, Section 7 of the Subsidiary Guaranty, Section 18 of the Pledge and Security Agreement and any similar section of any of the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such indemnification payments, costs and expenses owing to the Lenders on such date; (iv) fourth, to the payment of all of the amounts that are due and payable to the Administrative Agent and the Lender Parties under Sections 2.10 and 2.13 hereof on such date, ratably based upon the respective aggregate amounts thereof owing to the Administrative Agent and the Lender Parties on such date; (v) fifth, to the payment of all of the fees that are due and payable to the Lenders under Section 2.08(a) on such date, ratably based upon the respective aggregate Commitments of the Lenders under the Facilities on such date; (vi) sixth, to the payment of all of the accrued and unpaid interest on the Obligations of the Borrower under or in respect of the Loan Documents that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(b) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; (vii) seventh, to the payment of all of the accrued and unpaid interest on the Advances that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(a) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; (viii) eighth, to the payment of the principal amount of all of the outstanding Advances that is due and payable to the Administrative Agent and the Lender Parties on such date, ratably based upon the respective aggregate amounts of all such principal owing to the Administrative Agent and the Lender Parties on such date; and (ix) ninth, to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date. If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to 56 be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each of the Lender Parties in accordance with such Lender Party's Pro Rata Share of the sum of (A) the aggregate principal amount of all Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, in repayment or prepayment of such of the outstanding Advances or other Obligations then owing to such Lender Party, and, in the case of the Tranche A Term Facility and Tranche B Term Facility, for application to such principal repayment installments thereof, as the Administrative Agent shall direct. Section 2.12 Evidence of Debt. ---------------- (a) The Obligations shall be evidenced by one or more accounts or records maintained by each Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Advances and other credit extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of such Lender shall control. Upon the request of any Lender made through the Administrative Agent, such Lender's Advances may be evidenced by a Revolving Credit Note, a Tranche A Term Note, Tranche B Term Note and/or a Swing Line Note, as applicable, in addition to such accounts or records. Each Lender may attach schedules to its Note(s) and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Advances and payments with respect thereto. (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Advances. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control. Section 2.13 Taxes. ------ (a) Any and all payments by the Borrower to or for the account of any Lender Party or any Agent hereunder or under any other Loan Document shall be made, in accordance with Section 2.11 or the applicable provisions of such other Loan Document, if any, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or such Agent, as the case may be, is organized or any political subdivision thereof, and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of either of its Applicable Lending Offices or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, 57 withholdings and liabilities in respect of payments hereunder or under the Notes being, collectively, "TAXES"). If the Borrower shall be required under applicable Requirements of Law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender Party or any Agent, (i) the sum payable by the Borrower shall be increased as necessary so that after the Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Lender Party or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other Governmental Authority in accordance with applicable Requirements of Law and (iv) within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing payment thereof, to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under any other Loan Document or from the execution, delivery of, or otherwise with respect to, this Agreement or any other Loan Document (collectively, "OTHER TAXES"). (c) The Borrower agrees to indemnify each Lender Party and each Agent for the full amount of Taxes and Other Taxes (including, without limitation, the full amount of Taxes and Other Taxes of any kind imposed or asserted by any jurisdiction on amounts payable under this Section 2.13) imposed on or paid by such Lender Party or such Agent, as the case may be, and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. Amounts payable by the Borrower under the indemnity set forth in this subsection (c) shall be paid within 30 days from the date on which the applicable Lender or Agent, as the case may be, makes written demand therefor. (d) In the case of any payment hereunder or under any other Loan Document by or on behalf of the Borrower through an account or branch outside the United States, or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at its address referred to in Section 8.02, an opinion of counsel reasonably acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsections (e) and (f) of this Section 2.13, the terms "UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States (each "NON-US LENDER PARTY") shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender or each Initial Issuing Bank, as the case may be, and on or prior to the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as reasonably requested in writing by the Borrower (but only so long thereafter as such Non-US Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the 58 Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or any other Loan Document. If a Non-US Lender Party has certified in writing to the Administrative Agent that it is not a "bank" (as defined in Section 881(c)(3)(A) of the Internal Revenue Code) (a "NON-BANK NON-US LENDER PARTY"), such Non-Bank Non-US Lender Party shall instead provide two original Internal Revenue Service forms W-8BEN, together with a certificate representing that such Non-Bank Non-US Lender Party is not (i) a "bank" for purposes of Section 881(c) of the Internal Revenue Code, (ii) a ten-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower or (iii) a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code), to certify that such non-Bank Non-US Lender Party is a foreign corporation, partnership, estate or trust. (f) Each Non-US Lender Party, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums payable to such Lender Party hereunder or under any other Loan Document (for example, by virtue of selling a participation), shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender or each Initial Issuing Bank, as the case may be, on or prior to the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, or on such date when any such Lender Party ceases to act for its own account with respect to any portion of any such sums payable, and from time to time thereafter as reasonably requested in writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Borrower with (i) two original copies of the forms or statements required to be provided by such Non-US Lender Party under subsection (e) of this Section 2.13 to establish the portion of any such sums payable with respect to which such Lender Party acts for its own account, and (ii) two original copies of Internal Revenue Service form W-8IMY (or any successor forms) properly completed and duly executed by such Lender Party, together with any information, if any, such Lender Party chooses to transmit with such form, and any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder, to establish that such Lender Party is not acting for its own account with respect to a portion of any such sums payable to such Lender Party. (g) If any form or document referred to in subsections (e) and (f) of this Section 2.13 requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN (and, in the case of a Non-Bank Non-US Lender Party, the related certificate described in subsection (e) of this Section 2.13), W-8ECI, or W-8IMY, that the Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (h) If the forms provided by a Non-US Lender Party pursuant to subsection (e) of this Section 2.13 at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate 59 forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms. (i) For any period with respect to which a Non-US Lender Party has failed to provide the Borrower with the appropriate form, certificate or other document described in subsections (e) and (f) of this Section 2.13 or, pursuant to subsection (g) of this Section 2.13, has not included any information required to be disclosed on any such appropriate form, certificate or other document information (other than if such failure is due to a change in the applicable Requirements of Law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided or if such form, certificate or other document otherwise is not required under subsection (e) or (f) of this Section 2.13), such Non-US Lender Party shall not be entitled to payments or indemnification under subsection (a), (b) or (c) of this Section 2.13 with respect to Taxes imposed by the United States by reason of such failure; PROVIDED, HOWEVER, that should a Non-US Lender Party become subject to Taxes because of its failure to deliver a form, certificate or other document required hereunder or to disclose any information required to be disclosed on any such form, certificate or other document, the Borrower shall take such steps as such Non-US Lender Party shall reasonably request to assist such Non-US Lender Party in recovering such Taxes. (j) The right to payments or indemnification under subsections (a), (b) or (c) of this Section 2.13 shall not apply to the extent Taxes or Other Taxes relate to a portion of any sums payable to a Non-US Lender Party hereunder or under any other Loan Document with respect to which such Non-US Lender Party does not act for its own account. (k) Each of the Lender Parties hereby agrees that, upon the occurrence of any circumstances entitling such Lender Party to additional amounts pursuant to this Section 2.13, such Lender Party shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. Section 2.14 Sharing of Payments, Etc. If any Lender Party shall obtain ------------------------ at any time any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) (a) on account of Obligations due and payable to such Lender Party under or in respect of this Agreement or any of the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time (other than pursuant to Section 2.10, 2.13, 8.04 or 8.07) to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties at such time) of payments on account of the Obligations due and payable to all Lender Parties under or in respect of this Agreement and the other Loan Documents at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party under or in respect of this Agreement or any of the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time (other than pursuant to Section 2.10, 2.13, 8.04 or 8.07) to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties under or in respect of this Agreement and the other Loan Documents at such 60 time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties under or in respect of this Agreement and the other Loan Documents at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party's ratable share (according to the proportion of (A) the purchase price paid to such Lender Party to (B) the aggregate purchase price paid to all Lender Parties) of such recovery, together with an amount equal to such Lender Party's ratable share (according to the proportion of (1) the amount of such other Lender Party's required repayment to (2) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered; PROVIDED FURTHER that, so long as the Obligations under the Loan Documents shall not have been accelerated, any excess payment received by any Appropriate Lender shall be shared on a pro rata basis only with other Appropriate Lenders. The Borrower hereby agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted under applicable law, exercise all its rights of payment (including the right of setoff) with respect to such an interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such an interest or participating interest. Section 2.15 USE OF PROCEEDS. The proceeds of the Advances and --------------- issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely to refinance certain Debt of the Borrower and its Subsidiaries outstanding on the date of the Initial Extension of Credit and for the Borrower's working capital and other general corporate purposes. Section 2.16 DEFAULTING LENDERS. ------------------ (a) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower shall be required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower may, so long as no Default shall occur or be continuing at such time and to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of the Borrower to make such payment to or for the account of such Defaulting Lender against the obligation of such Defaulting Lender to make such Defaulted Advance. In the event that, on any date, the Borrower shall so set off and otherwise apply its obligation to make any such payment against the obligation of such Defaulting Lender to make any such Defaulted Advance on or prior to such date, the amount so set off and otherwise applied by the Borrower shall constitute for all purposes of this Agreement and the other Loan Documents an Advance by such Defaulting Lender made on the date of such setoff under the Facility pursuant to which such Defaulted Advance was originally required to have been made pursuant to Section 2.01. Such Advance shall be a Base Rate Advance and shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in 61 connection with which such Defaulted Advance was originally required to have been made pursuant to Section 2.01, even if the other Advances comprising such Borrowing shall be Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant to this subsection (a). The Borrower shall notify the Administrative Agent at any time the Borrower exercises its right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Advance required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Advance pursuant to this subsection (a). Any portion of such payment otherwise required to be made by the Borrower to or for the account of such Defaulting Lender which is paid by the Borrower, after giving effect to the amount set off and otherwise applied by the Borrower pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.16. (b) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to the Administrative Agent or any of the other Lender Parties and (iii) the Borrower shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Lender Parties and to the fullest extent permitted by applicable law, apply at such time the amount so paid by the Borrower to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Lender Parties, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent and such other Lender Parties and, if the amount of such payment made by the Borrower shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent and the other Lender Parties, in the following order of priority: (i) first, to the Administrative Agent for any Defaulted Amount then owing to the Administrative Agent; (ii) second, to the Issuing Banks and the Swing Line Bank for any Defaulted Amount then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to such Issuing Banks and the Swing Line Bank; and (iii) third, to any other Lender Parties for any Defaulted Amounts then owing to such other Lender Parties, ratably in accordance with such respective Defaulted Amounts then owing to such other Lender Parties. Any portion of such amount paid by the Borrower for the account of such Defaulting Lender remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b), shall be applied by the Administrative Agent as specified in subsection (c) of this Section 2.16. 62 (c) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance or a Defaulted Amount and (iii) the Borrower, the Administrative Agent or any other Lender Party shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrower or such other Lender Party shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow or the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this subsection (c) shall be deposited by the Administrative Agent in an account with Bank of America, in the name and under the control of the Administrative Agent, but subject to the provisions of this subsection (c). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be Bank of America's standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this subsection (c). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Lender and to pay any amount payable by such Defaulting Lender hereunder and under the other Loan Documents to the Administrative Agent or any other Lender Party, as and when such Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority: (i) first, to the Administrative Agent for any amount then due and payable by such Defaulting Lender to the Administrative Agent hereunder; (ii) second, to the Issuing Banks and the Swing Line Bank for any amounts then due and payable to them hereunder, in their capacities as such, by such Defaulting Lender, ratably in accordance with such amounts then due and payable to such Issuing Bank and the Swing Line Bank; and (iii) third, to any other Lender Parties for any amount then due and payable by such Defaulting Lender to such other Lender Parties hereunder, ratably in accordance with such respective amounts then due and payable to such other Lender Parties; and (iv) fourth, to the Borrower for any Advance then required to be made by such Defaulting Lender pursuant to a Commitment of such Defaulting Lender. In the event that any Lender Party that is a Defaulting Lender shall, at any time, cease to be a Defaulting Lender, any funds held by the Administrative Agent in escrow at such time with respect to such Lender Party shall be distributed by the Administrative Agent to such Lender Party and applied by such Lender Party to the Obligations owing to such Lender Party at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time. 63 (d) The rights and remedies against a Defaulting Lender under this Section 2.15 are in addition to other rights and remedies that the Borrower may have against such Defaulting Lender with respect to any Defaulted Advance and that the Administrative Agent or any Lender Party may have against such Defaulting Lender with respect to any Defaulted Amount. ARTICLE III CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT Section 3.01 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. --------------------------------------------------- The obligation of each Lender to make an Advance or of any Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance reasonably satisfactory to the Lender Parties (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party: (i) A pledge and security agreement, in substantially the form of Exhibit D hereto (together with each other security agreement and security agreement supplement delivered pursuant to Section 5.01(i), in each case as amended, the "PLEDGE AND SECURITY AGREEMENT"), duly executed by each Loan Party, together with: (A) certificates representing the Pledged In- terests referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank, (B) duly executed copies of proper financing statements for filing in all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority Liens created under the Pledge and Security Agreement, covering the Collateral described in the Pledge and Security Agreement, (C) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing all effective financing statements filed in the jurisdictions referred to in clause (B) above that name any Loan Party as debtor, together with copies of such other financing statements, (D) duly executed cover sheets or other documents or instruments required to be filed with the United States Patent and Trademark Office, (E) evidence of the completion of all other recordings and filings of or with respect to the Pledge and Security Agreement that the Administrative Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, and (F) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority Liens created under 64 the Pledge and Security Agreement has been taken (including, without limitation, receipt of duly executed payoff letters and UCC-3 termination statements). (ii) A guaranty, in substantially the form of Exhibit E hereto (together with each other guaranty and guaranty supplement delivered pursuant to Section 5.01(i), in each case as amended, the "SUBSIDIARY GUARANTY"), duly executed by each Material Domestic Subsidiary. (iii) Deeds of trust, trust deeds and mortgages, in sub- stantially the form of Exhibit F hereto and covering the properties listed on Schedule 3.01(a) hereto (the "MORTGAGES"), duly executed by the appropriate Loan Party, together with: (A) evidence that counterparts of the Mortgages have been duly recorded on or before the day of the Initial Extension of Credit in all filing or recording offices that the Administrative Agent may deem necessary or desirable in order to create a valid first and subsisting Lien on the property described therein in favor of the Administrative Agent for the benefit of the Secured Parties and that all filing and recording taxes and fees have been paid, (B) fully paid American Land Title Association Lender's Extended Coverage title insurance policies (the "MORTGAGE POLICIES") in form and substance, with endorsements and in amount acceptable to the Administrative Agent, issued, coinsured and reinsured by title insurers acceptable to the Administrative Agent, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all material defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Administrative Agent may deem necessary or desirable, (C) such consents and agreements of lessors and other third parties, and such estoppel letters and other confirmations, as the Administrative Agent may deem necessary or desirable, and (D) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. (iv) Certified copies of the resolutions of the Board of Directors of each Loan Party approving each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary Governmental Authorizations and other necessary corporate actions or third party approvals and consents, if any, with respect to each Loan Document to which it is or is to be a party. (v) A copy of a certificate of the Secretary of State of the jurisdiction of incorporation of each Loan Party, dated reasonably near the date of the Initial Extension of Credit, certifying (A) as to a true and correct copy of the charter (or comparable 65 Constitutive Document) of such Loan Party and each amendment thereto on file in such Secretary's office and (B) that (1) such amendments are the only amendments to such Loan Party's (or comparable Constitutive Document) on file in such Secretary's office, (2) such Loan Party has paid all franchise taxes to the date of such certificate and (C) such Loan Party is duly incorporated and in good standing or presently subsisting under the laws of the state of the jurisdiction of its incorporation. (vi) A copy of a certificate of the Secretary of State of each jurisdiction in which each Loan Party is qualified to do business, dated reasonably near the date of the Initial Extension of Credit, stating that such Loan Party is duly qualified and in good standing as a foreign corporation in such state and has filed all annual reports required to be filed to the date of such certificate. (vii) A certificate or certificates of each Loan Party, signed on behalf of such Loan Party by its President, a Vice President or Treasurer and its Secretary or any Assistant Secretary, dated the date of the Initial Extension of Credit (the statements made in which certificate or certificates shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the charter (or comparable Constitutive Document) of such Loan Party since the date of the Secretary of State's certificate referred to in Section 3.01(a)(v), (B) a true and correct copy of the bylaws (or comparable Constitutive Document) of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.01(a)(iv) were adopted and on the date of the Initial Extension of Credit, (C) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default. (viii) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (ix) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements dated November 29, 1998, November 28, 1999 and November 26, 2000, pro forma financial statements as to the Borrower and forecasts prepared by management of the Borrower, in form and substance satisfactory to the Lender Parties, of balance sheets and income statements on a monthly basis for the first Fiscal Year following the day of the Initial Extension of Credit and on an annual basis for each Fiscal Year thereafter until the Termination Date. (x) Evidence of insurance naming the Administrative Agent as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties, including, without limitation, business interruption insurance. 66 (xi) A Notice of Borrowing or Notice of Issuance, as applicable, relating to the Initial Extension of Credit. (xii) Favorable opinions of Wachtell, Lipton, Rosen & Katz, special counsel for the Loan Parties, Albert F. Moreno, Esq., Senior Vice President and General Counsel of the Borrower, and Legal Strategies Group, special intellectual property counsel to the Borrower, in form and substance reasonably satisfactory to the Lender Parties. (xiii) A favorable opinion of O'Melveny & Myers LLP, special counsel to the Lender Parties, in form and substance satisfactory to the Lender Parties. (b) The Lender Parties shall be satisfied that all obligations of the Borrower and its Subsidiaries under the Existing Credit Agreements have been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished. (c) There shall have occurred no Material Adverse Change since November 28, 1999. (d) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any Governmental Authority or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 4.01(f) hereto (the "DISCLOSED LITIGATION") or (ii) purports to affect the legality, validity or enforceability of any Loan Document and there shall have been no change in the status or financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation which change would be reasonably likely to have a Material Adverse Effect. (e) All Governmental Authorizations and all third party consents and approvals necessary in connection with the Loan Documents shall have been obtained and shall remain in effect; and no Requirements of Law shall be applicable in the reasonable judgment of the Lender Parties, in each case that restrains, prevents or imposes materially adverse conditions upon the Loan Documents or the rights of the Loan Parties or their Subsidiaries to create any Lien on, any properties now owned or hereafter acquired by any of them. (f) The Lender Parties shall have completed a due diligence inves- tigation of the Borrower and its Subsidiaries in scope, and with results, satisfactory to the Lender Parties, and nothing shall have come to the attention of the Lender Parties during the course of such due diligence investigation to lead them to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect, and, without limiting the generality of the foregoing, the Lender Parties shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested. (g) The Lender Parties shall have received a trademark valuation from Ernst & Young LLP. (h) The Borrower shall have paid all accrued fees of the Agents and the Lender Parties and all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Administrative Agent and local counsel to the Lender Parties). 67 Section 3.02 CONDITIONS PRECEDENT TO EACH BORROWING AND ISSUANCE ----------------------------------------------------- AND RENEWAL. The obligation of each Appropriate Lender to make an Advance - ----------- (other than a Letter of Credit Advance made by a Revolving Credit Lender pursuant to Section 2.03(c) and a Revolving Credit Advance made by a Revolving Credit Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), and the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit and the right of the Borrower to request a Swing Line Advance, shall be subject to the further conditions precedent that on the date of such Borrowing or issuance or renewal: (a) the following statements shall be true and the Administrative Agent shall have received for the account of such Lender or such Issuing Bank a certificate signed by a duly authorized officer of the Borrower, dated the date of such Borrowing or issuance or renewal, stating that: (i) the representations and warranties contained in each Loan Document are correct on and as of such date, before and after giving effect to such Borrowing or issuance or renewal and to the application of the proceeds therefrom, as though made on and as of such date (except (A) for any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing or issuance or renewal, in which case as of such specific date and (B) if any Required Financial Information has been delivered to the Administrative Agent and the Lender Parties on or prior to the date of such Borrowing or issuance or renewal, that the Consolidated financial statements of the Borrower and its Subsidiaries referred to in Section 4.01(g) shall be deemed at any time and from time to time after the Closing Date to refer to the Consolidated financial statements of the Borrower and its Subsidiaries comprising part of the Required Financial Information most recently delivered to the Administrative Agent and the Lender Parties pursuant to Sections 5.03(b) and 5.03(c), respectively, on or prior to the date of such Borrowing, issuance or renewal); and (ii) no Default has occurred and is continuing, or would result from such Borrowing or issuance or renewal or from the application of the proceeds therefrom; and (b) the Administrative Agent shall have received such other appro- vals, opinions or documents as any Appropriate Lender through the Administrative Agent may reasonably request. Section 3.03 DETERMINATIONS UNDER SECTION 3.01. For purposes of ----------------------------------- determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing, such Lender Party shall not have made available to the Administrative Agent such Lender Party's ratable portion of such Borrowing. 