NOTE PURCHASE AGREEMENT

 

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                                                                    EXHIBIT 99.1

 

EXECUTION COPY

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                                   BELK, INC.

                            BELK ADMINISTRATION COMPANY

                            BELK INTERNATIONAL, INC.

                           BELK STORES SERVICES, INC.

                BELK-SIMPSON COMPANY, GREENVILLE, SOUTH CAROLINA

                              THE BELK CENTER, INC.

                        UNITED ELECTRONIC SERVICES, INC.

                          BELK ACCOUNTS RECEIVABLE, LLC

                           BELK STORES OF VIRGINIA LLC

                           BELK GIFT CARD COMPANY LLC

                             BELK MERCHANDISING, LLC

                             BELK TEXAS HOLDINGS LLC

                            BELK DEPARTMENT STORES LP

 

           $20,000,000 5.05% Senior Notes, Series A, due July 12, 2012

 

          $100,000,000 5.31% Senior Notes, Series B, due July 12, 2015

 

       $80,000,000 Floating Rate Senior Notes, Series C, due July 12, 2012

 

                                ----------------

 

                             NOTE PURCHASE AGREEMENT

 

                                ----------------

 

                             Dated as of July 12, 2005

 

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                                TABLE OF CONTENTS

                           (not part of the Agreement)

 

<TABLE>

<CAPTION>

Section                                                                                                             Page

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SECTION 1.              AUTHORIZATION OF NOTES.....................................................................     2

         Section 1.1        Description of Notes..................................................................     2

         Section 1.2        Provisions Relating to the Series A Notes.............................................     2

         Section 1.3        Provisions Relating to the Series B Notes.............................................     2

         Section 1.4        Provisions Relating to the Series C Notes.............................................     2

SECTION 2.             SALE AND PURCHASE OF NOTES.................................................................     3

SECTION 3.             CLOSING....................................................................................     3

SECTION 4.             CONDITIONS TO CLOSING......................................................................     4

         Section 4.1        Representations and Warranties........................................................     4

         Section 4.2        Performance; No Default...............................................................     4

         Section 4.3        Compliance Certificates...............................................................     4

         Section 4.4        Opinions of Counsel...................................................................     4

         Section 4.5        Purchase Permitted By Applicable Law, Etc.............................................     5

          Section 4.6        Sale of Other Notes...................................................................     5

         Section 4.7        Payment of Special Counsel Fees.......................................................     5

         Section 4.8         Private Placement Number..............................................................     5

         Section 4.9        Changes in Corporate Structure........................................................     5

         Section 4.10       Funding Instructions..................................................................     5

         Section 4.11       Proceedings and Documents.............................................................     5

SECTION 5.             REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.............................................     6

         Section 5.1        Organization; Power and Authority.....................................................     6

         Section 5.2        Authorization, Etc....................................................................     6

         Section 5.3        Disclosure............................................................................     6

         Section 5.4        Organization and Ownership of Shares of Subsidiaries; Affiliates......................     7

         Section 5.5        Financial Statements; Material Liabilities............................................     7

         Section 5.6        Compliance with Laws, Other Instruments, Etc..........................................     8

         Section 5.7        Governmental Authorizations, Etc......................................................     8

         Section 5.8        Litigation; Observance of Agreements, Statutes and Orders.............................     8

         Section 5.9        Taxes.................................................................................     8

         Section 5.10       Title to Property; Leases.............................................................     9

         Section 5.11       Licenses, Permits, Etc................................................................     9

         Section 5.12       Compliance with ERISA.................................................................     9

         Section 5.13       Private Offering by the Obligors.....................................................     10

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                                TABLE OF CONTENTS

                           (not part of the Agreement)

 

<TABLE>

<CAPTION>

Section                                                                                                             Page

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         Section 5.14       Use of Proceeds; Margin Regulations..................................................     11

         Section 5.15       Existing Debt; Future Liens..........................................................     11

         Section 5.16       Foreign Assets Control Regulations, Etc..............................................     12

         Section 5.17       Status under Certain Statutes........................................................     12

         Section 5.18       Environmental Matters................................................................     12

         Section 5.19       Employee Relations...................................................................     13

         Section 5.20       Notes Rank Pari Passu................................................................     13

         Section 5.21       Solvency of the Obligors.............................................................     13

         Section 5.22       Consideration........................................................................     13

SECTION 6.             REPRESENTATIONS OF THE PURCHASERS.........................................................     14

         Section 6.1        Purchase for Investment..............................................................     14

         Section 6.2        Accredited Investor..................................................................     14

         Section 6.3        Source of Funds......................................................................     14

SECTION 7.             INFORMATION AS TO THE OBLIGORS............................................................     16

         Section 7.1        Financial and Business Information...................................................     16

         Section 7.2         Officer's Certificate................................................................     18

         Section 7.3        Visitation...........................................................................     19

SECTION 8.             PAYMENT OF THE NOTES......................................................................     19

         Section 8.1        Required Prepayments.................................................................     19

         Section 8.2        Optional Prepayments.................................................................     20

         Section 8.3        Allocation of Partial Prepayments....................................................     22

         Section 8.4        Maturity; Surrender, Etc.............................................................     22

         Section 8.5        Purchase of Notes....................................................................     22

         Section 8.6        Make-Whole Amount....................................................................     22

SECTION 9.             AFFIRMATIVE COVENANTS.....................................................................     24

         Section 9.1        Compliance with Law..................................................................     24

         Section 9.2        Insurance............................................................................     24

         Section 9.3        Maintenance of Properties............................................................     24

         Section 9.4        Payment of Taxes and Claims..........................................................     25

         Section 9.5        Corporate Existence, Etc.............................................................     25

         Section 9.6        Designation of Subsidiaries..........................................................     25

         Section 9.7        Notes to Rank Pari Passu.............................................................     25

         Section 9.8        Books and Records....................................................................     26

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                                TABLE OF CONTENTS

                           (not part of the Agreement)

 

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Section                                                                                                             Page

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         Section 9.9        Additional Obligors; Release of Obligors.............................................     26

SECTION 10.            NEGATIVE COVENANTS........................................................................     27

         Section 10.1       Consolidated Adjusted Debt to EBITDAR Ratio..........................................     27

         Section 10.2       Fixed Charge Coverage Ratio..........................................................     27

         Section 10.3       Priority Debt........................................................................     27

         Section 10.4       Limitation on Liens..................................................................     27

         Section 10.5       Sales of Assets......................................................................     30

         Section 10.6       Merger and Consolidation.............................................................     31

         Section 10.7       Transactions with Affiliates.........................................................     32

         Section 10.8       Terrorism Sanctions Regulations......................................................     32

         Section 10.9       Line of Business.....................................................................     32

SECTION 11.            EVENTS OF DEFAULT.........................................................................     32

SECTION 12.            REMEDIES ON DEFAULT, ETC..................................................................     34

          Section 12.1       Acceleration.........................................................................     34

         Section 12.2       Other Remedies.......................................................................     35

         Section 12.3        Rescission...........................................................................     35

         Section 12.4       No Waivers or Election of Remedies, Expenses, Etc....................................     36

SECTION 13.            REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.............................................     36

         Section 13.1       Registration of Notes................................................................     36

         Section 13.2       Transfer and Exchange of Notes.......................................................     36

         Section 13.3       Replacement of Notes.................................................................     37

SECTION 14.            PAYMENTS ON NOTES.........................................................................     37

         Section 14.1       Place of Payment.....................................................................     37

         Section 14.2       Home Office Payment..................................................................     37

SECTION 15.            EXPENSES, ETC.............................................................................     38

         Section 15.1       Transaction Expenses.................................................................      38

         Section 15.2       Survival.............................................................................     38

SECTION 16.            SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT..............................     38

SECTION 17.             AMENDMENT AND WAIVER......................................................................     39

         Section 17.1       Requirements.........................................................................     39

         Section 17.2       Solicitation of Holders of Notes.....................................................     39

         Section 17.3       Binding Effect, Etc..................................................................     40

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                                TABLE OF CONTENTS

                           (not part of the Agreement)

 

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<CAPTION>

Section                                                                                                             Page

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         Section 17.4       Notes Held by the Obligors, Etc......................................................     40

SECTION 18.             NOTICES...................................................................................     40

SECTION 19.            REPRODUCTION OF DOCUMENTS.................................................................     41

SECTION 20.            CONFIDENTIAL INFORMATION..................................................................     41

SECTION 21.            SUBSTITUTION OF PURCHASER.................................................................     42

SECTION 22.            MISCELLANEOUS.............................................................................     42

         Section 22.1       Successors and Assigns...............................................................     42

         Section 22.2       Payments Due on Non-Business Days....................................................     42

         Section 22.3       Accounting Terms.....................................................................     43

         Section 22.4       Joint and Several Liability of Obligors..............................................     43

         Section 22.5       Severability.........................................................................     44

         Section 22.6       Construction.........................................................................     44

         Section 22.7       Counterparts.........................................................................     44

         Section 22.8       Governing Law........................................................................     44

          Section 22.9       Jurisdiction and Process; Waiver of Jury Trial.......................................     44

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ATTACHMENTS TO NOTE PURCHASE AGREEMENT:

 

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<S>                  <C>   <C>

SCHEDULE A           --    Information Relating to Purchasers

 

SCHEDULE B           --    Defined Terms

 

SCHEDULE 5.3         --    Disclosure Materials

 

SCHEDULE 5.4         --    Subsidiaries of the Obligors, Ownership of Subsidiary Stock, Affiliates

 

SCHEDULE 5.5          --    Financial Statements

 

SCHEDULE 5.15        --    Existing Debt

 

SCHEDULE 5.19        --    Employee Relations

 

SCHEDULE 10.4        --    Existing Liens

 

EXHIBIT 1(a)         --    Form of 5.05% Senior Notes, Series A, due July 12, 2012

 

EXHIBIT 1(b)          --    Form of 5.31% Senior Notes, Series B, due July 12, 2015

 

EXHIBIT 1(c)         --    Form of Floating Rate Senior Notes, Series C, due July 12, 2012

 

EXHIBIT 2            --    Form of Joinder

 

EXHIBIT 4.4(a)       --    Form of Opinion of Assistant General Counsel to the Obligors

 

EXHIBIT 4.4(b)       --    Form of Opinion of Special Counsel to the Obligors

 

EXHIBIT 4.4(c)       --    Form of Opinion of Special Counsel to the Purchasers

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                                    BELK, INC.

                          BELK ADMINISTRATION COMPANY

                            BELK INTERNATIONAL, INC.

                           BELK STORES SERVICES, INC.

                BELK-SIMPSON COMPANY, GREENVILLE, SOUTH CAROLINA

                              THE BELK CENTER, INC.

                        UNITED ELECTRONIC SERVICES, INC.

