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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended May 4, 1996
Commission File Number 1-11633
PAYLESS SHOESOURCE, INC.
(Exact name of registrant as specified in its charter)
Missouri 48-0674097
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3231 East Sixth Street, Topeka, Kansas 66607-2207
(Address of principal executive offices) (Zip Code)
(913) 233-5171
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and
(2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value
40,365,054 shares as of May 31, 1996
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Millions)
May 4, April 29, Feb. 3,
ASSETS 1996 1995 1996
- ------ -------- -------- --------
Current Assets:
Cash and marketable securities $ 92.3 $ 6.7 $ 4.6
Accounts receivable, net 5.9 4.0 4.4
Merchandise inventories 366.3 401.4 398.0
Other current assets 45.6 21.8 43.9
-------- -------- --------
Total Current Assets 510.1 433.9 450.9
Property and Equipment, at cost 865.1 864.7 868.5
Accumulated Depreciation (321.5) (281.0) (308.5)
-------- -------- --------
Net Property and Equipment 543.6 583.7 560.0
Other Assets 3.3 3.4 3.4
-------- -------- --------
Total Assets $1,057.0 $1,021.0 $1,014.3
======== ======== ========
LIABILITIES AND SHAREOWNER'S EQUITY
- -----------------------------------
Current Liabilities:
Current maturities of
capital lease obligations $ 1.3 $ 1.5 $ 1.2
Accounts payable 68.3 78.9 65.0
Accrued expenses 164.7 73.5 152.7
-------- -------- --------
Total Current Liabilities 234.3 153.9 218.9
Capital Lease Obligations 9.4 10.8 10.3
Deferred Income Taxes 8.9 9.2 8.9
Other Liabilities 23.3 22.4 23.3
Shareowner's Equity 781.1 824.7 752.9
-------- -------- --------
Total Liabilities and
Shareowner's Equity $1,057.0 $1,021.0 $1,014.3
======== ======== ========
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
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PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Millions, except per share) 13 Weeks Ended
---------------------
May 4, April 29,
1996 1995
--------- ---------
Net Retail Sales: $ 601.4 $ 569.6
Cost of sales $ 426.6 $ 403.6
Selling, general and
administrative expenses 134.2 121.8
Interest expense, net .3 .3
--------- ---------
Earnings from continuing operations
before income taxes 40.3 43.9
Provision for income taxes 16.1 17.4
--------- ---------
Net Earnings $ 24.2 $ 26.5
========= =========
Earnings per Share $ .60 $ .66
========= ==========
Shares Outstanding 40.4 40.4
========= ==========
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
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PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions) 13 Weeks Ended
---------------------
May 4, April 29,
1996 1995
--------- ---------
Operating Activities:
Net earnings $ 24.2 $ 26.5
Depreciation/amortization 23.3 23.1
Change in working capital (excluding
cash, marketable securities and
short-term debt) 43.9 (36.8)
--------- ---------
Total Operating Activities 91.4 12.8
--------- ---------
Investing Activities:
Net additions to property and equipment (6.8) (16.2)
--------- ---------
Total Investing Activities (6.8) (16.2)
--------- ---------
Financing Activities:
Net repayments of long-term debt (.9) (.8)
Net transactions with May 0 4.3
Issuances of common stock 4.0 (0)
--------- ---------
Total Financing Activities 3.1 3.5
--------- ---------
Increase in Cash
and Marketable Securities $ 87.7 $ .1
Cash and Marketable Securities,
Beginning of Quarter 4.6 6.6
Cash and Marketable Securities,
End of Period 92.3 6.7
========= =========
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
4
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PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Results. These unaudited condensed consolidated
financial statements of Payless ShoeSource, Inc. (the "Company")
have been prepared in the ordinary course of business for the
purpose of presenting information with respect to the Company's
quarter ending May 4, 1996. The Company believes that all
adjustments (none of which were other than normal recurring
accruals) necessary for a fair presentation of the financial
position and operating results for the interim period have been
made. However, certain items are included in these statements
based on estimates for the entire year. The condensed
consolidated financial statements should be read in conjunction
with the financial statements of the Company included in its Form
10 Registration Statement that became effective on April 15, 1996
(the "Form 10") and the MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES (pages
21-25) in the Form 10. The results of operations for the 13
weeks ended May 4, 1996 are not necessarily indicative of results
for the entire fiscal year ended February 1, 1997.
Note 2. Inventories. Merchandise inventories are stated on the
FIFO (First-In-First-Out) cost basis.
Note 3. Spin-Off. In January 1996, The May Department Stores
Company announced its intention to spin-off the Company. The
spin-off was completed effective May 4, 1996 as a tax-free
distribution to The May Department Stores Company shareowners.
The Company's financial statements presented herein reflect
operations on a stand-alone basis independent of The May
Department Stores Company.
As discussed in the Company's Form 10, the Company is incurring
special retention costs associated with the spin-off establishing
Payless as an independent company. Those costs totaled $6.1
million pre-tax in the 13 weeks ended May 4, 1996, with an
additional $3.9 million estimated to be incurred in the remainder
of the current fiscal year.
Note 4. Store Closings. During the first quarter, the Company
closed 115 stores. In May, the Company closed an additional 217
stores as part of its previously announced plan to close
underperforming stores. The projected cost of the store-closing
program was recorded as a charge to earnings in the fourth
quarter of 1995.
Note 5. Earnings Per Share. The Company's earnings per share
and outstanding shares were calculated based on the number of
Company shares issued and outstanding as of May 4, 1996, the date
of the spin-off from The May Department Stores Company.
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Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
A summary of key financial information for the periods indicated
is as follows:
May 4, April 29, Feb. 3,
1996 1995 1996
------ --------- -------
Current Ratio 2.2 2.8 2.1
Debt-Capitalization Ratio* 1.3% 1.5% 1.5%
Fixed Charge Coverage** 2.0x 3.4x 2.0x
* Debt-to-capitalization has been computed by dividing total
debt, which includes current maturities and long-term capital
lease obligations by capitalization, which includes current
maturities and long-term capital lease obligations, and non-
current deferred taxes. The debt-to-capitalization ratio,
including the present value of future minimum rental payments
under operating leases as debt and capitalization would be
52.9%, 50.9% and 54.1% for the periods referred to above.
** Fixed charge coverage, which is presented for the trailing 52
weeks in each period ended above, is defined as earnings
before gross interest expense, income taxes, and the interest
component of rent expense divided by gross interest expense
and the interest component of rent expense. All costs and
expenses of the Company relating to special retention costs
and the special non-recurring charge associated with the
spin-off are included in the above calculation. Excluding
these costs, the fixed charge coverage would be 2.8x, 3.4x
and 2.8x for the periods referred to above.
Company's fixed charge coverage ratio for the 52 weeks ended May
4, 1996 decreased as compared with the 52 week period ended April
29, 1995, due to an increase in rent associated with the
acquisition of the Kobacker locations that was completed in the
first quarter fiscal 1995.
The Company has in place a $200 million revolving credit facility
with a bank syndication group on which no borrowings were
outstanding at the end of the quarter.
Capital expenditures during the 1996 first quarter totaled $13.1
million with an additional $100 million estimated to be expended
in fiscal year 1996. The Company anticipates that cash flow from
operations and the credit facility will be sufficient to finance
projected capital expenditures.
The increase in cash of $87.7 million resulted from earnings
before depreciation/amortization of $47.5 and improved working
capital, primarily attributable to lower inventories.