68 ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01 REPRESENTATIONS AND WARRANTIES OF THE BORROWER. -------------------------------------------------- The Borrower represents and warrants as follows: (a) ORGANIZATION AND POWERS. Each Loan Party is a corporation duly ------------------------ organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all Governmental Authorizations) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) SUBSIDIARIES. Set forth on Schedule 4.01(b) hereto is a ------------ complete and accurate list of all Subsidiaries of each Loan Party as of the date hereof, showing (as to each such Subsidiary) the jurisdiction of its incorporation and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party. All of the outstanding Equity Interests in each Loan Party's Subsidiaries have been validly issued, are fully paid and non-assessable and, except as set forth on Schedule 4.01(b) hereto, are owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created under the Collateral Documents. (c) NO CONFLICTS. The execution, delivery and performance by each ------------ Loan Party of each Loan Document to which it is or is to be a party are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's Constitutive Documents, (ii) violate any Requirements of Law, (iii) except as set forth on Schedule 4.01(c) hereto, conflict with or result in the breach of, or constitute a default or require any payment to be made under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such Requirements of Law or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect. (d) GOVERNMENTAL AUTHORIZATIONS. No Governmental Authorization, ---------------------------- and no other authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by any Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for filings or recordings contemplated by Section 4.01(l) and actions that may be required following the Closing Date as a result of a change in law and except 69 as may be required, in connection with the disposition of any Pledged Interests, by laws generally affecting the offering and sale of securities. (e) BINDING OBLIGATION. This Agreement has been, and each other ------------------- Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms. (f) LITIGATION. There is no action, suit, investigation, ---------- litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any Governmental Authority or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) would be reasonably likely to affect the legality, validity or enforceability of any Loan Document, and there has been no adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto, which change would be reasonably likely to have a Material Adverse Effect. (g) FINANCIAL CONDITION. The Consolidated and consolidating -------------------- balance sheets of the Borrower and its Subsidiaries as at November 28, 1999 and November 26, 2000, and the related Consolidated and consolidating statements of income and Consolidated statement of cash flows of the Borrower and its Subsidiaries for the Fiscal Year then ended, accompanied, with respect to the Consolidated financial statements only, by an unqualified opinion of Arthur Andersen, independent public accountants, copies of which have been furnished to each Lender Party, fairly present the Consolidated and consolidating financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated and consolidating results of operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis, and since November 28, 1999, there has been no Material Adverse Change. (h) PROJECTIONS. The Consolidated forecasted balance sheets and ----------- statements of income of the Borrower and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(ix) or 5.03 or contained in the Information Memorandum were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower's best estimate of its future financial performance. (i) USE OF PROCEEDS. The Borrower is not engaged in the business ---------------- of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. (j) GOVERNMENTAL REGULATION. Neither any Loan Party nor any of its ----------------------- Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither any Loan Party nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or 70 of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents and Related Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder applicable to a Loan Party or any of its Subsidiaries. (k) MATERIALLY ADVERSE AGREEMENTS. Neither any Loan Party nor ------------------------------- any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any Constitutive Documents or corporate restrictions that would be reasonably likely to have a Material Adverse Effect. (l) COLLATERAL. Except for the filings and other actions required ---------- by Sections 5.01(j) and 5.01(l), all filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and the Collateral Documents create in favor of the Administrative Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the Liens created or permitted under the Loan Documents. (m) SOLVENCY. Each Loan Party is, individually and together with -------- its Subsidiaries, Solvent. (n) ERISA COMPLIANCE. Except as specifically disclosed in Schedule ---------------- 4.01(n) hereto: (i) And except as would not have a Material Adverse Effect, each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the IRS and to the best knowledge of any Loan Party, nothing has occurred which would cause the loss of such qualification. The Borrower and each ERISA Affiliate have made all required contributions to any Plan subject to Section 412 of the Internal Revenue Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Internal Revenue Code has been made with respect to any Plan. (ii) There are no pending or, to the best knowledge of any Loan Party, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (iii) (a) No ERISA Event that requires notice to be given to the PBGC has occurred or is reasonably expected to occur; (b) no Plan has a Funded Current Liability 71 Percentage of less than 90% as of the most recent valuation date; (c) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); and (d) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan. (o) FOREIGN EMPLOYEE BENEFIT PLANS. With respect to each retire- -------------------------------- ment plan or arrangement mandated by a government other than the United States (a "FOREIGN GOVERNMENT SCHEME OR ARRANGEMENT") and with respect to each employee benefit plan maintained or contributed to by any Loan Party or any Subsidiary of any Loan Party that is not subject to United States law (a "FOREIGN PLAN"), each Foreign Plan is in compliance with the applicable Foreign Government Scheme or Arrangement and neither the Borrower nor any of its Subsidiaries has incurred or reasonably expects to incur any liability under any Foreign Government Scheme or Arrangement, which noncompliance or liability would be reasonably likely to have a Material Adverse Effect. (p) ENVIRONMENTAL MATTERS. The operations and properties of each ---------------------- Loan Party and each of its Subsidiaries comply in all respects with all applicable Environmental Laws and Environmental Permits except where such noncompliance could not have a Material Adverse Effect, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could have a Material Adverse Effect. (q) TAXES. (i) Neither any Loan Party nor any of its Subsidiaries ----- is party to any tax sharing agreement. (ii) Each Loan Party and each of its Subsidiaries and Affiliates has filed, has caused to be filed or has been included in all tax returns (federal, state, local and foreign) required to be filed and, except as permitted by Section 5.01(b), has paid all taxes shown thereon to be due, together with applicable interest and penalties. (iii) No issues have been raised by taxing authorities that in the aggregate would be reasonably likely to have a Material Adverse Effect. (r) LABOR MATTERS. Neither the business nor the properties of any ------------- Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that would be reasonably likely to have a Material Adverse Effect. (s) COMPLIANCE WITH LAW. Each of the Borrower and its Subsi- --------------------- diaries is in compliance with all Requirements of Law applicable to their properties, assets and business where the failure to so comply would (as to all such failures to comply in the aggregate) have a 72 Material Adverse Effect. There are no proceedings pending or, to the best knowledge of any Loan Party, threatened in writing, to terminate or modify any license, permit or other approval issued by a Governmental Authority, the termination or modification of which (in the aggregate as to all such matters) would have a Material Adverse Effect. (t) INTELLECTUAL PROPERTY. The Borrower and its Subsidiaries own, --------------------- or possess the right to use, all trademarks, trade names, copyrights, patents, patent rights, franchises, licenses and other intangible assets that are used in the conduct of their respective businesses as now operated, and none of such items, to the best knowledge of any Loan Party, conflicts with the valid trademark, trade name, copyright, patent, patent right, franchise, license or other intangible asset of any other Person, except to the extent such failure to own or possess or such conflict would not be reasonably likely to have a Material Adverse Effect. (u) INSURANCE. The properties of the Borrower and its Subsidiaries --------- are insured with financially sound and reputable insurance companies, not Affiliates of the Borrower, or with Majestic Insurance International Ltd., a wholly-owned Subsidiary of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower and its Subsidiaries operate. From and after the date that is 30 days following the Closing Date, property, general liability, business interruption and automobile insurance policies shall name the Administrative Agent for the benefit of the Secured Parties as an additional insured thereunder as its interests may appear and, in the case of property insurance, contain a loss payable subsection or endorsement, satisfactory in form and substance to the Administrative Agent, that names the Administrative Agent for the benefit of Lenders as the loss payee thereunder for any covered loss with respect to the Collateral, as appropriate. Insurance policies provide for at least 30 days prior written notice to the Administrative Agent of any material modification or cancellation of such policy. (v) CONDUCT OF BUSINESS. The Borrower and its Subsidiaries, consi- ------------------- dered together, are engaged only in businesses related or incidental to the manufacture and sale of clothing and accessories and the LOS/DOS Business. (w) EXISTING DEBT. Set forth on Schedule 4.01(w) hereto is a -------------- complete and accurate list of all Debt of the Borrower and its Subsidiaries for borrowed money that, after prepayment of all obligations of the Borrower and its Subsidiaries under the Existing Credit Agreements, is outstanding as of the date hereof, showing the obligor and the principal amount outstanding thereunder. (x) LIENS. Set forth on Schedule 4.01(x) hereto is a complete and ----- accurate list of all Liens and negative pledges to which, after prepayment of all obligations of the Borrower and its Subsidiaries under the Existing Credit Agreements, property or assets of any Loan Party or any of its Subsidiaries are subject as of the date hereof, other than Liens permitted under Sections 5.02(a)(ii)-(xii) and negative pledges permitted under Sections 5.02(l)(ii)-(vii), showing the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. 73 (y) REAL PROPERTY. Set forth on Schedule 4.01(y) hereto is a -------------- complete and accurate list of all real property owned or leased by any Loan Party or any of its Subsidiaries in the United States as of the date hereof, showing the street address, county or other relevant jurisdiction, state, record owner and book and estimated fair value thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such owned real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by general principles of equity. (z) RESTRICTED SUBSIDIARIES. Set forth on Schedule 4.01(z) ------------------------ hereto is a complete and accurate list of all Restricted Subsidiaries on the date hereof. (aa) ORGANIZATIONAL STRUCTURE. Set forth on Schedule 4.01(aa) here- ------------------------- to is the organizational structure of the Borrower and its Subsidiaries on the date hereof. (bb) MATERIAL SUBSIDIARIES. Set forth on Schedule 4.01(bb) hereto --------------------- is a complete and accurate list of all Material Subsidiaries. As of the end of the Fiscal Year ended November 28, 2000, the aggregate gross revenues of the Subsidiaries of the Borrower not constituting Material Subsidiaries for such Fiscal Year were not more than 5% of the aggregate gross revenues of the Borrower and its Subsidiaries on a Consolidated basis for such Fiscal Year. (cc) INVESTMENTS. Set forth on Schedule 4.01(cc) hereto is a ----------- complete and accurate list of all Investments held by any Loan Party or any of its Subsidiaries as of the date hereof, other than Investments permitted under Sections 5.02(f)(ii)-(xiv), showing the amount, obligor or issuer and maturity, if any, thereof. (dd) INTELLECTUAL PROPERTY. Set forth on Schedule 4.01(dd) hereto is --------------------- a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of any Loan Party or any of its Subsidiaries as of the date hereof, showing the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (ee) DISCLOSURE. No representation or warranty of any Loan Party ---------- contained in this Agreement or any other document (other than representations and warranties with respect to the Consolidated forecasted balance sheets and statements of income of the Borrower and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(ix) or 5.03 or contained in the Information Memorandum), certificate or written statement furnished to Administrative Agent or any Lender by any Loan Party for use in connection with any transactions contemplated by this Agreement, including the Information Memorandum, contains or will contain any untrue statement of a material fact or omits to state or will omit to state a material fact known to such Loan Party necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 74 ARTICLE V COVENANTS OF THE BORROWER Section 5.01 AFFIRMATIVE COVENANTS. So long as any Advance or ---------------------- any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will: (a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its -------------------------- Subsidiaries to comply with all applicable Requirements of Law, such compliance to include, without limitation, compliance with ERISA, all applicable Environmental Laws and Environmental Permits and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970, except where the failure to comply would not reasonably be expected to have a Material Adverse Effect. (b) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each of its --------------------- Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property (other than taxes, assessments and other governmental charges not exceeding $5,000,000 in the aggregate) and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; PROVIDED, HOWEVER, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) MAINTENANCE OF INSURANCE. Maintain, and cause each of its ------------------------ Subsidiaries to maintain, through self-insurance or with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of the Borrower and its Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations, if the failure to do so would (as to all such failures in the aggregate) have a Material Adverse Effect. Property, general liability, business interruption and automobile insurance policies shall (i) name the Administrative Agent for the benefit of the Secured Parties as an additional insured thereunder with respect to all Collateral as its interests may appear and, (ii) in the case of property insurance, contain a loss payable subsection or endorsement, satisfactory in form and substance to the Administrative Agent, that names the Administrative Agent for the benefit of the Secured Parties as the loss payee thereunder for any covered loss with respect to all Collateral, as appropriate. Insurance policies shall provide for at least 30 days prior written notice to the Administrative Agent of any material modification or cancellation of such policy. (d) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and main- ----------------------------------------- tain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory) and franchises and its Governmental Authorizations; PROVIDED, HOWEVER, that the Borrower and its Subsidiaries may consummate any merger, consolidation, liquidation, 75 wind up or dissolution permitted under Section 5.02(d) and PROVIDED FURTHER that neither the Borrower nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof would not be reasonably likely to have a Material Adverse Effect. (e) VISITATION RIGHTS. At any reasonable time and from time ------------------ to time on reasonable notice, permit any of the Agents or any of the Lender Parties, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. Following the occurrence and during the continuation of an Event of Default, the expenses of any Lender Party incurred pursuant to this Section 5.01(e) shall be for the account of the Borrower. (f) KEEPING OF BOOKS. Keep, and cause each of its Subsidiaries to ---------------- keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (g) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and ------------------------------ cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) TRANSACTIONS WITH AFFILIATES. Conduct, and cause each of its ---------------------------- Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (i) COVENANT TO GUARANTEE OBLIGATIONS AND GIVE SECURITY. Upon (x) --------------------------------------------------- the request of the Administrative Agent following the occurrence and during the continuance of a Default, (y) the formation or acquisition of any new direct or indirect Material Domestic Subsidiary by any Loan Party or (z) the acquisition of any property by any Loan Party, and such property, in the judgment of the Administrative Agent, shall not already be subject to a perfected first priority security interest in favor of the Administrative Agent for the benefit of the Secured Parties, then the Borrower shall, in each case at the Borrower's expense: (i) in connection with the formation or acquisition of a Material Domestic Subsidiary, within 30 days after such formation or acquisition, cause each such Material Domestic Subsidiary, and cause each direct and indirect parent of such Material Domestic Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties' obligations under the Loan Documents, 76 (ii) within 30 days after such request, formation or acquisition, duly execute and deliver, and cause each such Material Domestic Subsidiary and each direct and indirect parent of such Material Domestic Subsidiary (if it has not already done so) to duly execute and deliver, to the Administrative Agent mortgages, pledges, assignments, security agreements or security agreement supplements, as specified by and in form and substance reasonably satisfactory to the Administrative Agent, securing payment of all the Obligations of the applicable Loan Party, such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such properties, (iii) within 30 days after such request, formation or acquisition, take, and cause such Material Domestic Subsidiary or such parent to take, whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the mortgages, pledges, assignments, security agreements and security agreement supplements delivered pursuant to this Section 5.01(i), enforceable against all third parties in accordance with their terms, (iv) within 60 days after such request, formation or acquisition, deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion (in form and substance reasonably satisfactory to the Administrative Agent), addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clauses (i), (ii) and (iii) above, as to such guaranties, guaranty supplements, mortgages, pledges, assignments, security agreements and security agreement supplements being legal, valid and binding obligations of each Loan Party thereto enforceable in accordance with their terms, as to the matters contained in clause (iii) above, as to such recordings, filings, notices, endorsements and other actions being sufficient to create valid perfected Liens on such properties, and as to such other matters as the Administrative Agent may reasonably request, (v) as promptly as practicable after such request, formation or acquisition, deliver, upon the reasonable request of the Administrative Agent, to the Administrative Agent with respect to each parcel of real property owned or held by the entity that is the subject of such request, formation or acquisition title reports, surveys and engineering, soils and other reports, and environmental assessment reports, each in scope, form and substance satisfactory to the Administrative Agent, PROVIDED, HOWEVER, that to the extent that any Loan Party or any of its Material Domestic Subsidiaries shall have otherwise received any of the foregoing items with respect to such real property, such items shall, promptly after the receipt thereof, be delivered to the Administrative Agent, (vi) upon the occurrence and during the continuance of an Event of Default, promptly cause to be deposited any and all cash dividends paid or payable to it or any of its Subsidiaries from any of its Subsidiaries from time to time into the Cash Collateral Account, and with respect to all other dividends paid or payable to it or any of its Subsidiaries from time to time, promptly execute and deliver, or cause such Subsidiary to promptly execute and deliver, as the case may be, any and all further instruments and take or cause such Subsidiary to take, as the 77 case may be, all such other action as the Administrative Agent may deem necessary or desirable in order to obtain and maintain from and after the time such dividend is paid or payable a perfected, first priority Lien on such dividends, and (vii) at any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other reasonable action as the Administrative Agent may deem necessary or desirable in obtaining the full benefits of, or in perfecting and preserving the Liens of, such guaranties, mortgages, pledges, assignments and security agreements, PROVIDED, HOWEVER, neither the Borrower nor any of its Subsidiaries shall be required to grant Liens on any Principal Property, the Equity Interests of a Restricted Subsidiary or any Debt of or issued by a Restricted Subsidiary, (j) FOREIGN PLEDGED COLLATERAL. The Borrower shall use its ---------------------------- commercially reasonable efforts to take or cause to be taken all such actions, execute and deliver or cause to be executed and delivered all such agreements, documents and instruments and make or cause to be made all such filings and recordings that may be necessary or, in the opinion of the Administrative Agent, desirable in order to create in favor of the Administrative Agent, for the benefit of Secured Parties, a valid and perfected security interest in 65% of the Equity Interests owned by the Borrower or any other Loan Party of all Material Foreign Subsidiaries (other than the Equity Interests of Restricted Subsidiaries); PROVIDED, HOWEVER, that no action shall be required to be taken with respect to the Equity Interests of any Material Foreign Subsidiary pursuant to this subsection in the event that the Borrower and the Administrative Agent agree in good faith that the pledge of such Equity Interests would result in a significant tax liability to the Borrower or is restricted by the laws of the jurisdiction under which such Material Foreign Subsidiary is organized. (k) ADDITIONAL MATERIAL SUBSIDIARIES. In the event that, as of ---------------------------------- the end of any Fiscal Quarter, the aggregate gross revenues of the Subsidiaries of the Borrower not constituting Material Subsidiaries for the four-Fiscal Quarter period then ended were more than 5% of the aggregate gross revenues of the Borrower and its Subsidiaries on a Consolidated basis for such period, the Borrower shall designate one or more of its Subsidiaries as Material Subsidiaries for purposes of this Agreement and shall take all action required by Sections 5.01(i) and 5.01(j) with respect to such Subsidiary. (l) POST CLOSING ACTIONS. The Borrower shall, within 180 days after -------------------- the Closing Date, (i) deliver to the Administrative Agent evidence that all action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority Lien of the Administrative Agent for the benefit of the Secured Parties in all foreign registrations of Intellectual Property in Australia, Canada, France, Germany, Italy, Japan, Mexico, Netherlands Antilles, Spain, and the United Kingdom has been taken; provided that taking such action does not result in the granting of a trademark registration, patent, copyright registration or application therefor in the name of the Administrative Agent or the Secured Parties; 78 (ii) deliver to the Administrative Agent a certificate of each Foreign Subsidiary, signed on behalf of such Foreign Subsidiary by its President or a Vice President and its Secretary or any Assistant Secretary, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to a true and correct copy of the Constitutive Document of such Foreign Subsidiary and a copy of an intercompany promissory note duly executed by each Foreign Subsidiary (other than any Restricted Subsidiary) and duly endorsed to the Administrative Agent; (iii) deliver to the Administrative Agent such landlord and bailee waiver and consent agreements as may be reasonably requested by the Administrative Agent; (iv) deliver to the Administrative Agent executed control agreements with respect to all deposit, savings, investment and other accounts maintained by the Borrower or any of its Material Domestic Subsidiaries; and (v) at the request of any Hedge Bank delivered to the Borrower within 30 days after the Closing Date, enter into amendments to existing master agreements for Hedge Bank Hedge Agreements with such Hedge Bank (A) providing that the obligations of the Borrower and FinServ under such agreements are secured by the Collateral Documents until the payment in full of all Obligations under this Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements), the cancellation or expiration of all Letters of Credit and the termination of the Commitments and (B) setting forth the arrangements to be made between the parties at such time with respect to the providing of other collateral, if any. (m) FURTHER ASSURANCES. ------------------ (i) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender Party through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party's or any of its Subsidiaries' properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any 79 other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so. (n) TRANSFER OF RECEIVABLES. LSFCC shall sell to LSFLLC all ------------------------ accounts receivable purchased by it from the Borrower immediately upon consummation of such purchase. (o) LIEN SEARCHES. If requested by the Administrative Agent, ------------- promptly following receipt of the acknowledgment copy of any UCC financing statements filed in any applicable jurisdiction by or on behalf of the Secured Parties, deliver to the Administrative Agent completed requests for information listing such financing statement and all other effective financing statements filed in such jurisdiction that name any Loan Party as debtor, together with copies of such other financing statements. (p) CASH COLLATERAL ACCOUNTS. Maintain, and cause each of its ------------------------ Material Domestic Subsidiaries to maintain, the Cash Collateral Account and the L/C Cash Collateral Account with Bank of America or another commercial bank located in the United States which has accepted the assignment of such accounts to the Administrative Agent for the benefit of the Secured Parties pursuant to the Pledge and Security Agreement. From and after the date that is 180 days after the Closing Date, no Loan Party shall maintain any investment property or Deposit Account with any financial institution unless such institution has executed a control agreement in form and substance reasonably satisfactory to the Administrative Agent. Section 5.02 NEGATIVE COVENANTS. So long as any Advance or any ------------------ other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will not, at any time: (a) LIENS, ETC. Create, incur, assume or suffer to exist, or per- ---------- mit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, except: (i) Liens existing on the date hereof and described on Schedule 4.01(x) hereto; (ii) Liens created under the Loan Documents; (iii) Permitted Liens; (iv) purchase money Liens upon or in real property or per- sonal property acquired or held by the Borrower or any of its Subsidiaries (other than LSFCC or LSFCCC) in the ordinary course of business to secure the purchase price of such property or to secure Debt incurred solely for the purpose of financing the acquisition or improvement of any such property to be subject to such Liens, or Liens existing on any such property at the time of acquisition 80 (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; PROVIDED, HOWEVER, that no such Lien shall extend to or cover any property other than the property being acquired or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (iv) shall not exceed the amount permitted under Section 5.02(b)(iii)(C) at any time outstanding; (v) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(i)(B); provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases; (vi) Liens attaching to ownership interests in joint ventures (whether in partnership, corporate or other form) engaged in the LOS/DOS Business or attaching to intellectual property rights relating to the LOS/DOS Business; (vii) Liens created in connection with (A) Equipment Financing Transactions permitted under Section 5.02(b)(iii)(H), (B) Real Estate Financing Transactions permitted under Section 5.02(b)(iii)(G), (C) Permitted Foreign Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(F) and (D) Permitted Domestic Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(J); PROVIDED, HOWEVER, that no such Lien shall extend to or cover property other than the property subject to such Equipment Financing Transaction, Real Estate Financing Transaction, Permitted Foreign Receivables Purchase Transaction or Permitted Domestic Receivables Purchase Transaction; (viii) Liens created pursuant to applications or reim- bursement agreements pertaining to documentary letters of credit which encumber documents and other property relating to such documentary letters of credit and the products and proceeds thereof; (ix) Liens on cash, Cash Equivalents or other assets deposited in a margin account securing Ordinary Course Hedging Agreements permitted under Section 5.02(b)(iii)(D); (x) Liens on property that is the subject of a repurchase agreement entered into in the ordinary course of business and permitted under Section 5.02(f)(iv); (xi) Liens on property of Foreign Subsidiaries securing Debt outstanding in an aggregate principal amount not to exceed $25,000,000 at any time; and (xii) other Liens securing Debt outstanding in an aggregate principal amount not to exceed $10,000,000 at any time. (b) DEBT. Create, incur, assume or suffer to exist, or permit ---- any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: (i) in the case of the Borrower, 81 (A) Debt owed to a Material Domestic Subsidiary of the Borrower, which Debt (x) shall constitute Pledged Debt and (y) shall be evidenced by promissory notes in form and substance satisfactory to the Administrative Agent, shall be subordinated in right of payment to the payment in full of the Obligations and such promissory notes shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Administrative Agent pursuant to the terms of the Pledge and Security Agreement; (B) Capitalized Leases not to exceed in the aggregate $25,000,000 at any time outstanding; and (C) Debt of the Borrower issued in a Capital Markets Transaction provided such Debt is unsecured and such Debt does not have a stated maturity date or required principal payments earlier than the Termination Date and the Borrower makes the prepayment required pursuant to Section 2.06(b); (ii) in the case of any Subsidiary of the Borrower (other than LSFCC or LSFLLC), (A) Debt owed to the Borrower or to a Material Domestic Subsidiary of the Borrower (other than Debt owed by a Restricted Subsidiary), which Debt (x) shall constitute Pledged Debt and (y) shall, except in the case of redeemable preferred stock, be evidenced by promissory notes in form and substance satisfactory to the Administrative Agent, shall be subordinated in right of payment in full of the Obligations, and such promissory notes shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Administrative Agent pursuant to the terms of the Pledge and Security Agreement; (B) Debt owed to a Pledged Foreign Subsidiary by a Pledged Foreign Subsidiary; and (C) Debt owed to an Unpledged Foreign Subsidiary by a Pledged Foreign Subsidiary or an Unpledged Foreign Subsidiary; (iii) in the case of the Borrower and its Subsidiaries (other than LSFCC or LSFLLC), (A) Debt of the Borrower and its Subsidiaries outstanding on the Closing Date and listed on Schedule 4.01(w) hereto and any refinancing of the industrial revenue bond obligations listed on Schedule 4.01(w) hereto provided there is no increase in the aggregate principal amount of such obligations; (B) Debt under the Loan Documents; (C) Debt secured by Liens permitted by Section 5.02(a)(iv) not to exceed in the aggregate $50,000,000 at any time outstanding; 82 (D) Debt of the Borrower and FinServ in respect of Ordinary Course Hedge Agreements and consistent with prudent business practice, provided that the aggregate Agreement Value of all such Ordinary Course Hedge Agreements under which the Borrower or FinServ would be required to make a payment on termination thereof do not exceed in the aggregate $75,000,000 (net of the value of cash, Cash Equivalents or other assets deposited in a margin account in connection with any such Ordinary Course Hedge Agreements and the face amount of any letter of credit issued with respect to any such Ordinary Course Hedge Agreements) at any time outstanding; (E) Debt of the Borrower and its Subsidiaries (other than LSFCC or LSFLLC) to FinServ and Debt of FinServ to the Borrower and its other Subsidiaries (other than LSFCC or LSFLLC) in the ordinary course of business; (F) Debt of Foreign Subsidiaries in the form of Permitted Foreign Receivables Purchase Transactions, provided the Borrower and its Subsidiaries make the prepayment required pursuant to Section 2.06(b); (G) Debt of the Borrower and its Subsidiaries in the form of Real Estate Financing Transactions, provided the principal amount of all Debt permitted under this Section 5.02(b)(iii)(G) and Section 5.02(b)(iii)(H) (including all such Debt existing on the Closing Date and listed on Schedule 4.01(w) hereto) does not exceed in the aggregate $175,000,000 at any time outstanding and the Borrower and its Subsidiaries make the prepayment required pursuant to Section 2.06(b); (H) Debt of the Borrower and its Subsidiaries in the form of Equipment Financing Transactions, provided the principal amount of all Debt permitted under this Section 5.02(b)(iii)(H) and Section 5.02(b)(iii)(G) (including all such Debt existing on the Closing Date and listed on Schedule 4.01(w) hereto) does not exceed in the aggregate $175,000,000 at any time outstanding and the Borrower and its Subsidiaries make the prepayment required pursuant to Section 2.06(b); (I) Ordinary Course Hedging Agreements between the Borrower or FinServ and FinServ and the other Subsidiaries of the Borrower (other than LSFCC or LSFLLC) in the ordinary course of business; (J) Debt of the Borrower and its Subsidiaries in the form of Permitted Domestic Receivables Purchase Transactions in form and substance reasonably satisfactory to the Administrative Agent, provided the Borrower and its Subsidiaries make the prepayment required pursuant to Section 2.06(b); (K) Debt of the Borrower to any of its Subsidiaries and Debt of any of its Subsidiaries to the Borrower or any of its other Subsidiaries outstanding on the Closing Date and listed on Schedule 4.01(w) hereto; (L) Debt between the Borrower and any of its Subsidiaries or between any of its Subsidiaries arising from purchases of inventory or raw materials in the ordinary course of business; 83 (M) Debt arising from the honoring of a check, draft or similar instrument against insufficient funds; (N) Debt of the Borrower to any of its Subsidiaries and Debt of any of its Subsidiaries to the Borrower or any of its other