                          BELK ACCOUNTS RECEIVABLE, LLC

                           BELK STORES OF VIRGINIA LLC

                           BELK GIFT CARD COMPANY LLC

                             BELK MERCHANDISING, LLC

                             BELK TEXAS HOLDINGS LLC

                            BELK DEPARTMENT STORES LP

                              2801 West Tyvola Road

                          Charlotte, North Carolina 28217

 

           $20,000,000 5.05% Senior Notes, Series A, due July 12, 2012

          $100,000,000 5.31% Senior Notes, Series B, due July 12, 2015

       $80,000,000 Floating Rate Senior Notes, Series C, due July 12, 2012

 

                                                                     Dated as of

                                                                   July 12, 2005

 

TO THE PURCHASERS LISTED IN

  THE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

      BELK, INC., a Delaware corporation (the "Company"), BELK ADMINISTRATION

COMPANY, a North Carolina corporation ("Administration"), BELK INTERNATIONAL,

INC., a North Carolina corporation ("International"), BELK STORES SERVICES,

INC., a North Carolina corporation ("Stores Services"), BELK-SIMPSON COMPANY,

GREENVILLE, SOUTH CAROLINA, a South Carolina corporation ("Belk-Simpson"), THE

BELK CENTER, INC., a North Carolina corporation ("Belk Center"), UNITED

ELECTRONIC SERVICES, INC., a Virginia corporation ("United"), BELK ACCOUNTS

RECEIVABLE, LLC, a North Carolina limited liability company ("Belk Accounts"),

BELK STORES OF VIRGINIA LLC, a North Carolina limited liability company ("Belk

Virginia"), BELK GIFT CARD COMPANY LLC, a North Carolina limited liability

company ("Belk Gift Card"), BELK MERCHANDISING, LLC, a North Carolina limited

liability company ("Merchandising"), BELK TEXAS HOLDINGS LLC, a North Carolina

limited liability company ("Belk Holdings"), and BELK DEPARTMENT STORES LP, a

North Carolina limited partnership ("Belk Department Stores"), (the Company,

Administration, International, Stores Services, Belk-Simpson, Belk Center,

United, Belk Accounts, Belk Virginia, Belk Gift Card, Merchandising, Belk

Holdings and Belk Department Stores and each other Person required to become an

obligor hereunder pursuant to Section 9.9, being sometimes hereinafter referred

to individually as an "Obligor" and

 

<PAGE>

 

collectively as the "Obligors"), jointly and severally, agree with the

purchasers listed in the attached Schedule A (the "Purchasers") as follows:

 

SECTION 1. AUTHORIZATION OF NOTES.

 

      Section 1.1 Description of Notes. The Obligors will authorize the issue

and sale of $200,000,000 aggregate principal amount of their Senior Notes

consisting of (a) $20,000,000 aggregate principal amount of their 5.05% Senior

Notes, Series A, due July 12, 2012 (the "Series A Notes"), (b) $100,000,000

aggregate principal amount of their 5.31% Senior Notes, Series B, due July 12,

2015 (the "Series B Notes") and (c) $80,000,000 aggregate principal amount of

their Floating Rate Senior Notes, Series C, due July 12, 2012 (the "Series C

Notes"). The Series A Notes, the Series B Notes and the Series C Notes are

collectively referred to as the "Notes." As used herein, the term "Notes" shall

mean all notes (irrespective of series unless otherwise specified) originally

delivered pursuant to this Agreement and any such notes issued in substitution

therefor pursuant to Section 13. The Series A Notes, the Series B Notes and the

Series C Notes shall be substantially in the forms set out in Exhibit 1(a),

Exhibit 1(b) and Exhibit 1(c), respectively, with such changes therefrom, if

any, as may be approved by the Purchasers and the Obligors. Certain capitalized

terms used in this Agreement are defined in Schedule B; references to a

"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an

Exhibit attached to this Agreement.

 

      Section 1.2 Provisions Relating to the Series A Notes. The Series A Notes

shall bear interest (computed on the basis of a 360-day year of twelve 30-day

months) on the unpaid principal thereof from the date of issuance at the rate of

5.05% per annum, payable semiannually in arrears on the twelfth day of January

and July in each year commencing on January 12, 2006 and, to the extent

permitted by law, interest (so computed) on any overdue payment of interest and,

during the continuance of an Event of Default, on the unpaid principal thereof

and on any overdue payment of Make-Whole Amount at the Default Rate, until such

overdue amounts shall have been paid or such Event of Default shall no longer

exist.

 

      Section 1.3 Provisions Relating to the Series B Notes. The Series B Notes

shall bear interest (computed on the basis of a 360-day year of twelve 30-day

months) on the unpaid principal thereof from the date of issuance at the rate of

5.31% per annum, payable semiannually in arrears on the twelfth day of January

and July in each year commencing on January 12, 2006 and, to the extent

permitted by law, interest (so computed) on any overdue payment of interest and,

during the continuance of an Event of Default, on the unpaid principal thereof

and on any overdue payment of Make-Whole Amount at the Default Rate, until such

overdue amounts shall have been paid or such Event of Default shall no longer

exist.

 

      Section 1.4 Provisions Relating to the Series C Notes.

 

            (a) The Series C Notes shall bear interest (computed on the basis of

      a 360-day year and actual days elapsed) on the unpaid principal thereof

      from the date of issuance at a floating rate equal to the Adjusted LIBOR

      Rate for the Interest Period in effect from time to time, payable

      quarterly in arrears on the twelfth day of January, April, July and

      October and at maturity, commencing on October 12, 2005, until such

      principal sum shall

 

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      have become due and payable (whether at maturity, upon notice of

      prepayment or otherwise) (each such date being referred to herein as an

      "Interest Payment Date") and, to the extent permitted by law, interest (so

      computed) on any overdue payment of interest, and during the continuance

      of an Event of Default, on the unpaid principal thereof and on any overdue

      payment of Prepayment Premium and any overdue payment of LIBOR Breakage

      Amount at the Default Rate, until such overdue amounts shall have been

      paid or such Event of Default shall no longer exist.

 

            (b) The Adjusted LIBOR Rate for the Series C Notes shall be

      determined by the Obligors, and notice thereof shall be given to the

      holders of the Series C Notes, within three Business Days after the

      beginning of each Interest Period, together with a copy of the relevant

      screen used for the determination of LIBOR, a calculation of the Adjusted

      LIBOR Rate for such Interest Period, the number of days in such Interest

      Period, the date on which interest for such Interest Period will be paid

      and the amount of interest to be paid to each holder of Series C Notes on

      such date. In the event that the holders of more than 50% in aggregate

      principal amount of the outstanding Series C Notes do not concur with such

      determination by the Obligors, within 10 Business Days after receipt by

      such holders of the notice delivered by the Obligors pursuant to the

      immediately preceding sentence, such holders of the Series C Notes shall

      provide notice to the Obligors, together with a copy of the relevant

      screen used for the determination of LIBOR, a calculation of the Adjusted

      LIBOR Rate for such Interest Period, the number of days in such Interest

      Period, the date on which interest for such Interest Period will be paid

      and the amount of interest to be paid to each holder of Series C Notes on

      such date, and any such determination made in accordance with the

      provisions of this Agreement, shall be conclusive absent manifest error.

 

SECTION 2. SALE AND PURCHASE OF NOTES.

 

      Subject to the terms and conditions of this Agreement, the Obligors will

issue and sell to each Purchaser and each Purchaser will purchase from the

Obligors, at the closing provided for in Section 3, Notes of the series and in

the principal amount specified opposite such Purchaser's name in Schedule A at

the purchase price of 100% of the principal amount thereof. The obligations of

each Purchaser hereunder are several and not joint obligations and no Purchaser

shall have any liability to any Person for the performance or nonperformance of

any obligation by any other Purchaser hereunder.

 

SECTION 3. CLOSING.

 

      The sale and purchase of the Notes to be purchased by each Purchaser shall

occur at the offices of Schiff Hardin LLP, 623 Fifth Avenue, 28th Floor, New

York, New York 10022 at 11:00 a.m., New York, New York time, at a closing on

July 12, 2005 or on such other Business Day thereafter as may be agreed upon by

the Obligors and the Purchasers (the "Closing Date"). On the Closing Date, the

Obligors will deliver to each Purchaser the Notes of each series to be purchased

by such Purchaser in the form of a single Note of such series (or such greater

number of Notes of such series in denominations of at least $100,000 as such

Purchaser may request) dated the Closing Date and registered in such Purchaser's

name (or in the name of its nominee),

 

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against delivery by such Purchaser to the Obligors or their order of immediately

available funds in the amount of the purchase price therefor by wire transfer of

immediately available funds for the account of the Obligors. If, on the Closing

Date, the Obligors shall fail to tender such Notes to any Purchaser as provided

above in this Section 3, or any of the conditions specified in Section 4 shall

not have been fulfilled to any Purchaser's satisfaction, such Purchaser shall,

at its election, be relieved of all further obligations under this Agreement,

without thereby waiving any rights such Purchaser may have by reason of such

failure or such nonfulfillment.

 

SECTION 4. CONDITIONS TO CLOSING.

 

      Each Purchaser's obligation to purchase and pay for the Notes to be sold

to such Purchaser on the Closing Date is subject to the fulfillment to such

Purchaser's satisfaction, prior to or on the Closing Date, of the following

conditions:

 

      Section 4.1 Representations and Warranties. The representations and

warranties of the Obligors in this Agreement shall be correct when made and on

the Closing Date.

 

      Section 4.2 Performance; No Default. Each Obligor shall have performed and

complied with all agreements and conditions contained in this Agreement required

to be performed or complied with by it prior to or on the Closing Date, and

after giving effect to the issue and sale of the Notes (and the application of

the proceeds thereof as contemplated by Section 5.14), no Default or Event of

Default shall have occurred and be continuing. Neither any Obligor nor any

Subsidiary shall have entered into any transaction since the date of the

Memorandum that would have been prohibited by Section 10 hereof had such Section

applied since such date.

 

Section 4.3 Compliance Certificates.

 

            (a) Officer's Certificate. Each Obligor shall have delivered to such

      Purchaser an Officer's Certificate, dated the Closing Date, certifying

      that the conditions specified in Sections 4.1, 4.2 and 4.9 have been

      fulfilled.

 

            (b) Secretary's Certificate. Each Obligor shall have delivered to

      such Purchaser a certificate of its Secretary or an Assistant Secretary,

      dated the Closing Date, certifying as to the resolutions attached thereto

      and other corporate or other proceedings relating to the authorization,

      execution and delivery of the Notes and this Agreement.

 

      Section 4.4 Opinions of Counsel. Such Purchaser shall have received

opinions in form and substance satisfactory to such Purchaser, dated the Closing

Date (a) from Luther T. Moore, Esq., Assistant General Counsel of the Obligors,

covering the matters set forth in Exhibit 4.4(a) and covering such other matters

incident to the transactions contemplated hereby as such Purchaser or special

counsel to the Purchasers may reasonably request, (b) from Helms Mulliss &

Wicker, PLLC, special counsel for the Obligors, covering the matters set forth

in Exhibit 4.4(b) and covering such other matters incident to the transactions

contemplated hereby as such Purchaser or special counsel to the Purchasers may

reasonably request (and each Obligor hereby instructs its counsel to deliver

such opinion to the Purchasers) and (c) from Schiff Hardin LLP, special counsel

to the Purchasers in connection with such transactions, substantially in the

form

 

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set forth in Exhibit 4.4(c) and covering such other matters incident to such

transactions as such Purchaser may reasonably request.

 

      Section 4.5 Purchase Permitted By Applicable Law, Etc. On the Closing

Date, such Purchaser's purchase of Notes shall (a) be permitted by the laws and

regulations of each jurisdiction to which such Purchaser is subject, without

recourse to provisions (such as Section 1405(a)(8) of the New York Insurance

Law) permitting limited investments by insurance companies without restriction

as to the character of the particular investment, (b) not violate any applicable

law or regulation (including, without limitation, Regulation T, U or X of the

Board of Governors of the Federal Reserve System) and (c) not subject such

Purchaser to any tax, penalty or liability under or pursuant to any applicable

law or regulation. If requested by such Purchaser, such Purchaser shall have

received from each Obligor an Officer's Certificate certifying as to such

matters of fact as such Purchaser may reasonably specify to enable such

Purchaser to determine whether such purchase is so permitted.