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Results of Operations
Net retail sales represent the sales of stores operating during
the period. Sales percent increases are as follows:
Total Store-for-Store
----- ---------------
First Quarter 1996 5.6% 5.3%
First Quarter 1995 10.2% (4.6)%
Store-for-store sales represent sales of those stores open during
comparable periods.
The following table presents the components of costs and
expenses, as a percent of revenues, for the first quarter of 1996
and 1995.
1996 1995
----- -----
Cost of sales 70.9% 70.9%
Selling, general and
administrative expenses 22.3 21.3
Interest expense, net .1 .1
----- -----
Earnings before income taxes 6.7% 7.7%
===== =====
Effective income tax rate 39.9% 39.6%
===== =====
Net Earnings 4.0% 4.7%
===== =====
Cost of sales was $426.6 million in the 1996 first quarter, up
5.7% from $403.6 million in the 1995 first quarter. The overall
increase resulted from a 5.6% increase in sales. As a percent of
revenues, cost of sales remained constant between 1996 and 1995
at 70.9%.
Selling, general and administrative expenses were $134.2 million
in the 1996 first quarter, compared with $121.8 million in the
1995 first quarter, a 10.2% increase. The increase is related to
higher sales volume and a $6.1 million retention charge
associated with the spin-off. Selling, general and
administrative expenses, as a percent of revenues, increased 1.0%
for the first quarter of 1996 as compared with 1995. Excluding
the retention charge (as discussed in Note 3), selling, general
and administrative expenses, as a percent of revenues, decreased
by .1%.
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At the end of the first quarter, the Company operated 4,477
stores in 49 states, Puerto Rico and the U.S. Virgin Islands.
The following table presents the change in store count for the
first quarter of 1996 and 1995.
1996 1995
----- -----
Beginning of year 4,549 4,435
Stores opened 43 163
Stores closed (115) (29)
Ending store count 4,477 4,569
For further information see the First Quarter Press Release of
Sales and Earnings which is appended to this report as Exhibit
20.
8
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to
which registrant or any of its subsidiaries is a party or of
which any of their property is the subject.
Item 2 - Changes in Securities None.
Item 3 - Defaults Upon Senior Securities None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Copy of Restated Articles of Incorporation of the
Company
3.2 Copy of Amended and Restated Bylaws of the Company
10.1 Copy of Amended Tax Sharing Agreement dated as of
April 2, 1996, between the Company and The May
Department Stores Company.
10.2 Copy of Multicurrency Credit Agreement, dated as of
April 22, 1996, among the Company, several financial
institutions and Bank of America National Trust and
Savings Association.
10.3 Copy of Payless ShoeSource, Inc. Executive Incentive
Compensation Plan for Payless Executives, as
amended.
11 Computation of Net Earnings Per Share
20 Press Release of Sales and Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter
ended May 4, 1996.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PAYLESS SHOESOURCE, INC.
Date: 6/13/96 /s/ Steven J. Douglass
------------------- --------------------------------
Steven J. Douglass
Chairman and
Chief Executive Officer
Date: 6/13/96 /s/ Ullrich E. Porzig
------------------- --------------------------------
Ullrich E. Porzig
Senior Vice President and
Chief Financial Officer
10
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Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PAYLESS SHOESOURCE, INC.
Pursuant to the provisions of Section 351.106 of the Missouri General
and Business Corporation Law (the "GBCL"), the undersigned Corporation,
originally incorporated under the name Volume Distributors, Inc. on October 30,
1961, pursuant to a resolution adopted by its sole shareholder as of April 30,
1996, such shareholder owning 41,000,000 shares of the Corporation's Common
Stock, which represents all of the Corporation's issued and outstanding stock as
of the date hereof, hereby executes its Restated Articles of Incorporation.
These Restated Articles of Incorporation correctly set forth without
change the corresponding provisions of the Articles of Incorporation as
theretofore amended and restated, and these Restated Articles of Incorporation
supercede the original Articles of Incorporation and all amendments and
restatements thereto.
"FIRST -- The name of the corporation is Payless ShoeSource, Inc.
(the "Corporation").
"SECOND -- The Corporation's registered agent shall be CT Corporation
System at 906 Olive Street, St. Louis, Missouri, 63101.
"THIRD --
A. Classes and Number of Shares. The aggregate number of shares that
the Corporation shall have authority to issue is one hundred forty-five million
(145,000,000), consisting of one hundred twenty million (120,000,000) shares of
common stock, par value $.01 per share (the "Common Stock"), and twenty-five
million (25,000,000) shares of preferred stock, par value $.01 per share (the
"Preferred Stock").
B. Preemptive Rights. All preemptive rights are hereby denied, so
that none of the Common Stock, the Preferred Stock or any other security or
securities of the Corporation shall carry with it, and no holder or owner of any
Common Stock, Preferred Stock or any other security or securities of the
Corporation shall have, any preferential or preemptive right to acquire any
additional shares of Common Stock, Preferred Stock or any other security or
securities of the Corporation.
C. Cumulative Voting. All cumulative voting rights are hereby denied,
so that none of the Common Stock, the Preferred Stock or any other security or
securities of the Corporation shall carry with it, and no holder or owner of any
Common Stock, Preferred Stock or any other security of the Corporation shall
have any right to vote cumulatively in the election of directors or for any
other purpose.
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D. Preferred Stock. Shares of the Preferred Stock of the Corporation
may be issued from time to time in one or more classes or series, each of which
class or series shall have such distinctive designation or title as shall be
fixed by the Board of Directors of the Corporation (the "Board of Directors")
prior to the issuance of any shares thereof. Each such class or series of
Preferred Stock shall have such voting powers, full or limited, or no voting
powers, and such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be stated in such resolution or resolutions providing for the issue of
such class or series of Preferred Stock as may be adopted from time to time by
the Board of Directors prior to the issuance of any shares thereof pursuant to
the authority hereby expressly vested in it, all in accordance with the
requirements of the GBCL.
"FOURTH --
A. Number and Classification. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, consisting of not less than 3 nor more than 15 directors, the exact
number of directors to be determined from time to time by resolution adopted by
the affirmative vote of a majority of the entire Board of Directors. The number
of directors shall be fixed by, or in the manner provided in, the Bylaws of the
Corporation. Any changes in the number of directors shall be reported to the
Secretary of State of Missouri within thirty calendar days of such change, if
required by the GBCL. The Board of Directors shall be and is divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors, with the term of office of the
directors of one class expiring each year. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected; provided, however, the directors elected to
Class I as of May 4, 1996 shall serve for a term ending on the date of the
annual meeting next following the end of the calendar year 1996, the directors
elected to Class II as of May 4, 1996 shall serve for a term ending on the
date of the annual meeting next following the end of the calendar year 1997,
and the directors elected to Class III as of May 4, 1996 shall serve for a term
ending on the date of the annual meeting next following the end of the calendar
year 1998. Each director shall hold office until the annual meeting for the
year in which his term expires and until such director's successor shall be
elected and qualified, subject, however, to such director's earlier death,
resignation, disqualification or removal from office. In the event of any change
in the authorized number of directors, the Board of Directors shall apportion
any newly created directorships among, or reduce the number of directorships in,
such class or classes as shall, so far as possible, equalize the number of
directors in each class. Notwithstanding the foregoing, whenever the holders of
any one or more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series to elect directors at
an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of these Articles of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Article THIRD applicable thereto,
and such directors so elected shall not be divided into classes pursuant to this
Article FOURTH unless expressly provided by such terms.
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B. Vacancies. Any vacancy in the Board of Directors resulting from any
increase in the number of directors and any other vacancy occurring in the Board
of Directors may be filled by the Board of Directors acting by a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director, and any director so elected to fill a vacancy shall hold office until
the next election of directors by shareholders of the Corporation. In no event
shall a decrease in the number of directors shorten the term of any incumbent
director.