Subsidiaries; PROVIDED, HOWEVER, that the sum, without duplication, of (i) the aggregate principal amount of all such Debt incurred after the date hereof PLUS (ii) the aggregate Investments permitted by Section 5.02(f)(x) PLUS (iii) the aggregate dispositions permitted by Section 5.02(e)(x) shall not exceed $50,000,000 in the aggregate during Fiscal Year 2001, $100,000,000 in the aggregate during Fiscal Years 2001 and 2002, taken as a single period, or $150,000,000 in the aggregate during Fiscal Years 2001, 2002 and 2003, taken as a single period; (O) Debt of the Borrower to any of its Subsidiaries and Debt of any of its Subsidiaries to the Borrower or any of its other Subsidiaries incurred in connection with a disposition permitted under Section 5.02(e)(xii); (P) Debt of the Borrower or any Subsidiary of the Borrower to the Borrower or any of its other Subsidiaries incurred in connection with a Permitted Foreign Receivables Purchase Transaction permitted under Section 5.02(b)(iii)(F) in an amount not to exceed the proceeds thereof; and (Q) other Debt (without duplication) of the Borrower and its Subsidiaries not exceeding $150,000,000 in the aggregate at any time. (c) CHANGE IN NATURE OF BUSINESS. Engage in, or suffer or permit ----------------------------- any of its Subsidiaries to engage in, any business not related or incidental to the manufacture and sale of clothing and accessories. The LOS/DOS Business is a business that is related or incidental to the manufacture and sale of clothing within the meaning of the preceding sentence. The Borrower shall not suffer or permit LSFLLC to engage in any business other than the purchase, holding and securitization of accounts receivable and shall not suffer or permit LSFCC to engage in any business other than the purchase, sale to LSFLLC and servicing of accounts receivable generated by the Borrower, the processing of accounts payable of the Borrower and its Subsidiaries, procurement support services for the Borrower and its Subsidiaries and other accounting and general customer relationship functions. (d) MERGERS, ETC. Merge into or consolidate with any Person or ------------- permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that: (i) any Domestic Subsidiary of the Borrower may merge into or consolidate with any other Domestic Subsidiary of the Borrower or be liquidated, wound-up or dissolved or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of to any other Domestic Subsidiary of the Borrower, provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a Domestic Subsidiary of the Borrower, provided further that, in the case of any such merger or consolidation to which a Material Domestic Subsidiary is a party, the Person formed by such merger or consolidation shall be or become a Material Domestic Subsidiary; 84 (ii) any Pledged Foreign Subsidiary may merge into or con- solidate with any other Pledged Foreign Subsidiary or be liquidated, wound-up or dissolved or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of to the Borrower, any Material Domestic Subsidiary or any other Pledged Foreign Subsidiary; and (iii) any Unpledged Foreign Subsidiary may merge into or consolidate with any other Unpledged Foreign Subsidiary or any Pledged Foreign Subsidiary, or be liquidated, wound-up or dissolved or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of to any other Unpledged Foreign Subsidiary or any Pledged Foreign Subsidiary, provided that, in the case of any such merger or consolidation between a Pledged Foreign Subsidiary and an Unpledged Foreign Subsidiary, the Person formed by such merger or consolidation shall be a Pledged Foreign Subsidiary. (e) SALES, ETC., OF ASSETS. Sell, lease, transfer or other- ------------------------- wise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except: (i) purchases or sales of inventory in the ordinary course of its business; (ii) dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (iii) dispositions of inventory by the Borrower or any of Subsidiaries to the Borrower or any of its Subsidiaries in arm's length transactions in the ordinary course of business; (iv) dispositions of accounts receivable from the Borrower to LSFCC and from LSFCC to LSFLLC; (v) dispositions of Foreign Receivables pursuant to Permitted Foreign Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(F) provided the Borrower and its Subsidiaries make the prepayments required pursuant to Section 2.06(b); (vi) dispositions of equipment pursuant to Equipment Financing Transactions permitted under Section 5.02(b)(iii)(H) provided the Borrower and its Subsidiaries make the prepayments required pursuant to Section 2.06(b); (vii) dispositions of real property pursuant to Real Estate Financing Transactions permitted under Section 5.02(b)(iii)(G) provided the Borrower and its Subsidiaries make the prepayments required pursuant to Section 2.06(b); (viii) dispositions of Domestic Receivables pursuant to Permitted Domestic Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(J) provided the Borrower and its Subsidiaries make the prepayments required pursuant to Section 2.06(b); (ix) licenses of Intellectual Property in the ordinary course of business; 85 (x) dispositions by the Borrower to any of its Subsidi- aries of property other than accounts receivable and inventory and dispositions by any of its Subsidiaries to the Borrower or any of its other Subsidiaries of property other than accounts receivable and inventory; provided that the sum, without duplication, of (i) the fair market value of the assets sold, transferred, licensed or otherwise disposed of after the date hereof PLUS (ii) the aggregate principal amount of Debt permitted by Section 5.02(b)(iii)(N) PLUS (iii) the aggregate Investments permitted by Section 5.02(f)(x) shall not exceed $50,000,000 in the aggregate during Fiscal Year 2001, $100,000,000 in the aggregate during Fiscal Years 2001 and 2002, taken as a single period, or $150,000,000 in the aggregate during Fiscal Years 2001, 2002 and 2003, taken as a single period; (xi) other dispositions by the Borrower and its Subsi- diaries of property other than accounts receivable; provided that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition; (ii) the consideration received for such disposition shall be in an amount at least equal to the fair market value of the assets sold, transferred, licensed or otherwise disposed of; (iii) at least 75% of the consideration received for such disposition shall be cash; (iv) the non-cash consideration received for all such dispositions in the aggregate shall not exceed $30,000,000 at any time outstanding; (v) the aggregate fair market value of all assets so sold, transferred, licensed or otherwise disposed of by the Borrower and its Subsidiaries shall not exceed $50,000,000 in any Fiscal Year; and (vi) the Borrower and its Subsidiaries make the prepayments required pursuant to Section 2.06(b); (xii) dispositions of the Equity Interests of Material Domestic Subsidiaries to the Borrower and wholly owned Material Domestic Subsidiaries; dispositions of the Equity Interests of Pledged Foreign Subsidiaries to the Borrower, Material Domestic Subsidiaries and other Pledged Foreign Subsidiaries; and dispositions of the Equity Interests of Unpledged Foreign Subsidiaries to the Borrower or any of its other Subsidiaries; (xiii) dispositions of accounts receivable to collection agencies provided the aggregate face amount of all such accounts receivable does not exceed $5,000,000; and (xiv) dispositions of accounts receivable of Foreign Subsi- diaries, provided the aggregate face amount of all such accounts receivable does not exceed $25,000,000. (f) INVESTMENTS IN OTHER PERSONS. Make or hold, or permit any ------------------------------ of its Subsidiaries to make or hold, any Investment in any Person, except: (i) Investments existing on the date hereof and described on Schedule 4.01(cc) hereto; (ii) equity Investments by the Borrower and its Subsi- diaries in their Subsidiaries outstanding on the date hereof and described on Schedule 4.01(cc) hereto; (iii) advances to officers, directors and employees of the Borrower or any of its Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes; (iv) Investments by the Borrower and its Subsidiaries in cash and Cash Equivalents; 86 (v) Investments consisting of intercompany Debt permitted under Section 5.02(b)(i)(A), 5.02(b)(ii), 5.02(b)(iii)(E), 5.02(b)(iii)(I), 5.02(b)(iii)(K), 5.02(b)(iii)(L), 5.02(b)(iii)(N), 5.02(b)(iii)(O) or 5.02(b)(iii)(P); (vi) extensions of credit to customers or suppliers of the Borrower or any of its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof; (vii) Investments by the Borrower in any Material Domes- tic Subsidiary and Investments of any Material Domestic Subsidiary in the Borrower or any other Material Domestic Subsidiary; (viii) Investments by Pledged Foreign Subsidiaries in other Pledged Foreign Subsidiaries; (ix) Investments by Unpledged Foreign Subsidiaries in other Unpledged Foreign Subsidiaries or Pledged Foreign Subsidiaries; (x) Investments by the Borrower in any of its Subsidi- aries and Investments of any of its Subsidiaries in the Borrower or any of its other Subsidiaries; provided that the sum, without duplication, of (i) such Investments made after the date hereof PLUS (ii) the aggregate principal amount of Debt permitted by Section 5.02(b)(iii)(N) PLUS (iii) the aggregate dispositions permitted by Section 5.02(e)(x) shall not exceed $50,000,000 in the aggregate during Fiscal Year 2001, $100,000,000 in the aggregate during Fiscal Years 2001 and 2002, taken as a single period, or $150,000,000 in the aggregate during Fiscal Years 2001, 2002 and 2003, taken as a single period; PROVIDED FURTHER that Investments in Subsidiaries of the Borrower that are not Solvent immediately prior to the making of any such Investment shall not exceed $10,000,000 in the aggregate in any Fiscal Year; (xi) Investments by the Borrower in any of its Subsidi- aries and Investments of any of its Subsidiaries in the Borrower or any of its other Subsidiaries made in connection with a disposition permitted under Section 5.02(e)(xii); (xii) Investments by the Borrower in Subsidiaries formed in connection with Permitted Domestic Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(J); (xiii) Investments by any Subsidiary of the Borrower in the Borrower or any of its other Subsidiaries made in connection with a Permitted Foreign Receivables Purchase Transaction permitted under Section 5.02(b)(iii)(F) in an amount not to exceed the proceeds thereof; and (xiv) other Investments by the Borrower and its Subsi- diaries not otherwise permitted under this Section 5.02(f) in an aggregate amount not to exceed $35,000,000. (g) RESTRICTED PAYMENTS. Declare or pay any dividends, purchase, ------------------- redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its 87 stockholders, partners or members (or the equivalent Persons thereof) as such, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Borrower, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (i) the Borrower may declare and pay dividends and distributions payable only in common stock (other than Disqualified Stock) of the Borrower; and (ii) any Subsidiary of the Borrower may (A) declare and pay cash dividends and dividends and distributions payable in common stock (other than Disqualified Stock) of such Subsidiary to the Borrower and (B) declare and pay cash dividends and dividends and distributions payable in common stock (other than Disqualified Stock) of such Subsidiary to any Subsidiary of the Borrower of which it is a Subsidiary; provided that any dividends paid by a Subsidiary of the Borrower which is not a wholly-owned Subsidiary are paid to all stockholders thereof on a pro rata basis or on a basis that results in the receipt by the Borrower or a Subsidiary that is the parent of that Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis. (h) LEASE OBLIGATIONS. Create, incur, assume or suffer to exist, ----------------- or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any obligations as lessee (i) for the rental or hire of real or personal property in connection with any sale and leaseback transaction other than (A) Capitalized Leases permitted under Section 5.02(b)(i)(B), (B) Real Estate Financing Transactions permitted under Section 5.02(b)(iii)(G) and (C) Equipment Financing Transactions permitted under Section 5.02(b)(iii)(H), or (ii) for the rental or hire of other real or personal property of any kind under leases or agreements to lease (excluding Capitalized Leases) other than (A) leases in existence on the Closing Date and (B) leases entered into or assumed by the Borrower or any Subsidiary after the date hereof in the ordinary course of business. (i) AMENDMENTS OF CONSTITUTIVE DOCUMENTS. Amend, or permit any -------------------------------------- of its Subsidiaries to amend, any of its Constitutive Documents if the effect of such amendment would be materially adverse to the Borrower or to the Lenders. (j) ACCOUNTING CHANGES. Make or permit, or permit any of its ------------------- Subsidiaries to make or permit, any change in its Fiscal Year. (k) PREPAYMENTS, ETC., OF DEBT. Prepay, redeem, purchase, defease --------------------------- or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except (i) the prepayment of the Advances in accordance with the terms of this Agreement and the prepayment of Debt payable to the Borrower, (ii) the payment of Debt as contemplated by the definitions of Net Cash Proceeds, (iii) the contemporaneous exchange of Debt, in an aggregate principal amount not to exceed $50,000,000, outstanding under the Indentures, that certain U.S. Dollar Indenture dated as of January 18, 2001 between the Borrower and Citibank, N.A., as trustee, or that certain Euro Indenture dated as of January 18, 2001 between the Borrower and Citibank, N.A., as trustee, for Debt issued in connection with a Capital Markets Transaction permitted under Section 5.02(b)(i)(C), (iv) the prepayment of secured Debt provided there are no outstanding Advances 88 after giving effect to such prepayment, and (v) the close out of Ordinary Course Hedge Agreements. (l) NEGATIVE PLEDGE. Enter into or suffer to exist, or permit ---------------- any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets except: (i) those existing on property of the Borrower and its Subsidiaries on the Closing Date and listed on Schedule 4.01(x) hereto; (ii) those in favor of the Secured Parties; (iii) those in connection with any purchase money Debt permitted under Section 5.02(b)(iii)(C) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt; (iv) those in connection with any Capitalized Lease permitted under Section 5.02(b)(i)(B) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto; (v) negative pledges on accounts receivable of Foreign Subsidiaries and the associated assets of Foreign Subsidiaries in connection with Permitted Foreign Receivable Purchase Transactions permitted under Section 5.02(b)(iii)(F), negative pledges on accounts receivable of Domestic Subsidiaries and associated assets of Domestic Subsidiaries in connection with Permitted Domestic Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(J), negative pledges on the property subject to Equipment Financing Transactions permitted under Section 5.02(b)(iii)(H) and Real Estate Financing Transactions permitted under Section 5.02(b)(iii)(G) and negative pledges on the property of Foreign Subsidiaries subject to Liens permitted under Section 5.02(a)(xi); (vi) negative pledges on Intellectual Property licensed from third parties; and (vii) negative pledges with respect to property of the Borrower and its Subsidiaries contained in documentation for any Capital Markets Transaction provided such negative pledges (A) expressly permit Liens in favor of Administrative Agent on all assets of the Borrower and its Subsidiaries and Liens on equipment subject to Equipment Financing Transactions, real property subject to Real Estate Financing Transactions, accounts receivable subject to Permitted Domestic Receivables Purchase Transactions and Permitted Foreign Receivables Purchase Transactions and property subject to any other Lien permitted under Section 5.02(a) and (B) do not require the Debt issued in such Capital Markets Transactions to be secured by such permitted Liens. (m) CAPITAL EXPENDITURES. Make, or permit any of its Subsidiaries --------------------- to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Borrower and its Subsidiaries in any Fiscal Year to exceed $75,000,000. 89 (n) RESTRICTED SUBSIDIARIES. Permit any of its Subsidiaries ------------------------ existing as of the Closing Date to become a Restricted Subsidiary, other than as a result of a change in Consolidated Net Tangible Assets. (o) PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Directly or ------------------------------------------- indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the Borrower (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) restrictions on Subsidiaries formed in connection with Permitted Foreign Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(F) and Permitted Domestic Receivables Purchase Transactions permitted under Section 5.02(b)(iii)(J) contained in documentation for such Transactions, (iii) restrictions on the declaration or payment or other distributions in respect of such Equity Interests contained in documentation for any Capital Markets Transaction permitted under Section 5.02(b)(i)(C) provided such restrictions do not prohibit any actions expressly permitted hereunder, (iv) restrictions on the foregoing (other than restrictions of the type set forth in clause (iii)), if any, contained in documentation for any Capital Markets Transaction permitted under Section 5.02(b)(i)(C) provided that any such restrictions shall be deemed to be included herein as if set forth in this Agreement, and (v) restrictions on the transfer of the property subject to Equipment Financing Transactions permitted under Section 5.02(b)(iii)(H), Real Estate Financing Transactions permitted under Section 5.02(b)(iii)(G) and dispositions of accounts receivable permitted under Section 5.02(e)(xiv). (p) AMENDMENTS OF DOCUMENTS RELATING TO DEBT AND RECEIVABLES. Amend -------------------------------------------------------- or otherwise change the terms of any Debt, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Debt, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate or make less onerous any such event or default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Debt (or a trustee or other representative on their behalf) which would be materially adverse to the Borrower or to the Lenders. The Borrower shall not amend or otherwise change the terms of the Receivables Transfer Agreements other than (i) amendments to extend the term thereof or to preserve the arm's length nature of the purchase and sale effected thereby and (ii) amendments in connection with a Permitted Domestic Receivables Purchase Transaction provided the effect of such amendment would not be materially adverse to the Borrower or to the Lenders. (q) USE OF PROCEEDS. --------------- (i) Use any portion of the proceeds of the Advances, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Debt of the Borrower or 90 others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Sections 13 or 14 of the Exchange Act. (ii) Use any portion of the proceeds of the Advances, directly or indirectly, (i) knowingly to purchase Ineligible Securities from either Co-Lead Arranger during any period in which such Co-Lead Arranger makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by either Co-Lead Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by either Co-Lead Arranger and issued by or for the benefit of the Borrower or any Affiliate of the Borrower. Each Co-Lead Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities. Section 5.03 REPORTING REQUIREMENTS. So long as any Advance or ----------------------- any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Agents and the Lender Parties: (a) DEFAULT NOTICE. As soon as possible and in any event within --------------- two days after an Officer of the Borrower obtains knowledge of a Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto. (b) ANNUAL FINANCIALS. As soon as available and in any event ------------------ within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, including therein Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion with respect to the Consolidated statements reasonably acceptable to the Required Lenders of Arthur Andersen or other independent public accountants of recognized standing acceptable to the Required Lenders, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of a Responsible Officer of the Borrower, in substantially the form of Exhibit G hereto, stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto. 91 (c) QUARTERLY FINANCIALS. As soon as available and in any event --------------------- within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Quarter and ending with the end of such Fiscal Quarter and Consolidated and consolidating statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP, together with (i) a certificate of said Responsible Officer, in substantially the form of Exhibit G hereto, stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP. (d) MONTHLY FINANCIALS. As soon as available and in any event ------------------- within 30 days after the end of each fiscal month, a Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such month and Consolidated statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous month and ending with the end of such month and Consolidated statements of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, all in reasonable detail and duly certified by a Responsible Officer of the Borrower. (e) ANNUAL FORECASTS. As soon as available and in any event no ----------------- later than 60 days after the end of each Fiscal Year, forecasts prepared by management of the Borrower, in form satisfactory to the Administrative Agent, of Consolidated balance sheets and income statements of the Borrower and its Subsidiaries on a monthly basis for the Fiscal Year following such Fiscal Year and on an annual basis for each Fiscal Year thereafter until the Termination Date. (f) LITIGATION. Promptly after the commencement thereof, notice of ---------- all actions, suits, investigations, litigation and proceedings before any Governmental Authority or arbitrator, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. (g) SECURITIES REPORTS. Promptly after the sending or filing there- ------------------ of, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all 92 registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange. (h) CREDITOR REPORTS. Promptly after the furnishing thereof, ----------------- copies of any statement or report furnished to any holder of Debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of the Indentures or any indenture, loan or credit or similar agreement executed in connection with a Capital Markets Transaction and not otherwise required to be furnished to the Lender Parties pursuant to any other clause of this Section 5.03. (i) AGREEMENT NOTICES. Promptly upon receipt thereof, copies of ------------------- all notices, requests and other documents received by any Loan Party or any of its Subsidiaries under or pursuant to any instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any Loan Party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and copies of any amendment, modification or waiver of any provision of any instrument, indenture, loan or credit or similar agreement and, from time to time upon request by the Administrative Agent, such information and reports regarding such instruments, indentures and loan and credit and similar agreements as the Administrative Agent may reasonably request. (j) ERISA. promptly upon any Officer of the Borrower becoming ----- aware of its occurrence, notice of any of the following events affecting the Borrower or any ERISA Affiliate (but in no event more than 10 days after such event), and such Officer shall also deliver to Administrative Agent and each Lender a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Borrower or any ERISA Affiliate with respect to such event: (i) an ERISA Event; (ii) a decrease in the Funded Current Liability Percen- tage for any Plan at the end of any fiscal quarter to less than 90%; or (iii) any significant change in the status of any item dis- closed on Schedule 4.01(n) hereto. (k) INSURANCE. As soon as available and in any event within 60 --------- days after the end of each Fiscal Year, a report summarizing any changes in the insurance coverage maintained for the Borrower and its Subsidiaries during such Fiscal Year and containing such additional information as any Agent, or any Lender Party through the Administrative Agent, may reasonably specify. (l) NEW SUBSIDIARIES. No later than 60 days after the end of each ---------------- Fiscal Year, a list of all Subsidiaries of each Loan Party showing (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of its Equity Interests authorized and the number outstanding, and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights. 93 (m) FOREIGN INTELLECTUAL PROPERTY. No later than 60 days after ------------------------------ the end of each Fiscal Year, a list of the ten countries (other than the United States) in which the highest percentage of the aggregate gross revenues of the Borrower and its Subsidiaries on a Consolidated basis for such Fiscal Year were generated. (n) MATERIAL SUBSIDIARIES. No later than 60 days after the end of ---------------------- each Fiscal Year, a list of all Material Subsidiaries and the percentage of the aggregate gross revenues of the Borrower and its Subsidiaries on a Consolidated basis for such Fiscal Year contributed by each such Material Subsidiary. (o) OTHER INFORMATION. Such other information respecting the busi- ----------------- ness, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request. Section 5.04 FINANCIAL COVENANTS. So long as any Advance or any ------------------- other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will: (a) LEVERAGE RATIO. Maintain at all times a Leverage Ratio of --------------- not more than the amount set forth below for each Business Day occurring in the periods set forth below: ----------------------------------------------------- PERIOD RATIO ----------------------------------------------------- Closing - 11/24/01 4.25:1.00 ----------------------------------------------------- 11/25/01 - 05/25/02 4.00:1.00 ----------------------------------------------------- 05/26/02 - 11/23/02 3.75:1.00 ----------------------------------------------------- 11/24/02 - 05/24/03 3.25:1.00 ----------------------------------------------------- 05/25/03 - 08/29/03 3.00:1.00 ----------------------------------------------------- (b) SENIOR SECURED LEVERAGE RATIO. Maintain at all times a Senior ------------------------------- Secured Leverage Ratio of not more than the amount set forth below for each Business Day occurring in the periods set forth below: ------------------------------------------------------ PERIOD RATIO ------------------------------------------------------ Closing - 11/24/01 2.50:1.00 ------------------------------------------------------ 11/25/01 - 05/25/02 2.25:1.00 ------------------------------------------------------ 05/26/02 - 11/23/02 2.00:1.00 ------------------------------------------------------ 11/24/02 - 05/24/03 1.75:1.00 ------------------------------------------------------ 05/25/03 - 08/29/03 1.50:1.00 ------------------------------------------------------ (c) FIXED CHARGE COVERAGE RATIO. Maintain at the end of each ----------------------------- Fiscal Quarter of the Borrower a Fixed Charge Coverage Ratio of not less than 1.00 to 1.00 for each Measurement Period. 94 (d) INTEREST COVERAGE RATIO. Maintain at the end of each ------------------------- Fiscal Quarter of the Borrower an Interest Coverage Ratio of not less than the amount set forth below for each Measurement Period ending during the periods set forth below: ------------------------------------------------------ MEASUREMENT PERIOD ENDING IN RATIO ------------------------------------------------------ Closing - 11/24/01 2.00:1.00 ------------------------------------------------------ 11/25/01 - 05/25/02 2.00:1.00 ------------------------------------------------------ 05/26/02 - 11/23/02 2.25:1.00 ------------------------------------------------------ 11/24/02 - 05/24/03 2.50:1.00 ------------------------------------------------------ 05/25/03 - 08/29/03 2.75:1.00 ------------------------------------------------------ ARTICLE VI EVENTS OF DEFAULT Section 6.01 EVENTS OF DEFAULT. If any of the following events ------------------ ("EVENTS OF DEFAULT") shall occur and be continuing: (a) (i) the Borrower shall fail to pay any principal of any Advance when the same shall become due and payable, whether by scheduled maturity or at a date fixed for prepayment or by acceleration, demand or otherwise, or (ii) the Borrower shall fail to pay any interest on any Advance or any fee owing under or in respect of this Agreement, or any Loan Party shall fail to make any other payment under or in respect of any Loan Document, whether by scheduled maturity or at a date fixed for payment or prepayment or by acceleration, demand or otherwise, in each case under this clause (ii) within three Business Days after the same becomes due and payable; or (b) any representation or warranty made by any Loan Party under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) (i) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.14, 5.01(c), 5.01(d), 5.01(n) or 5.01(p), 5.02, 5.03 or 5.04; or (d) any Loan Party shall fail to perform or observe any term, covenant or agreement contained in any of the Loan Documents on its part to be performed or observed that is not otherwise referred to in this Section 6.01 if such failure shall remain unremedied for at least 30 days after the earlier of the date on which (i) an Officer of any of the Loan Parties first becomes aware of such failure and (ii) written notice thereof shall have been given to the Borrower by the Administrative Agent or any of the Lenders Parties; or (e) (i) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on, or any other amount payable in respect of, one or more items of Debt of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding in an aggregate principal amount (or, in the case of any Hedge Agreement, that has an Agreement Value) of at least $25,000,000 when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such 95 failure shall continue after the applicable grace period, if any, specified in the agreements or instruments relating to all such Debt; or (ii) any other event shall occur or condition shall exist under the agreements or instruments relating to one or more items of Debt of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding (or under which one or more Persons have a commitment to extend credit) in an aggregate principal amount (or, in the case of any Hedge Agreement, that has an Agreement Value) of at least $25,000,000, and such other event or condition shall continue after the applicable grace period, if any, specified in all such agreements or instruments, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or (iii) one or more items of Debt of the Loan Parties and their Subsidiaries (excluding Debt outstanding hereunder) that is outstanding (or under which one or more Persons have a commitment to extend credit) in an aggregate principal amount (or, in the case of any Hedge Agreement, that has an Agreement Value) of at least $25,000,000 shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled or required prepayment or redemption or as contemplated by the definition of Net Cash Proceeds), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) the Borrower or any Material Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Material Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of at least 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any event or action analogous to or having a substantially similar effect to any of the events or actions set forth above in this Section 6.01(f) (other than a solvent reorganization) shall occur under the Requirements of Law of any jurisdiction applicable to the Borrower or any Material Subsidiary; or the Borrower or any Material Subsidiary shall take any corporate, partnership, limited liability company or other similar action to authorize any of the actions set forth above in this Section 6.01(f); or (g) one or more judgments or orders for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against the Borrower or any of its Material Subsidiaries and shall remain unsatisfied and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order or (ii) there shall be any period of at least 30 days during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; PROVIDED, HOWEVER, that any such judgment or order shall not give rise to an Event of Default under this Section 6.01(g) if and for so long as (A) the amount of such judgment or order is covered by a valid and binding policy of insurance 96 between the defendant and the insurer, which shall be rated at least "A" by A.M. Best Company, covering full payment thereof and (B) such insurer has been notified, and has not denied the claim made for payment, of the amount of such judgment or order; or (h) one or more nonmonetary judgments or orders (including, without limitation, writs or warrants of attachment, garnishment, execution, distraint or similar process) shall be rendered against the Borrower or any of its Material Subsidiaries that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and there shall be any period of at least 30 days during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01, 5.01(i), 5.01(j) or 5.01(l) shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against any Loan Party intended to be