 

      Section 4.6 Sale of Other Notes. On the Closing Date, the Obligors shall

sell to each other Purchaser and each other Purchaser shall purchase the Notes

to be purchased by it on the Closing Date as specified in Schedule A.

 

      Section 4.7 Payment of Special Counsel Fees. Without limiting the

provisions of Section 15.1, the Obligors shall have paid on or before the

Closing Date, the reasonable fees, reasonable charges and reasonable

disbursements of Schiff Hardin LLP, special counsel to the Purchasers, referred

to in Section 4.4(c) to the extent reflected in a statement of such counsel

rendered to the Company at least one Business Day prior to the Closing Date.

 

      Section 4.8 Private Placement Number. A Private Placement Number issued by

Standard & Poor's CUSIP Service Bureau (in cooperation with the SVO of the NAIC)

shall have been obtained for each series of the Notes.

 

      Section 4.9 Changes in Corporate Structure. Except for the acquisition of

the Acquired Assets and certain related liabilities pursuant to the Purchase

Agreement, no Obligor shall have changed its jurisdiction of organization or

been a party to any merger or consolidation or shall have succeeded to all or

any substantial part of the liabilities of any other entity, at any time

following the date of the most recent financial statements referred to in

Schedule 5.5.

 

      Section 4.10 Funding Instructions. At least three Business Days prior to

the Closing Date, each Purchaser shall have received written instructions signed

by a Responsible Officer of the Company on letterhead of the Company directing

the manner of the payment of funds and setting forth (a) the name and address of

the transferee bank, (b) such transferee bank's ABA number, (c) the account name

and number into which the purchase price for the Notes is to be deposited and

(d) the name and telephone number of the account representative responsible for

verifying receipt of such funds.

 

      Section 4.11 Proceedings and Documents. All corporate and other

organizational proceedings in connection with the transactions contemplated by

this Agreement and all documents and instruments incident to such transactions

shall be satisfactory to such Purchaser

 

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and special counsel to the Purchasers, and such Purchaser and special counsel to

the Purchasers shall have received all such counterpart originals or certified

or other copies of such documents as such Purchaser or such special counsel may

reasonably request.

 

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.

 

      The Obligors, jointly and severally, represent and warrant to each

Purchaser that:

 

      Section 5.1 Organization; Power and Authority. Each Obligor is a

corporation, limited liability company or limited partnership, as applicable,

duly organized, validly existing and in good standing under the laws of its

jurisdiction of organization, and is duly qualified as a foreign corporation,

foreign limited liability company or foreign limited partnership, as applicable,

and is in good standing in each jurisdiction in which such qualification is

required by law, other than those jurisdictions as to which the failure to be so

qualified or in good standing would not, individually or in the aggregate,

reasonably be expected to have a Material Adverse Effect. Each Obligor has the

corporate or other organizational power and authority to own or hold under lease

the properties it purports to own or hold under lease, to transact the business

it transacts and proposes to transact, to execute and deliver this Agreement and

the Notes and to perform the provisions hereof and thereof.

 

      Section 5.2 Authorization, Etc. This Agreement and the Notes have been

duly authorized by all necessary corporate or other organizational action on the

part of each Obligor, and this Agreement constitutes, and upon execution and

delivery thereof each Note will constitute, a legal, valid and binding

obligation of each Obligor enforceable against such Obligor in accordance with

its terms, except as such enforceability may be limited by (a) applicable

bankruptcy, insolvency, reorganization, moratorium or other similar laws

affecting the enforcement of creditors' rights generally and (b) general

principles of equity (regardless of whether such enforceability is considered in

a proceeding in equity or at law).

 

      Section 5.3 Disclosure. The Obligors, through their agent, Banc of America

Securities LLC, have delivered to each Purchaser a copy of a Confidential

Private Placement Memorandum, dated June 2005 (the "Memorandum"), relating to

the transactions contemplated hereby. The Memorandum fairly presents, in all

material respects, the general nature of the business and principal properties

of the Obligors taken as a whole. This Agreement, the Memorandum, the documents,

certificates or other writings identified in Schedule 5.3 and the financial

statements listed in Schedule 5.5, in each case, delivered to the Purchasers

prior to June 21, 2005 (this Agreement, the Memorandum and such documents,

certificates or other writings and such financial statements being referred to,

collectively, as the "Disclosure Documents"), taken as a whole, do not contain

any untrue statement of a material fact or omit to state any material fact

necessary to make the statements therein not misleading in any material respect

in light of the circumstances under which they were made. Except as disclosed in

the Disclosure Documents, since January 29, 2005, there has been no change in

the financial condition, operations, business or properties of the Obligors or

any Restricted Subsidiary except changes that individually or in the aggregate

would not reasonably be expected to have a Material Adverse Effect. There is no

fact known to the Obligors that would reasonably be expected to have a Material

Adverse Effect that has not been set forth herein or in the Disclosure

Documents.

 

                                      -6-

<PAGE>

 

       Section 5.4 Organization and Ownership of Shares of Subsidiaries;

Affiliates.

 

            (a) Schedule 5.4 contains (except as noted therein) complete and

      correct lists (1) of each Obligor's Restricted and Unrestricted

      Subsidiaries, showing, as to each Subsidiary, the correct name thereof,

      the jurisdiction of its organization, and the percentage of shares of each

      class of its capital stock or similar equity interests outstanding owned

      by each Obligor and each other Subsidiary, (2) of each Obligor's

      Affiliates, other than Subsidiaries and (3) of each Obligor's directors

      and senior officers.

 

            (b) All of the outstanding shares of capital stock or similar equity

      interests of each Subsidiary shown in Schedule 5.4 as being owned by any

      Obligor and its Subsidiaries have been validly issued, are fully paid and

      nonassessable and are owned by such Obligor or such Subsidiaries free and

      clear of any Lien (except as otherwise disclosed in Schedule 5.4).

 

            (c) Each Subsidiary identified in Schedule 5.4 is a corporation or

      other legal entity duly organized, validly existing and in good standing

      under the laws of its jurisdiction of organization, and is duly qualified

       as a foreign corporation or other legal entity and is in good standing in

      each jurisdiction in which such qualification is required by law, other

      than those jurisdictions as to which the failure to be so qualified or in

      good standing would not, individually or in the aggregate, reasonably be

      expected to have a Material Adverse Effect. Each such Subsidiary has the

      corporate or other power and authority to own or hold under lease the

      properties it purports to own or hold under lease and to transact the

      business it transacts and proposes to transact.

 

            (d) No Subsidiary (other than Belk National Bank) is a party to, or

      otherwise subject to, any legal, regulatory, contractual or other

      restriction (other than this Agreement, the agreements listed on Schedule

      5.4 and customary limitations imposed by corporate or similar law

      statutes) restricting the ability of such Subsidiary to pay dividends out

      of profits or make any other similar distributions of profits to any

      Obligor or any of its Subsidiaries that owns outstanding shares of capital

      stock or similar equity interests of such Subsidiary.

 

      Section 5.5 Financial Statements; Material Liabilities. The Obligors have

delivered to each Purchaser copies of the consolidated financial statements of

the Company and its Subsidiaries listed on Schedule 5.5. All of said financial

statements (including in each case the related schedules and notes) fairly

present in all material respects the consolidated financial position of the

Company and its Subsidiaries as of the respective dates specified in such

Schedule and the consolidated results of their operations and cash flows for the

respective periods so specified and have been prepared in accordance with GAAP

consistently applied throughout the periods involved except as set forth in the

notes thereto (subject, in the case of any interim financial statements, to

normal year-end adjustments). The Company and its Subsidiaries do not have any

Material liabilities that are not disclosed on such financial statements or

otherwise disclosed in the Disclosure Documents.

 

                                      -7-

<PAGE>

 

      Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution,

delivery and performance by each Obligor of this Agreement and the Notes will

not (a) contravene, result in any breach of, or constitute a default under, or

result in the creation of any Lien in respect of any property of such Obligor or

any of its Subsidiaries under, any indenture, mortgage, deed of trust, loan,

purchase or credit agreement, lease, corporate charter or by-laws, or any other

agreement or instrument to which such Obligor or any of its Subsidiaries is

bound or by which such Obligor or any of its Subsidiaries or any of their

respective properties may be bound or affected, (b) conflict with or result in a

breach of any of the terms, conditions or provisions of any order, judgment,

decree or ruling of any court, arbitrator or Governmental Authority applicable

to such Obligor or any of its Subsidiaries or (c) violate any provision of any

statute or other rule or regulation of any Governmental Authority applicable to

such Obligor or any of its Subsidiaries.

 

      Section 5.7 Governmental Authorizations, Etc. Subject to compliance by the

Purchasers with the representations and warranties set forth in Section 6 and

the procedures set forth in Section 13, no consent, approval or authorization

of, or registration, filing or declaration with, any Governmental Authority is

required in connection with the execution, delivery or performance by any

Obligor of this Agreement or the Notes.

 

      Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.

 

            (a) There are no actions, suits, investigations or proceedings

      pending or, to the knowledge of any Obligor, threatened against or

      affecting any Obligor or any Restricted Subsidiary or any property of any

      Obligor or any Restricted Subsidiary in any court or before any arbitrator

      of any kind or before or by any Governmental Authority that, individually

      or in the aggregate, would reasonably be expected to have a Material

      Adverse Effect.

 

            (b) Neither any Obligor nor any Restricted Subsidiary is in default

      under any term of any agreement or instrument to which it is a party or by

      which it is bound, or any order, judgment, decree or ruling of any court,

      arbitrator or Governmental Authority or is in violation of any applicable

      law, ordinance, rule or regulation (including, without limitation,

      Environmental Laws or the USA Patriot Act) of any Governmental Authority,

      which default or violation, individually or in the aggregate, would

      reasonably be expected to have a Material Adverse Effect.

 

      Section 5.9 Taxes. The Obligors and their Subsidiaries have filed all tax

returns that are required to have been filed in any jurisdiction, and have paid

all taxes shown to be due and payable on such returns and all other taxes and

assessments levied upon them or their properties, assets, income or franchises,

to the extent such taxes and assessments have become due and payable and before

they have become delinquent, except for any taxes and assessments (a) the amount

of which is not, individually or in the aggregate, Material or (b) the amount,

applicability or validity of which is currently being contested in good faith by

appropriate proceedings and with respect to which an Obligor or a Subsidiary, as

the case may be, has established adequate reserves in accordance with GAAP. No

Obligor knows of any basis for any other tax or assessment that would reasonably

be expected to have a Material Adverse Effect. The charges,

 

                                      -8-

<PAGE>

 

accruals and reserves on the books of the Obligors and their Subsidiaries in

respect of federal, state or other taxes for all fiscal periods are adequate in

accordance with GAAP. The federal income tax liabilities of the Company and its

Subsidiaries have been finally determined (whether by reason of completed audits

or the statute of limitations having run) for all fiscal years up to and

including the fiscal year ended February 3, 2001.