C. Removal of Directors. Subject to the rights, if any, of the holders
of shares of Preferred Stock then outstanding, at a meeting called expressly for
that purpose, any or all of the directors of the Corporation, may be removed
from the office at any time, but only for cause and only by the affirmative vote
of the holders of sixty-six and two-thirds percent (66-2/3%) of the outstanding
securities of the Corporation then entitled to vote generally in the election of
directors, considered for purposes of this Article FOURTH as one class. Whenever
the holders of the shares of any class are entitled to elect one or more
directors by the provisions of these Articles of Incorporation, the provisions
of this Article FOURTH shall apply in respect of the removal of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class and not to the vote of the holders of the outstanding shares as a
whole.
"FIFTH -- Elections of directors at an annual or special meeting of
shareholders shall be by written ballot unless the Bylaws of the Corporation
shall otherwise provide.
"SIXTH -- The Corporation shall have perpetual existence.
"SEVENTH -- The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the GBCL.
"EIGHTH -- The Bylaws of the Corporation may be amended, altered,
changed or rescinded only by a vote of sixty-six and two-thirds percent (66
2/3%) of the entire Board of Directors.
"NINTH -- Special meetings of the shareholders of the Corporation for
any purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of
shareholders of the Corporation may not be called by any other person or
persons.
"TENTH --
A. In addition to any affirmative vote required by the GBCL or these
Articles of Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in Section B of this Article TENTH, approval of any
Business Combination (as hereinafter defined) with an Interested Shareholder
shall require the affirmative vote of not less than a majority of the votes
entitled to be cast by the holders of all outstanding shares of Voting Stock (as
hereinafter defined) entitled to vote at a meeting of shareholders called for
such purpose, voting together as a single class, excluding Voting Stock
beneficially owned by any Interested Shareholder (as hereinafter defined) or any
Affiliate (as hereinafter defined) or Associate (as hereinafter defined) of such
Interested Shareholder. Such affirmative vote shall be required notwithstanding
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the fact that no vote may be required, or that a lesser percentage or separate
class vote may be specified, by the GBCL or in any agreement with any national
securities exchange or otherwise.
B. The provisions of Section A of this Article TENTH shall not be
applicable to any Business Combination involving an Interested Shareholder or an
Affiliate or Associate of an Interested Shareholder, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law, any other provision of the Articles of Incorporation of the Corporation,
the Bylaws of the Corporation or otherwise, if:
1. The Business Combination shall have been approved by the Board of
Directors of the Corporation prior to such Interested Shareholder's Stock
Acquisition Date (as hereinafter defined), or the purchase of stock made by such
Interested Shareholder on such Interested Shareholder's Stock Acquisition Date
had been approved by the Board of Directors of the Corporation prior to such
Interested Shareholder's Stock Acquisition Date; or
2. The Business Combination shall have been approved by the
affirmative vote of the holders of a majority of the outstanding Voting Stock
not beneficially owned by such Interested Shareholder or any Affiliate or
Associate of such Interested Shareholder at a meeting called for such purpose no
earlier than five years after such Interested Shareholder's Stock Acquisition
Date; or
3. All of the following conditions shall have been satisfied with
respect to the Business Combination:
(a) The aggregate amount of the cash and the Market Value (as
hereinafter defined) as of the Consummation Date (as hereinafter defined) of
consideration other than cash to be received per share by holders of outstanding
shares of Common Stock of the Corporation in such Business Combination is at
least equal to the higher of the following:
(1) The highest per share price paid by such Interested
Shareholder at a time when he was the Beneficial Owner (as hereinafter
defined), directly or indirectly, of five percent or more of the
outstanding Voting Stock of the Corporation, for any shares of Common Stock
of the same class or series acquired by it within the five-year period
immediately prior to the Announcement Date (as hereinafter defined) with
respect to such Business Combination, or within the five-year period
immediately prior to, or in, the transaction in which such Interested
Shareholder became an Interested Shareholder, whichever is higher; plus, in
either case, interest compounded annually from the earliest date on which
such highest per share acquisition price was paid through the Consummation
Date at the rate for one-year United States treasury obligations from time
to time in effect; less the aggregate amount of any cash dividends paid,
and the Market Value of any dividends paid other than in cash, per share of
Common Stock since such earliest date, up to the amount of such interest;
and
(2) The Market Value per share of Common Stock on the Announcement
Date with respect to such Business Combination or on such Interested
Shareholder's Stock Acquisition Date, whichever is higher; plus interest
compounded annually from such date through the Consummation Date at the
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rate for one-year United States treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid, and the
Market Value of any dividends paid other than in cash, per share of Common
Stock since such date, up to the amount of such interest;
(b) The aggregate amount of the cash and the Market Value as of the
Consummation Date of consideration other than cash to be received per share by
holders of outstanding shares of any class or series of stock, other than Common
Stock, of the Corporation is at least equal to the highest of the following,
whether or not such Interested Shareholder has previously acquired any shares of
such class or series of stock:
(1) The highest per share price paid by such Interested
Shareholder at a time when he was the Beneficial Owner, directly or
indirectly, of five percent or more of the outstanding Voting Stock of the
Corporation, for any shares of such class or series of stock acquired by
him within the five-year period immediately prior to the Announcement Date
with respect to such Business Combination, or within the five-year period
immediately prior to, or in, the transaction in which such Interested
Shareholder became an Interested Shareholder, whichever is higher; plus, in
either case, interest compounded annually from the earliest date on which
such highest per share acquisition price was paid through the Consummation
Date at the rate for one-year United States treasury obligations from time
to time in effect; less the aggregate amount of any cash dividends paid,
and the Market Value of any dividends paid other than in cash, per share of
such class or series of stock since such earliest date, up to the amount of
such interest;
(2) The highest preferential amount per share to which the holders
of shares of such class or series of stock are entitled in the event of any
voluntary liquidation, dissolution or winding up of the Corporation, plus
the aggregate amount of any dividends declared or due as to which such
holders are entitled prior to payment of dividends on some other class or
series of stock, unless the aggregate amount of such dividends is included
in such preferential amount; and
(3) The Market Value per share of such class or series of stock on
the Announcement Date with respect to such Business Combination or on such
Interested Shareholder's Stock Acquisition Date, whichever is higher; plus
interest compounded annually from such date through the Consummation Date
at the rate for one-year United States treasury obligations from time to
time in effect; less the aggregate amount of any cash dividends paid, and
the Market Value of any dividends paid other than in cash, per share of
such class or series of stock since such date, up to the amount of such
interest;
(c) The consideration to be received by holders of a particular class
or series of outstanding stock, including Common Stock, of the Corporation in
such Business Combination is in cash or in the same form as the Interested
Shareholder has used to acquire the largest number of shares of such class or
series of stock previously acquired by it, and such consideration shall be
distributed promptly;
(d) The holders of all outstanding shares of stock of the Corporation
not beneficially owned by such Interested Shareholder immediately prior to the
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Consummation Date are entitled to receive in such Business Combination cash or
other consideration for such shares in compliance with paragraphs (a), (b) and
(c) of this Section;
(e) After such Interested Shareholder's Stock Acquisition Date and
prior to the Consummation Date with respect to such Business Combination, such
Interested Shareholder has not become the Beneficial Owner of any additional
shares of Voting Stock of the Corporation except (i) as part of the transaction
which resulted in such Interested Shareholder becoming an Interested
Shareholder, (ii) by virtue of proportionate stock splits, stock dividends or
other distributions of stock in respect of stock not constituting a Business
Combination under Paragraph (1)(e) of Section C of this Article TENTH, (iii)
through a Business Combination meeting all of the conditions of this Section B,
or (iv) through purchase by such Interested Shareholder at any price which, if
such price had been paid in an otherwise permissible Business Combination the
Announcement Date and Consummation Date of which were the date of such purchase,
would have satisfied the requirements of paragraphs (a), (b), and (c) of this
Section.