a party thereto, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 3.01, 5.01(i), 5.01(j) or 5.01(l) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority Lien on the Collateral purported to be covered thereby; or (k) any Plan maintained by the Borrower or any of its ERISA Affili- ates shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the PBGC (or any successor thereto) shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, and, in each case, the Borrower's or any such ERISA Affiliate's liability (after giving effect to the tax consequences thereof) as of the date thereof to the PBGC (or any successor thereto) for unfunded guaranteed vested benefits under such Plan or the Borrower's obligations to contribute to any Plan in order to voluntarily terminate such Plan exceed $20,000,000 (or in the case of a termination involving the Borrower or any of its ERISA Affiliates as a "substantial employer" (as defined in Section 4001(a)(2) of ERISA) the withdrawing employer's proportionate share of such liability shall exceed such amount); or (l) the Borrower or any of its ERISA Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a Withdrawal Liability in an amount exceeding $20,000,000; or (m) (i) Any Person or two or more Persons (other than Permitted Transferees) acting in concert shall acquire beneficial ownership, directly or indirectly, of Equity Interests of the Borrower or Voting Trust Certificates issued under the Voting Trust Agreement (or other securities convertible into such securities) representing 30% or more of the combined voting power of all Equity Interests of the Borrower entitled to vote (or would be entitled to vote in the absence of the Voting Trust Agreement) in the election of directors (except that the provisions of this subsection (i) shall not apply to Voting Trustees serving in their capacities as such under the Voting Trust Agreement); or (ii) during any period of up to 24 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 24 month period were directors of the Borrower shall cease for any reason to constitute a majority of the Board of Directors of 97 the Borrower unless the persons replacing such individuals were nominated by the Board of Directors of the Borrower, by Permitted Transferees or by any of the Voting Trustees; or (iii) the occurrence of any "CHANGE IN CONTROL" as defined in any indenture or other agreement executed in connection with a Capital Markets Transaction; then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by a Revolving Credit Lender pursuant to Section 2.03(c) and the obligations of each Lender Party to purchase its Pro Rata Share of outstanding Swing Line Advances pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Obligations, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and (B) by notice to each party required under the terms of any agreement in support of which a Standby Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable; PROVIDED, HOWEVER, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (1) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by a Revolving Credit Lender pursuant to Section 2.03(c) and the obligations of each Lender Party to purchase its Pro Rata Share of outstanding Swing Line Advances pursuant to Section 2.02(b)) and each Issuing Bank to issue Letters of Credit shall automatically be terminated and (2) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. Section 6.02 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON ------------------------------------------------ DEFAULT. If any Event of Default shall have occurred and be continuing, the - ------- Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Administrative Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Secured Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied, to the extent 98 permitted under applicable law, to reimburse the relevant Issuing Bank or the Revolving Credit Lenders, as applicable. ARTICLE VII THE AGENTS Section 7.01 APPOINTMENT, POWERS AND IMMUNITY. -------------------------------- (a) Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable), an Issuing Bank (if applicable), and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes the Administrative Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent (which term as used in this sentence and in Section 7.05(a) and the first sentence of Section 7.06 shall include its Affiliates and its own and its Affiliates' officers, directors, employees, and agents): (i) 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 Party; (ii) shall not be responsible to the Lender Parties 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, or the perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document, or any other document referred to or provided for therein or for any failure by any Loan Party or any other Person to perform any of its obligations thereunder; (iii) 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 Loan Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Loan Party or any of its Subsidiaries or Affiliates; (iv) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (v) shall not be responsible for any action taken or omitted to be taken by it or any of its directors, officers, agents or employees under or in connection with any Loan Document, except for its or their own gross negligence or willful misconduct. (b) The Administrative Agent shall also act as the "COLLATERAL AGENT" under the Loan Documents, and each of the Lender Parties (in its capacities as a Lender, the Swing Line Bank (if applicable), an Issuing Bank (if applicable) and a potential Hedge Bank) hereby appoints and authorizes the Administrative Agent to act as the agent of such Lender Party for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto. The Administrative Agent may from time to time in its discretion appoint any of the other Lender Parties or any of the Affiliates of a Lender Party to act as its co-agent or sub-agent or its attorney-in-fact for any purpose, including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder at the direction of the Administrative Agent, and the Administrative Agent shall not be responsible for the negligence or misconduct of any such co-agents, sub-agents or attorneys-in-fact selected by it with 99 reasonable care. In this connection, the Administrative Agent, as "collateral agent", and such co-agents, sub-agents and attorneys-in-fact shall be entitled to the benefits of all provisions of this Article VII (including, without limitation, Section 7.05, as though such co-agents, sub-agents and attorneys-in-fact were the "collateral agent" under the Loan Documents) as if set forth in full herein with respect thereto. (c) The Co-Lead Arrangers shall not have any powers or discretion under this Agreement or any of the other Loan Documents other than those bestowed upon it as a co-agent or sub-agent from time to time by the Administrative Agent pursuant to subsection (b) of this Section 7.01, and each of the Lender Parties hereby acknowledges that (i) it has not relied on the Co-Lead Arrangers in deciding whether to enter into this Agreement or in taking or not taking any action under the Agreement and (ii) the Co-Lead Arrangers shall not have any liability under this Agreement or any of the other Loan Documents. (d) Neither the Documentation Agent nor the Syndication Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Section 7.02 RELIANCE BY AGENT. The Administrative Agent shall ----------------- be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) 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 Loan Party), independent accountants, and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Administrative Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 8.07. As to any matters not expressly provided for by this Agreement, the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lender Parties; PROVIDED, HOWEVER, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to any Loan Document or applicable Requirements of Law or unless it shall first be indemnified to its satisfaction by the Lender Parties against any and all liability and expense which may be incurred by it by reason of taking any such action. Section 7.03 DEFAULTS. The Administrative Agent shall not be -------- deemed to have knowledge or notice of the occurrence of a Default or Event of Default (other than an Event of Default under Section 6.01(a)) unless the Administrative Agent has received written notice from a Lender Party or the Borrower specifying such Default or Event of Default and stating that such notice is a "NOTICE OF DEFAULT". In the event that the Administrative Agent receives such a notice of the occurrence of a Default or Event of Default, the Administrative Agent shall give prompt notice thereof to the Lender Parties. The Administrative Agent shall (subject to Section 7.02) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such 100 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 Lender Parties. Section 7.04 BANK OF AMERICA, BAS AND AFFILIATES. With ---------------------------------------- respect to its Commitments, the Advances made by it and the Note or Notes issued to it, Bank of America (and any successor acting as the Administrative Agent) in its capacity as a Lender Party hereunder shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not acting as the Administrative Agent or an Issuing Bank; and the term "LENDER PARTY" or "LENDER PARTIES" shall, unless otherwise expressly indicated, include Bank of America in its individual capacity. Bank of America (and any successor acting as the Administrative Agent), BAS and their respective affiliates may (without having to account therefor to any Lender Party) 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 Loan Party or any of its Subsidiaries or Affiliates as if it were not acting as an Agent or an Issuing Bank, and Bank of America (and any successor acting as the Administrative Agent), BAS and their respective affiliates may accept fees and other consideration from any Loan Party or any of its Subsidiaries or Affiliates, or any Person that may do business with or own securities of any Loan Party or any such Subsidiary or Affiliate, for services in connection with this Agreement or otherwise without having to account for the same to the Lender Parties. Section 7.05 INDEMNIFICATION. --------------- (a) The Lenders severally agree to indemnify the Administrative Agent (to the extent not promptly reimbursed under Section 8.04, but without limiting the obligations of the Borrower under such Section) ratably in accordance with their respective Commitments, 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 the Administrative Agent in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by the Administrative Agent under any Loan Document (collectively, the "INDEMNIFIED COSTS"); 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. In the case of any claim, investigation, litigation or proceeding for which indemnity under this Section 7.05(a) applies, such indemnity shall apply whether or not such claim, investigation, litigation or proceeding is brought by the Administrative Agent, any of the other Agents, any of the Lender Parties or a third party. Without limitation of the foregoing, each Lender severally agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrower under Section 8.04, to the extent that the Administrative Agent is not promptly reimbursed for such costs and expenses (including, without limitation, fees and expenses of counsel) by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person. The failure of any Lender Party to reimburse the Administrative Agent promptly upon demand for its ratable share of any amount required to be paid by the Lender Party to the Administrative Agent as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse the Administrative Agent for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to 101 reimburse the Administrative Agent for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender contained in this Section 7.05(a) shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. (b) The Revolving Credit Lenders severally agree to indemnify each Issuing Bank (to the extent not promptly reimbursed under Section 8.04, but without limiting the obligations of the Borrower under such Section) for such Revolving Credit Lender's Pro Rata Share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank in any way relating to or arising out of the Loan Documents or the transactions contemplated thereby or any action taken or omitted by such Issuing Bank under the Loan Documents; PROVIDED, HOWEVER, that no Revolving Credit Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank's gross negligence or willful misconduct. In the case of any claim, investigation, litigation or proceeding for which indemnity under this Section 7.05(b) applies, such indemnity shall apply whether or not such claim, investigation, litigation or proceeding is brought by any Issuing Bank, any of the other Lender Parties or a third party. Without limitation of the foregoing, each Revolving Credit Lender severally agrees to reimburse such Issuing Bank promptly upon demand for its Pro Rata Share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 8.04, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. The failure of any Revolving Credit Lender to reimburse such Issuing Bank promptly upon demand for its Pro Rata Share of any amount required to be paid by the Revolving Credit Lenders to such Issuing Bank as provided herein shall not relieve any other Revolving Credit Lender of its obligation hereunder to reimburse such Issuing Bank for its Pro Rata Share of such amount, but no Revolving Credit Lender shall be responsible for the failure of any other Revolving Credit Lender to reimburse such Issuing Bank for such other Revolving Credit Lender's Pro Rata Share of such amount. Without prejudice to the survival of any other agreement of any Revolving Credit Lender hereunder, the agreement and obligations of each Revolving Credit Lender contained in this Section 7.05(b) shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. Section 7.06 NON-RELIANCE ON AGENT AND OTHER LENDER PARTIES. Each ---------------------------------------------- Lender Party agrees that it has, independently and without reliance on any Agent or any other Lender Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Loan Parties and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon any Agent or any other Lender Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own 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 Lender Parties by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender Party with any credit or other information concerning the affairs, financial condition, or business of 102 any Loan Party or any of its Subsidiaries or Affiliates that may come into the possession of the Administrative Agent or any of its affiliates. Section 7.07 RESIGNATION OF ADMINISTRATIVE AGENT. The Adminis- trative Agent may resign at any time (effective as set forth below) by giving notice thereof to the Lender Parties and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent which such successor Administrative Agent shall, so long as no Event of Default has occurred and is continuing, be approved by the Borrower (such approval not to be unreasonably withheld or delayed and to be deemed to have been given if no objection thereto is received by the Required Lenders within five Business Days after the date on which notice of the proposed appointment is provided to the Borrower). If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lender Parties, appoint a successor Administrative Agent which shall be a commercial bank organized under the laws of the United States or any state thereof and having combined capital and surplus of at least $500,000,000. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 7.07 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (a) the retiring Administrative Agent's resignation shall become effective, (b) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (c) the Required Lenders shall thereafter perform all duties and obligations of the retiring Administrative Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above in this Section 7.07. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation hereunder as Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. ARTICLE VIII MISCELLANEOUS Section 8.01 AMENDMENTS, ETC. No amendment or waiver of any pro- ---------------- vision of this Agreement, the Notes or any other Loan Document, nor consent to any departure by any of the Loan Parties therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to in writing) by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that (a) no amendment, waiver or consent shall, unless in writing and signed by all of the Lender Parties (other than any Lender Party that is, at such time, a Defaulting Lender), do any of the following at any time: (i) waive 103 any of the conditions specified in Section 3.01 or, in the case of the Initial Extension of Credit, Section 3.02; (ii) change the number of Lenders or the percentage of the Commitments or the aggregate outstanding principal amount of Advances or the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lender Parties or any of them to take any action hereunder or thereunder; (iii) release all or substantially all of the value of the guarantees of the Material Domestic Subsidiaries under the Subsidiary Guaranty (other than, in the case of any Material Domestic Subsidiary, to the extent permitted under the Subsidiaries Guaranty); (iv) release all or substantially all of the Collateral in any transaction or series of related transactions (other than to the extent permitted under the Pledge and Security Agreement); or (v) amend Section 2.14 or this Section 8.01; (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender (other than any Lender that is, at such time, a Defaulting Lender) that has a Commitment under, or is owed any amounts under or in respect of, the Tranche A Term Facility, the Tranche B Term Facility or the Revolving Credit Facility if such Lender is directly and adversely affected by such amendment, waiver or consent: (i) increase the Commitments of such Lender; (ii) reduce the principal of, or stated rate of interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender; (iii) postpone any date scheduled for any payment of principal of, or interest on, the Notes pursuant to Section 2.04 or 2.07 or any date fixed for any payment of fees hereunder or any Guaranteed Obligations payable under the Subsidiary Guaranty; or (iv) change the order of application of any reduction in the Commitments or any prepayment of Advances between the Tranche A Term Facility or the Tranche B Term Facility from the application thereof set forth in the applicable provisions of Section 2.05(b) or 2.06(b), respectively, in any manner that materially and adversely affects the Lenders under such Tranche A Term Facility or Tranche B Term Facility, as the case may be, or require the permanent reduction of the Revolving Credit Facility at any time when all or a portion of the Tranche A Term Facility or Tranche B Term Facility remains in effect; and (c) the consent of any Lender Party shall not be required for any amendment that increases the Revolving Credit Commitments by $250,000,000 in the event such increase does not increase the Commitments of such Lender Party; PROVIDED FURTHER that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or each Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Banks, as the case may be, under this Agreement; and PROVIDED FURTHER that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement and the other Loan Documents. Notwithstanding any of the foregoing provisions of this Section 8.01, none of the defined terms set forth in Section 1.01 shall be amended, supplemented or otherwise modified in any manner that would change the meaning, purpose or effect of this Section 8.01 or any section referred to herein unless such amendment, supplement or modification is agreed to in writing by the number and percentage of Lenders (and the Swing Line Bank, each Issuing Bank and the Administrative Agent, if applicable) otherwise required to amend such section under the terms of this Section 8.01. Section 8.02 NOTICES, ETC. All notices and other communications ------------- provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered, if to the Borrower, at its address at 1155 Battery Street, San Francisco, CA 94111, Attention: Treasurer; if to any Initial Lender, the 104 Swing Line Bank or each Initial Issuing Bank, at its Base Rate Lending Office specified opposite its name on Schedule 1.01(a) hereto; if to any other Lender Party, at its Base Rate Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender Party; and if to the Administrative Agent, at its address at Bank of America, N.A. Attention: Credit Services, 1850 Gateway Boulevard, CA 4-706-05-09, Concord, CA 94520, for borrowings, conversions, continuations and payment notices and Bank of America, N.A. Attention: Agency Management, 1455 Market Street, CA 5-701-12-09, San Francisco, CA 94103, for all other notices; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, except that notices and communications to any Agent pursuant to Article II, III or VII shall not be effective until received by such Agent. Delivery by telecopier of an executed counterpart of a signature page to any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. Section 8.03 NO WAIVER; REMEDIES. No failure on the part of any Lender Party or any Agent to exercise, and no delay in exercising, any right hereunder or under any Note or any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 8.04 COSTS AND EXPENSES. ------------------ (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of each Agent in connection with the syndication, preparation, execution, delivery, administration, modification and amendment of, or any consent or waiver under, the Loan Documents and the other documents to be delivered thereunder (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for each Agent with respect thereto, with respect to advising such Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of each Agent and each Lender Party in connection with the enforcement of the Loan Documents and the other documents to be delivered thereunder, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent and each Lender Party with respect thereto). (b) The Borrower agrees to indemnify, defend and save and hold harmless each Agent, each Lender Party and each of their affiliates and their respective officers, directors, 105 employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) 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 a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents, or any of the transactions contemplated thereby, or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the Transaction is consummated. The Borrower also agrees not to assert any claim against any Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby. (c) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion. (d) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.10 and 2.13 and this Section 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. Section 8.05 RIGHT OF SET-OFF. Upon (a) the occurrence and ------------------ during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Obligations due and payable pursuant to the provisions of Section 6.01, each Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise 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 Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such Obligations may be unmatured. Each Agent and each Lender Party agrees promptly to notify the Borrower after any such set-off and application; PROVIDED, HOWEVER, that 106 the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender Party and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have. Section 8.06 BINDING EFFECT. This Agreement shall become effective -------------- when it shall have been executed by the Borrower and each Agent and the Administrative Agent shall have been notified by each Initial Lender, the Swing Line Bank and each Initial Issuing Bank that such Initial Lender, the Swing Line Bank or such Initial Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. Section 8.07 ASSIGNMENTS 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 Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of any or all Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or an Approved Fund of any Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than, in the case of an assignment of all or a portion of a Lender's Revolving Credit Commitment, $5,000,000 (or such lesser amount as shall be approved by the Administrative Agent and, so long as no Event of Default shall have occurred and be continuing at the time of the effectiveness of such assignment, the Borrower) or, in the case of an assignment of all or a portion of a Lender's Tranche A Term Commitment or Tranche B Term Commitment, $1,000,000, (iii) each such assignment to an Approved Fund of any Lender shall in no event be less than $1,000,000, (iv) each such assignment shall be to an Eligible Assignee, and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000. (b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (ii) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.13 and 8.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall 107 cease to be a party hereto). If the assignee is not incorporated under the laws of the United States or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 2.13. (c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Borrower, shall maintain at its address referred to in Section 8.02 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 Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lender Parties shall treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. In the case of any assignment by a Lender, if so requested, promptly after its 108 receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1, A-2 or A-3 hereto, as the case may be. (f) Each Lender Party may sell participations to one or more Per- sons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights, obligations or rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); PROVIDED, HOWEVER, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement, (v) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 2.10, 2.13 and 8.04(c) and the right of set-off contained in Section 8.05 and (vi) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or stated rate of interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date scheduled for any payment of principal of, or interest on, the Notes pursuant to Section 2.04 or 2.07 or any date fixed for any payment of fees hereunder or any Guaranteed Obligations payable under the Subsidiary Guaranty, in each case to the extent subject to such participation, or release all or substantially all of the Collateral. (g) Any Lender Party may, in connection with any assignment or par- ticipation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; PROVIDED, HOWEVER, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party. (h) Notwithstanding any other provision set forth in this Agreement any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. 109 (i) Notwithstanding anything to the contrary contained herein, any Lender that is a fund that invests in bank loans may create a security interest in all or any portion of the Advances owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities, provided, that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 8.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise. (j) Notwithstanding anything to the contrary contained herein, any Lender Party (a "GRANTING LENDER") may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an "SPC") the option to provide all or any part of any Advance that such Granting Lender would otherwise be obligated to make pursuant to this Agreement, provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Advance, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Advance, the Granting Lender shall be obligated to make such Advance pursuant to the terms hereof. The making of an Advance by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender Party would be liable, (ii) no SPC shall be entitled to the benefits of Sections 2.10 and 2.13 (or any other increased costs protection provision) and (iii) the Granting Bank shall for all purposes, including, without limitation, the approval of any amendment or waiver of any provision of any Loan Document, remain the Lender Party of record hereunder. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior Debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any state thereof. Notwithstanding anything to the contrary contained in this Agreement, any SPC may (i) with notice to, but without prior consent of, the Borrower and the Administrative Agent and with the payment of a processing fee of $500, assign all or any portion of its interest in any Advance to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Advances to any rating agency, commercial paper dealer or provider of any surety or guarantee or credit or liquidity enhancement to such SPC. This subsection (k) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advances are being funded by the SPC at the time of such amendment. Section 8.08 EXECUTION IN COUNTERPARTS. This Agreement may be -------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery by telecopier of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. 110 Section 8.09 NO LIABILITY OF THE ISSUING BANKS. The Borrower --------------------------------- assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Section 8.10 CONFIDENTIALITY. Neither any Agent nor any Lender --------------- Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors, to other Lender Parties and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner (including the National Association of Insurance Commissioners or any similar organization or quasi-regulatory authority) regulating such Lender Party, (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party, (e) in connection with any litigation or proceeding to which such Agent or such Lender Party or any of its Affiliates may be a party, (f) to the extent reasonably required, in connection with the exercise of any remedy under this Agreement or any other Loan Document, (g) as provided in Section 8.07(h) or (h) to any direct or indirect contractual counterparty in swap agreements relating to this Agreement or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 8.10). Section 8.11 RELEASE OF COLLATERAL. Upon the sale, lease, ---------------------- transfer or other disposition of any item of Collateral of any Loan Party (including, without limitation, as a result of the sale, in accordance with the terms of the Loan Documents, of the Loan Party that owns such Collateral) in accordance with the terms of the Loan Documents, the Administrative Agent will, at the Borrower's expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the 111 assignment and security interest granted under the Collateral Documents in accordance with the terms of the Loan Documents. Section 8.12 JURISDICTION, ETC. ------------------ (a) Each of the parties hereto hereby irrevocably and uncondi- tionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the fullest extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Section 8.13 GOVERNING LAW. This Agreement and the Notes shall be -------------- governed by, and construed in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York) without regard to conflicts of laws principles that would require application of another law. Section 8.14 WAIVER OF JURY TRIAL. Each of the Borrower, the --------------------- Agents and the Lender Parties irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances, the Letters of Credit or the actions of any Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. Section 8.15 JUDGMENT CURRENCY. ----------------- (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent or a Lender could purchase the Original Currency with such Other Currency in New York, New York on the Business Day immediately preceding the day on which any such judgment, or any relevant part thereof, is given. 112 (b) The obligations of the Borrower in respect of any sum due from it to any Agent or Lender hereunder shall, notwithstanding any judgment in such Other Currency, be discharged only to the extent that on the Business Day following receipt by such Agent or Lender of any sum adjudged to be so due in such Other Currency such Agent or Lender may in accordance with normal banking procedures purchase the Original Currency with such Other Currency; if the Original Currency so purchased is less than the sum originally due such Agent or Lender in the Original Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Agent or Lender against such loss, and if the Original Currency so purchased exceeds the sum originally due to such Agent or Lender in the Original Currency, such Agent or Lender shall remit such excess to such Borrower. 113 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. LEVI STRAUSS & CO. By -------------------------------------------- Name: Title: ADDRESS FOR NOTICES: Levi Strauss & Co. Levi's Plaza 1155 Battery Street San Francisco, CA 94111 Facsimile: (415) 501-1342 Telephone: (415) 501-6955 S-1 O'M&M DRAFT 01/29/01 $1,050,000,000 CREDIT AGREEMENT Dated as of February 1, 2001 Among LEVI STRAUSS & CO., AS BORROWER, -- -------- and THE INITIAL LENDERS, INITIAL ISSUING BANKS AND SWING LINE BANK NAMED HEREIN, AS INITIAL LENDERS, INITIAL ISSUING BANKS, AND SWING LINE BANK -- ------- ------- ------- ------- ----- --- ----- ---- ---- and BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT AND COLLATERAL AGENT, -- -------------- ----- --- ---------- ---- and BANC OF AMERICA SECURITIES LLC, and SALOMON SMITH BARNEY INC., AS CO-LEAD ARRANGERS AND JOINT BOOK MANAGERS -- ------- --------- --- ----- ---- -------- and CITICORP USA, INC., AS SYNDICATION AGENT -- ----------- ----- and THE BANK OF NOVA SCOTIA, AS DOCUMENTATION AGENT -- ------------- ----- TABLE OF CONTENTS SECTION PAGE - ------- ---- SCHEDULES - --------- Schedule 1.01(a) - Commitments and Applicable Lending Offices Schedule 1.01(b) - Existing Letters of Credit Schedule 3.01(a) - Mortgaged Property Schedule 4.01(b) - Subsidiaries Schedule 4.01(c) - Conflicts Schedule 4.01(f) - Disclosed Litigation Schedule 4.01(n) - ERISA Schedule 4.01(w) - Existing Debt Schedule 4.01(x) - Liens Schedule 4.01(y) - Real Property Schedule 4.01(z) - Restricted Subsidiaries Schedule 4.01(aa) - Organizational Structure Schedule 4.01(bb) - Material Subsidiaries Schedule 4.01(cc) - Investments Schedule 4.01(dd) - Intellectual Property EXHIBITS - -------- Exhibit A-1 Form of Tranche A Term Note Exhibit A-2 Form of Tranche B Term Note Exhibit A-3 Form of Revolving Credit Note Exhibit A-4 Form of Swing Line Note Exhibit B-1 Form of Notice of Borrowing Exhibit B-2 Form of Notice of Conversion/Continuation Exhibit C Form of Assignment and Acceptance Exhibit D Form of Pledge and Security Agreement Exhibit E Form of Subsidiary Guaranty Exhibit F Form of Mortgage Exhibit G Form of Compliance Certificate