 

      Section 5.10 Title to Property; Leases. The Obligors and their Restricted

Subsidiaries have good title to their respective properties that, individually

or in the aggregate, are Material, including all such properties reflected in

the most recent audited balance sheet referred to in Section 5.5 or purported to

have been acquired by any Obligor or any Restricted Subsidiary after said date

(except as sold or otherwise disposed of in the ordinary course of business and

except for the Headquarters Property Tax Deferred Exchange), in each case free

and clear of Liens prohibited by this Agreement. All leases that, individually

or in the aggregate, are Material are valid and subsisting and are in full force

and effect in all material respects.

 

      Section 5.11 Licenses, Permits, Etc.

 

            (a) The Obligors and their Restricted Subsidiaries own or possess

      all licenses, permits, franchises, authorizations, patents, copyrights,

      proprietary software, service marks, trademarks, trade names and domain

      names or rights thereto, that, individually or in the aggregate, are

      Material, without known conflict with the rights of others.

 

            (b) To the best knowledge of each Obligor, no product of any Obligor

      or any Restricted Subsidiary infringes in any material respect any

      license, permit, franchise, authorization, patent, copyright, proprietary

      software, service mark, trademark, trade name, domain name or other right

      owned by any other Person the effect of which would reasonably be expected

      to have a Material Adverse Effect.

 

            (c) To the best knowledge of each Obligor, there is no violation by

      any Person of any right of any Obligor or any Restricted Subsidiary with

      respect to any patent, copyright, proprietary software, service mark,

      trademark, trade name, domain name or other right owned or used by any

      Obligor or any Restricted Subsidiary the effect of which would reasonably

      be expected to have a Material Adverse Effect.

 

      Section 5.12 Compliance with ERISA.

 

             (a) Each Obligor and each ERISA Affiliate have operated and

      administered each Plan in compliance with all applicable laws except for

      such instances of noncompliance as have not resulted in and could not

      reasonably be expected to result in a Material Adverse Effect. Neither any

      Obligor nor any ERISA Affiliate has incurred any liability pursuant to

      Title I or IV of ERISA or the penalty or excise tax provisions of the Code

      relating to employee benefit plans (as defined in Section 3 of ERISA), and

      no event, transaction or condition has occurred or exists that could

      reasonably be expected to result in the incurrence of any such liability

      by any Obligor or any ERISA Affiliate, or in the imposition of any Lien on

      any of the rights, properties or assets of any Obligor or any ERISA

      Affiliate, in either case pursuant to Title I or IV of ERISA or to such

      penalty or

 

                                      -9-

<PAGE>

 

      excise tax provisions or to Section 401(a)(29) or 412 of the Code or

      Section 4068 of ERISA, other than such liabilities or Liens as would not

      be, individually or in the aggregate, Material.

 

            (b) The present value of the aggregate benefit liabilities under

      each of the Plans subject to Section 412 of the Code, determined as of the

      end of such Plan's most recently ended plan year on the basis of the

      actuarial assumptions specified for funding purposes in such Plan's most

      recent actuarial valuation report, did not exceed the aggregate current

      value of the assets of such Plan allocable to such benefit liabilities.

      The term "benefit liabilities" has the meaning specified in Section 4001

      of ERISA and the terms "current value" and "present value" have the

      meanings specified in Section 3 of ERISA.

 

            (c) The Obligors and their ERISA Affiliates have not incurred any

      withdrawal liabilities (and are not subject to contingent withdrawal

      liabilities) under Section 4201 or 4204 of ERISA in respect of

      Multiemployer Plans that, individually or in the aggregate, are Material.

 

            (d) The expected post-retirement benefit obligation (determined as

      of the last day of the Company's most recently ended fiscal year in

      accordance with Financial Accounting Standards Board Statement No. 106,

      without regard to liabilities attributable to continuation coverage

      mandated by Section 4980B of the Code) of the Obligors and their

      Subsidiaries is not Material.

 

            (e) The execution and delivery of this Agreement and the issuance

      and sale of the Notes hereunder will not involve any transaction that is

      subject to the prohibitions of Section 406 of ERISA or in connection with

      which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the

      Code. The representation by the Obligors to each Purchaser in the first

      sentence of this Section 5.12(e) is made in reliance upon and subject to

      the accuracy of such Purchaser's representation in Section 6.3 as to the

      sources of the funds to be used to pay the purchase price of the Notes to

      be purchased by such Purchaser.

 

      Section 5.13 Private Offering by the Obligors. No Obligor nor anyone

acting on its behalf has offered the Notes or any similar securities for sale

to, or solicited any offer to buy any of the same from, or otherwise approached

or negotiated in respect thereof with, any Person other than the Purchasers and,

based solely on information supplied by the placement agent, not more than 43

other Institutional Investors of the type described in clause (c) of the

definition thereof, each of which has been offered the Notes in connection with

a private sale for investment. No Obligor nor anyone acting on its behalf has

taken any action that would subject the issuance or sale of the Notes to the

registration requirements of Section 5 of the Securities Act or to the

registration requirements of any securities or blue sky laws of any applicable

jurisdiction.

 

      Section 5.14 Use of Proceeds; Margin Regulations. The Obligors will apply

the proceeds of the sale of the Notes as set forth in the "Summary of Proposed

Terms" of the Memorandum and for other general corporate purposes of the

Obligors. No part of the proceeds

 

                                      -10-

<PAGE>

 

from the sale of the Notes hereunder will be used, directly or indirectly, for

the purpose of buying or carrying any margin stock within the meaning of

Regulation U of the Board of Governors of the Federal Reserve System (12 CFR

221), or for the purpose of buying or carrying or trading in any securities

under such circumstances as to involve the Obligors in a violation of Regulation

X of said Board (12 CFR 224) or to involve any broker or dealer in a violation

of Regulation T of said Board (12 CFR 220). Margin stock does not constitute

more than 10% of the value of the consolidated total assets of any Obligor and

its Subsidiaries and no Obligor has any present intention that margin stock will

constitute more than 10% of the value of such assets. As used in this Section,

the terms "margin stock" and "purpose of buying or carrying" shall have the

meanings assigned to them in said Regulation U.

 

      Section 5.15 Existing Debt; Future Liens.

 

            (a) Except as described therein, Schedule 5.15 sets forth, as of

      July 5, 2005, (1) a complete and correct list of all outstanding Debt

      having a principal balance in excess of $1,000,000 of the Obligors and

       their Restricted Subsidiaries (including a description of the obligors and

      obligees, principal amount outstanding and collateral therefor, if any,

      and guaranty thereof, if any), since which date there has been no Material

      change in the amounts, interest rates, sinking funds, installment payments

      or maturities of such Debt of the Obligors or their Restricted

      Subsidiaries and (2) the aggregate principal amount of all outstanding

      Debt which individually has an outstanding principal balance of $1,000,000

      or less, since which date there has been no Material change in the

      aggregate amount thereof. Neither any Obligor nor any Restricted

      Subsidiary is in default and no waiver of default is currently in effect,

      in the payment of any principal or interest on any Debt having a principal

      balance in excess of $1,000,000 of any Obligor or any Restricted

      Subsidiary and no event or condition exists with respect to any such Debt

      of any Obligor or any Restricted Subsidiary that would permit (or that

      with notice or the lapse of time, or both, would permit) one or more

      Persons to cause such Debt to become due and payable before its stated

      maturity or before its regularly scheduled dates of payment.

 

            (b) Except as disclosed in Schedule 5.15, neither any Obligor nor

      any Restricted Subsidiary has agreed or consented to cause or permit in

      the future (upon the happening of a contingency or otherwise) any of its

       property, whether now owned or hereafter acquired, to be subject to a Lien

      not permitted by Section 10.4.

 

            (c) Neither any Obligor nor any Subsidiary is a party to, or

      otherwise subject to any provision contained in, any instrument evidencing

      Debt having a principal balance in excess of $1,000,000 of such Obligor or

      such Subsidiary, any agreement relating thereto or any other agreement

      (including, but not limited to, its charter or other organizational

      document) which limits the amount of, or otherwise imposes restrictions on

      the incurring of, Debt of any Obligor, except as specifically indicated in

      Schedule 5.15.

 

                                      -11-

<PAGE>

 

      Section 5.16 Foreign Assets Control Regulations, Etc.

 

            (a) Neither the sale of the Notes by the Obligors hereunder nor

      their use of the proceeds thereof will violate the Trading with the Enemy

      Act, as amended, or any of the foreign assets control regulations of the

      United States Treasury Department (31 CFR, Subtitle B, Chapter V, as

      amended) or any enabling legislation or executive order relating thereto.

 

            (b) Neither any Obligor nor any Subsidiary (1) is a Person described

      or designated in the Specially Designated Nationals and Blocked Persons

      List of the Office of Foreign Assets Control or in Section 1 of the

      Anti-Terrorism Order or (2) to the best knowledge of the Obligors, engages

      in any dealings or transactions with any such Person. Each Obligor and its

      Subsidiaries are in compliance, in all material respects, with the USA

      Patriot Act.

 

            (c) No part of the proceeds from the sale of the Notes hereunder

      will be used, directly or indirectly, by any Obligor or any Subsidiary for

      any payments to any government official or employee, political party,

      official of a political party, candidate for political office, or anyone

      else acting in an official capacity, in order to obtain, retain or direct

      business or obtain any improper advantage, in violation of the United

      States Foreign Corrupt Practices Act of 1977, as amended, assuming in all

      cases that such act applies to the Obligors.

 

      Section 5.17 Status under Certain Statutes. Neither any Obligor nor any

Restricted Subsidiary is an "investment company" registered or required to be

registered under the Investment Company Act of 1940, as amended, or is subject

to regulation under the Public Utility Holding Company Act of 1935, as amended,

the ICC Termination Act of 1995, as amended, or the Federal Power Act, as

amended.

 

      Section 5.18 Environmental Matters.

 

            (a) Neither any Obligor nor any Restricted Subsidiary has knowledge

      of any liability or has received any notice of any liability, and no

      proceeding has been instituted raising any liability against any Obligor

      or Restricted Subsidiary or any of their respective real properties now or

      formerly owned, leased or operated by any of them, or other assets,

      alleging any damage to the environment or violation of any Environmental

      Laws, except, in each case, such as would not reasonably be expected to

      result in a Material Adverse Effect.

 

            (b) Neither any Obligor nor any Restricted Subsidiary has knowledge

      of any facts which would give rise to any liability, public or private,

      for violation of Environmental Laws or damage to the environment emanating

      from, occurring on or in any way related to real properties now or

      formerly owned, leased or operated by any of them or to other assets or

      their use, except, in each case, such as would not reasonably be expected

      to result in a Material Adverse Effect.

 

                                       -12-

<PAGE>

 

            (c) Neither any Obligor nor any Restricted Subsidiary has stored any

      Hazardous Materials on real properties now or formerly owned, leased or

      operated by any of them or has disposed of any Hazardous Materials in each

      case in a manner contrary to any Environmental Laws and in each case in

      any manner that would reasonably be expected to result in a Material

      Adverse Effect.

 

            (d) To the best knowledge of the Obligors, all buildings on all real

      properties now owned, leased or operated by any Obligor or any Restricted

      Subsidiary are in compliance with applicable Environmental Laws, except

      where failure to comply would not reasonably be expected to result in a

      Material Adverse Effect.