C. For purposes of this Article TENTH:
1. The term "Business Combination" shall mean:
(a) Any merger or consolidation of the Corporation or any subsidiary
of the Corporation with an Interested Shareholder or any other corporation,
whether or not itself an Interested Shareholder of the Corporation, which is, or
after such merger or consolidation would be, an Affiliate or Associate of such
Interested Shareholder;
(b) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions to or with an
Interested Shareholder or any Affiliate or Associate of such Interested
Shareholder, of assets of the Corporation or any subsidiary of the Corporation
having an aggregate Market Value equal to ten percent or more of the aggregate
Market Value of all the assets, determined on a consolidated basis, of the
Corporation, having an aggregate Market Value equal to ten percent or more of
the aggregate Market Value of all the outstanding stock of the Corporation, or
representing ten percent or more of the earning power or net income, determined
on a consolidated basis, of the Corporation;
(c) The issuance or transfer by the Corporation or any subsidiary of
the Corporation, in one transaction or a series of transactions, of any stock of
the Corporation or any subsidiary of the Corporation which has an aggregate
Market Value equal to five percent or more of the aggregate Market Value of all
the outstanding stock of the Corporation to an Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder except pursuant to the
exercise of warrants or rights to purchase stock offered, or a dividend or
distribution paid or made, pro rata to all shareholders of the Corporation;
(d) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by, or pursuant to any agreement,
arrangement or understanding, whether or not in writing, with an Interested
Shareholder or any Affiliate or Associate of such Interested Shareholder;
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(e) Any reclassification of securities, including, without limitation,
any stock split, stock dividend, or other distributions of stock in respect of
stock, or any reverse stock split, or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any subsidiary of the
Corporation, or any other transaction, whether or not with or into or otherwise
involving an Interested Shareholder, proposed by, or pursuant to any agreement,
arrangement or understanding, whether or not in writing, with such Interested
Shareholder or any Affiliate or Associate of such Interested Shareholder, which
has the effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class or series of Voting Stock or securities
convertible into Voting Stock of the Corporation or any subsidiary of the
Corporation which is directly or indirectly owned by such Interested Shareholder
or any Affiliate or Associate of such Interested Shareholder, except as a result
of immaterial changes due to fractional share adjustments; or
(f) Any receipt by an Interested Shareholder or any Affiliate or
Associate of such Interested Shareholder of the benefit, directly or indirectly,
except proportionately as a shareholder of the Corporation, of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by or through the Corporation.
2. The term "Voting Stock" shall mean all shares of capital stock of
the Corporation entitled to vote generally in the election of directors.
3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of capital stock.
4. The term "Interested Shareholder" shall mean any person who:
(a) Is the Beneficial Owner, directly or indirectly, of twenty percent
(20%) or more of the outstanding Voting Stock of the Corporation; or
(b) Is an Affiliate or Associate of the Corporation and at any time
within the five-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of twenty percent (20%) or more of the
then outstanding Voting Stock of the Corporation; provided that, for the purpose
of determining whether a person is an Interested Shareholder, the number of
shares of Voting Stock of the Corporation deemed to be outstanding shall include
shares deemed to be beneficially owned by the person but shall not include any
other unissued shares of Voting Stock of the Corporation which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(c) Interested Shareholders shall not include the Corporation, any
subsidiary, any profit-sharing, employee stock ownership or other employee
benefit plan of the Corporation or any subsidiary or any trustee of or fiduciary
with respect to any such plan when acting in such capacity, which as of the date
hereof is the Beneficial Owner of Common Stock representing more than twenty
percent (20%) of the votes entitled to be cast by holders of all of the shares
of Voting Stock outstanding on the date hereof.
5. The term "Beneficial Owner" of any capital stock means a person
who:
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(a) Individually or with or through any of its Affiliates or
Associates, beneficially owns such stock, directly or indirectly; or
(b) Individually or with or through any of its Affiliates or
Associates, has the right to acquire such stock, whether such right is
exercisable immediately or only after the passage of time, pursuant to any
agreement, arrangement or understanding, whether or not in writing, or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the Beneficial
Owner of stock tendered pursuant to a tender or exchange offer made by such
person or any of such person's Affiliates or Associates until such tendered
stock is accepted for purchase or exchange; or the right to vote such stock
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a person shall not be deemed the Beneficial
Owner of any stock under this item if the agreement, arrangement or
understanding to vote such stock arises solely from a revocable proxy or consent
given in response to a proxy or consent solicitation made in accordance with the
applicable rules and regulations under the Securities Exchange Act of 1934
(the "Exchange Act") and is not then reportable on a Schedule 13D under the
Exchange Act, or any comparable or successor report; or
(c) Has any agreement, arrangement or understanding, whether or not in
writing, for the purpose of acquiring, holding, voting, except voting pursuant
to a revocable proxy or consent as described in paragraph (b) of this
subsection, or disposing of such stock with any other person that beneficially
owns or whose Affiliates or Associates beneficially own, directly or indirectly,
such stock.
6. The term "Affiliate" shall mean a person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, a specified person.
7. The term "Associate," when used to indicate a relationship with any
person, means any corporation or organization of which such person is an officer
or partner or is, directly or indirectly, the Beneficial Owner of ten percent or
more of any class of Voting Stock, any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, and any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person.
8. The term "Consummation Date," with respect to any Business
Combination, means the date of consummation of such Business Combination, or, in
the case of a Business Combination as to which a shareholder vote is taken, the
later of the business day prior to the vote or 20 days prior to the date of
consummation of such Business Combination;
9. The term "control," including the terms "controlling," "controlled
by" and "under common control with," shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting stock, by
contract, or otherwise. A person's beneficial ownership of ten percent or more
of a corporation's outstanding Voting Stock shall create a presumption that such
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person has control of such corporation. Notwithstanding the foregoing, a person
shall not be deemed to have control of a corporation if such person holds Voting
Stock, in good faith and not for the purpose of circumventing this Section, as
an agent, bank, broker, nominee, custodian or trustee for one or more Beneficial
Owners who do not individually or as a group have control of such corporation.
10. The term "stock" means:
(a) Any stock or similar security, any certificate of interest, any
participation in any profit sharing agreement, any voting trust certificate, or
any certificate of deposit for stock; and
(b) Any security convertible, with or without consideration, into
stock, or any warrant, call or other option or privilege of buying stock without
being bound to do so, or any other security carrying any right to acquire,
subscribe to or purchase stock;
11. The term "Stock Acquisition Date," with respect to any person and
the Corporation, means the date that such person first becomes an Interested
Shareholder of the Corporation.
12. The term "Market Value" means:
(a) In the case of stock, the highest closing sale price during the
thirty-day period immediately preceding the date in question of a share of such
stock on the composite tape for New York Stock Exchange listed stocks, or, if
such stock is not quoted on such composite tape or if such stock is not listed
on such exchange, on the principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the thirty-day period preceding the date in question
on the National Association of Securities Dealers, Inc., Automated Quotations
System or any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as determined
by the Board of Directors of the Corporation in good faith; and
(b) In the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the Board of
Directors of the Corporation in good faith.
13. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
Paragraphs (3)(a) and (3)(b) of Section B of this Article TENTH shall include
the shares of Common Stock and/or the shares of any other class or series of
capital stock retained by the holders of such shares.
14. The term "Announcement Date" when used in reference to any
Business Combination, means the date of the first public announcement of the
final, definitive proposal for such Business Combination.
D. The fact that any Business Combination complies with the provisions
of Section B of this Article TENTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
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or approval to the shareholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
"ELEVENTH --
A. Indemnification of Officers, Directors and Others. The Corporation
shall indemnify to the fullest extent authorized or permitted by law (as now or
hereafter in effect) any person made, or threatened to be made, a party to or
otherwise involved in any action or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Corporation or by reason of the fact that such
director or officer, at the request of the Corporation, is or was serving any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, in any capacity. Nothing contained herein shall affect any
rights to indemnification to which employees other than directors and officers
may be entitled by law. No amendment or repeal of this Article ELEVENTH shall
apply to or have any effect on any right to indemnification provided hereunder
with respect to any acts or omissions occurring prior to such amendment or
repeal.
B. Insurance, Indemnification Agreements and Other Matters. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of the law. The Corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation, letters
of credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing for indemnification to the fullest extent authorized or
permitted by law and including as part thereof any or all of the foregoing, to
ensure the payment of such sums as may become necessary to effect full
indemnification.
C. Nonexclusivity. The rights to indemnification conferred in this
Article ELEVENTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, these Articles of Incorporation of
the Corporation, or the Bylaws or any agreement, vote of shareholders or
directors or otherwise.
"TWELFTH -- The Corporation reserves the right at any time and from
time to time to make, amend, alter, change or rescind any provision contained in
these Articles of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon shareholders herein are granted subject
to this reservation.
"THIRTEENTH -- Notwithstanding the fact that a lesser percentage may
be specified by the GBCL, these Articles of Incorporation or the Bylaws of the
Corporation, any proposal to amend, repeal or adopt any provision of these
Articles of Incorporation shall require the affirmative vote of the holders of
not less than a majority of the outstanding shares of stock of the Corporation
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entitled to vote thereon, provided, however, any proposal to amend, repeal or
adopt any provision of these Articles of Incorporation which is not recommended
by the affirmative vote of a majority of the entire Board of Directors shall
require the affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the outstanding shares of stock of the
Corporation entitled to vote thereon.
"FOURTEENTH -- The names of the original incorporators listed in the
Restated Articles of Incorporation filed with the Missouri Secretary of State on
April 15, 1981 are Roger A. Lagenheim, L. Theodore Reinoehl and James L. Viani.
IN WITNESS WHEREOF, the undersigned, Jan R. Kniffen, vice president, and
John M. Manos, assistant secretary, of Payless ShoeSource, Inc., have executed
these Restated Articles of Incorporation and have affixed the corporate seal of
Payless ShoeSource, Inc. hereto and attested said seal on the 30th day of April,
1996.
PAYLESS SHOESOURCE, INC.
/s/ Jan R. Kniffen
-----------------------------------
Jan R. Kniffen
Vice President
/s/ John M. Manos
-----------------------------------
John M. Manos
Assistant Secretary
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
I, Sarah Jane Westover, a Notary Public, do hereby certify that on this
30th day of April, 1996, personally appeared before me Jan R. Kniffen and John
M. Manos who, being by me first duly sworn, declared that they are Vice
President and Assistant Secretary, respectively, of Payless ShoeSource, Inc.,
that they signed the foregoing document as Vice President and Assistant
Secretary, respectively, of Payless ShoeSource, Inc., and that the statements
therein contained are true.
/s/ Sarah Jane Westover
-----------------------------------
Sarah Jane Westover
Notary Public
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
PAYLESS SHOESOURCE, INC.
ARTICLE I
OFFICES
-------
Section 1. The registered office of the Corporation shall be in the
City of St. Louis, State of Missouri, or at such other place within the State of
Missouri as the Board of Directors may at any time and from time to time
designate.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Missouri as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. All meetings of the shareholders shall be held either
within or without the State of Missouri as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. The annual meeting of shareholders shall be held at such
place within or without the State of Missouri, at such hour and on such date,
not earlier than May 1 and not later than July 10 in each year as the Board of
Directors may specify in the call of such meeting, at which such meeting the
shareholders shall elect by a plurality vote a Board of Directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Except as otherwise required by law, written notice of the
annual meeting stating the place, date and hour of the meeting shall be given by
mail, postage prepaid, not less than ten or more than seventy days before the
date of the meeting, to each shareholder entitled to vote at such meeting at
such address as shall appear on the books of the Corporation.
Section 4. The Secretary of the Corporation shall prepare and make, at
least ten days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder. Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.
<PAGE>
Section 5. Special meetings of the shareholders, for any purpose or
purposes, may be called by the Board of Directors, the Chairman of the Board of
Directors, or the President. Special meetings of shareholders may not be called
by any other person or persons. The business transacted at a special meeting of
shareholders shall be confined to the purpose or purposes specified in the
notice therefor.
Section 6. Except as otherwise required by law, written notice of a
special meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be given by mail, postage
prepaid, not less than ten nor more than seventy days before the date of the
meeting, to each shareholder entitled to vote at such meeting at such address as
shall appear on the books of the Corporation.
Section 7. The holders of a majority of the stock issued and
outstanding and entitled to vote at any meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by law
or by the Articles of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy even though
less than a quorum, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally called. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section 8. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of law or the
Articles of Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 9. Except as otherwise provided by the Articles of
Incorporation, each shareholder of record shall at every meeting of the
shareholders be entitled to one vote for each share of capital stock of the
Corporation entitled to vote thereat held by such shareholder. Such votes may be
cast in person or by proxy, but no proxy shall be voted on or after three years
from its date, unless the proxy provides for a longer period. The Board of
Directors shall prescribe the rules and regulations for voting at all meetings
of the shareholders; provided, however, the vote for the election of directors,
and upon the direction of the presiding officer of the meeting, the vote on any
other question before the meeting, shall be by written ballot.
Section 10. Except as otherwise provided by the Articles of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of shareholders may be taken without a meeting of the
shareholders only if consents in writing, setting forth the action so taken, are
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
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Section 11. To be properly brought before the annual or any special
shareholders' meeting, business must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before the annual or any special
shareholders' meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 75 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 90 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and record address of the shareholder proposing such business,
(iii) the class and number of shares of common stock of the Corporation which
are beneficially owned by the shareholder and (iv) any material interest of the
shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual or any special meeting except in accordance
with the procedures set forth in this Section 11, provided, however, that
nothing in this Section 11 shall be deemed to preclude discussion by any
shareholder of any business properly brought before the meeting.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 11, and if he should so
determine and declare, any such business not properly brought before the meeting
shall not be transacted.
Section 12. Except as provided in Section 3 of Article III, only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the Corporation at the annual meeting may be made at the
meeting by or at the direction of the Board of Directors, by any nominating
committee or person appointed by the Board of Directors or by any shareholder of
the Corporation entitled to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Section 12. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the secretary
of the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 75 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 90 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, which first occurs.
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Such shareholder's notice to the secretary shall set forth (a) as to each person
whom the shareholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence of the person, (ii)
the principal occupation or employment of the person, (iii) the class and number
of shares of common stock of the Corporation which are beneficially owned by the
person, and (iv) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of directors pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b)
as to the shareholder giving the notice (i) the name and record address of the
shareholder and (ii) the class and number of shares of common stock of the
Corporation which are beneficially owned by the shareholder. Such notice shall
be accompanied by the executed consent of each nominee to serve as a director if
so elected. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine and declare, the defective
nomination shall be disregarded.