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01 Certain Defined Terms..........................................................................2 Section 1.02 Computation of Time Periods; Other Definitional Provisions....................................31 Section 1.03 Accounting Terms..............................................................................32 Section 1.04 Change in Accounting Principles...............................................................32 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT Section 2.01 The Advances and the Letters of Credit........................................................32 Section 2.02 Making the Advances...........................................................................35 Section 2.03 Issuance of and Drawings and Reimbursement Under Letters of Credit............................38 Section 2.04 Repayment of Advances.........................................................................41 Section 2.05 Termination or Reduction of the Commitments...................................................43 Section 2.06 Prepayments...................................................................................43 Section 2.07 Interest......................................................................................46 Section 2.08 Fees..........................................................................................47 Section 2.09 Conversion and Continuation of Advances.......................................................48 Section 2.10 Increased Costs, Etc..........................................................................50 Section 2.11 Payments and Computations.....................................................................52 Section 2.12 Evidence of Debt..............................................................................56 Section 2.13 Taxes.........................................................................................56 Section 2.14 Sharing of Payments, Etc......................................................................59 Section 2.15 Use of Proceeds...............................................................................60 Section 2.16 Defaulting Lenders............................................................................60 Section 3.01 Conditions Precedent to Initial Extension of Credit...........................................62 Section 3.02 Conditions Precedent to Each Borrowing and Issuance and Renewal...............................66 Section 3.03 Determinations Under Section 3.01.............................................................67 Section 4.01 Representations and Warranties of the Borrower................................................67 Section 5.01 Affirmative Covenants.........................................................................73 Section 5.02 Negative Covenants............................................................................78 Section 5.03 Reporting Requirements........................................................................89 Section 5.04 Financial Covenants...........................................................................92 Section 6.01 Events of Default.............................................................................93 Section 6.02 Actions in Respect of the Letters of Credit upon Default......................................97 Section 7.01 Appointment, Powers and Immunity..............................................................97 Section 7.02 Reliance by Agent.............................................................................98 Section 7.03 Defaults......................................................................................99 Section 7.04 Bank of America, BAS and Affiliates...........................................................99 Section 7.05 Indemnification..............................................................................100 Section 7.06 Non-Reliance on Agent and Other Lender Parties...............................................101 Section 7.07 Resignation of Administrative Agent..........................................................101 Section 8.01 Amendments, Etc..............................................................................102 Section 8.02 Notices, Etc.................................................................................103 Section 8.03 No Waiver; Remedies..........................................................................103 Section 8.04 Costs and Expenses...........................................................................104 Section 8.05 Right of Set-off.............................................................................105 Section 8.06 Binding Effect...............................................................................105 Section 8.07 Assignments and Participations...............................................................105 Section 8.08 Execution in Counterparts....................................................................109 Section 8.09 No Liability of the Issuing Banks............................................................109 Section 8.10 Confidentiality..............................................................................110 Section 8.11 Release of Collateral........................................................................110 Section 8.12 Jurisdiction, Etc............................................................................110 Section 8.13 Governing Law................................................................................111 Section 8.14 Waiver of Jury Trial.........................................................................111 Section 8.15 Judgment Currency............................................................................111
EX-10.58 23 0023.txt PLEDGE AND SECURITY AGREEMENT EXHIBIT D [FORM OF PLEDGE AND SECURITY AGREEMENT] PLEDGE AND SECURITY AGREEMENT This PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") is dated as of February 1, 2001 and entered into by and among LEVI STRAUSS & CO., a Delaware corporation (the "BORROWER"), each of THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of the Borrower (each of such undersigned Subsidiaries being a "SUBSIDIARY GRANTOR" and collectively "SUBSIDIARY GRANTORS") and each ADDITIONAL GRANTOR that may become a party hereto after the date hereof in accordance with Section 21 hereof (each of the Borrower, each Subsidiary Grantor, and each Additional Grantor being a "GRANTOR" and collectively the "GRANTORS") and BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as Administrative Agent for and representative of (in such capacities herein called "SECURED PARTY") the several financial institutions (the "LENDERS") from time to time party to the Credit Agreement referred to below and any Hedge Bank (as defined in the Credit Agreement referred to below). PRELIMINARY STATEMENTS A. Pursuant to the Credit Agreement dated as of February 1, 2001 (said Credit Agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among the Borrower, the Lenders, the financial institutions party thereto as Co-Lead Arrangers and Joint Book Managers, the financial institution party thereto as Syndication Agent, the financial institution party thereto as Documentation Agent, and Bank of America, as Administrative Agent, the Lenders have made certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend certain credit facilities to the Borrower. B. The Borrower and Levi Strauss & Co. Financial Services, S.A., a Belgium corporation, or any successor thereto ("FINSERV"), may from time to time enter, or may from time to time have entered, into one or more Hedge Bank Hedge Agreements in accordance with the terms of the Credit Agreement, and it is desired that the Obligations of the Borrower and FinServ under the Hedge Bank Hedge Agreements, including the obligation of the Borrower and FinServ to make payments thereunder in the event of early termination or close out thereof, together with all Obligations of the Borrower under the Credit Agreement and the other Loan Documents, be secured hereunder until the payment in full of all Obligations under the Credit Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements), the cancellation or expiration of all Letters of Credit and the termination of the Commitments. C. Subsidiary Grantors have executed and delivered that certain Guaranty dated the date hereof (said Guaranty, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the "SUBSIDIARY GUARANTY") in favor of Secured Party for the benefit of the Lenders, Administrative Agent and any Hedge Banks, pursuant to which each Subsidiary Grantor has guarantied the prompt payment and performance when due of all Obligations of the Borrower under the Credit Agreement and all Obligations of the Borrower and FinServ under the Hedge Bank Hedge Agreements, including the obligation of the Borrower and FinServ to make payments thereunder in the event of early termination or close out thereof. D. It is a condition precedent to the initial extensions of credit by the Lenders under the Credit Agreement that the Grantors listed on the signature pages hereof shall have granted the security interests and undertaken the Obligations contemplated by this Agreement. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders and Secured Party to enter into the Credit Agreement and to induce the Hedge Lenders to enter into the Hedge Bank Hedge Agreements, each Grantor hereby agrees with Secured Party as follows: SECTION 1. Grant of Security. ----------------- Each Grantor hereby assigns to Secured Party, and hereby grants to Secured Party a security interest in, all of such Grantor's right, title and interest in and to the following, in each case whether now or hereafter existing, whether tangible or intangible, or in which such Grantor now has or hereafter acquires an interest and wherever the same may be located (the "COLLATERAL"): (a) all equipment in all of its forms, all parts thereof and all accessions thereto (any and all such equipment, parts and accessions being the "EQUIPMENT"); (b) all inventory in all of its forms, including (i) all goods held by such Grantor for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in such Grantor's business, (iii) all goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind, and (iv) all goods which are returned to or repossessed by such Grantor and all accessions thereto and products thereof (collectively the "INVENTORY") and all negotiable and non-negotiable documents of title (including documents, warehouse receipts, dock receipts and bills of lading) issued by any Person covering any Inventory (any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF TITLE"); (c) all accounts, contract rights, chattel paper, documents, instruments, letter-of-credit rights and other rights and obligations of any kind owned by or owing to such Grantor and all rights in, to and under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, documents, instruments, letter-of-credit rights, or other rights and obligations (any and all such accounts, contract rights, chattel paper, documents, instruments, letter-of-credit rights and other rights and obligations being the "ACCOUNTS", and any and all such security agreements, leases and other contracts being the "RELATED CONTRACTS"); D-2 (d) all deposit accounts ("DEPOSIT ACCOUNTS"), including the restricted deposit accounts established and maintained by Secured Party pursuant to Section 11, together with (i) all amounts on deposit from time to time in such deposit accounts and (ii) all interest, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing, including Deposit Accounts listed on Schedule 1(d); (e) the "SECURITIES COLLATERAL", which term means: (i) all shares of stock, partnership interests, interests in joint ventures, limited liability company interests and all other equity interests now or hereafter owned by such Grantor in any Person that is, or becomes, a direct Subsidiary of such Grantor, including all securities convertible into, and rights, warrants, options and other rights to purchase or otherwise acquire, any of the foregoing now or hereafter owned by such Grantor, including those owned on the date hereof and described on Schedule 1(e)(i), and the certificates or other instruments representing any of the foregoing and any interest of such Grantor in the entries on the books of any securities intermediary pertaining thereto (the "PLEDGED INTERESTS"), and all dividends, distributions, returns of capital, cash, warrants, options, rights, instruments, rights to vote or manage the business of such Person pursuant to organizational documents governing the rights and obligations of the stockholders, partners, members or other owners thereof and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Interests; provided, that if the issuer of any of such Pledged Interests is a controlled foreign corporation (used hereinafter as such term is defined in Section 957(a) or a successor provision of the Internal Revenue Code), the Pledged Interests shall not include any shares of stock of such issuer in excess of the number of shares of such issuer possessing up to but not exceeding 65% of the voting power of all classes of capital stock entitled to vote of such issuer, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Interests; (ii) all indebtedness from time to time owed to such Grantor by any obligor that is, or becomes, a direct or indirect Subsidiary of such Grantor, or by any obligor of which Grantor is a direct or indirect Subsidiary, including, without limitation, the indebtedness described on Schedule 1(e)(ii) and issued by the obligors named therein, and the instruments evidencing such indebtedness (the "PLEDGED DEBT"), and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; and (iii) all other investment property, as that term is defined in the Uniform Commercial Code (the "UCC") of any relevant jurisdiction, of such Grantor; (f) the "INTELLECTUAL PROPERTY COLLATERAL", which term means: (i) all rights, title and interest (including rights acquired pursuant to a license or otherwise) in and to all trademarks, service marks, designs, logos, indicia, D-3 tradenames, trade dress, corporate names, company names, business names, fictitious business names, trade styles and/or other source and/or business identifiers and applications pertaining thereto, owned by such Grantor, or hereafter adopted and used, in its business (including, without limitation, the trademarks listed in Schedule 1(f)(i), as the same may be amended pursuant hereto from time to time) (collectively, the "TRADEMARKS"), all registrations that have been or may hereafter be issued or applied for thereon in the United States and any state thereof and in foreign countries (including, without limitation, the registrations and applications specifically identified in Schedule 1(f)(i), as the same may be amended pursuant hereto from time to time) (the "TRADEMARK REGISTRATIONS"), all common law and other rights in and to the Trademarks in the United States and any state thereof and in foreign countries (the "TRADEMARK RIGHTS"), and all goodwill of such Grantor's business symbolized by the Trademarks and associated therewith (the "ASSOCIATED GOODWILL"); (ii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) in and to all patents and patent applications and rights and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned or held by such Grantor and all patents and patent applications and rights, title and interests in patents and patent applications under any domestic or foreign law that are presently, or in the future may be, owned by such Grantor in whole or in part (including, without limitation, the patents and patent applications listed in Schedule 1(f)(ii), as the same may be amended pursuant hereto from time to time), all rights (but not obligations) corresponding thereto (including the right, exercisable only upon the occurrence and during the continuation of an Event of Default, to sue for past, present and future infringements in the name of such Grantor or in the name of Secured Party or the Lenders), and all re-issues, divisions, continuations, renewals, extensions and continuations-in-part thereof (all of the foregoing being collectively referred to as the "PATENTS"); and (iii) all rights, title and interest (including rights acquired pursuant to a license or otherwise) under copyright in various published and unpublished works of authorship including computer programs, computer data bases, other computer software, layouts, trade dress, drawings, designs, writings, and formulas owned by such Grantor (including, without limitation, the works listed on Schedule 1(f)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHTS"), all copyright registrations issued to such Grantor and applications for copyright registration that have been or may hereafter be issued or applied for thereon by such Grantor in the United States and any state thereof and in foreign countries (including, without limitation, the registrations listed on Schedule 1(f)(iii), as the same may be amended pursuant hereto from time to time) (collectively, the "COPYRIGHT REGISTRATIONS"), all common law and other rights in and to the Copyrights in the United States and any state thereof and in foreign countries including all copyright licenses (but with respect to such copyright licenses, only to the extent permitted by such licensing arrangements) (the "COPYRIGHT Rights"), including each of the Copyrights, rights, titles and interests in and to the Copyrights, all derivative works and other works protectable by copyright, which are presently, or in the future may be, owned, created (as a work for hire for the benefit of such Grantor), authored (as a work for hire for the benefit of such Grantor), or acquired D-4 by such Grantor, in whole or in part, and all Copyright Rights with respect thereto and all Copyright Registrations therefor, heretofore or hereafter granted or applied for, and all renewals and extensions thereof, throughout the world, including the right to renew and extend such Copyright Registrations and Copyright Rights and to register works protectable by copyright and the right, exercisable only upon the occurrence and during the continuation of an Event of Default, to sue for past, present and future infringements in the name of such Grantor or in the name of Secured Party or the Lenders; (g) all information used or useful or arising from the business including all goodwill, trade secrets, trade secret rights, know-how, customer lists, processes of production, ideas, confidential business information, techniques, processes, formulas, and all other proprietary information; (h) to the extent not included in any other paragraph of this Section 1, all general intangibles, including tax refunds, payment intangibles, other rights to payment or performance, CHOSES IN ACTION, software and judgments taken on any rights or claims included in the Collateral; (i) all plant fixtures, business fixtures and other fixtures and storage and office facilities, and all accessions thereto and products thereof; (j) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and (k) all proceeds, products, rents and profits of or from any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Secured Party is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in (i) any of such Grantor's rights or interests in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder or any of its rights or interests in other property to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under, any license, contract or agreement to which such Grantor is a party (other than to the extent that any such term would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code) or principles of equity) or any agreement permitted by Section 5.02(l) of the Credit Agreement prohibiting or conditioning the creation or assumption of any Lien upon its property or assets or such rights or interests; provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and such Grantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect, or (ii) any real property D-5 leasehold, unless a Grantor has executed a leasehold mortgage or leasehold deed of trust covering such real property leasehold. Each item of Collateral listed in this Section 1 that is defined in Articles 8 or 9 of the UCC shall have the meaning set forth in the UCC, as it exists on the date of this Agreement or as it may hereafter be amended, it being the intention of the Grantors that the description of the Collateral set forth above be construed to include the broadest possible range of assets, except for assets expressly excluded as set forth above. Notwithstanding anything herein to the contrary, neither the Borrower nor any Grantor shall be deemed to have granted a security interest in (i) any Principal Property, (ii) any capital stock of any Restricted Subsidiary or (iii) any Pledged Debt of or issued by any Restricted Subsidiary. SECTION 2. Security for Obligations. ------------------------ This Agreement secures, and the Collateral assigned by each Grantor is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including, without limitation, the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured Obligations of such Grantor. "SECURED OBLIGATIONS" means: (a) with respect to the Borrower, all Obligations and liabilities of every nature of the Borrower now or hereafter existing under or arising out of or in connection with the Credit Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements) and, until the payment in full of all Obligations under the Credit Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements), the cancellation or expiration of all Letters of Credit and the termination of the Commitments, all Obligations and liabilities of every nature of the Borrower and FinServ, now or hereafter existing under or arising out of or in connection with any Hedge Bank Hedge Agreement, and (b) with respect to each Subsidiary Grantor and Additional Grantor, all Obligations and liabilities of every nature of such Grantors now or hereafter existing under or arising out of or in connection with the Subsidiary Guaranty; in each case together with all extensions or renewals thereof, whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to the Borrower or any other Grantor, would accrue on such Obligations, whether or not a claim is allowed against the Borrower or such Grantor for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit, payments for early termination or close out of Hedge Bank Hedge Agreements, fees, expenses, indemnities or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such Obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Secured Party or any Lender or Hedge Bank as a D-7 preference, fraudulent transfer or otherwise, and all Obligations of every nature of the Grantors now or hereafter existing under this Agreement. SECTION 3. Grantors Remain Liable. ---------------------- Anything contained herein to the contrary notwithstanding, (a) each Grantor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Secured Party of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) Secured Party shall not have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. Representations and Warranties. ------------------------------ Each Grantor represents and warrants as follows: (a) OWNERSHIP OF COLLATERAL. Except as expressly permitted by the Credit Agreement and for the security interest created by this Agreement, such Grantor owns the Collateral owned by such Grantor free and clear of any Lien. Except as expressly permitted by the Credit Agreement and such as may have been filed in favor of Secured Party relating to this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (b) LOCATIONS OF EQUIPMENT AND INVENTORY. All of the Equipment and Inventory is, as of the date hereof, or in the case of an Additional Grantor, the date of the applicable counterpart entered into pursuant to Section 21 hereof (each, a "COUNTERPART") located at the places specified in Schedule 4(b), except for Equipment and Inventory which, in the ordinary course of business, is in transit either (i) from a supplier or a processor to a Grantor, (ii) between the locations specified in Schedule 4(b), (iii) from a supplier or a Grantor to a processor, or (iv) to customers of a Grantor. (c) OFFICE LOCATIONS; TYPE AND JURISDICTION OF ORGANIZATION. The chief place of business, the chief executive office and the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts are, as of the date hereof, and, except as set forth on Schedule 4(c), have been for the four month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, located at the locations set forth on Schedule 4(c); the type (i.e. corporation, limited partnership, etc.) and jurisdiction of organization of such Grantor are listed on Schedule 4(c). (d) NAMES. No Grantor (or predecessor by merger or otherwise of such Grantor) has, within the four month period preceding the date hereof, or, in the case of an Additional Grantor, the date of the applicable Counterpart, had a different name from the name of such Grantor listed or the signature pages hereof, except the names listed in Schedule 4(d). D-7 (e) DELIVERY OF CERTAIN COLLATERAL. Except as permitted by Section 5.01(l) of the Credit Agreement, all certificates or instruments (excluding checks) evidencing, comprising or representing the Collateral (including, without limitation, the Securities Collateral) have been delivered to Secured Party duly endorsed or accompanied by duly executed instruments of transfer or assignment in blank. (f) SECURITIES COLLATERAL. (i) All of the Pledged Interests described on Schedule 1(e)(i) have been duly authorized and validly issued and are fully paid and non-assessable; (ii) all of the Pledged Debt described on Schedule 1(e)(ii) has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default; (iii) except as set forth in Schedule 1(e)(i), the Pledged Interests constitute all of the issued and outstanding shares of stock or other equity interests of each issuer thereof (subject to the proviso to Section 1(e)(i) hereof with respect to shares of a foreign controlled corporation), and there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Interests; (iv) the Pledged Debt constitutes all of the issued and outstanding intercompany indebtedness evidenced by a promissory note of the respective issuers thereof owing to such Grantor; (v) Schedule 1(e)(i) sets forth all of the Pledged Interests owned by each Grantor on the date hereof; and (vi) Schedule 1(e)(ii) sets forth all of the Pledged Debt in existence on the date hereof. (g) INTELLECTUAL PROPERTY COLLATERAL. (i) a true and complete list of all Trademark Registrations and Trademark applications owned by such Grantor, in whole or in part, that are material to such Grantor's business is set forth in Schedule 1(f)(i); (ii) a true and complete list of all Patents owned by such Grantor, in whole or in part, that are material to such Grantor's business is set forth in Schedule 1(f)(ii); (iii) a true and complete list of all Copyright Registrations and applications for Copyright Registrations owned by such Grantor, in whole or in part, that are material to such Grantor's business is set forth in Schedule 1(f)(iii); (iv) after reasonable inquiry, such Grantor is not aware of any pending or threatened claim by any third party that any of the Intellectual Property Collateral owned, held or used by such Grantor is invalid or unenforceable that is reasonably likely to have a Material Adverse Effect; and (v) after giving effect to the releases delivered on the Closing Date in respect of the Existing Credit Agreements, no effective security interest or other Lien covering all or any part of the Intellectual Property Collateral is on file in the United States Patent and Trademark Office or the United States Copyright Office. (h) PERFECTION. The security interests in the Collateral granted to Secured Party for the ratable benefit of the Lenders and Hedge Banks hereunder constitute valid Liens on such Collateral, securing the payment of the Secured Obligations. Upon (i) the filing of UCC D-8 financing statements naming each Grantor as "debtor", naming Secured Party as "secured party" and describing the Collateral in the filing offices with respect to such Grantor set forth on Schedule 4(i), (ii) in the case of the Securities Collateral consisting of certificated securities or evidenced by instruments, delivery of the certificates representing such certificated securities and delivery of such instruments to Secured Party, in each case duly endorsed or accompanied by duly executed instruments of assignment or transfer in blank, and (iii) in the case of the Intellectual Property Collateral, in addition to the filing of such UCC financing statements, the filing of a Grant of Trademark Security Interest, substantially in the form of Exhibit I, and a Grant of Patent Security Interest, substantially in the form of Exhibit II, with the United States Patent and Trademark Office and the filing of a Grant of Copyright Security Interest, substantially in the form of Exhibit III, with the United States Copyright Office (each such Grant of Trademark Security Interest, Grant of Patent Security Interest and Grant of Copyright Security Interest being referred to herein as a "GRANT"), the security interests in the Collateral granted to Secured Party for the ratable benefit of the Lenders and Hedge Banks will constitute perfected security interests therein, to the extent such security interests may be perfected by filing in the United States or by possession, prior to all other Liens (except for Liens expressly permitted by the Credit Agreement), and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly made or taken. SECTION 5. Further Assurances. ------------------ (a) GENERALLY. Each Grantor agrees that from time to time, at the expense of the Grantors, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Secured Party may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor will: (i) at the reasonable request of Secured Party, mark conspicuously each item of chattel paper included in the Accounts, each Related Contract and, at the request of Secured Party, each of its records pertaining to the Collateral, with a legend, in form and substance satisfactory to Secured Party, indicating that such Collateral is subject to the security interest granted hereby, (ii) at the reasonable request of Secured Party, deliver and pledge to Secured Party hereunder all promissory notes and other instruments (including checks) and all original counterparts of chattel paper constituting Collateral, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Secured Party, (iii) execute and file such financing or continuation statements, or amendments thereto, agreements establishing that Secured Party has control of Deposit Accounts and investment property and such other instruments or notices, as may be necessary or desirable, or as Secured Party may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (iv) furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail, (v) if requested by Administrative Agent, promptly after the acquisition by such Grantor of any item of Equipment that is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the D-9 security interest created hereunder on such certificate of title, (vi) within 45 days after the end of each fiscal quarter of the Borrower, deliver to Secured Party copies of all such applications or other documents filed during such fiscal quarter and copies of all such certificates of title issued during such fiscal quarter indicating the security interest created hereunder in the items of Equipment covered thereby, (vii) at any reasonable time, upon request by Secured Party, exhibit the Collateral to and allow inspection of the Collateral by Secured Party, or persons designated by Secured Party, and (viii) at Secured Party's request, appear in and defend any action or proceeding that may affect such Grantor's title to or Secured Party's security interest in all or any part of the Collateral. Each Grantor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of any Grantor. Each Grantor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement signed by such Grantor shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions. (b) SECURITIES COLLATERAL. Without limiting the generality of the foregoing Section 5(a), each Grantor agrees that it will, upon obtaining any additional shares of stock or other securities required to be pledged hereunder, promptly (and in any event within ten Business Days) deliver to Secured Party a Pledge Supplement, duly executed by such Grantor, in substantially