 

      Section 5.19 Employee Relations. Each Obligor and each of its Restricted

Subsidiaries has a stable work force in place and is not, as of the Closing

Date, party to any collective bargaining agreement nor has any labor union been

recognized as the representative of its employees except as set forth on

Schedule 5.19. No Obligor knows of any pending, threatened or contemplated

strikes, work stoppage or other collective labor disputes involving its

employees or those of its Restricted Subsidiaries.

 

      Section 5.20 Notes Rank Pari Passu. The Obligors have no reason to believe

that the obligations of each Obligor under this Agreement and the Notes do not

rank pari passu in right of payment with all other senior unsecured Debt (actual

or contingent) of such Obligor, including, without limitation, all senior

unsecured Debt of such Obligor described in Schedule 5.15.

 

      Section 5.21 Solvency of the Obligors. The Obligors, considered as a

whole, are solvent and have assets having a value both at fair valuation and at

present fair salable value greater than the amount required to pay their debts

as they become due and greater than the amount that will be required to pay

their probable liability on existing debts as they become due and matured. The

Obligors, taken as a whole, do not intend to incur, or believe or should have

believed that they will incur, debts beyond their ability to pay such debts as

they become due. The Obligors, taken as a whole, will not be rendered insolvent

by the execution, delivery and performance of their obligations under this

Agreement or the Notes. The Obligors, taken as a whole, do not intend to and

will not hinder, delay or defraud its creditors by or through the execution,

delivery or performance of their obligations under this Agreement or the Notes.

 

      Section 5.22 Consideration. Considered on a combined basis, there will be

provided to the Obligors a substantial economic benefit and adequate

consideration for the issuance and sale of the Notes and the execution and

delivery of this Agreement by reason of, among other reasons, the proceeds of

the Notes being used in the manner set forth in Section 5.14 and therefore will

enhance the business and operating position of each Obligor.

 

SECTION 6. REPRESENTATIONS OF THE PURCHASERS.

 

      Section 6.1 Purchase for Investment. Each Purchaser severally represents

that it is purchasing the Notes for its own account or for one or more separate

accounts maintained by it or for the account of one or more pension or trust

funds and not with a view to the distribution

 

                                      -13-

<PAGE>

 

thereof (other than any Notes purchased by Banc of America Securities LLC on the

Closing Date which are intended to be resold to a Qualified Institutional Buyer

pursuant to Rule 144A of the Securities Act), provided that the disposition of

such Purchaser's or such pension or trust fund's property shall at all times be

within such Purchaser's or such pension or trust fund's control. Each Purchaser

understands that the Notes have not been registered under the Securities Act or

any state securities laws and may be resold only if registered pursuant to the

provisions of the Securities Act or any state securities laws or if an exemption

from registration is available, except under circumstances where neither such

registration nor such an exemption is required by law, and that the Obligors are

not required to register the Notes.

 

      Section 6.2 Accredited Investor. Each Purchaser severally represents that

it is an "accredited investor" (within the meaning of Rule 501(a) of Regulation

D under the Securities Act) acting for its own account (and not for the account

of others) or as a fiduciary or agent for others (which others are also

"accredited investors") and is a Qualified Institutional Buyer. Each Purchaser

further severally represents that such Purchaser has had the opportunity to ask

questions of the Obligors and has received answers concerning the terms and

conditions of the sale of the Notes.

 

      Section 6.3 Source of Funds. Each Purchaser severally represents that at

least one of the following statements is an accurate representation as to each

source of funds (a "Source") to be used by such Purchaser to pay the purchase

price of the Notes to be purchased by such Purchaser hereunder:

 

            (a) the Source is an "insurance company general account" (as the

      term is defined in the United States Department of Labor's Prohibited

      Transaction Exemption ("PTE") 95-60) in respect of which the reserves and

      liabilities (as defined by the annual statement for life insurance

      companies approved by the NAIC (the "NAIC Annual Statement")) for the

      general account contract(s) held by or on behalf of any employee benefit

      plan together with the amount of the reserves and liabilities for the

      general account contract(s) held by or on behalf of any other employee

      benefit plans maintained by the same employer (or affiliate thereof as

      defined in PTE 95-60) or by the same employee organization in the general

      account do not exceed 10% of the total reserves and liabilities of the

      general account (exclusive of separate account liabilities) plus surplus

      as set forth in the NAIC Annual Statement filed with such Purchaser's

      state of domicile; or

 

            (b) the Source is a separate account that is maintained solely in

      connection with such Purchaser's fixed contractual obligations under which

      the amounts payable, or credited, to any employee benefit plan (or its

      related trust) that has any interest in such separate account (or to any

      participant or beneficiary of such plan (including any annuitant)) are not

      affected in any manner by the investment performance of the separate

      account; or

 

            (c) the Source is either (1) an insurance company pooled separate

      account, within the meaning of PTE 90-1 or (2) a bank collective

      investment fund, within the meaning of PTE 91-38 and, except as disclosed

      by such Purchaser to the Obligors in writing pursuant to this clause (c),

      no employee benefit plan or group of plans maintained

 

                                      -14-

<PAGE>

 

      by the same employer or employee organization beneficially owns more than

      10% of all assets allocated to such pooled separate account or collective

      investment fund; or

 

            (d) the Source constitutes assets of an "investment fund" (within

      the meaning of Part V of PTE 84-14 (the "QPAM Exemption")) managed by a

      "qualified professional asset manager" or "QPAM" (within the meaning of

      Part V of the QPAM Exemption), no employee benefit plan's assets that are

      included in such investment fund, when combined with the assets of all

      other employee benefit plans established or maintained by the same

      employer or by an affiliate (within the meaning of Section V(c)(1) of the

      QPAM Exemption) of such employer or by the same employee organization and

      managed by such QPAM, exceed 20% of the total client assets managed by

      such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are

      satisfied, neither the QPAM nor a Person controlling or controlled by the

      QPAM (applying the definition of "control" in Section V(e) of the QPAM

      Exemption) owns a 5% or more interest in any Obligor and (1) the identity

      of such QPAM and (2) the names of all employee benefit plans whose assets

      are included in such investment fund have been disclosed to the Obligors

      in writing pursuant to this clause (d); or

 

            (e) the Source constitutes assets of a "plan(s)" (within the meaning

      of Section IV of PTE 96-23 (the "INHAM Exemption")) managed by an

      "in-house asset manager" or "INHAM" (within the meaning of Part IV of the

      INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM

      Exemption are satisfied, neither the INHAM nor a Person controlling or

      controlled by the INHAM (applying the definition of "control" in Section

      IV(d) of the INHAM Exemption) owns a 5% or more interest in any Obligor

      and (1) the identity of such INHAM and (2) the name(s) of the employee

      benefit plan(s) whose assets constitute the Source have been disclosed to

      the Obligors in writing pursuant to this clause (e); or

 

            (f) the Source is a governmental plan; or

 

            (g) the Source is one or more employee benefit plans, or a separate

      account or trust fund comprised of one or more employee benefit plans,

      each of which has been identified to the Obligors in writing pursuant to

      this clause (g); or

 

            (h) the Source does not include assets of any employee benefit plan,

      other than a plan exempt from the coverage of ERISA.

 

As used in this Section 6.3, the terms "employee benefit plan," "governmental

plan," and "separate account" shall have the respective meanings assigned to

such terms in Section 3 of ERISA.

 

SECTION 7. INFORMATION AS TO THE OBLIGORS.

 

      Section 7.1 Financial and Business Information. The Obligors shall deliver

to each holder of Notes that is an Institutional Investor:

 

                                      -15-

<PAGE>

 

            (a) Quarterly Statements -- within 60 days after the end of each

      quarterly fiscal period in each fiscal year of the Company (other than the

      last quarterly fiscal period of each such fiscal year), copies of:

 

                  (1) an unaudited consolidated balance sheet of the Company and

             its Subsidiaries as at the end of such quarter, and

 

                  (2) unaudited consolidated statements of income, retained

            earnings and cash flows of the Company and its Subsidiaries, for

            such quarter and (in the case of the second and third quarters) for

            the portion of the fiscal year ending with such quarter,

 

      setting forth in each case in comparative form the figures for the

      corresponding periods in the previous fiscal year, all in reasonable

      detail, prepared in accordance with GAAP applicable to quarterly financial

      statements generally, and certified by a Senior Financial Officer of each

      Obligor as fairly presenting, in all material respects, the financial

      position of the companies being reported on and their results of

      operations and cash flows, subject to changes resulting from year-end

      adjustments, provided that delivery within the time period specified above

      of copies of the Company's Quarterly Report on Form 10-Q prepared in

      compliance with the requirements therefor and filed with the SEC shall be

      deemed to satisfy the requirements of this Section 7.1(a);

 

            (b) Annual Statements -- within 105 days after the end of each

       fiscal year of the Company, copies of:

 

                  (1) a consolidated balance sheet of the Company and its

            Subsidiaries, as at the end of such year, and

 

                  (2) consolidated statements of income, retained earnings and

             cash flows of the Company and its Subsidiaries, for such year,

 

      setting forth in each case in comparative form the figures for the

      previous fiscal year, all in reasonable detail, prepared in accordance

      with GAAP, and accompanied by an opinion thereon of independent certified

      public accountants of recognized national standing, which opinion shall

      state that such financial statements present fairly, in all material

      respects, the financial position of the companies being reported upon and

      their results of operations and cash flows and have been prepared in

      conformity with GAAP, and that the examination of such accountants in

      connection with such financial statements has been made in accordance with

      the standards of the Public Company Accounting Oversight Board (United

      States), and that such audit provides a reasonable basis for such opinion

      in the circumstances, provided that delivery within the time period

      specified above of copies of the Company's Annual Report on Form 10-K for

      such fiscal year (together with the Company's annual report to

      shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange

      Act) prepared in accordance with the requirements therefor and filed with

      the SEC, shall be deemed to satisfy the requirements of this Section

      7.1(b);

 

                                      -16-

<PAGE>

 

            (c) SEC and Other Reports -- except for filings delivered pursuant

      to Sections 7.1(a) and (b) above, promptly upon their becoming available

      one copy of (1) each financial statement, notice or proxy statement sent

      by any Obligor or any Subsidiary to its principal lending banks as a whole

      (excluding information or notices sent to such banks in the ordinary

      course of administration of a bank facility, such as information relating

      to pricing and borrowing availability) or to its public securities holders

      generally and (2) each regular or periodic report, each registration

      statement (without exhibits except as expressly requested by such holder),

      and each prospectus and all amendments thereto filed by any Obligor or any

      Subsidiary with the SEC and of all press releases and other statements

      made available generally by any Obligor or any Subsidiary to the public

      concerning developments that are Material;

 

            (d) Notice of Default or Event of Default -- promptly, and in any

      event within 10 days after a Responsible Officer of any Obligor becomes

      aware of (1) the existence of any Default or Event of Default or that any

      Person has given any notice or taken any action with respect to a claimed

      default hereunder or that any Person has given any notice or taken any

      action with respect to a claimed default of the type referred to in

      paragraph (f) of Section 11, a written notice specifying the nature and

      period of existence thereof and what action the Obligors are taking or

      propose to take with respect thereto or (2) the occurrence of a Change in

      Control (under and as defined in the Bank Credit Agreement);

 

            (e) ERISA Matters -- promptly, and in any event within 10 days after

      a Responsible Officer of any Obligor becomes aware of any of the

      following, a written notice setting forth the nature thereof and the

      action, if any, that the Obligors propose to take, or an ERISA Affiliate

      proposes to take, with respect thereto:

 

                   (1) with respect to any Plan, any reportable event, as defined

            in Section 4043(c) of ERISA and the regulations thereunder, for

            which notice thereof has not been waived pursuant to such

            regulations as in effect on the date thereof; or

 

                  (2) the taking by the PBGC of steps to institute, or the

            threatening by the PBGC of the institution of, proceedings under

            Section 4042 of ERISA for the termination of, or the appointment of

             a trustee to administer, any Plan, or the receipt by any Obligor or

            any ERISA Affiliate of a notice from a Multiemployer Plan that such

            action has been taken by the PBGC with respect to such Multiemployer

            Plan; or

 

                   (3) any event, transaction or condition that could result in

            the incurrence of any liability by any Obligor or any ERISA

            Affiliate pursuant to Title I or IV of ERISA or the imposition of a

            penalty or excise tax under the provisions of the Code relating to

            employee benefit plans, or the imposition of any Lien on any of the

            rights, properties or assets of the Company or any ERISA Affiliate

            pursuant to Title I or IV of ERISA or such penalty or excise tax

            provisions, if such liability or Lien, taken together with any other

            such liabilities

 

                                      -17-

<PAGE>

 

            or Liens then existing, would reasonably be expected to have a

            Material Adverse Effect;

 

            (f) Notices from Governmental Authority -- promptly, and in any

      event within 30 days of receipt thereof, copies of any notice to any

      Obligor or any Subsidiary from any federal or state Governmental Authority

      relating to any order, ruling, statute or other law or regulation

      specifically directed to an Obligor or a Subsidiary (as opposed to any

      entity generally) that would reasonably be expected to have a Material

       Adverse Effect; and

 

            (g) Requested Information -- with reasonable promptness, such other

      data and information relating to the business, operations, affairs,

      financial condition, assets or properties of any Obligor or any Subsidiary

      or relating to the ability of the Obligors to perform their obligations

      hereunder or under the Notes as from time to time may be reasonably

      requested by any such holder of Notes or such information regarding the

      Obligors required to satisfy the requirements of 17 C.F.R. Section

      230.144A, as amended from time to time, in connection with any

      contemplated transfer of the Notes pursuant to Rule 144A of the Securities

      Act.

 

      Notwithstanding the foregoing, in the event that one or more Unrestricted

Subsidiaries of the Company shall either (i) own more than 10% of the

consolidated total assets of the Company and its Subsidiaries or (ii) account

for more than 10% of the consolidated gross revenues of the Company and its

Subsidiaries, in each case determined in accordance with GAAP, then, within the

respective periods provided in Sections 7.1(a) and (b) above, the Obligors shall

deliver to each holder of Notes that is an Institutional Investor, unaudited

financial statements of the character and for the dates and periods as in said

Sections 7.1(a) and (b) covering such group of Unrestricted Subsidiaries (on a

consolidated basis), together with a consolidating statement reflecting

eliminations or adjustments required in order to reconcile the financial

statements of such group of Unrestricted Subsidiaries to the consolidated

financial statements delivered pursuant to Sections 7.1(a) and (b).

 

      Section 7.2 Officer's Certificate. Each set of financial statements

delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)

shall be accompanied by a certificate signed by a Senior Financial Officer of

each Obligor setting forth:

 

            (a) Covenant Compliance -- the information (including detailed

       calculations with respect to Sections 10.1 through 10.3, inclusive)

      required in order to establish whether the Obligors were in compliance

      with the requirements of Section 10.1 through Section 10.5, inclusive,

      during the quarterly or annual period covered by the statements then being

      furnished (including with respect to each such Section, where applicable,

      the calculations of the maximum or minimum amount, ratio or percentage, as

      the case may be, permissible under the terms of such Sections, and the

      calculation of the amount, ratio or percentage then in existence); and

 

            (b) Event of Default -- a statement that such officer has reviewed

      the relevant terms hereof and has made, or caused to be made, under his or

      her supervision, a review

 

                                      -18-

<PAGE>

 

      of the transactions and conditions of the Obligors and their Subsidiaries

      from the beginning of the quarterly or annual period covered by the

       statements then being furnished to the date of the certificate and that

      such review shall not have disclosed the existence during such period of

      any condition or event that constitutes a Default or an Event of Default

      or, if any such condition or event existed or exists, specifying the

      nature and period of existence thereof and what action the Obligors shall

      have taken or propose to take with respect thereto.

 

      Section 7.3 Visitation. Each Obligor shall permit the representatives of

each holder of Notes that is an Institutional Investor:

 

            (a) No Default -- if no Default or Event of Default then exists, at

      the expense of such holder and upon reasonable prior notice to such

      Obligor, to visit the principal executive office of such Obligor, to

      discuss the affairs, finances and accounts of such Obligor and its

      Subsidiaries with such Obligor's officers, and (with the consent of such

      Obligor, which consent will not be unreasonably withheld) its independent

      public accountants, and (with the consent of such Obligor, which consent

      will not be unreasonably withheld) to visit the other offices and

      properties of such Obligor and each Restricted Subsidiary, all at such

      reasonable times and as often as may be reasonably requested in writing;

      and

 

            (b) Default -- if a Default or Event of Default then exists, at the

      expense of the Obligors, to visit and inspect any of the offices or

      properties of such Obligor or any Restricted Subsidiary, to examine all

      their respective books of account, records, reports and other papers, to

      make copies and extracts therefrom, and to discuss their respective

      affairs, finances and accounts with their respective officers and

      independent public accountants (and by this provision such Obligor

      authorizes said accountants to discuss the affairs, finances and accounts

      of such Obligor and its Restricted Subsidiaries), all at such times and as

      often as may be requested.

 

SECTION 8. PAYMENT OF THE NOTES.

 

      Section 8.1 Required Prepayments.

 

            (a) Required Prepayments of Series A Notes. The Series A Notes shall

      not be subject to any required prepayments and the entire unpaid principal

      amount of the Series A Notes shall become due and payable on July 12,

      2012.

 

            (b) Required Prepayments of Series B Notes. The Series B Notes shall

      not be subject to any required prepayments and the entire unpaid principal

      amount of the Series B Notes shall become due and payable on July 12,

      2015.

 

            (c) Required Prepayments of Series C Notes. The Series C Notes shall

      not be subject to any required prepayments and the entire unpaid principal

      amount of the Series C Notes shall become due and payable on July 12,

      2012.

 

      Section 8.2 Optional Prepayments.

 

                                      -19-

<PAGE>

 

            (a) Optional Prepayments of Series A Notes. During any period when

      no Default or Event of Default exists or would be caused by an optional

      prepayment of Notes, the Obligors may, at their option, upon notice as

      provided below, prepay at any time all, or from time to time any part of,

      the Series A Notes, in an amount not less than 10% of the original

      aggregate principal amount of the Series A Notes in the case of a partial

      prepayment (or such lesser amount as shall be required to effect a partial

      prepayment resulting from a prepayment pursuant to Section 10.5), at 100%

      of the principal amount so prepaid, plus accrued and unpaid interest, plus

      the Make-Whole Amount, if any, determined for the prepayment date with

      respect to such principal amount.

 

             (b) Optional Prepayments of Series B Notes. During any period when

      no Default or Event of Default exists or would be caused by an optional

      prepayment of Notes, the Obligors may, at their option, upon notice as

      provided below, prepay at any time all, or from time to time any part of,

      the Series B Notes, in an amount not less than 10% of the original

      aggregate principal amount of the Series B Notes in the case of a partial

      prepayment (or such lesser amount as shall be required to effect a partial

      prepayment resulting from a prepayment pursuant to Section 10.5), at 100%

      of the principal amount so prepaid, plus accrued and unpaid interest, plus

      the Make-Whole Amount, if any, determined for the prepayment date with

      respect to such principal amount.

 

            (c) Optional Prepayments of Series C Notes. During any period when

      no Default or Event of Default exists or would be caused by an optional

      prepayment of Notes, the Obligors may, at their option, upon notice as

      provided below, prepay at any time all, or from time to time any part of,

      the Series C Notes, in an amount not less than 10% of the original

      aggregate principal amount of the Series C Notes in the case of a partial

      prepayment (or such lesser amount as shall be required to effect a partial

      prepayment resulting from a prepayment pursuant to Section 10.5), at 100%

      of the principal amount so prepaid, plus accrued and unpaid interest, plus

      the Prepayment Premium, if any, and, if such prepayment occurs on any date

      other than an Interest Payment Date, the LIBOR Breakage Amount, if any,

      determined for the prepayment date with respect to such principal amount.

 

            (d) Optional Prepayment following Default. During any period when a

      Default or Event of Default exists or would be caused by an optional

      prepayment of Notes, the Obligors may, at their option, upon notice as

      provided below, prepay at any time all, or from time to time any part of,

      the Notes of each series, in an amount not less than 10% of the original

      aggregate principal amount of the Notes in the case of a partial

      prepayment (or such lesser amount as shall be required to effect a partial

      prepayment resulting from a prepayment pursuant to Section 10.5), at 100%

      of the principal amount so prepaid, plus accrued and unpaid interest,

      plus, in the case of the Series A Notes and Series B Notes, the Make-Whole

      Amount, if any, and, in the case of the Series C Notes, the Prepayment

      Premium, if any, and if such prepayment occurs on any date other than an

      Interest Payment Date, the LIBOR Breakage Amount, if any, in each case,

      determined for the prepayment date with respect to such principal amount.

      In no event shall the rights of

 

                                      -20-

<PAGE>

 

      the Company under this Section 8.2(d) extend the date payment is due in

      respect of any Notes that have become due and payable pursuant to Section

      12.1. Acceptance of a prepayment of Notes pursuant to this Section 8.2(d)

      shall not constitute a waiver of any Default or Event of Default.

 

            (e) Notice of Optional Prepayments. The Obligors will give each

      holder of Notes to be prepaid pursuant to this Section 8.2 (with a copy to

      each other holder of Notes) written notice of each optional prepayment

      under this Section 8.2 not less than 30 days and not more than 60 days

      prior to the date fixed for such prepayment. Each such notice shall

      specify such date (which shall be a Business Day), the aggregate principal

      amount of the Notes of each series to be prepaid on such date, the

      principal amount of each Note held by such holder to be prepaid

      (determined in accordance with Section 8.3), and the interest to be paid

      on the prepayment date with respect to such principal amount being

      prepaid, and shall be accompanied by a certificate signed by a Senior

      Financial Officer of each Obligor as to the estimated Make-Whole Amount or

      Prepayment Premium, as applicable, due in connection with such prepayment

      (calculated as if the date of such notice were the date of the

      prepayment), setting forth the details of such computation. In the case of

      prepayments of Series A Notes and Series B Notes, two Business Days prior

      to such prepayment, the Obligors shall deliver to each holder of Series A

      Notes or Series B Notes, as applicable, a certificate signed by a Senior

      Financial Officer of each Obligor specifying the calculation of each such

      Make-Whole Amount as of the specified prepayment date.

 

            (f) The term "LIBOR Breakage Amount" shall mean any loss, cost or

      expense (other than lost profits) actually incurred by any holder of a

      Series C Note as a result of any payment or prepayment of any Series C

      Note on a day other than a regularly scheduled Interest Payment Date or at

      the scheduled maturity (whether voluntary, mandatory, automatic, by reason

      of acceleration or otherwise), and any loss or expense arising from the

      liquidation or reemployment of funds obtained by such holder or from fees

      payable to terminate the deposits from which such funds were obtained;

      provided that any such loss, cost or expense shall be limited to the time

      period from the date of such prepayment through the earlier of (1) the

      next Interest Payment Date or (2) the maturity date of the Series C Notes.