ARTICLE III
DIRECTORS
---------
Section 1. Except as otherwise required by law or the Articles of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
Section 2. The number of directors of the Corporation shall be fixed
in the manner provided in the Articles of Incorporation. Except as otherwise
provided in Section 3 of this Article III, the directors of the Corporation
shall be elected by the shareholders of the Corporation, and at each such
election the nominees receiving the greatest number of votes, up to the number
of directors then to be elected, shall be the persons then elected.
Section 3. Except as otherwise required by the Articles of
Incorporation, any vacancy in the Board of Directors resulting from any increase
in the number of directors and any other vacancy occurring in the Board of
Directors may be filled by the Board of Directors acting by a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director, and any director so elected to fill a vacancy shall hold office until
such director's successor is duly elected and qualified (subject, however, to
such director's earlier death, resignation, disqualification or removal from
office) for a term that shall coincide with the term of the class to which such
director shall have been elected. In no event shall a decrease in the number of
directors shorten the term of any incumbent director.
Section 4. The Board of Directors may hold its meetings, both regular
and special, and cause the books of the Corporation to be kept, either within or
without the State of Missouri at such place or places as they may from time to
time determine.
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Section 5. Subject to Section 8 of this Article III there shall be an
annual meeting of the Board of Directors on the day of the annual meeting of
shareholders in each year or as soon thereafter as convenient, such annual
meeting to be at such place and time (and, if applicable, on such date) as the
Chairman of the Board or the Chief Executive Officer shall designate by written
notice to the directors, and regular meetings shall be held on such dates and at
such times and places either as the directors shall by resolution provide or as
the Chairman of the Board or the Chief Executive Officer shall designate by
written notice to the directors. Except as above provided, no notice of said
annual meeting or such regular meetings of the Board of Directors need be given.
Section 6. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the Chief Executive Officer, the President, the
Secretary or the Treasurer and shall be called by one of the foregoing officers
on the written request of a majority of the entire Board of Directors specifying
the object or objects of such special meeting. In the event that one of the
foregoing officers shall fail to call a meeting within two days after receipt of
such request, such meeting may be called in like manner by the directors making
such request. Notice of each special meeting shall be deposited in the regular
or overnight mail, sent by telecopy, telegram or delivered by hand to each
director not later than the day preceding the date of such meeting, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 7. At all meetings of the Board of Directors a majority of the
entire Board of Directors in office at the time shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law, the Articles
of Incorporation or by these Bylaws. If a quorum, shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 8. Except as otherwise required by the Articles of
Incorporation or these Bylaws, any action required or permitted to be taken by
the Board of Directors at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 9. Any one or more members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time. Participation in a meeting
pursuant to this Section 9 shall constitute presence in person at such meeting.
Section 10. The Board of Directors may, by resolution passed by a
majority of the entire Board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent allowed by law and as provided in the resolution,
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shall have and may exercise all of the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board
of Directors.
Section 11. Each committee of the Board shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 12. Directors and members of committees may receive such
compensation for their services, and such reimbursement of expenses, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 13. No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose
if (a) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of Directors
or the committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
Section 14. As used in these Bylaws generally, the term "entire Board
of Directors" means the total number of directors which the Corporation would
have if there were no vacancies.
ARTICLE IV
NOTICES
-------
Section 1. Whenever written notice is required by law, the Articles of
Incorporation or these Bylaws, to be given to any director, committee member or
shareholder, such requirement shall not be construed to mean personal notice,
but such notice may be given in writing, by mail addressed to such director,
committee member or shareholder, at his address as it appears on the records of
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the Corporation, with postage thereon prepaid and such notice shall be deemed to
be given at the time when the same shall be deposited in the United States mail.
Written notice may also be given personally or by telecopy, telegram, telex or
cable or by overnight mail. An affidavit of the Secretary or an Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Whenever any notice is required by law, the Articles of
Incorporation or these Bylaws, to be given to any director, committee member or
shareholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
--------
Section 1. The officers of the Corporation shall be elected by the
Board of Directors and shall consist of the Chairman of the Board, a President,
one or more Vice Presidents, a Secretary, and a Treasurer, and such other
officers, including, without limitation, one or more Executive Vice Presidents,
one or more Senior Vice Presidents, one or more Assistant Secretaries and one or
more Assistant Treasurers, as the Board of Directors may deem necessary and
proper. Any two or more of such offices, exempting the office of President and
Secretary, may be held by the same person, but no officer shall execute,
acknowledge, or verify any instrument on behalf of the Corporation in more than
one capacity.
Section 2. The Board of Directors, at its first meeting held after
each annual meeting of shareholders, shall elect the officers of the
Corporation, who shall be subject to the control of the Board of Directors and
shall have such duties in the management of the Corporation as may be provided
by appropriate resolution of the Board of Directors and/or provided in these
Bylaws.
Section 3. The Board of Directors may determine or provide the method
of determining the compensation of all officers.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualify, or until their earlier resignation or
removal. Any officer elected or appointed by the Board of Directors may be
removed at any time by the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors.
Section 5. Each officer of the Corporation shall be subject to the
control of the Board of Directors and shall have such duties in the management
of the Corporation as may be provided by appropriate resolution of the Board of
Directors and/or provided in these Bylaws.
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Section 6. Powers of attorney, proxies, waivers of notice of meeting,
consents and other instruments relating to securities owned by the corporation
may be executed in the name of and on behalf of the Corporation by the President
or any Vice President and any such officer may, in the name of and on behalf of
the Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any corporation
in which the Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from time to time confer like powers upon any other person or persons.
Section 7. Any officer, if required by the Board of Directors, shall
give bond in such sum and with such security as the Board of Directors may
require for the faithful performance of duties.
Section 8. In the case of the absence of any officer of the
Corporation, or for any other reason that the Board may deem sufficient, the
Board of Directors may delegate the powers or duties of such officer to any
other officer or to any other director, or to any other person for the time
being.
ARTICLE VI
CERTIFICATES OF STOCK
---------------------
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate signed in the name of the Corporation by the Chairman of
the Board, the President or a Vice-President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Such certificate shall
certify the number of shares owned by such holder in the Corporation.
Section 2. Where a certificate is countersigned by (i) a transfer
agent other than the Corporation or its employee, or (ii) a registrar other than
the Corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issuance of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as the Board of
Directors shall require and/or to give the Corporation a bond in such sum as it
may direct and with such surety as it may approve, as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
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Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than seventy days before the date of such meeting, nor
more than seventy days prior to any other action; provided, however that if the
Board of Directors does not set a record date for the determination of the
shareholders entitled to notice of, and to vote at, a meeting of shareholders,
only the shareholders of record at the close of business on the twentieth day
preceding the date of the meeting shall be entitled to notice of, and to vote
at, the meeting and any adjournment of the meeting. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting. Pursuant
to law, dividends may be paid in cash, in property, or in shares of the capital
stock.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors may from time to time, in their absolute discretion, deem proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the directors may modify or abolish any such reserve in the manner
in which it was created.
Section 3. All checks or demands for money and all notes and other
obligations of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may at any time and from
time to time designate.
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Section 4. The fiscal year of the Corporation shall end on the
Saturday closest to the 31st day of January in each year.
Section 5. The corporate seal shall consist of the words "PAYLESS
SHOESOURCE, INC. MISSOURI" arranged in a circular form around the words and
figures "Corporate Seal 1961" and shall be kept by the Secretary. The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
----------
These Bylaws may be amended, altered, changed or rescinded, in whole
or in part, or new Bylaws may be adopted, in the manner provided in the Articles
of Incorporation.