the form of Exhibit IV (a "PLEDGE SUPPLEMENT"), in respect of the additional Pledged Interests or Pledged Debt to be pledged pursuant to this Agreement. Upon each delivery of a Pledge Supplement to Secured Party, the representations and warranties contained in clauses (i)-(iv) of Section 4(g) hereof shall be deemed to have been made by such Grantor as to the Securities Collateral described in such Pledge Supplement as of the date thereof. Each Grantor hereby authorizes Secured Party to attach each Pledge Supplement to this Agreement and agrees that all Pledged Interests or Pledged Debt of such Grantor listed on any Pledge Supplement shall for all purposes hereunder be considered Collateral of such Grantor; provided, the failure of any Grantor to execute a Pledge Supplement with respect to any additional Pledged Interests or Pledged Debt pledged pursuant to this Agreement shall not impair the security interest of Secured Party therein or otherwise adversely affect the rights and remedies of Secured Party hereunder with respect thereto. (c) INTELLECTUAL PROPERTY COLLATERAL. Without limiting the generality of the foregoing Section 5(a), if any Grantor shall hereafter obtain rights to any new Intellectual Property Collateral or become entitled to the benefit of (i) any patent application or patent or any reissue, division, continuation, renewal, extension or continuation-in-part of any Patent or any improvement of any Patent or (ii) any Copyright Registration, application for Copyright Registration or renewals or extension of any Copyright, then in any such case, the provisions of this Agreement shall automatically apply thereto. Each Grantor shall, within 45 days after the end of each fiscal quarter of the Borrower, notify Secured Party in writing of any of the foregoing rights acquired by such Grantor after the date hereof or the date of the last such notice, as the case may be, and of (i) any Trademark Registrations issued or application for a Trademark Registration or application for a Patent made, and (ii) any Copyright Registrations issued or applications for Copyright Registration made, in any such case, after the date hereof. Within 45 days after the end of each fiscal quarter of the Borrower during which any Grantor files an application for any (1) Trademark Registration; (2) Patent; and (3) Copyright Registration, each Grantor shall execute and deliver to Secured Party and record in all places where a Grant is D-10 recorded an IP Supplement, substantially in the form of Exhibit V (an "IP SUPPLEMENT"), pursuant to which such Grantor shall grant to Secured Party a security interest to the extent of its interest in such Intellectual Property Collateral; provided, if, in the reasonable judgment of such Grantor, after due inquiry, granting such interest would result in the grant of a Trademark Registration or Copyright Registration in the name of Secured Party, such Grantor shall give written notice to Secured Party on the day on which such Grantor would otherwise be required to record the IP Supplement and the filing shall instead be undertaken as soon as practicable but in no case later than immediately following the grant of the applicable Trademark Registration or Copyright Registration, as the case may be. Upon delivery to Secured Party of an IP Supplement, Schedules 1(f)(i), 1(f)(ii), and 1(f)(iii) hereto and Schedule A to each Grant, as applicable, shall be deemed modified to include reference to any right, title or interest in any existing Intellectual Property Collateral or any Intellectual Property Collateral included on Schedule A to such IP Supplement. Each Grantor hereby authorizes Secured Party to modify this Agreement without the signature or consent of any Grantor by attaching Schedules 1(f)(i), 1(f)(ii), and 1(f)(iii), as applicable, that have been modified to include such Intellectual Property Collateral or to delete any reference to any right, title or interest in any Intellectual Property Collateral in which any Grantor no longer has or claims any right, title or interest; provided, the failure of any Grantor to execute an IP Supplement with respect to any additional Intellectual Property Collateral pledged pursuant to this Agreement shall not impair the security interest of Secured Party therein or otherwise adversely affect the rights and remedies of Secured Party hereunder with respect thereto. Notwithstanding the foregoing, Grantor shall not be required to record the security interest of Secured Party in any Intellectual Property Collateral, if such recordation would result in the grant of a Trademark Registration, Patent, or Copyright Registration, or any application therefor, in the name of Secured Party. SECTION 6. Certain Covenants of the Grantors. --------------------------------- Each Grantor shall: (a) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral, except where such violation would not have a Material Adverse Effect; (b) notify Secured Party of any change in such Grantor's name, identity or corporate structure within 30 days of such change; (c) give Secured Party 30 days' prior written notice of any change in such Grantor's chief place of business, chief executive office or residence or the office where such Grantor keeps its records regarding the Accounts and all originals of all chattel paper that evidence Accounts or a reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of such Grantor; and (d) if Secured Party gives value to enable such Grantor to acquire rights in or the use of any Collateral, use such value for such purposes. D-11 SECTION 7. Special Covenants With Respect to Equipment and Inventory. ---------------------------------------------------------- Each Grantor shall: (a) If such Grantor is a Subsidiary Grantor, keep the Equipment and Inventory owned by such Subsidiary Grantor at the places therefor specified on Schedule 4(b) or, provided that such Subsidiary Grantor gives Secured Party notice of any transfer of Equipment or Inventory within 60 days after such transfer, at such other places in jurisdictions where all action that may be necessary or desirable, or that Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Secured Party to exercise and enforce its rights and remedies hereunder, with respect to such Equipment and Inventory shall have been taken; (b) except as otherwise expressly permitted by the Credit Agreement, cause the Equipment owned by such Grantor to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with such Grantor's past practices, and shall forthwith make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Each Grantor shall promptly furnish to Secured Party a statement respecting any material loss or damage to any of the Equipment owned by such Grantor, but only to the extent that such loss or damage is material to the Equipment owned by Company and its Subsidiaries, taken as a whole; (c) keep correct and accurate records of Inventory owned by such Grantor, itemizing and describing the kind, type and quantity of such Inventory, such Grantor's cost therefor and (where applicable) the current list prices for such Inventory; (d) notify all of any of such Grantor's agents or processors possessing or controlling any Inventory and all public warehouses in which Inventory is maintained of the Lien of Secured Party in such Inventory; (e) upon the occurrence of an Event of Default, instruct all agents or processors of such Grantor possessing or controlling any Inventory and all public warehouses in which Inventory is maintained to hold all such Inventory for the account of Secured Party and subject to the instructions of Secured Party; and (f) each Grantor shall, at its own expense, maintain insurance with respect to the Equipment and Inventory in accordance with the terms of the Credit Agreement. SECTION 8. Special Covenants with respect to Accounts and Related Contracts. ----------------------------------------------------------------- (a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts and Related Contracts, and all originals of all chattel paper that evidence Accounts, at the locations therefor set forth on Schedule 4(d), upon 30 days' prior written notice to Secured Party, at such other location in a jurisdiction where all action that may be necessary or desirable, or that Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Secured Party to exercise and enforce its rights and remedies hereunder, D-12 with respect to such Accounts and Related Contracts shall have been taken. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of Secured Party at any time during normal business hours to inspect and make abstracts from such records and chattel paper, and each Grantor agrees to render to Secured Party, at Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the request of Secured Party, each Grantor shall deliver to Secured Party complete and correct copies of each Related Contract. (b) Each Grantor shall, for not less than three (3) years from the date on which each Account of such Grantor arose, maintain (i) complete records of such Account, including records of all payments received, credits granted and merchandise returned, and (ii) all documentation relating thereto. (c) Except as otherwise provided in this subsection (c), each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Accounts and Related Contracts. In connection with such collections, each Grantor may take (and, upon the occurrence and during the continuance of an Event of Default at Secured Party's direction, shall take) such action as such Grantor or Secured Party may deem necessary or advisable to enforce collection of amounts due or to become due under the Accounts; provided, however, that Secured Party shall have the right at any time, upon the occurrence and during the continuation of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to Secured Party and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to Secured Party, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Accounts have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to Secured Party and, upon such notification and at the expense of the Grantors, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice from Secured Party referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Accounts and the Related Contracts shall be received in trust for the benefit of Secured Party hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to Secured Party in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 17 hereof, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 9. Special Covenants With Respect to the Securities Collateral. ------------------------------------------------------------ (a) DELIVERY. Each Grantor agrees that all certificates or instruments representing or evidencing the Securities Collateral shall be delivered to and held by or on behalf of Secured Party pursuant hereto and shall be in suitable form for transfer by delivery or, as applicable, shall be accompanied by such Grantor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Secured Party. Secured Party shall have the right at any time to exchange certificates or D-13 instruments representing or evidencing Securities Collateral for certificates or instruments of smaller or larger denominations. (b) COVENANTS. Each Grantor shall, except as otherwise not prohibited by the Credit Agreement, (i) not permit any issuer of Pledged Interests to merge or consolidate unless all the outstanding capital stock or other equity interests of the surviving or resulting Person is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, if the surviving or resulting Person upon any such merger or consolidation involving an issuer of Pledged Interests which is a controlled foreign corporation is a controlled foreign corporation, then such Grantor shall only be required to pledge outstanding capital stock of such surviving or resulting Person possessing up to but not exceeding 65% of the voting power of all classes of capital stock of such issuer entitled to vote; (ii) cause each issuer of Pledged Interests not to issue any stock, other equity interests or other securities in addition to or in substitution for the Pledged Interests issued by such issuer, except to such Grantor; (iii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock, other equity interests or other securities of each issuer of Pledged Interests; (iv) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all shares of stock or other equity interests of any Person that, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of such Grantor; provided, notwithstanding anything contained in this clause (iv) to the contrary, such Grantor shall only be required to pledge the outstanding capital stock of a controlled foreign corporation possessing up to but not exceeding 65% of the voting power of all classes of capital stock of such controlled foreign corporation entitled to vote and any such Grantor shall not be required to pledge the capital stock of any Restricted Subsidiary; (v) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of additional indebtedness from time to time owed to such Grantor by any obligor on the Pledged Debt; provided, notwithstanding anything contained in this subsection (v) to the contrary, any such Grantor shall not be required to pledge any such instruments or other evidences of additional indebtedness owed to such Grantor by any Restricted Subsidiary; (vi) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of indebtedness from time to time owed to such Grantor by any Person that after the date of this Agreement becomes, as a result of any occurrence, a direct or indirect Subsidiary of such Grantor; provided, notwithstanding anything contained in this subsection (vi) to the contrary, any such Grantor shall not be required to pledge any such instruments or other evidences of indebtedness owed to such Grantor by any Restricted Subsidiary; (vii) promptly notify Secured Party of any event of which such Grantor becomes aware causing loss or depreciation in the value of the Securities Collateral that has a Material Adverse Effect; and (viii), at the request of Secured Party, promptly execute and deliver to Secured Party an agreement providing for the control, as that term is defined in the UCC, by Secured Party of all securities entitlements and securities accounts of such Grantor. (c) VOTING AND DISTRIBUTIONS. So long as no Event of Default shall have occurred and be continuing, (i) each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; provided, no Grantor shall exercise or refrain from exercising any such right if Secured Party shall have notified such Grantor that, in Secured Party's reasonable judgment, such action would have a Material D-14 Adverse Effect; and provided further, such Grantor shall give Secured Party at least five Business Days' prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right (it being understood, however, that neither (A) the voting by such Grantor of any Pledged Interests for or such Grantor's consent to the election of directors or other members of a governing body of an issuer of Pledged Interests at a regularly scheduled annual or other meeting of stockholders or holders of equity interests or with respect to incidental matters at any such meeting, nor (B) such Grantor's consent to or approval of any action otherwise not prohibited under this Agreement and the Credit Agreement shall be deemed inconsistent with the terms of this Agreement or the Credit Agreement within the meaning of this Section, and no notice of any such voting or consent need be given to Secured Party); (ii) each Grantor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends, other distributions and interest paid in respect of the Securities Collateral; provided, any and all (A) dividends, distributions and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Securities Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Securities Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Securities Collateral, shall be, and shall forthwith be delivered to Secured Party to hold as, Securities Collateral and shall, if received by such Grantor, be received in trust for the benefit of Secured Party, be segregated from the other property or funds of such Grantor and be forthwith delivered to Secured Party as Securities Collateral in the same form as so received (with all necessary endorsements); and (iii) Secured Party shall promptly execute and deliver (or cause to be executed and delivered) to such Grantor all such proxies, dividend payment orders and other instruments as such Grantor may from time to time reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights which it is entitled to exercise pursuant to clause (i) above and to receive the dividends, distributions, principal or interest payments which it is authorized to receive and retain pursuant to clause (ii) above. Upon the occurrence and during the continuation of an Event of Default, (x) upon written notice from Secured Party to any Grantor, all rights of such Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease, and all such rights shall thereupon become vested in Secured Party who shall thereupon have the sole right to exercise such voting and other consensual rights; (y) all rights of such Grantor to receive the dividends, other distributions and interest payments which it would otherwise be authorized to receive and retain pursuant hereto shall cease, and all such rights shall thereupon become vested in Secured Party who shall thereupon have the sole right to receive and hold as Securities Collateral such dividends, other distributions and interest payments; and (z) all dividends, principal, interest payments and other distributions which are received by such Grantor contrary to the provisions of clause (ii) of the immediately preceding paragraph or clause (y) above shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of such Grantor and shall forthwith be paid over to Secured Party as Securities Collateral in the same form as so received (with any necessary endorsements). In order to permit Secured Party to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other D-15 distributions which it may be entitled to receive hereunder, (I) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to Secured Party all such proxies, dividend payment orders and other instruments as Secured Party may from time to time reasonably request, and (II) without limiting the effect of clause (I) above, each Grantor hereby grants to Secured Party an irrevocable proxy to vote the Pledged Interests and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Interests would be entitled (including giving or withholding written consents of shareholders or other holders of equity interests, calling special meetings of shareholders or other holders of equity interests and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Interests on the record books of the issuer thereof) by any other Person (including the issuer of the Pledged Interests or any officer or agent thereof), upon the occurrence of an Event of Default and which proxy shall only terminate upon the payment in full of the Secured Obligations. SECTION 10. Special Covenants With Respect to the Intellectual Property ----------------------------------------------------------- Collateral. ---------- (a) Each Grantor shall: (i) diligently keep reasonable records respecting the Intellectual Property Collateral and at all times keep at least one complete set of its records concerning such Collateral at its chief executive office or principal place of business; (ii) use commercially reasonable efforts so as not to permit the inclusion in any contract to which it hereafter becomes a party of any provision that could or might in any way impair or prevent the creation of a security interest in, or the assignment of, such Grantor's rights and interests in any property included within the definitions of any Intellectual Property Collateral acquired under such contracts; (iii) take any and all reasonable steps to protect the secrecy of all trade secrets relating to the products and services sold or delivered under or in connection with the Intellectual Property Collateral, including, without limitation, where appropriate entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents; (iv) use proper statutory notice in connection with its use of any of the Intellectual Property Collateral, except where the failure to give such notice would not have a Material Adverse Effect; (v) use a commercially appropriate standard of quality (which may be consistent with such Grantor's past practices) in the manufacture, sale and delivery of products and services sold or delivered under or in connection with the Trademarks; and (vi) furnish to Secured Party from time to time at Secured Party's reasonable request statements and schedules further identifying and describing any Intellectual Property Collateral and such other reports in connection with such Collateral, all in reasonable detail. D-16 (b) Except as otherwise provided in this Section 10, each Grantor shall continue to collect, at its own expense, all amounts due or to become due to such Grantor in respect of the Intellectual Property Collateral or any portion thereof. In connection with such collections, each Grantor may take (and, after the occurrence and during the continuance of any Event of Default at Secured Party's reasonable direction, shall take) such action as such Grantor or Secured Party may deem reasonably necessary or advisable to enforce collection of such amounts; provided, Secured Party shall have the right at any time, upon the occurrence and during the continuation of an Event of Default and upon written notice to such Grantor of its intention to do so, to notify the obligors with respect to any such amounts of the existence of the security interest created hereby and to direct such obligors to make payment of all such amounts directly to Secured Party, and, upon such notification and at the expense of such Grantor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by any Grantor of the notice from Secured Party referred to in the proviso to the preceding sentence and during the continuation of any Event of Default, (i) all amounts and proceeds (including checks and other instruments) received by each Grantor in respect of amounts due to such Grantor in respect of the Intellectual Property Collateral or any portion thereof shall be received in trust for the benefit of Secured Party hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to Secured Party in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 17 hereof, and (ii) such Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (c) Each Grantor shall have the duty diligently, through counsel reasonably acceptable to Secured Party, to prosecute, file and/or make, unless and until such Grantor, in its commercially reasonable judgment, decides otherwise, (i) any application relating to any of the Intellectual Property Collateral owned, held or used by such Grantor and identified on Schedules 1(f)(i), 1(f)(ii) or 1(f)(iii), as applicable, that is pending as of the date of this Agreement, (ii) any Copyright Registration on any existing or future unregistered but copyrightable works (except for works of nominal commercial value or with respect to which such Grantor has determined in the exercise of its commercially reasonable judgment that it shall not seek registration), (iii) application on any future patentable but unpatented innovation or invention comprising Intellectual Property Collateral, and (iv) any Trademark opposition and cancellation proceedings, renew Trademark Registrations and Copyright Registrations and do any and all acts which are necessary or desirable to preserve and maintain all rights in all Intellectual Property Collateral. Any expenses incurred in connection therewith shall be borne solely by the Grantors. Subject to the foregoing, each Grantor shall, within 45 days after the end of each Fiscal Quarter of the Borrower, give Secured Party written notice of any abandonment of any Intellectual Property Collateral registered with a Governmental Authority or any pending patent application or any Patent. (d) Except as provided herein, each Grantor shall have the right to commence and prosecute in its own name, as real party in interest, for its own benefit and at its own expense, such suits, proceedings or other actions for infringement, unfair competition, dilution, misappropriation or other damage, or reexamination or reissue proceedings as are necessary to protect the Intellectual Property Collateral. Secured Party shall provide, at such Grantor's D-17 expense, all reasonable and necessary cooperation in connection with any such suit, proceeding or action including, without limitation, joining as a necessary party. Each Grantor shall, within 45 days after the end of each Fiscal Quarter of the Borrower, notify Secured Party of the institution of, or of any adverse determination that would be reasonably likely to have a Material Adverse Effect in, any proceeding (whether in the United States Patent and Trademark Office, the United States Copyright Office or any federal, state, local or foreign court) or regarding such Grantor's ownership, right to use, or interest in any Intellectual Property Collateral. Each Grantor shall provide to Secured Party any information with respect thereto requested by Secured Party. (e) In addition to, and not by way of limitation of, the granting of a security interest in the Collateral pursuant hereto, each Grantor, effective upon the occurrence and during the continuation of an Event of Default, hereby assigns, transfers and conveys to Secured Party the nonexclusive right and license to use all trademarks, tradenames, copyrights, patents or technical processes (including, without limitation, the Intellectual Property Collateral) owned or used by such Grantor that relate to the Collateral and any other collateral granted by such Grantor as security for the Secured Obligations, together with any goodwill associated therewith, all to the extent necessary to enable Secured Party to realize on the Collateral in accordance with this Agreement and to enable any transferee or assignee of the Collateral to enjoy the benefits of the Collateral; provided, however, the license granted under this Section shall not be construed to limit such Grantor's ability to take reasonable steps, in accordance with its then current business practices, to protect and preserve the Trademarks, the Trademark Registrations, the Trademark Rights and the Associated Goodwill. This right shall inure to the benefit of all successors, assigns and transferees of Secured Party and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license shall be granted free of charge, without requirement that any monetary payment whatsoever be made to such Grantor. In addition, each Grantor hereby grants to Secured Party and its employees, representatives and agents the right to visit such Grantor's and any of its Affiliate's or subcontractor's plants, facilities and other places of business that are utilized in connection with the manufacture, production, inspection, storage or sale of products and services sold or delivered under any of the Intellectual Property Collateral (or which were so utilized during the prior six month period), and to inspect the quality control and all other records relating thereto upon reasonable advance written notice to such Grantor and at reasonable dates and times and as often as may be reasonably requested. If and to the extent that any Grantor is permitted to license the Intellectual Property Collateral, Secured Party shall promptly enter into a non-disturbance agreement or other similar arrangement, at such Grantor's request and expense, with such Grantor and any licensee of any Intellectual Property Collateral permitted hereunder in form and substance reasonably satisfactory to Secured Party pursuant to which (i) Secured Party shall agree not to disturb or interfere with such licensee's rights under its license agreement with such Grantor so long as such licensee is not in default thereunder, and (ii) such licensee shall acknowledge and agree that the Intellectual Property Collateral licensed to it is subject to the security interest created in favor of Secured Party and the other terms of this Agreement. D-18 SECTION 11. Cash Collateral Accounts. ------------------------- Secured Party is hereby authorized to establish and maintain as blocked accounts in the name of the Borrower and under the sole dominion and control of Secured Party, a restricted deposit account designated as "Levi Strauss & Co. Cash Collateral Account" (the "CASH COLLATERAL ACCOUNT") and a restricted deposit account designated as "Levi Strauss & Co. L/C Cash Collateral Account" the "L/C CASH COLLATERAL ACCOUNT"). All amounts at any time held in the Cash Collateral Account and the L/C Cash Collateral Account shall be beneficially owned by the Grantors but shall be held in the name of Secured Party hereunder, for the benefit of the Lenders, as collateral security for the Secured Obligations upon the terms and conditions set forth herein. The Grantors shall have no right to withdraw, transfer or, except as expressly set forth herein, otherwise receive any funds deposited into the Cash Collateral Account and the L/C Cash Collateral Account. Anything contained herein to the contrary notwithstanding, the Cash Collateral Account and the L/C Cash Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect. All deposits of funds in the Cash Collateral Account and the L/C Cash Collateral Account shall be made by wire transfer (or, if applicable, by intra-bank transfer from another account of a Grantor) of immediately available funds, in each case addressed in accordance with instructions of Secured Party. Each Grantor shall, promptly after initiating a transfer of funds to the Cash Collateral Account, give notice to Secured Party by telefacsimile of the date, amount and method of delivery of such deposit. Cash held by Secured Party in the Cash Collateral Account and the L/C Cash Collateral Account shall not be invested by Secured Party but instead shall be maintained as a cash deposit in the Cash Collateral Account and the L/C Cash Collateral Account pending application thereof as elsewhere provided in this Agreement. To the extent permitted under Regulation Q of the Board of Governors of the Federal Reserve System, any cash held in the Cash Collateral Account and the L/C Cash Collateral Account shall bear interest at the standard rate paid by Secured Party to its customers for deposits of like amounts and terms. Subject to Secured Party's rights hereunder, any interest earned on deposits of cash in the Cash Collateral Account and the L/C Cash Collateral Account shall be deposited directly in, and held in the Cash Collateral Account and the L/C Cash Collateral Account. SECTION 12. Secured Party Appointed Attorney-in-Fact. ----------------------------------------- Each Grantor hereby irrevocably appoints Secured Party as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, Secured Party or otherwise, from time to time in Secured Party's discretion to take any action and to execute any instrument that Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) upon the occurrence and during the continuance of an Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to Administrative Agent pursuant to the Credit Agreement; (b) upon the occurrence and during the continuance of an Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; D-19 (c) upon the occurrence and during the continuance of an Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clauses (a) and (b) above; (d) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Secured Party with respect to any of the Collateral; (e) except as otherwise permitted by the Credit Agreement, to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or the Credit Agreement) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Secured Party in its sole discretion, any such payments made by Secured Party to become Obligations of such Grantor to Secured Party, due and payable immediately without demand; (f) upon the occurrence and during the continuance of an Event of Default, to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts and other documents relating to the Collateral; and (g) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and to do, at Secured Party's option and the Grantors' expense, at any time or from time to time, all acts and things that Secured Party deems necessary to protect, preserve or realize upon the Collateral and Secured Party's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. SECTION 13. Secured Party May Perform. ------------------------- If any Grantor fails to perform any agreement contained herein, Secured Party may itself perform, or cause performance of, such agreement, and the expenses of Secured Party incurred in connection therewith shall be payable by the Grantors under Section 18(b) hereof. SECTION 14. Standard of Care. ----------------- The powers conferred on Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Secured Party accords its own property. D-20 SECTION 15. Remedies. --------- (a) GENERALLY. If any Event of Default shall have occurred and be continuing, Secured Party may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of Secured Party forthwith, assemble all or part of the Collateral as directed by Secured Party and make it available to Secured Party at a place to be designated by Secured Party that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Secured Party deems appropriate, (iv) take possession of any Grantor's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of such Grantor's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation, (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Secured Party may deem commercially reasonable, (vi) exercise dominion and control over and refuse to permit further withdrawals from any Deposit Account maintained with Secured Party