      Each holder shall determine the LIBOR Breakage Amount with respect to the

      principal amount of its Series C Notes then being paid or prepaid (or

      required to be paid or prepaid) by written notice to the Obligors setting

      forth such determination in reasonable detail not less than two Business

      Days prior to the date of prepayment in the case of any prepayment

      pursuant to Section 8.2(c) and not more than five Business Days after any

      payment required by Section 8.2(d) or Section 12.1. Each such

      determination shall be conclusive absent manifest error.

 

      Section 8.3 Allocation of Partial Prepayments. In the case of each partial

prepayment of the Notes pursuant to the provisions of Section 8.2(a), (b) or

(c), the principal amount of the Notes of the series to be prepaid shall be

allocated among all of the Notes of such series at the time outstanding in

proportion, as nearly as practicable, to the respective unpaid principal amounts

thereof not theretofore called for prepayment. In the case of any prepayment

pursuant to Section 8.2(d), the principal amount of the Notes to be prepaid

shall be allocated among all of the

 

                                      -21-

<PAGE>

 

Notes at the time outstanding in proportion, as nearly as practicable, to the

respective unpaid principal amounts thereof not theretofore called for

prepayment. Each purchase made pursuant to Section 8.5 shall be applied only to

the Notes of the holders who are participating in such purchase.

 

      Section 8.4 Maturity; Surrender, Etc. In the case of each prepayment of

Notes pursuant to this Section 8, the principal amount of each Note to be

prepaid shall mature and become due and payable on the date fixed for such

prepayment (which shall be a Business Day), together with interest on such

principal amount accrued to such date and, in the case of the Series A Notes,

the applicable Make-Whole Amount, if any, or, in the case of the Series C Notes,

the applicable Prepayment Premium, if any, and, if such prepayment occurs on a

date other than an Interest Payment Date, the LIBOR Breakage Amount, if any.

From and after such date, unless the Obligors shall fail to pay such principal

amount when so due and payable, together with the interest and Make-Whole

Amount, if any, or applicable Prepayment Premium, if any, and LIBOR Breakage

Amount, if any, as aforesaid, interest on such principal amount shall cease to

accrue. Any Note paid or prepaid in full shall be surrendered to the Obligors

and cancelled and shall not be reissued, and no Note shall be issued in lieu of

any prepaid principal amount of any Note.

 

      Section 8.5 Purchase of Notes. The Obligors will not, and will not permit

any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or

indirectly, any of the outstanding Notes except (a) upon the payment or

prepayment of the Notes in accordance with the terms of this Agreement and the

Notes or (b) pursuant to a written offer to purchase any outstanding Notes made

by one or more Obligors or an Affiliate pro rata to each holder of Notes of a

series at the time outstanding upon the same terms and conditions; provided,

that in the case of any such offer during any period when a Default or Event of

Default then exists, any such offer shall be made pro rata to all holders of

Notes of each series at the time outstanding upon the same terms and conditions.

Any such offer shall provide each holder with sufficient information to enable

it to make an informed decision with respect to such offer and shall remain open

for at least 20 Business Days. If the holders of more than 50% of the

outstanding principal amount of the Notes of any series for which an offer has

been made pursuant to this Section 8.5 accept such offer, the Obligors shall

promptly notify the remaining holders of such series of such fact and the

expiration date for the acceptance by such holders of Notes of such offer shall

be extended by the number of days necessary to give each such remaining holder

at least 10 Business Days from its receipt of such notice to accept such offer.

The Obligors will promptly cancel all Notes acquired by it or any Affiliate

pursuant to any payment, prepayment or purchase of Notes pursuant to any

provision of this Agreement and no Notes may be issued in substitution or

exchange for any such Notes.

 

      Section 8.6 Make-Whole Amount. The term "Make-Whole Amount" shall mean

with respect to any Series A Note and any Series B Note an amount equal to the

excess, if any, of the Discounted Value of the Remaining Scheduled Payments with

respect to the Called Principal of such Series A Note or Series B Note, minus

the amount of such Called Principal, provided that the Make-Whole Amount may in

no event be less than zero. For the purposes of determining the Make-Whole

Amount, the following terms have the following meanings:

 

                                      -22-

<PAGE>

 

            "Called Principal" shall mean, with respect to the Called Principal

      of any Series A Note or Series B Note, the principal of such Series A Note

      or Series B Note that is to be prepaid pursuant to Section 8.2 or has

      become or is declared to be immediately due and payable pursuant to

      Section 12.1, as the context requires.

 

            "Discounted Value" shall mean, with respect to the Called Principal

      of any Series A Note or Series B Note, the amount obtained by discounting

      all Remaining Scheduled Payments from their respective scheduled due dates

      to the Settlement Date with respect to such Called Principal, in

      accordance with accepted financial practice and at a discount factor

      (applied on the same periodic basis as that on which interest on such

      Series A Note or Series B Note is payable) equal to the Reinvestment

      Yield.

 

            "Reinvestment Yield" shall mean, with respect to the Called

      Principal of any Series A Note or Series B Note, 0.50% plus the yield to

      maturity calculated by using (a) the yields reported, as of 10:00 a.m.

      (New York, New York time) on the second Business Day preceding the

      Settlement Date on screen "PX-1" on the Bloomberg Financial Market Service

      ("Bloomberg") (or such other information service as may replace Bloomberg)

      for actively traded U.S. Treasury securities having a maturity equal to

      the Remaining Average Life of such Called Principal as of such Settlement

      Date or (b) if such yields are not reported as of such time or the yields

      reported as of such time are not ascertainable, the Treasury Constant

      Maturity Series Yields reported, for the latest day for which such yields

      have been so reported as of the second Business Day preceding the

      Settlement Date, in Federal Reserve Statistical Release H.15 (519) (or any

      comparable successor publication) for actively traded U.S. Treasury

      securities having a constant maturity equal to the Remaining Average Life

      of such Called Principal as of such Settlement Date. In either case, the

      yield will be determined, if necessary, by (1) converting U.S. Treasury

      bill quotations to bond-equivalent yields in accordance with accepted

      financial practice and (2) interpolating linearly on a straight line basis

      between (i) the actively traded U.S. Treasury security with the maturity

      closest to and greater than the Remaining Average Life and (ii) the

      actively traded U.S. Treasury security with the maturity closest to and

      less than the Remaining Average Life. The Reinvestment Yield shall be

      rounded to the number of decimal places as appears in the interest rate of

      the Series A Notes or Series B Note, as applicable.

 

            "Remaining Average Life" shall mean, with respect to the Called

      Principal of any Series A Note or Series B Note, the number of years

      (calculated to the nearest one-twelfth year) obtained by dividing (a) such

      Called Principal into (b) the sum of the products obtained by multiplying

      (1) the principal component of each Remaining Scheduled Payment by (2) the

      number of years (calculated to the nearest one-twelfth year) that will

      elapse between the Settlement Date and the scheduled due date of such

      Remaining Scheduled Payment.

 

            "Remaining Scheduled Payments" shall mean, with respect to the

      Called Principal of any Series A Note or Series B Note, all payments of

      such Called Principal and interest thereon that would be due after the

      Settlement Date if no payment of such Called Principal were made prior to

      its scheduled due date, provided that if such

 

                                      -23-

<PAGE>

 

      Settlement Date is not a date on which interest payments are due to be

      made under the terms of such Note, then the amount of the next succeeding

      scheduled interest payment will be reduced by the amount of interest

      accrued to such Settlement Date and required to be paid on such Settlement

      Date pursuant to Section 8.2 or 12.1.

 

            "Settlement Date" shall mean, with respect to the Called Principal

      of any Series A Note or Series B Note, the date on which such Called

      Principal is to be prepaid pursuant to Section 8.2 or has become or is

      declared to be immediately due and payable pursuant to Section 12.1, as

      the context requires.

 

SECTION 9. AFFIRMATIVE COVENANTS.

 

      The Obligors, jointly and severally, covenant that so long as any of the

Notes are outstanding:

 

      Section 9.1 Compliance with Law. Without limiting Section 10.8, each

Obligor will, and will cause each of its Subsidiaries to, comply with all laws,

ordinances or governmental rules or regulations to which each of them is

subject, including, without limitation, ERISA, the USA Patriot Act and

Environmental Laws, and will obtain and maintain in effect all licenses,

certificates, permits, franchises and other governmental authorizations

necessary to the ownership of their respective properties or to the conduct of

their respective businesses, in each case to the extent necessary to ensure that

non-compliance with such laws, ordinances or governmental rules or regulations

or failures to obtain or maintain in effect such licenses, certificates,

permits, franchises and other governmental authorizations would not,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect.

 

      Section 9.2 Insurance. Each Obligor will, and will cause each Restricted

Subsidiary to, maintain, with financially sound and reputable insurers,

insurance with respect to their respective properties and businesses against

such casualties and contingencies, of such types, on such terms and in such

amounts (including deductibles, co-insurance and self-insurance, if adequate

reserves are maintained with respect thereto) as is customary in the case of

entities engaged in the same or a similar business and similarly situated.

 

      Section 9.3 Maintenance of Properties. Each Obligor will, and will cause

each Restricted Subsidiary to, maintain and keep, or cause to be maintained and

kept, their respective properties in good repair, working order and condition

(other than ordinary wear and tear), so that the business carried on in

connection therewith may be properly conducted at all times, provided that this

Section shall not prevent any Obligor or any Restricted Subsidiary from

discontinuing the operation and the maintenance of any of its properties if such

discontinuance is desirable in the conduct of its business and such Obligor or

such Restricted Subsidiary, as applicable, has concluded that such

discontinuance would not, individually or in the aggregate, reasonably be

expected to have a Material Adverse Effect.

 

      Section 9.4 Payment of Taxes and Claims. Each Obligor will, and will cause

each of its Subsidiaries to, file all tax returns required to be filed in any

jurisdiction and to pay and discharge all taxes shown to be due and payable on

such returns and all other taxes, assessments,

 

                                      -24-

<PAGE>

 

governmental charges or levies imposed on them or any of their properties,

assets, income or franchises, to the extent such taxes, assessments,

governmental charges or levies have become due and payable and before they have

become delinquent and all claims for which sums have become due and payable that

have or might become a Lien on properties or assets of any Obligor or any

Subsidiary not permitted by Section 10.4, provided that neither any Obligor nor

any Subsidiary need pay any such tax, assessment, governmental charge, levy or

claim if (a) the amount, applicability or validity thereof is contested by such

Obligor or such Subsidiary on a timely basis in good faith and in appropriate

proceedings, and such Obligor or such Subsidiary has established adequate

reserves therefor in accordance with GAAP on the books of such Obligor or such

Subsidiary or (b) the non-filing of all such tax returns or the nonpayment of

all such taxes, assessments, governmental charges, levies and claims, in the

aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

      Section 9.5 Corporate Existence, Etc. Subject to Section 10.6, each

Obligor will at all times preserve and keep in full force and effect its

corporate or other organizational existence. Subject to Sections 10.5 and 10.6,

the Obligors will at all times preserve and keep in full force and effect the

legal existence of each of the Restricted Subsidiaries (unless merged into the

Company or another Obligor) and all rights and franchises of each Obligor and

their Restricted Subsidiaries unless, in the good faith judgment of the

Obligors, the termination of or failure to preserve and keep in full force and

effect such legal existence, right or franchise would not, individually or in

the aggregate, reasonably be expected to have a Material Adverse Effect.