The substance of such amendment, alteration, change, rescission or
adoption or the subject matter thereof shall be submitted in writing at a
preceding meeting of the Board of Directors or notice thereof shall be given to
the directors at least ten days before; waiver of notice by any director being
deemed equivalent to such notice to him.
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<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
TAX SHARING AGREEMENT
This AMENDED AND RESTATED TAX SHARING AGREEMENT (the "Agreement"),
dated as of April 2, 1996, is entered into by THE MAY DEPARTMENT STORES COMPANY,
a New York corporation ("May"), and PAYLESS SHOESOURCE, INC., a Missouri
corporation ("Payless"), and shall be deemed effective as of May 4, 1996.
RECITALS
On January 17, 1996, May announced its plans to divest itself of its
discount shoe store operations. To this end, May intends to distribute pro rata
on the Distribution Date (as hereinafter defined) the Payless common stock then
owned by May to the owners of May common stock. After the Distribution Date, May
will own no shares of Payless' common stock.
The purpose of this Agreement is to set forth the agreement between
May and Payless with respect to the Federal, state, local and foreign taxes
attributable to each of them and their subsidiaries for all taxable periods
beginning on or before the Distribution Date, and replaces the Tax Sharing
Agreement previously executed by the parties as of the date and year first
written above. This Agreement also provides certain indemnity obligations
between the parties hereto if the actions of either party or its shareowners
have an adverse effect on the tax-free nature of the distribution described
above and consequently the tax liability of the other party.
NOW THEREFORE, in consideration of the mutual agreements of the
parties hereto, and further good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
Article I
DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
(a) "Adjustment" shall mean any final change in any pre-Distribution
Tax Item of any member of the May Affiliated Group initiated or agreed to
by the IRS.
(b) "Affiliated Group" shall mean an affiliated group of corporations
within the meaning of Code section 1504(a) for the taxable period in
question.
(c) "Carryback Item" shall mean any net operating loss, net capital
loss, unused general business tax credit or any other Tax Item of the
Payless Affiliated Group which under the Code or any other applicable
Income Tax law can be used to generate a Tax Benefit for the May Affiliated
Group.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
and in effect for the taxable period in question.
(e) "Deferred Taxes" shall mean the tax effect of differences arising
from the recognition of revenue and expense in different periods for tax
and financial statement purposes.
<PAGE>
(f) "Deferred Tax Liabilities" shall mean the net liability for
Deferred Taxes for all taxable periods beginning on or before the
Distribution Date.
(g) "Distribution" shall mean the pro rata distribution by May of the
ownership of the stock of Payless to owners of May common stock as of the
close of business on the record date for such distribution.
(h) "Distribution Date" shall mean the date on which the Distribution
occurs. For all purposes, the Distribution shall be effective as of the
close of business on the Distribution Date.
(i) "Event of Loss" shall mean the incurrence by the May Affiliated
Group of any liability for Income Tax as a result of the Distribution.
(j) "Final Determination" shall mean the final resolution of any tax
liability (including all related interest and penalties) in respect of any
Adjustment for a taxable period. A Final Determination shall result from
the first to occur of:
(i) the expiration of 30 days after IRS acceptance of a Waiver of
Restrictions (or partial Waiver of Restrictions) on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment on
Federal Revenue Form 870 or 870-AD, except as to reserved matters
specified therein (or any successor comparable form or the expiration
of a comparable agreement or form under the laws of other
jurisdictions);
(ii) a decision, judgment, decree, or other order by a court of
competent jurisdiction that is (x) not subject to further judicial
review (by appeal or otherwise) or (y) subject to further judicial
review but with respect to which May notifies Payless, in good faith
and in its sole discretion that it has determined not to appeal;
(iii) the execution of a closing agreement under section 7121 of
the Code or the acceptance by the IRS or its counsel of an offer in
compromise under section 7122 of the Code, or comparable agreements
under the laws of other jurisdictions, except as to reserved matters
specified therein;
(iv) the expiration of the time for filing a claim for refund or
for instituting suit in respect of a claim for refund disallowed in
whole or part by the IRS;
(v) any other final disposition of the tax
liability for such period by reason of the expiration
of the applicable statute of limitations; or
(vi) any other event that the parties agree is a final and
irrevocable determination of the liability at issue.
(k) "Income Tax or Taxes" shall mean all Federal, state and local, and
foreign taxes imposed upon, or measured by, income, including, without
limitation, environmental and alternative or add-on minimum taxes, and such
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related franchise, excise and similar taxes as have been customarily
included in the provision for income taxes on May's financial statements,
together with all related interest, penalties and additions to tax.
(l) "IRS" shall mean the United States Internal Revenue Service or any
successor thereto, including, but not limited to, its agents,
representatives, and attorneys.
(m) "May Affiliated Group" shall mean, for each taxable period, the
Affiliated Group of which May or any successor of May is a member or the
common parent, as defined in Code Section 1504(a).
(n) "May Group" shall mean, with respect to any taxable period, the
corporations that were members of the May Affiliated Group during such
period, exclusive of the corporations that are included in the Payless
Affiliated Group immediately after the Distribution Date.
(o) "Other Taxes" shall mean any gross income, gross receipts, sales,
use, ad valorem, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits
tax, custom, duty or other charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by
any governmental authority responsible for the imposition of any such tax.
(p) "Payless Affiliated Group" shall mean, for each taxable period
beginning after the Distribution Date, the Affiliated Group of which
Payless or any successor of Payless is a member or the common parent, as
defined in Code section 1504(a).
(q) "Payless Assets" shall mean all of the assets held by the members
of the Payless Affiliated Group immediately after the Distribution.
(r) "Payless Group" shall mean, with respect to any taxable period,
the corporations that were members of the May Affiliated Group and that are
members of the Payless Affiliated Group immediately after the Distribution
Date.
(s) "Return" shall mean any return, report, information return,
officer report or filing or other document (including, without limitation,
estimated returns and related or supporting information) in respect of
Income Taxes or Other Taxes, as the case may be.
(t) "Stub Period" shall mean the taxable period (or portion
thereof)that begins on February 4, 1996 and ends on the Distribution Date.
(u) "Tax Benefit" shall mean a reduction in the Income Tax liability
of a corporation (or of the Affiliated Group of which it is a member) for
any taxable period that arises, or may arise in the future, as a result of
any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Income Tax liability of the taxpayer (or the Affiliated
Group of which it is a member).
(v) "Tax Detriment" shall mean an increase in the Income Tax liability
of a corporation (or of the Affiliated Group of which it is a member) for
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<PAGE>
any taxable period that arises, or may arise in the future, as a result of
any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Income Tax liability of the taxpayer (or the Affiliated
Group of which it is a member).
(w) "Taxes" shall mean Income Taxes and Other Taxes.
(x) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable.
Article II
FILING OF TAX RETURNS
Section 2.1. Pre-Distribution Tax Returns. (a) May shall file all
consolidated Federal Income Tax Returns and all state and local Income Tax
Returns required to be filed on a combined, consolidated or unitary basis for
each member of the May Affiliated Group that are required to be filed for the
taxable year ending February 3, 1996 and for the taxable year that begins on
February 4, 1996 and ends on or after the Distribution Date. Payless
acknowledges that Treas. Reg. sec. 1.1502-77(a) confers certain authority on
May, as the common parent of the May Affiliated Group, with respect to Federal
Income Tax matters for all taxable periods beginning on or before the
Distribution Date and agrees to enter into any election or consent reasonably
requested by May with respect to such matters for such taxable years.