or any Lender constituting a part of the Collateral and (vii) without notice to any Grantor, transfer to or to register in the name of Secured Party or any of its nominees any or all of the Securities Collateral. Secured Party or any Lender or Hedge Bank may be the purchaser of any or all of the Collateral at any such sale and Secured Party, as agent for and representative of the Lenders and Hedge Banks (but not any Lender or Hedge Bank in its individual capacity unless Required Lenders shall otherwise agree in writing), shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Secured Party at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, the Grantors shall be jointly and severally liable for the deficiency and the fees of any attorneys D-21 employed by Secured Party to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to Secured Party, that Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and each Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. (b) SECURITIES COLLATERAL. (i) Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933 and the regulations promulgated thereunder (the "SECURITIES ACT") and applicable state securities laws, Secured Party may be compelled, with respect to any sale of all or any part of the Securities Collateral conducted without prior registration or qualification of such Securities Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Securities Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Secured Party by such Grantor pursuant hereto, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Secured Party shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If Secured Party determines to exercise its right to sell any or all of the Securities Collateral, upon written request, each Grantor shall and shall cause each issuer of any Pledged Interests to be sold hereunder from time to time to furnish to Secured Party all such information as Secured Party may request in order to determine the number of shares and other instruments included in the Securities Collateral which may be sold by Secured Party in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (ii) If Secured Party shall determine to exercise its right to sell all or any of the Securities Collateral pursuant to this Section, each Grantor agrees that, upon request of Secured Party (which request may be made by Secured Party in its sole discretion), such Grantor will, at its own expense (A) execute and deliver, and cause each issuer of the Securities Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Secured Party, advisable to register such Securities Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective D-22 and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Secured Party, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (B) use its best efforts to qualify the Securities Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Securities Collateral, as requested by Secured Party; (C) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act; (D) do or cause to be done all such other acts and things as may be necessary to make such sale of the Securities Collateral or any part thereof valid and binding and in compliance with applicable law; and (E) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its Obligations under this Section. (iii) Without limiting the generality of Section 7.05 of the Credit Agreement, in the event of any public sale described herein, each Grantor agrees to indemnify and hold harmless (to the maximum extent permitted under the Securities Act or other applicable law) Secured Party, and each Lender and each Hedge Bank and each of their respective directors, officers, employees and agents from and against any loss, fee, cost, expense, damage, liability or claim, joint or several, to which any such Persons may become subject or for which any of them may be liable, under the Securities Act or otherwise, insofar as such losses, fees, costs, expenses, damages, liabilities or claims (or any litigation commenced or threatened in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement, prospectus or other such document published or filed in connection with such public sale, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will (to the maximum extent permitted under the Securities Act or other applicable law) reimburse Secured Party and such other Persons for any legal or other expenses reasonably incurred by Secured Party and such other Persons in connection with any litigation, of any nature whatsoever, commenced or threatened in respect thereof (including any and all fees, costs and expenses whatsoever reasonably incurred by Secured Party and such other Persons and counsel for Secured Party and such other Persons in investigating, preparing for, defending against or providing evidence, producing documents or taking any other action in respect of, any such commenced or threatened litigation or any claims asserted). This indemnity shall be in addition to any liability which any Grantor may otherwise have and shall extend upon the same terms and conditions to each Person, if any, that controls Secured Party or such Persons within the meaning of the Securities Act. (c) L/C CASH COLLATERAL ACCOUNT. If an Event of Default has occurred and is continuing and, in accordance with Section 6.02 of the Credit Agreement, the Borrower is required to pay to Secured Party an amount (the "AGGREGATE AVAILABLE AMOUNT") equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding under the Credit Agreement, the Borrower shall deliver funds in such an amount for deposit in D-23 the L/C Cash Collateral Account. If for any reason the aggregate amount delivered by the Borrower for deposit in the L/C Cash Collateral Account as aforesaid is less than the Aggregate Available Amount, the aggregate amount so delivered by the Borrower shall be apportioned among all outstanding Letters of Credit for purposes of this Section in accordance with the ratio of the maximum amount available for drawing under each such Letter of Credit (as to such Letter of Credit, the "MAXIMUM AVAILABLE AMOUNT") to the Aggregate Available Amount. Upon any drawing under any outstanding Letter of Credit in respect of which the Borrower has deposited in the L/C Cash Collateral Account any amounts described above, Secured Party shall apply such amounts to reimburse the Issuing Lender for the amount of such drawing. In the event of cancellation or expiration of any Letter of Credit in respect of which the Borrower has deposited in the L/C Cash Collateral Account any amounts described above, or in the event of any reduction in the Maximum Available Amount under such Letter of Credit, Secured Party shall apply the amount then on deposit in the L/C Collateral Account in respect of such Letter of Credit (less, in the case of such a reduction, the Maximum Available Amount under such Letter of Credit immediately after such reduction) first, to the payment of any amounts payable to Secured Party pursuant to Section 17 hereof, second, to the extent of any excess, to the cash collateralization pursuant to the terms of this Agreement of any outstanding Letters of Credit in respect of which the Borrower has failed to pay all or a portion of the amounts described above (such cash collateralization to be apportioned among all such Letters of Credit in the manner described above), third, to the extent of any further excess, to the payment of any other outstanding Secured Obligations in such order as Secured Party shall elect, and fourth, to the extent of any further excess, to the payment to whomsoever shall be lawfully entitled to receive such funds. (d) CASH COLLATERAL ACCOUNT. If an Event of Default has occurred and is continuing, the Borrower shall deliver any and all cash dividends paid or payable to it or any of its Subsidiaries from any of its Subsidiaries from time to time for deposit in the Cash Collateral Account. Amounts in the Cash Collateral Account shall be applied in accordance with Section 17 hereof. SECTION 16. Additional Remedies for Intellectual Property Collateral. --------------------------------------------------------- (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default, (i) Secured Party shall have the right (but not the obligation) to bring suit, in the name of any Grantor, Secured Party or otherwise, to enforce any Intellectual Property Collateral, in which event each Grantor shall, at the request of Secured Party, do any and all lawful acts and execute any and all documents required by Secured Party in aid of such enforcement and each Grantor shall promptly, upon demand, reimburse and indemnify Secured Party as provided in Section 7.05 of the Credit Agreement and Section 18 hereof, as applicable, in connection with the exercise of its rights under this Section, and, to the extent that Secured Party shall elect not to bring suit to enforce any Intellectual Property Collateral as provided in this Section, each Grantor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement of any of the Intellectual Property Collateral by others and for that purpose agrees to use its commercially reasonable judgment in maintaining any action, suit or proceeding against any Person so infringing reasonably necessary to prevent such infringement; (ii) upon written demand from Secured Party, each Grantor shall execute and deliver to Secured Party an D-24 assignment or assignments of the Intellectual Property Collateral and such other documents as are necessary or appropriate to carry out the intent and purposes of this Agreement; (iii) each Grantor agrees that such an assignment and/or recording shall be applied to reduce the Secured Obligations outstanding only to the extent that Secured Party (or any Lender) receives cash proceeds in respect of the sale of, or other realization upon, the Intellectual Property Collateral; and (iv) within five Business Days after written notice from Secured Party, each Grantor shall make available to Secured Party, to the extent within such Grantor's power and authority, such personnel in such Grantor's employ on the date of such Event of Default as Secured Party may reasonably designate, by name, title or job responsibility, to permit such Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Grantor under or in connection with the Trademarks, Trademark Registrations and Trademark Rights, such persons to be available to perform their prior functions on Secured Party's behalf and to be compensated by Secured Party at such Grantor's expense on a per diem, pro-rata basis consistent with the salary and benefit structure applicable to each as of the date of such Event of Default. (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment to Secured Party of any rights, title and interests in and to the Intellectual Property Collateral shall have been previously made, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, Secured Party shall promptly execute and deliver to such Grantor such assignments as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to Secured Party as aforesaid, subject to any disposition thereof that may have been made by Secured Party; provided, after giving effect to such reassignment, Secured Party's security interest granted pursuant hereto, as well as all other rights and remedies of Secured Party granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to Secured Party and Liens expressly permitted by the Credit Agreement. SECTION 17. Application of Proceeds. ----------------------- Except as expressly provided elsewhere in this Agreement, all proceeds received by Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority: FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to Secured Party and its agents and counsel, and all other expenses, liabilities and advances made or incurred by Secured Party in connection therewith, and all amounts for which Secured Party is entitled to indemnification hereunder and all advances made by Secured Party hereunder for the account of the Grantors, and to the payment of all costs and expenses paid or incurred by Secured Party in connection with the exercise of any right or remedy hereunder; SECOND: To the payment of all other Secured Obligations (for the ratable benefit of the holders thereof) and, as to Obligations arising under the Credit Agreement, as provided in the Credit Agreement; and D-25 THIRD: To the payment to or upon the order of the Borrower, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 18. Indemnity and Expenses. ---------------------- (a) The Grantors jointly and severally agree to indemnify Secured Party, each Lender and each Hedge Bank from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from Secured Party's or such Lender's or Hedge Bank's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. (b) The Grantors jointly and severally agree to pay to Secured Party upon demand the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Secured Party hereunder, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof. (c) The obligations of the Grantors in this Section 18 shall (i) survive the termination of this Agreement and the discharge of the Grantors' other Obligations under this Agreement, the Hedge Bank Hedge Agreements, the Credit Agreement and the other Loan Documents and (ii), as to any Grantor that is a party to a Subsidiary Guaranty, be subject to the provisions of Section 1(b) thereof. SECTION 19. Continuing Security Interest; Transfer of Loans; Termination -------------------------------------------------------------- and Release. ----------- (a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the payment in full of the Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, (ii) be binding upon the Grantors and their respective successors and assigns, and (iii) inure, together with the rights and remedies of Secured Party hereunder, to the benefit of Secured Party and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), (A) but subject to the provisions of Section 8.07 of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Lenders herein or otherwise and (B) any Hedge Bank may assign or otherwise transfer any Hedge Bank Hedge Agreement to which it is a party to any other Person in accordance with the terms of such Hedge Bank Hedge Agreement, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Hedge Banks herein or otherwise. (b) Upon the payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, the security interest granted hereby shall terminate and all rights to the Collateral shall D-26 revert to the applicable the Grantors. Upon any such termination Secured Party will, at the Grantors' expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination. (c) In addition, upon the proposed sale, transfer or other disposition of any Collateral by a Grantor in accordance with the Credit Agreement for which such Grantor desires to obtain a security interest release from Secured Party, such Grantor shall deliver an officer's certificate (x) stating that the Collateral subject to such disposition is being sold, transferred or otherwise disposed of in compliance with the terms of the Credit Agreement and (y) specifying the Collateral being sold, transferred or otherwise disposed of in the proposed transaction. Upon the receipt of such officer's certificate, Secured Party shall, at such Grantor's expense, so long as Secured Party has no reason to believe that the officer's certificate delivered by such Grantor with respect to such sale is not true and correct, execute and deliver such releases of its security interest in such Collateral which is to be so sold, transferred or disposed of, as may be reasonably requested by such Grantor. SECTION 20. Secured Party as Agent. ---------------------- (a) Secured Party has been appointed to act as Secured Party hereunder by the Lenders and, by their acceptance of the benefits hereof, Hedge Banks. Secured Party shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided that Secured Party shall exercise, or refrain from exercising, any remedies provided for in Section 15 hereof in accordance with the instructions of Required Lenders. In furtherance of the foregoing provisions of this Section 20(a), each Hedge Bank, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Hedge Bank that all rights and remedies hereunder may be exercised solely by Secured Party for the benefit of the Lenders and Hedge Banks in accordance with the terms of this Section 20(a). (b) Secured Party shall at all times be the same Person that is Administrative Agent under the Credit Agreement. Written notice of resignation by Administrative Agent pursuant to Section 7.07 of the Credit Agreement shall also constitute notice of resignation as Secured Party under this Agreement; and appointment of a successor administrative agent pursuant to Section 7.07 of the Credit Agreement shall also constitute appointment of a successor Secured Party under this Agreement. Upon the acceptance of any appointment as Administrative Agent under Section 7.07 of the Credit Agreement by a successor administrative agent, that successor administrative agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Secured Party under this Agreement, and the retiring Secured Party under this Agreement shall promptly (i) transfer to such successor Secured Party all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Secured Party under this Agreement, and (ii) execute and deliver to such successor Secured Party such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Secured Party of the security interests created hereunder, whereupon such retiring Secured Party shall be discharged from its duties and obligations under this Agreement. After any retiring D-27 administrative agent's resignation hereunder as Secured Party, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Secured Party hereunder. (c) Secured Party shall not be deemed to have any duty whatsoever with respect to any Hedge Bank until it shall have received written notice in form and substance satisfactory to Secured Party from a Grantor or the Hedge Bank as to the existence and terms of the applicable Hedge Bank Hedge Agreement. SECTION 21. Additional Grantors. ------------------- The initial Subsidiary Grantors hereunder shall be such of the Subsidiaries of the Borrower as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, additional Material Domestic Subsidiaries of the Borrower may become parties hereto as additional Grantors (each an "ADDITIONAL GRANTOR"), by executing a counterpart substantially in the form of Exhibit VI annexed hereto. Upon delivery of any such counterpart to Secured Party, notice of which is hereby waived by the Grantors, each such Additional Grantor shall be a Grantor and shall be as fully a party hereto as if such Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Administrative Agent not to cause any Subsidiary of the Borrower to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder. SECTION 22. Amendments; Etc. ---------------- No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall in any event be effective unless the same shall be in writing and signed by Secured Party and, in the case of any such amendment or modification, by the Grantors; provided this Agreement may be modified by the execution of a counterpart by an Additional Grantor in accordance with Section 21 hereof and the Grantors hereby waive any requirement of notice of or consent to any such amendment. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. SECTION 23. Notices. -------- Any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Secured Party shall not be effective until received. For the purposes hereof, the address of each party hereto shall be as provided in Section 8.02 of the Credit Agreement or as set forth under such party's name on the signature pages hereof or such other address as shall be designated by such party in a written notice delivered to the other parties hereto. D-28 SECTION 24. Failure or Indulgence Not Waiver; Remedies Cumulative. ------------------------------------------------------ No failure or delay on the part of Secured Party in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 25. Severability. ------------- In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 26. Headings. --------- Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. SECTION 27. Governing Law; Terms; Rules of Construction. -------------------------------------------- This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York) without regard to conflicts of laws principles that would require application of another law. Unless otherwise defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of New York are used herein as therein defined. The rules of construction set forth in Sections 1.02 and 1.04 of the Credit Agreement shall be applicable to this Agreement MUTATIS MUTANDIS. SECTION 28. Consent to Jurisdiction and Service of Process. ----------------------------------------------- (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the fullest extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction. D-29 (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 29. Waiver of Jury Trial. -------------------- Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances, the Letters of Credit or the actions of any Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. SECTION 30. Counterparts. ------------- This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. [Remainder of page intentionally left blank] D-30 IN WITNESS WHEREOF, the Grantors and Secured Party have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. LEVI STRAUSS & CO. By:_____________________________ Name:__________________________ Title:___________________________ EACH OF THE ENTITIES LISTED ON SCHEDULE A ANNEXED ---------- HERETO By: _________________________________ on behalf of each of the entities listed on Schedule A annexed hereto ---------- Name:____________________________ Title:____________________________ BANK OF AMERICA, N.A. As Administrative Agent, as Secured Party By:______________________________ Name:__________________________ Title:___________________________ EX-10.59 24 0024.txt FORM OF SUBSIDIARY GUARANTY EXHIBIT E [FORM OF] SUBSIDIARY GUARANTY This GUARANTY is entered into as of February 1, 2001 by the undersigned (each a "GUARANTOR", and together with any future Subsidiaries executing this Guaranty, being collectively referred to herein as the "GUARANTORS") in favor of and for the benefit of Bank of America, N.A., as Administrative Agent for and representative of (in such capacity herein called the "GUARANTIED PARTY") the several financial institutions (the "LENDERS") from time to time party to the Credit Agreement referred to below and any Hedge Bank, and for the benefit of the other Beneficiaries (as hereinafter defined). PRELIMINARY STATEMENTS A. Levi Strauss & Co., a Delaware corporation (the "BORROWER"), has entered into that certain Credit Agreement, dated as of February 1, 2001, with the Lenders, the several financial institutions party thereto as Co-Lead Arrangers and Joint Book Managers, the financial institution party thereto as Syndication Agent, the financial institution party thereto as Documentation Agent, and Guarantied Party, as Administrative Agent for the Lenders (said Credit Agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the "CREDIT AGREEMENT"; the terms defined therein being used herein as therein defined). B. The Borrower and Levi Strauss & Co. Financial Services, S.A., a Belgian corporation, or any successor thereto ("FINSERV"), may from time to time enter, or may from time to time have entered, into one or more Hedge Bank Hedge Agreements in accordance with the terms of the Credit Agreement, and it is desired that the obligations of the Borrower and FinServ under the Hedge Bank Hedge Agreements, including, without limitation, the obligation of the Borrower and FinServ to make payments thereunder in the event of early termination or close out thereof, together with all obligations of the Borrower under the Credit Agreement and the other Loan Documents, be guarantied hereunder until the payment in full of all Obligations under the Credit Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements), the cancellation or expiration of all Letters of Credit and the termination of the Commitments. C. The Guarantied Party, the Lenders, and each Hedge Bank for which the Guarantied Party has received the notice required by Section 17(c) hereof are sometimes referred to herein as "BENEFICIARIES". D. A portion of the proceeds of the Advances may be advanced to the Guarantors, and thus the Guarantied Obligations (as hereinafter defined) are being incurred for and will inure to the benefit of the Guarantors (which benefits are hereby acknowledged). E. It is a condition precedent to the initial extensions of credit by the Lenders under the Credit Agreement that the Borrower's obligations thereunder be guarantied by the Guarantors. F. The Guarantors are willing irrevocably and unconditionally to guaranty such obligations of the Borrower. NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders and the Guarantied Party to enter into the Credit Agreement and to induce Hedge Banks to enter into the Hedge Bank Hedge Agreements, the Guarantors hereby agree as follows: 1. Guaranty. (a) In order to induce the Lenders to extend -------- credit to the Borrower pursuant to the Credit Agreement and the entry by Hedge Banks into the Hedge Bank Hedge Agreements, the Guarantors jointly and severally irrevocably and unconditionally guaranty, as primary obligors and not merely as sureties, the due and punctual payment in full of all Guarantied Obligations (as hereinafter defined) when the same shall become due, whether at stated maturity, by acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)). The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes any and all Obligations of the Borrower and all obligations of the Borrower and FinServ under Hedge Bank Hedge Agreements, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Credit Agreement, the Hedge Bank Hedge Agreements, this Guaranty and the other Loan Documents, including those arising under successive borrowing transactions under the Credit Agreement which shall either continue the Obligations of the Borrower or from time to time renew them after they have been satisfied; PROVIDED, HOWEVER, that obligations arising under or in connection with the Hedge Bank Hedge Agreements shall be Guarantied Obligations only until the payment in full of all Obligations under the Credit Agreement and the other Loan Documents (other than the Hedge Bank Hedge Agreements), the cancellation or expiration of all Letters of Credit and the termination of the Commitments. Each Guarantor acknowledges that a portion of the Advances may be advanced to it, that Letters of Credit may be issued for the benefit of its business and that the Guarantied Obligations are being incurred for and will inure to its benefit. Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Borrower or FinServ (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention of each Guarantor and the Guarantied Party that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve the Borrower or FinServ of any portion of such Guarantied Obligations. In the event that all or any portion of the Guarantied Obligations is paid, the obligations of each Guarantor hereunder shall continue and remain in E-2 full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Guarantied Party or any other Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations. Subject to the other provisions of this Section 1, upon the failure of the Borrower or FinServ to pay any of the Guarantied Obligations when and as the same shall become due, each Guarantor will upon demand pay, or cause to be paid, in cash, to the Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to the aggregate of the unpaid Guarantied Obligations. (b) Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor under this Guaranty shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (i) in respect of intercompany indebtedness to the Borrower or other affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder and (ii) under any guaranty which contains a limitation as to maximum amount similar to that set forth in this Section 1(b), pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms of any agreement. (c) Each Guarantor under this Guaranty, and each guarantor under other guaranties, if any, relating to the Credit Agreement (the "RELATED GUARANTIES") that contain a contribution provision similar to that set forth in this Section 1(c), together desire to allocate among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations arising under this Guaranty and the Related Guaranties. Accordingly, in the event any payment or distribution is made on any date by a Guarantor under this Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such other guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in the maximum amount permitted by law so as to maximize the aggregate amount of the Guarantied Obligations paid to Beneficiaries. 2. Guaranty Absolute; Continuing Guaranty. The obligations of --------------------------------------- each Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) the Guarantied Party may enforce this Guaranty upon the occurrence of an Event of Default under the Credit Agreement notwithstanding the existence of any dispute between the Borrower or FinServ and any E-3 Beneficiary with respect to the existence of such event; (c) the obligations of each Guarantor hereunder are independent of the obligations of the Borrower under the Loan Documents or of the Borrower and FinServ under the Hedge Bank Hedge Agreements and the obligations of any other Guarantor and a separate action or actions may be brought and prosecuted against each Guarantor whether or not any action is brought against the Borrower, FinServ or any of such other Guarantors and whether or not the Borrower or FinServ is joined in any such action or actions; and (d) a payment of a portion, but not all, of the Guarantied Obligations by one or more Guarantors shall in no way limit, affect, modify or abridge the liability of such or any other Guarantor for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon each Guarantor and its successors and assigns, and each Guarantor irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guarantied Obligations. 3. Actions by Beneficiaries. Any Beneficiary may from time to ------------------------ time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of any Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of any Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Guarantied Party or the other Beneficiaries, or any of them, may have against any such security, as Guarantied Party in its discretion may determine consistent with the Credit Agreement, the Hedge Bank Hedge Agreements and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to the Guarantied Party or the other Beneficiaries, or any of them, under the Loan Documents or the Hedge Bank Hedge Agreements. 4. No Discharge. This Guaranty and the obligations of the ------------- Guarantors hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including, without limitation, the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of the Credit Agreement, any of the other Loan Documents, the Hedge Bank Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the E-4 Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even though Guarantied Party or the other Beneficiaries, or any of them, might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the Borrower or FinServ may assert against the Guarantied Party or any Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of a Guarantor as an obligor in respect of the Guarantied Obligations. 5. Waivers. Each Guarantor waives, for the benefit of ------- Beneficiaries: (a) any right to require the Guarantied Party or the other Beneficiaries, as a condition of payment or performance by such Guarantor, to (i) proceed against the Borrower or FinServ, any other guarantor (including any other Guarantor) of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Borrower or FinServ, any other guarantor of the Guarantied Obligations or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of any Beneficiary in favor of the Borrower, FinServ or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Borrower or FinServ including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Borrower or FinServ from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon the Guarantied Party's or any other Beneficiary's errors or omissions in the administration of the Guarantied Obligations, except behavior that amounts to gross negligence or willful misconduct; (e) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any Lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty, notices of default under the Credit Agreement, notices of default, close out or early termination under any Hedge Bank Hedge Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guarantied Obligations or any agreement related thereto, notices of any extension of credit to the Borrower or FinServ and notices of any of the matters referred to in Sections 3 and 4 hereof and any right to consent to any thereof; and (g) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. E-5 As used in this paragraph, any reference to "the principal" includes the Borrower and FinServ, and any reference to "the creditor" includes the Guarantied Party and each other Beneficiary. In accordance with Section 2856 of the California Civil Code (a) each Guarantor waives any and all rights and defenses available to it by reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code, including, without limitation, any and all rights or defenses such Guarantor may have by reason of protection afforded to the principal with respect to any of the Guarantied Obligations, or to any other guarantor of any of the Guarantied Obligations with respect to any of such guarantor's obligations under its guaranty, in either case pursuant to the antideficiency or other laws of the State of California limiting or discharging the principal's indebtedness or such guarantor's obligations, including, without limitation, Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and (b) each Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guarantied Obligation, has destroyed such Guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise; and even though that election of remedies by the creditor, such as nonjudicial foreclosure with respect to security for an obligation of any other guarantor of any of the Guarantied Obligations, has destroyed such Guarantor's rights of contribution against such other guarantor. No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this paragraph. As provided below, this Guaranty shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York, without regard to conflicts of laws principles. This paragraph is included solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Guaranty or to any of the Guarantied Obligations. 