 

      Section 9.6 Designation of Subsidiaries. The Obligors may from time to

time cause any Obligor (other than the Company) or any Restricted Subsidiary to

be designated as an Unrestricted Subsidiary or any Unrestricted Subsidiary to be

designated as a Restricted Subsidiary; provided, however, that at the time of

such designation and immediately after giving effect thereto, (a) no Default or

Event of Default would exist under the terms of this Agreement and (b) the

Obligors and their Subsidiaries or Restricted Subsidiaries, as the case may be,

would be in compliance with all of the covenants set forth in this Section 9 and

Section 10 if tested on the date of such action and provided, further, that once

a Subsidiary has been designated an Unrestricted Subsidiary or a Restricted

Subsidiary pursuant to this Section 9.6, it shall not thereafter be redesignated

as a Restricted Subsidiary or an Unrestricted Subsidiary on more than one

occasion. Within 10 days following any designation described above, the Obligors

will deliver to each holder of Notes a notice of such designation accompanied by

a certificate signed by a Senior Financial Officer of each Obligor certifying

compliance with all requirements of this Section 9.6 and setting forth all

information required in order to establish such compliance.

 

      Section 9.7 Notes to Rank Pari Passu. Other than on account of actions, if

any, taken by any holder or holders of Notes, each Obligor shall cause the Notes

and all other obligations of such Obligor under this Agreement at all times to

be direct and senior unsecured obligations of such Obligor ranking pari passu as

against the assets of such Obligor with all other present and future unsecured

Debt (actual or contingent) of such Obligor which is not expressed to be

subordinate or junior in rank to any other unsecured Debt of such Obligor.

 

      Section 9.8 Books and Records. Each Obligor will, and will cause each

Restricted Subsidiary to, maintain proper books of record and account in

conformity with GAAP and all

 

                                      -25-

<PAGE>

 

applicable requirements of any Governmental Authority having legal or regulatory

jurisdiction over such Obligor or such Restricted Subsidiary, as the case may

be.

 

      Section 9.9 Additional Obligors; Release of Obligors.

 

            (a) The Obligors will cause any Subsidiary which becomes a

      co-obligor or guarantor in respect of Debt under the Bank Credit Agreement

      to become a party to this Agreement and deliver to each of the holders of

      the Notes (concurrently with becoming a co-obligor or guarantor in respect

      of the Bank Credit Agreement) the following items:

 

                  (1) a joinder to this Agreement in the form attached hereto as

            Exhibit 2 pursuant to which such Subsidiary becomes an Obligor

            hereunder and under the Notes (the "Joinder");

 

                  (2) a certificate signed by a Responsible Officer of such

            Subsidiary making representations and warranties to the effect of

            those contained in Section 5 (other than those contained in (i)

            Sections 5.3, 5.5, 5.13 and 5.14 and (ii) any other section so long

            as such Subsidiary shall have set forth in such certificate the

             basis for not making such representation and warranty), with respect

            to such Subsidiary, this Agreement and the Notes, as applicable;

            provided that in the event such Subsidiary is not able to make the

            representations and warranties contained in Section 5.6 or Section

            5.7, the Obligors shall give written notice thereof to each holder

            of Notes at least 10 Business Days prior to the execution and

            delivery of the Joinder; and

 

                   (3) an opinion of counsel (who may be in-house counsel for the

            Obligors) addressed to each of the holders of Notes satisfactory to

            the Required Holders, to the effect that the Joinder entered into by

            such Subsidiary has been duly authorized, executed and delivered and

            that this Agreement and the Notes constitute the legal, valid and

            binding contracts and agreements of such Subsidiary enforceable

            against such Subsidiary in accordance with their respective terms,

            except as such enforceability may be limited by bankruptcy,

            insolvency, fraudulent conveyance and similar laws affecting the

            enforcement of creditors' rights generally and by general equitable

            principles.

 

            (b) If at any time, pursuant to the terms and conditions of the Bank

      Credit Agreement, any Obligor (other than the Company) is no longer

      obligated as a co-obligor and/or a guarantor under the Bank Credit

      Agreement and the Company shall have delivered to each holder of Notes an

      Officer's Certificate from the Company certifying that (1) such Obligor is

      not obligated as a co-obligor and/or a guarantor under the Bank Credit

      Agreement and (2) immediately preceding the release of such Obligor from

      this Agreement and the Notes and after giving effect thereto, no Default

      or Event of Default shall have existed or would exist, then, upon receipt

      by the holders of Notes of such Officer's Certificate, such Obligor shall

      be released and deemed discharged from its obligations under this

      Agreement and the Notes.

 

                                      -26-

<PAGE>

 

            (c) So long as no Default or Event of Default shall then exist, any

      Obligor (other than the Company) may be released and discharged from its

      obligations under this Agreement and the Notes (1) with the written

      consent of the Required Holders or (2) upon any Obligor being designated

      as an Unrestricted Subsidiary in accordance with Section 9.6; provided

      that, in connection with clause (2) above, such Obligor is not then

      presently, or is concurrently being released as, a co-obligor and/or a

      guarantor under the Bank Credit Agreement.

 

            (d) The Company agrees that it will not, nor will it permit any

      Obligor, Subsidiary or Affiliate to, directly or indirectly, pay or cause

      to be paid any consideration or remuneration, whether by way of

       supplemental or additional interest, fee or otherwise, or grant any

      security, to any creditor of any Obligor or of any Affiliate as

      consideration for or as an inducement to the entering into by any such

      creditor of any release or discharge of any Obligor with respect to any

      liability of such Obligor as an obligor and/or a guarantor under or in

      respect of Debt outstanding under the Bank Credit Agreement, unless such

      consideration or remuneration is concurrently paid, or security is

      concurrently granted, on the same terms, ratably to each of the holders of

      the Notes.

 

SECTION 10. NEGATIVE COVENANTS.

 

      The Obligors, jointly and severally, covenant that so long as any of the

Notes are outstanding:

 

      Section 10.1 Consolidated Adjusted Debt to EBITDAR Ratio. The Obligors

will not, as of the end of any fiscal quarter, permit the ratio of (a)

Consolidated Adjusted Debt on such date to (b) EBITDAR for the period of four

consecutive fiscal quarters ending on or immediately prior to such date to be

greater than 4.25 to 1.00.

 

      Section 10.2 Fixed Charge Coverage Ratio. The Obligors will not, as of the

end of any fiscal quarter, permit the Fixed Charge Coverage Ratio to be less

than 1.75 to 1.00.

 

      Section 10.3 Priority Debt. The Obligors will not, as of the end of any

fiscal quarter, permit the aggregate amount of all Priority Debt to exceed an

amount equal to 20% of Net Worth determined as of the end of the then most

recently ended fiscal quarter of the Company.

 

      Section 10.4 Limitation on Liens. The Obligors will not, and will not

permit any Restricted Subsidiary to, directly or indirectly create, incur,

assume or permit to exist (upon the happening of a contingency or otherwise) any

Lien on or with respect to any property or asset (including, without limitation,

any document or instrument in respect of goods or accounts receivable) of any

such Obligor or any such Restricted Subsidiary, whether now owned or held or

hereafter acquired, or any income or profits therefrom, or assign or otherwise

convey any right to receive income or profits (unless it makes, or causes to be

made, effective provision whereby the Notes will be equally and ratably secured

with any and all other obligations thereby secured, such security to be pursuant

to an agreement reasonably satisfactory to the Required Holders and, in any such

case, the Notes shall have the benefit, to the fullest extent that, and with

such priority

 

                                      -27-

<PAGE>

 

as, the holders of the Notes may be entitled under applicable law, of an

equitable Lien on such property), except:

 

            (a) Liens for taxes, assessments or other governmental charges that

      are not yet due and payable or the payment of which is not at the time

      required by Section 9.4;

 

            (b) any attachment or judgment Lien, unless the judgment it secures

      shall constitute an Event of Default under Section 11(i);

 

            (c) Liens incidental to the conduct of business or the ownership of

      properties and assets (including landlords', carriers', warehousemen's,

      mechanics', materialmen's and other similar Liens for sums (1) which are

      not overdue for a period of more than 30 days or (2) are being contested

      on a timely basis in good faith and by appropriate proceedings) and Liens

      to secure the performance of bids, tenders, leases or trade contracts or

      to secure statutory obligations (including obligations under workers

      compensation, unemployment insurance and other social security

      legislation), surety or appeal bonds or other Liens incurred in the

      ordinary course of business and not in connection with the borrowing of

      money;

 

            (d) leases or subleases granted to others, easements, rights-of-way,

      restrictions and other similar charges or encumbrances, in each case

      incidental to the ownership of property or assets or the ordinary conduct

      of the business of an Obligor or any Restricted Subsidiary, and Liens

      incidental to minor survey exceptions and the like, provided that such

      Liens do not, in the aggregate, materially detract from the value of such

      property;

 

            (e) Liens securing Debt of a Restricted Subsidiary to an Obligor or

      to another Restricted Subsidiary or of an Obligor to another Obligor;

 

            (f) Liens existing on the Closing Date and reflected in Schedule

      10.4;

 

            (g) Liens incurred after the Closing Date given to secure the

       payment of the purchase price incurred in connection with the acquisition,

      construction or improvement of property (other than accounts receivable or

      inventory) useful and intended to be used in carrying on the business of

      an Obligor or a Restricted Subsidiary, including Liens existing on such

      property at the time of acquisition or construction thereof or improvement

      thereon or Liens incurred within 365 days of such acquisition or

      completion of such construction or improvement; provided that (1) the Lien

      shall attach solely to the property acquired, purchased, constructed or

      improved, (2) at the time of acquisition, construction or improvement of

      such property (or, in the case of any Lien incurred within 365 days of

      such acquisition or completion of such construction or improvement, at the

      time of the incurrence of the Debt secured by such Lien), the aggregate

      amount remaining unpaid on all Debt secured by Liens on such property,

      whether or not assumed by an Obligor or a Restricted Subsidiary, shall not

      exceed the lesser of (i) the cost of such acquisition, construction or

      improvement or (ii) the Fair Market Value at the time such property is

      acquired or constructed or improvement of such property is completed, as

      the case may be, (as determined in good faith by one or more officers of

      such Obligor or such

                                      -28-

<PAGE>

 

      Restricted Subsidiary to whom authority to enter into the transaction has

      been delegated by the board of directors of such Obligor or such

      Restricted Subsidiary), (3) the aggregate principal amount of all Debt

      secured by such Liens would be permitted by the limitation set forth in

      Section 10.1 if tested on the date of such action and not as of the end of

      the immediately preceding fiscal quarter and (4) at the time of such

      incurrence and after giving effect thereto, no Default or Event of Default

      shall have occurred and be continuing;

 

            (h) any Lien existing on property of a Person immediately prior to

      its being consolidated with or merged into an Obligor or a Restricted

      Subsidiary or its becoming a Subsidiary, or any Lien existing on any

      property acquired by any Obligor or any Restricted Subsidiary at the time

      such property is so acquired (whether or not the Debt secured thereby

      shall have been assumed); provided that (1) no such Lien shall have been

      created or as