6. Guarantors' Rights of Subrogation, Contribution, Etc.; ---------------------------------------------------------- Subordination of Other Obligations. Until the Guarantied Obligations shall have - ---------------------------------- been paid in full, the Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, no Guarantor shall exercise any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Borrower, FinServ or their respective assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute (including, without limitation, under California Civil Code Section 2847, 2848 or 2849), under common law or otherwise and including, without limitation, (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against the Borrower or FinServ, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against the Borrower or FinServ, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against the Borrower or FinServ or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights the Guarantied Party or the other Beneficiaries may have against the Borrower or FinServ, to all right, title and interest the Guarantied Party or the other E-6 Beneficiaries may have in any such collateral or security, and to any right the Guarantied Party or the other Beneficiaries may have against such other guarantor. Any indebtedness of the Borrower or FinServ now or hereafter held by any Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of the Borrower or FinServ to a Guarantor collected or received by such Guarantor after an Event of Default has occurred and is continuing, and any amount paid to a Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for the Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over to the Guarantied Party for the benefit of Beneficiaries to be credited and applied against the Guarantied Obligations. 7. Expenses. The Guarantors jointly and severally agree to -------- pay, or cause to be paid, on demand, and to save the Guarantied Party and the other Beneficiaries harmless against liability for, any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred or expended by the Guarantied Party or any other Beneficiary in connection with the enforcement of or preservation of any rights under this Guaranty. 8. Financial Condition of the Borrower or FinServ. No ----------------------------------------------------- Beneficiary shall have any obligation, and each Guarantor waives any duty on the part of any Beneficiary, to disclose or discuss with such Guarantor its assessment, or such Guarantor's assessment, of the financial condition of the Borrower or FinServ or any matter or fact relating to the business, operations or condition of the Borrower or FinServ. Each Guarantor has adequate means to obtain information from the Borrower or FinServ on a continuing basis concerning the financial condition of the Borrower or FinServ and its ability to perform its obligations under the Loan Documents and the Hedge Bank Hedge Agreement, as the case may be, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of the Borrower or FinServ and of all circumstances bearing upon the risk of nonpayment of the Guarantied Obligations. 9. Representations and Warranties. Each Guarantor makes, for ------------------------------ the benefit of Beneficiaries, each of the representations and warranties made in the Credit Agreement by the Borrower as to such Guarantor, its assets, financial condition, operations, organization, legal status, business and the Loan Documents to which it is a party. 10. Covenants. Each Guarantor agrees that, so long as any part --------- of the Guarantied Obligations shall remain unpaid, any Letter of Credit shall be outstanding and any Lender shall have any Commitment, such Guarantor will, unless Required Lenders shall otherwise consent in writing, perform or observe, and cause its Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that the Borrower is to cause a Guarantor and such Subsidiaries to perform or observe. 11. Set Off. In addition to any other rights any Beneficiary ------- may have under law or in equity, if any amount shall at any time be due and owing by a Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to E-7 apply any and all deposits (general or special, including but not limited to indebtedness evidence by certificates of deposit, whether matured or unmatured) and any other indebtedness of such Beneficiary owing to a Guarantor and any other property of such Guarantor held by a Beneficiary to or for the credit or the account of such Guarantor against and on account of the Guarantied Obligations and liabilities of such Guarantor to any Beneficiary under this Guaranty. 12. Discharge of Guaranty Upon Sale of Guarantor. If all of --------------------------------------------- the stock of a Guarantor or any of its successors in interest under this Guaranty shall be sold or otherwise disposed of (including by merger or consolidation) in a sale not prohibited by the Credit Agreement or otherwise consented to by Required Lenders, the obligations of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such sale; provided that, if the sale of such stock constitutes a disposition of assets as a condition precedent to such discharge and release, the Guarantied Party shall have received evidence satisfactory to it that arrangements satisfactory to it have been made for delivery to the Guarantied Party of the Net Cash Proceeds (if any) as required by the Credit Agreement. 13. Amendments and Waivers. No amendment, modification, ------------------------ termination or waiver of any provision of this Guaranty, and no consent to any departure by any Guarantor therefrom, shall in any event be effective without the written concurrence of the Guarantied Party and, in the case of any such amendment or modification, the Guarantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 14. Miscellaneous. It is not necessary for Beneficiaries ------------- to inquire into the capacity or powers of any Guarantor, the Borrower or FinServ or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiaries by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiaries by virtue of any statute or rule of law or in any of the Loan Documents or Hedge Bank Hedge Agreement or any agreement between one or more Guarantors and one or more Beneficiaries or between the Borrower or FinServ and one or more Beneficiaries. Any forbearance or failure to exercise, and any delay by any Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW. E-8 This Guaranty shall inure to the benefit of Beneficiaries and their respective successors and assigns. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the fullest extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty or any of the other Loan Documents in the courts of any jurisdiction. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the Guaranty or the actions of any Agent, any Lender Party or any Hedge Bank in the negotiation, administration, performance or enforcement thereof. 15. Additional Guarantors. The initial Guarantor(s) hereunder --------------------- shall be such of the Material Domestic Subsidiaries of the Borrower as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, Subsidiaries of the Borrower may become parties hereto, as additional Guarantors (each an "ADDITIONAL GUARANTOR"), by executing a counterpart, a form of which is attached as Exhibit A, of this Guaranty. Upon delivery of any such --------- counterpart to the Guarantied Party, notice of which is hereby waived by the Guarantors, each such Additional Guarantor shall be a Guarantor and shall be as fully a party hereto as if such Additional Guarantor were an original signatory hereof. Each Guarantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Guarantor hereunder, nor by any election of the Guarantied Party not to cause any Subsidiary of the Borrower to become an Additional Guarantor hereunder. This Guaranty shall be fully effective as to any Guarantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Guarantor hereunder. 16. Counterparts; Effectiveness. This Guaranty may be executed --------------------------- in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall E-9 constitute one and the same agreement. This Guaranty shall become effective as to each Guarantor upon the execution of a counterpart hereof by such Guarantor (whether or not a counterpart hereof shall have been executed by any other Guarantor) and receipt by the Guarantied Party of written or telephonic notification of such execution and authorization of delivery thereof. Delivery by telecopier of an executed counterpart of a signature page to this Guaranty shall be effective as delivery of an original executed counterpart of this Guaranty. 17. The Guarantied Party as Agent. ----------------------------- (a) The Guarantied Party has been appointed to act as the Guarantied Party hereunder by the Lenders. The Guarantied Party shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action, solely in accordance with this Guaranty and the Credit Agreement. (b) The Guarantied Party shall at all times be the same Person that is the Administrative Agent under the Credit Agreement. Written notice of resignation by the Administrative Agent pursuant to Section 7.07 of the Credit Agreement shall also constitute notice of resignation as the Guarantied Party under this Guaranty; and appointment of a successor administrative agent pursuant to Section 7.07 of the Credit Agreement shall also constitute appointment of a successor Guarantied Party under this Guaranty. Upon the acceptance of any appointment as administrative agent under Section 7.07 of the Credit Agreement by a successor administrative agent, that successor administrative agent shall thereupon succeed to become vested with all the rights, powers, privileges and duties of the retiring Guarantied Party under this Guaranty, and the retiring Guarantied Party under this Guaranty shall promptly (i) transfer to such successor Guarantied Party all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Guarantied Party under this Guaranty, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Guarantied Party of the rights created hereunder, whereupon such retiring Guarantied Party shall be discharged from its duties and obligations under this Guaranty. After any retiring Guarantied Party's resignation hereunder as the Guarantied Party, the provisions of this Guaranty shall inure to its benefits as to any actions taken or omitted to be taken by it under this Guaranty while it was the Guarantied Party hereunder. (c) The Guarantied Party shall not be deemed to have any duty whatsoever with respect to any Hedge Bank until it shall have received written notice in form and substance satisfactory to the Guarantied Party from the Borrower, a Guarantor or the Hedge Bank as to the existence and terms of the applicable Hedge Bank Hedge Agreement. [The remainder of this page intentionally left blank.] E-10 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above. BATTERY STREET ENTERPRISES, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- LEVI STRAUSS FINANCIAL CENTER CORPORATION By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- LEVI STRAUSS FUNDING, LLC By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- LEVI STRAUSS GLOBAL FULFILLMENT SERVICES, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- E-11 LEVI STRAUSS GLOBAL OPERATIONS, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- LEVI STRAUSS INTERNATIONAL By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- LEVI STRAUSS LATIN AMERICA, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- E-12 LEVI'S ONLY STORES, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- NF INDUSTRIES, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- ACKNOWLEDGED AND FOR PURPOSES OF THE WAIVER OF JURY TRIAL SET FORTH IN SECTION 14 ONLY, AGREED AS OF THE DATE FIRST WRITTEN ABOVE Bank of America, N.A., as Administrative Agent By:_____________________________ Title: ___________________________ E-13 Exhibit A to Subsidiary Guaranty [Form of] Counterpart for Additional Guarantors This COUNTERPART (this "COUNTERPART"), dated _______, _____, is delivered pursuant to Section 15 of the Guaranty referred to below. The undersigned hereby agrees that this Counterpart may be attached to the Guaranty, dated as of January __, 2001 (as it may be from time to time amended, amended and restated, supplemented or otherwise modified, the "GUARANTY"; the terms defined therein being used herein as therein defined), among the Guarantors named therein and Bank of America, N.A., as the Guarantied Party. The undersigned, by executing and delivering this Counterpart, hereby becomes an Additional Guarantor under the Guaranty in accordance with Section 15 thereof and agrees to be bound by all of the terms thereof. IN WITNESS WHEREOF, the undersigned has caused this Counterpart to be duly executed and delivered by its officer thereunto duly authorized as of ______________, ____. [NAME OF ADDITIONAL GUARANTOR] By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Address: -------------------------- -------------------------- -------------------------- E-1 EX-10.60 25 0025.txt FORMS OF AMENDMENTS TO EUROPEAN RECEIVABLES [LETTERHEAD OF TAPCO] To: LEVI STRAUSS (U.K.) LIMITED 100 New Bridge Street London EC4V 6JA LEVI STRAUSS & CO. 1155 Battery Street San Francisco CA 94120 USA 28 December 2000 Dear Sirs, EUROPEAN SECURITISATION We refer to: o a Receivables Purchase Agreement dated 29 February 2000 and made between yourselves as Seller, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"); and o a Servicing Agreement dated 29 February 2000 and made between yourselves as Servicer, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "SERVICING AGREEMENT"). We are hereby adding the following Clause to the Receivables Purchase Agreement: 5. CLEAN-UP CALL 5.1 On any Collection Payment Date after the occurrence of a Termination Date (the "RETRANSFER DATE"), the Seller shall be entitled, at its option, on giving not less than 5 days' prior notice to the Purchaser, to repurchase all outstanding Purchased Receivables if, on such Retransfer Date, the Outstanding Nominal Amount of all Purchased Receivables is less than 15% of the Outstanding Nominal Amount of all Purchased Receivables at the date on which the Termination Date is declared. 5.2 For the purpose of Clause 5.1 above, upon exercise of the option granted to it in Clause 5.1 above, the Seller shall provide the Purchaser with satisfactory evidence of the Outstanding Nominal Amount of all Purchased Receivables on the date on which the Termination Date is declared. 5.3 The repurchase price ("REPURCHASE PRICE") payable by the Seller if it wishes to execute the option granted to it pursuant to Clause 5.1 above, shall be the Outstanding Nominal Amount of all Purchased Receivables. Such Repurchase Price will be payable in full on the Retransfer Date and shall be deemed to be Collections of such Purchased Receivables. The re-transfer of such Purchased Receivables shall take effect upon receipt of the Repurchase Price by the Purchaser. 5.4 Any repurchase pursuant to this Clause 5 shall be without recourse against or warranty or representation on the part of the Purchaser and at the sole cost and expense of the Seller. This Clause should be added as Clause 5 to the Receivables Purchase Agreement, with Clause 5 becoming clause 6 etc. The other provisions of the Receivables Purchase Agreement and the Servicing Agreement remain unchanged. This letter will be effective as from 22 November 2000. Please countersign this letter if you agree with its content. Yours faithfully, TULIP ASSET PURCHASE COMPANY - -------------------- -------------------- Name: Name: Title: Title: WE AGREE WITH THE CONTENT OF THIS LETTER LEVI STRAUSS (U.K.) LIMITED _____________________ DATE: NAME TITLE: LEVI STRAUSS & CO. _____________________ DATE: NAME TITLE: -2- [LETTERHEAD OF TAPCO] To: LEVI STRAUSS GERMANY GMBH Levi Strauss Allee 63150 Heusenstamm Germany 28 December 2000 Dear Sirs, EUROPEAN SECURITISATION We refer to: o a Receivables Purchase Agreement dated 29 February 2000 and made between yourselves as Seller and ourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"); and o a Servicing Agreement dated 29 February 2000 and made between yourselves as Servicer, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "SERVICING AGREEMENT"). We are hereby adding the following Clause to the Receivables Purchase Agreement: 5. CLEAN-UP CALL 5.1 On any Collection Payment Date after the occurrence of a Termination Date (the "RETRANSFER DATE"), the Seller shall be entitled, at its option, on giving not less than 5 days' prior notice to the Purchaser, to repurchase all outstanding Purchased Receivables if, on such Retransfer Date, the Outstanding Nominal Amount of all Purchased Receivables is less than 15% of the Outstanding Nominal Amount of all Purchased Receivables at the date on which the Termination Date is declared. 5.2 For the purpose of Clause 5.1 above, upon exercise of the option granted to it in Clause 5.1 above, the Seller shall provide the Purchaser with satisfactory evidence of the Outstanding Nominal Amount of all Purchased Receivables on the date on which the Termination Date is declared. 5.3 The repurchase price ("REPURCHASE PRICE") payable by the Seller if it wishes to execute the option granted to it pursuant to Clause 5.1 above, shall be the Outstanding Nominal Amount of all Purchased Receivables. Such Repurchase Price will be payable in full on the Retransfer Date and shall be deemed to be Collections of such Purchased Receivables. The re-transfer of such Purchased Receivables shall take effect upon receipt of the Repurchase Price by the Purchaser. -3- 5.4 Any repurchase pursuant to this Clause 5 shall be without recourse against or warranty or representation on the part of the Purchaser and at the sole cost and expense of the Seller. This Clause should be added as Clause 5 to the Receivables Purchase Agreement, with Clause 5 becoming clause 6 etc. The other provisions of the Receivables Purchase Agreement and the Servicing Agreement remain unchanged. This letter will be effective as from 22 November 2000. Please countersign this letter if you agree with its content. Yours faithfully, TULIP ASSET PURCHASE COMPANY - -------------------- -------------------- Name: Name: Title: Title: WE AGREE WITH THE CONTENT OF THIS LETTER LEVI STRAUSS GERMANY GMBH _____________________ DATE: NAME TITLE: -4- [LETTERHEAD OF TAPCO] To: LEVI STRAUSS DE ESPANA Avda Diagonal 605, 3(degree) PLANTA Barcelona Spain LEVI STRAUSS & CO. 1155 Battery Street San Francisco CA 94120 USA 28 December 2000 Dear Sirs, EUROPEAN SECURITISATION We refer to: o a Receivables Purchase Agreement dated 29 February 2000 and made between yourselves as Seller, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"); and o a Servicing Agreement dated 29 February 2000 and made between yourselves as Servicer, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "SERVICING AGREEMENT"). We are hereby adding the following Clause to the Receivables Purchase Agreement: 5. CLEAN-UP CALL 5.1 On any Collection Payment Date after the occurrence of a Termination Date (the "RETRANSFER DATE"), the Seller shall be entitled, at its option, on giving not less than 5 days' prior notice to the Purchaser, to repurchase all outstanding Purchased Receivables if, on such Retransfer Date, the Outstanding Nominal Amount of all Purchased Receivables is less than 15% of the Outstanding Nominal Amount of all Purchased Receivables at the date on which the Termination Date is declared. 5.2 For the purpose of Clause 5.1 above, upon exercise of the option granted to it in Clause 5.1 above, the Seller shall provide the Purchaser with satisfactory evidence of the Outstanding Nominal Amount of all Purchased Receivables on the date on which the Termination Date is declared. -5- 5.3 The repurchase price ("REPURCHASE PRICE") payable by the Seller if it wishes to execute the option granted to it pursuant to Clause 5.1 above, shall be the Outstanding Nominal Amount of all Purchased Receivables. Such Repurchase Price will be payable in full on the Retransfer Date and shall be deemed to be Collections of such Purchased Receivables. The re-transfer of such Purchased Receivables shall take effect upon receipt of the Repurchase Price by the Purchaser. 5.4 Any repurchase pursuant to this Clause 5 shall be without recourse against or warranty or representation on the part of the Purchaser and at the sole cost and expense of the Seller. This Clause should be added as Clause 5 to the Receivables Purchase Agreement, with Clause 5 becoming clause 6 etc. The other provisions of the Receivables Purchase Agreement and the Servicing Agreement remain unchanged. This letter will be effective as from 22 November 2000. Please countersign this letter if you agree with its content. Yours faithfully, TULIP ASSET PURCHASE COMPANY - -------------------- -------------------- Name: Name: Title: Title: WE AGREE WITH THE CONTENT OF THIS LETTER LEVI STRAUSS DE ESPANA _____________________ DATE: NAME TITLE: LEVI STRAUSS & CO. _____________________ DATE: NAME TITLE: -6- [LETTERHEAD OF ABN AMRO BANK N.V. (BELGIAN BRANCH)] To: LEVI STRAUSS ITALIA SRL Corso Como 15 20154 Milan Italy LEVI STRAUSS & CO. 1155 Battery Street San Francisco CA 94120 USA TULIP ASSET PURCHASE COMPANY BV Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands 28 December 2000 Dear Sirs, EUROPEAN SECURITISATION We refer to: o a Receivables Purchase Agreement dated 29 February 2000 and made between yourselves as Seller, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"); and o a Servicing Agreement dated 29 February 2000 and made between yourselves as Servicer, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "SERVICING AGREEMENT"). We are hereby adding the following Clause to the Receivables Purchase Agreement: 5. CLEAN-UP CALL 5.1 On any Collection Payment Date after the occurrence of a Termination Date (the "RETRANSFER DATE"), the Seller shall be entitled, at its option, on giving not less than 5 days' prior notice to the Purchaser, to repurchase all outstanding Purchased Receivables if, on such Retransfer Date, the Outstanding Nominal Amount of all Purchased Receivables is less than 15% of the Outstanding Nominal Amount of all Purchased Receivables at the date on which the Termination Date is declared. -7- 5.2 For the purpose of Clause 5.1 above, upon exercise of the option granted to it in Clause 5.1 above, the Seller shall provide the Purchaser with satisfactory evidence of the Outstanding Nominal Amount of all Purchased Receivables on the date on which the Termination Date is declared. 5.3 The repurchase price ("REPURCHASE PRICE") payable by the Seller if it wishes to execute the option granted to it pursuant to Clause 5.1 above, shall be the Outstanding Nominal Amount of all Purchased Receivables. Such Repurchase Price will be payable in full on the Retransfer Date and shall be deemed to be Collections of such Purchased Receivables. The re-transfer of such Purchased Receivables shall take effect upon receipt of the Repurchase Price by the Purchaser. 5.4 Any repurchase pursuant to this Clause 5 shall be without recourse against or warranty or representation on the part of the Purchaser and at the sole cost and expense of the Seller. This Clause should be added as Clause 5 to the Receivables Purchase Agreement, with Clause 5 becoming clause 6 etc. The other provisions of the Receivables Purchase Agreement and the Servicing Agreement remain unchanged. This letter will be effective as from 22 November 2000. Please countersign this letter if you agree with its content. Yours faithfully, ABN AMRO BANK N.V. (BELGIAN BRANCH) - -------------------- -------------------- Name: Name: Title: Title: WE AGREE WITH THE CONTENT OF THIS LETTER LEVI STRAUSS ITALIA SRL _____________________ DATE: NAME TITLE: LEVI STRAUSS & CO. _____________________ DATE: NAME TITLE: TULIP ASSET PURCHASE COMPANY BV _____________________ DATE: NAME TITLE: -8- [LETTERHEAD OF ABN AMRO BANK N.V. (BELGIAN BRANCH)] To: LEVI STRAUSS CONTINENTAL S.A. Avenue Arnaud Fraiteur 15-23 1050 Brussels Belgium LEVI STRAUSS & CO. 1155 Battery Street San Francisco CA 94120 USA TULIP ASSET PURCHASE COMPANY BV Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands 28 December 2000 Dear Sirs, EUROPEAN SECURITISATION We refer to: o a Receivables Purchase Agreement dated 29 February 2000 and made between yourselves as Seller, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"); and o a Servicing Agreement dated 29 February 2000 and made between yourselves as Servicer, Levi Strauss & Co. as Parent and ourselves as Purchaser (the "SERVICING AGREEMENT"). We are hereby adding the following Clause to the Receivables Purchase Agreement: 5. CLEAN-UP CALL 5.1 On any Collection Payment Date after the occurrence of a Termination Date (the "RETRANSFER DATE"), the Seller shall be entitled, at its option, on giving not less than 5 days' prior notice to the Purchaser, to repurchase all outstanding Purchased Receivables if, on such Retransfer Date, the Outstanding Nominal Amount of all Purchased Receivables is less than 15% of the Outstanding Nominal Amount of all Purchased Receivables at the date on which the Termination Date is declared. 5.2 For the purpose of Clause 5.1 above, upon exercise of the option granted to it in Clause 5.1 above, the Seller shall provide the Purchaser with satisfactory evidence of the -9- Outstanding Nominal Amount of all Purchased Receivables on the date on which the Termination Date is declared. 5.3 The repurchase price ("REPURCHASE PRICE") payable by the Seller if it wishes to execute the option granted to it pursuant to Clause 5.1 above, shall be the Outstanding Nominal Amount of all Purchased Receivables. Such Repurchase Price will be payable in full on the Retransfer Date and shall be deemed to be Collections of such Purchased Receivables. The re-transfer of such Purchased Receivables shall take effect upon receipt of the Repurchase Price by the Purchaser. 5.4 Any repurchase pursuant to this Clause 5 shall be without recourse against or warranty or representation on the part of the Purchaser and at the sole cost and expense of the Seller. This Clause should be added as Clause 5 to the Receivables Purchase Agreement, with Clause 5 becoming clause 6 etc. The other provisions of the Receivables Purchase Agreement and the Servicing Agreement remain unchanged. This letter will be effective as from 22 November 2000. Please countersign this letter if you agree with its content. Yours faithfully, ABN AMRO BANK N.V. (BELGIAN BRANCH) - -------------------- -------------------- Name: Name: Title: Title: WE AGREE WITH THE CONTENT OF THIS LETTER LEVI STRAUSS CONTINENTAL S.A. _____________________ DATE: NAME TITLE: LEVI STRAUSS & CO. _____________________ DATE: NAME TITLE: LEVI STRAUSS ITALIA SRL _____________________ DATE: NAME TITLE: -10- EX-12 26 0026.txt STATEMENTS RE: COMPUTATION OF RATIOS
Ratio of Earnings to Fixed Charges EXHIBIT 12 For Fiscal Years Ended 1996 - 2000 (000's) Fiscal Year Ended ----------------------------------------------------------- 11/26/00 11/28/99 11/29/98 11/30/97 11/24/96 ----------------------------------------------------------- FIXED CHARGES: Interest: Interest expense (includes amortization of debt discount and costs) $ 234,098 $ 182,978 $ 178,035 $ 212,358 $ 145,234 Capitalized debt costs 34,769 15,729 27,447 25,221 33,941 Interest factor in rental expense 26,026 28,700 26,733 32,600 29,733 ----------------------------------------------------------- Total fixed charges 294,893 227,407 232,215 270,179 208,908 ----------------------------------------------------------- EARNINGS: Income before income taxes 343,680 8,499 162,700 184,281 619,906 Add: Fixed charges 294,893 227,407 232,215 270,179 208,908 Subtract: Capitalized debt costs (34,769) (15,729) (27,447) (25,221) (33,941) ----------------------------------------------------------- Total Earnings 603,804 220,177 367,468 429,239 794,873 ----------------------------------------------------------- Ratio of Earnings to Fixed Charges 2.0 1.0 1.6 1.6 3.8 In computing the ratio of earnings to fixed charges: (1) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of capitalized debt costs) and (2) fixed charges consist of interest and debt discount and cost expenses (including amounts capitalized) and the estimated interest portion of rents.
EX-21 27 0027.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 LEVI STRAUSS & CO. SUBSIDIARIES AS OF JANUARY 25, 2001 Battery Street Enterprises, Inc. Levi Strauss Services Inc. Hartwell Commodities Group Levi Strauss (Geneva) S.A. Levi Strauss (Hong Kong) Limited Levi Strauss (India) Private Limited Levi Strauss Brasil Representacoes Ltda Levi Strauss Dominicana S.A. Levi Strauss Eximco (Asia) Pte Ltd Levi Strauss Eximco Chile Limitada Levi Strauss Eximco de Columbia Limitada Levi Strauss Financial Center Corporation Levi Strauss Funding Corp. Levi Strauss Foreign Sales Corporation Levi Strauss Global Fulfillment Services, Inc. Levi Strauss International Levi Strauss & Co. (Canada) Inc. Levi Strauss & Co. Europe S.A. Casualwear Direct B.V. Levi Strauss & Co. Financial Services S.A. Levi Strauss (Australia) Pty. Ltd. Levi Strauss (Far East) Ltd. Levi Strauss do Brasil Industria e Comercio Ltda PT Levi Strauss Indonesia Levi Strauss (Malaysia) Sdn. Bhd. Levi Strauss (New Zealand) Ltd. Levi Strauss (Phil.) Inc. II Levi Strauss (Philippines) Inc. Levi Strauss (Suisse) S.A. Levi Strauss (U.K.) Limited Farvista Limited Levi Strauss Pension Trustee Ltd. Middlebrook Ltd. Retailindex Limited Levi Strauss Asia Pacific Division Pte Ltd Levi Strauss Belgium, S.A. Levi Strauss Chile Limitada Levi Strauss Continental S.A. Levi Strauss International Group Finance B.V.B.A./S.P.R.L. Levi Strauss International Group Finance Coordination Services C.V.A./S.C.A. Paris - O.L.S.S.A.R.L. Levi Strauss de Espana S.A. Levi Strauss de Mexico, S.A. de C.V. Levi Strauss France, S.A. Levi Strauss Germany GmbH Levi Strauss Global Operations, Inc. Levi Strauss Nederland B.V. Dockers Europe BV Casual Wear Co. A/S Dockers Portugal Clothing, Lda Levi Strauss Hellas S.A. Levi Strauss Polska Sp.zo.o. Levi Strauss Praha, Spol.Sro. (Levi Strauss Prague, Ltd) Levi Strauss South Africa (Proprietary) Limited Levi Strauss Hungary Trading Ltd. Levi Strauss Instanbul Konfeksiyon Sanayi ve Ticaret A.S. Levi Strauss Italia, Srl Flagstore Srl Levi Strauss Korea Ltd. Levi Strauss Latin America, Inc. Levi Strauss Latin America, Inc. & CIA Levi Strauss Mauritius Limited Levi Strauss (India) Private Limited Levi Strauss Norway, A/S Buksehjornet A/S (Joint Stock Company) Levi Strauss, U.S.A., LLC Levi Strauss-Argentina, LLC Saddleman South America, Inc. Suomen Levi Strauss OY Levi Strauss Japan K.K. Levi's Only Stores, Inc. LDJV, Inc. Majestic Insurance International Ltd. Miratrix, S.A. NF Industries, Inc. Levi Strauss Funding, LLC January 19, 2001 To: TULIP ASSET PURCHASE COMPANY B.V. Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands Dear Sirs, EUROPEAN SECURITISATION - GUARANTEE AGREEMENT We refer to a Guarantee Agreement dated 29 February 2000 and made between ourselves as Parent and yourselves as Purchaser. The Guarantee Agreement relates to a Receivables Purchase Agreement dated 29 February 2000 and made between Levi Strauss Germany GmbH, a company registered under HRB 6223 at Amtsgericht Offenbach am Main, Federal Republic of Germany, acting through its principal office at Heusenstamm, Federal Republic of Germany as Seller and yourselves as Purchaser (the "RECEIVABLES PURCHASE AGREEMENT"). Terms defined in the Guarantee Agreement and in the Receivables Purchase Agreement shall have the same meaning herein. Pursuant to the guarantee agreement we provide a limited guarantee, up to the guarantee cap, for the payment obligations of the debtors under the purchased receivables. We acknowledge receipt of a copy of a letter dated 28 December 2000 from Levi Strauss Germany GmbH and countersigned by yourselves entitled European Securitisation (the "AMENDMENT LETTER"), whereby a Clause 5 (Clean-Up Call) is added to the Receivables Purchase Agreement. We confirm our agreement with the content of the Amendment Letter and the consequential modifications to the Receivables Purchase Agreement. We also confirm that the limited guarantee described in the Guarantee Agreement shall remain in full force and effect, and shall related to the Receivables Purchase Agreement as amended pursuant to the Amendment Letter. Yours faithfully, LEVI STRAUSS & CO. _______________________ Joseph M. Maurer Vice President & Treasurer EX-27 28 0028.txt FINANCIAL DATA SCHEDULE
5 0000094845 Levi Strauss & Co. 1,000 12-MOS NOV-26-2000 NOV-26-2000 117,058 0 689,845 29,717 652,249 1,848,873 1,070,025 495,986 3,205,728 1,293,811 1,895,140 373 0 0 (1,098,946) 3,205,728 4,645,126 4,645,126 2,690,170 2,690,170 1,481,718 12,171 234,098 343,680 120,288 223,392 0 0 0 223,392 5.99 5.99
-----END PRIVACY-ENHANCED MESSAGE-----