(b) May shall file all foreign Income Tax Returns and all state and
local Income Tax Returns for each member of the Payless Group not required to be
included in a combined, consolidated or unitary state and local Income Tax
Return of the May Affiliated Group for the taxable period ending February 3,
1996 and for the taxable period that begins on February 4, 1996 and ends on or
before the Distribution Date. Payless shall file all foreign Income Tax Returns
and all state and local Income Tax Returns for each member of the Payless Group
not required to be included in a combined, consolidated or unitary state and
local Income Tax Return of the May Affiliated Group for the taxable period (if
any) that begins on February 4, 1996 and ends after the Distribution Date.
(c) All Returns with respect to Other Taxes for a period beginning
before the Distribution Date and all other filings required to be filed with any
taxing authority after the Distribution Date shall be filed by the party that
under Section 3.5 is responsible for paying the tax to which the Return relates
or for making such filing, as the case may be.
Section 2.2. Post-Distribution Tax Returns. For taxable periods
beginning after the Distribution Date (1) May shall be responsible for filing
all Returns relating to members of the May Group and, except with respect to any
requirement under Section 3.7 hereof, shall pay all Taxes required by such
Returns; and (2) Payless shall be responsible for filing all Returns relating to
members of the Payless Group and shall pay all Taxes required by such Returns.
4
<PAGE>
Article III
PAYMENT OF TAXES
Section 3.1. Certain Pre-Distribution Income Taxes. The parties
acknowledge that there has not yet been a Final Determination of the
consolidated Income Tax liability of the May Affiliated Group for any taxable
period beginning on or after February 3, 1991. The parties further acknowledge
that May has contributed to the capital of the Payless Group an amount equal to
Payless's Deferred Tax Liabilities for all taxable periods ending on or before
February 3, 1996 based on the Returns as filed or expected to be filed for such
periods. Absent an adjustment under Section 3.2 or an indemnity obligation under
Section 3.3 or Section 3.7, the parties acknowledge and agree that no further
sum shall be due to May from any member of the Payless Group or from May to any
member of the Payless Group on account of the Income Tax liabilities reflected
in the consolidated and other Returns filed or to be filed with respect to all
taxable periods ending on or before February 3, 1996, except to the extent that
one or more of the Puerto Rican subsidiaries of Payless utilize net operating
loss deductions, and in that event Payless shall pay to May, in accordance with
Section 3.8 of this Agreement, one-half of the Tax Benefit of all such net
operating loss deductions, measured by the difference in the Income Tax
liability of the Puerto Rican subsidiaries calculated with and without such net
operating loss deductions; provided however, in such calculation, the
utilization of the net operating loss deductions shall be limited with respect
to each Puerto Rican subsidiary to the amount of cumulative net financial
statement pre-tax losses incurred up to, and including, the period ending
February 3, 1996 by such Puerto Rican subsidiary.
Section 3.2. Payless Deferred Tax Liabilities. (a) In connection with
May's calculation of Payless' share of the consolidated Income Tax liability of
the May Affiliated Group pursuant to Section 3.1 hereof, the parties acknowledge
that a portion of the Deferred Taxes have been reconciled to and are supported
by the Federal and state and local Income Tax Returns of the May Affiliated
Group filed for all taxable periods ending on or before January 28, 1995. The
parties further acknowledge that the Payless Group has been allocated its
estimated share of Deferred Taxes for the taxable period ending February 3,
1996. Within 120 days of the filing of the Federal Income Tax Return for the
taxable period ending on February 3, 1996, the estimate of Deferred Taxes
allocated to the Payless Group will be reconciled to the actual amounts
determined to be allocable to the Payless Group through February 3, 1996, and
any necessary adjustments will be made between the parties as provided in
Section 3.2(b) below. The determination of whether such an adjustment is
required shall be made in accordance with generally accepted accounting
principles as set forth in Accounting Principles Board Opinion Number 11 and the
methodology used by the May Affiliated Group in preparing its financial
statement for the fiscal year ended February 3, 1996.
(b) To the extent that the actual Deferred Tax Liabilities for the
taxable period ending February 3, 1996 are in excess of the amount originally
estimated as described in Section 3.2(a), May will pay Payless this difference.
To the extent that actual Deferred Tax Liabilities for the taxable period ending
February 3, 1996 are less than the amount originally estimated as described in
Section 3.2(a), Payless will pay May this difference. Such payment shall be made
within one hundred and fifty (150) days of the filing by the May Affiliated
Group of the Federal Income Tax Return for the taxable period ending on Febru-
ary 3, 1996.
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Section 3.3. Responsibility for Certain Pre-Distribution Income Tax
Liabilities. (a) Payless shall pay, reimburse and indemnify May an amount
computed pursuant to paragraph (c) below if there is an Adjustment that results
in a Tax Detriment to the May Affiliated Group and a corresponding decrease in
the Payless Group's Deferred Tax Liabilities that is required to be reflected
(without regard to materiality) in any financial statements of Payless pursuant
to Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" ("FAS 109") in a post-Distribution period.
(b) May shall pay, reimburse and indemnify Payless, an amount
computed pursuant to paragraph (d) below if there is an Adjustment that results
in a Tax Benefit to the May Affiliated Group and a corresponding increase in the
Payless Group's Deferred Tax Liabilities that is required to be reflected
(without regard to materiality) in any financial statements of Payless pursuant
to FAS 109 in a post-Distribution period.
(c) Any payment made pursuant to paragraph (a) of this Section
3.3 shall be made in accordance with Section 3.8 hereof and shall equal (i) for
any taxable period beginning prior to January 1, 1993, (x) the amount of the
Adjustment (computed without regard to any interest, penalties or additions to
tax), reduced by the amount of any decrease in the Deferred Tax Liabilities of
the May Affiliated Group arising as a result of the effect of such Adjustment in
all pre-Distribution periods, and, in the case of any Adjustment arising from a
Tax Item that is not a tax credit or recapture of a tax credit, multiplied by(y)
thirty-eight and one-half percent (38 1/2%) and (ii) for any other taxable
period, (x) the amount of the Adjustment (computed without regard to any
interest, penalties or additions to tax), reduced by the amount of any decrease
in the Deferred Tax Liabilities of the May Affiliated Group arising as a result
of the effect of such Adjustment in all pre-Distribution periods, and, in the
case of any Adjustment arising from a Tax Item that is not a tax credit or
recapture of a tax credit, multiplied by (y) thirty-nine and one-half percent
(39 1/2%).
(d) Any payment made pursuant to paragraph (b) of this Section
3.3 shall be made in accordance with Section 3.8 hereof and shall equal (i) for
any taxable period beginning prior to January 1, 1993 (x) the amount of the
Adjustment (computed without regard to any interest, penalties or additions to
tax), reduced by the amount of any increase in the Deferred Tax Liabilities of
the May Affiliated Group arising as a result of the effect of such Adjustment in
all pre-Distribution periods, and, in the case of any Adjustment arising from a
Tax Item that is not a tax credit or recapture of a tax credit, multiplied by
(y) thirty-eight and one-half percent (38 1/2%) and (ii) for any other taxable
period, (x) the amount of the Adjustment (computed without regard to any
interest, penalties or additions to tax), reduced by the amount of any increase
in the Deferred Tax Liabilities of the May Affiliated Group arising as a result
of the effect of such Adjustment in all pre-Distribution periods, and, in the
case of any Adjustment arising from a Tax Item that is not a tax credit or
recapture of a tax credit, multiplied by (y) thirty-nine and one-half percent
(39 1/2%).
Section 3.4. Stub Period Income Taxes. (a) Notwithstanding anything
to the contrary in Section 3.3 hereof, Payless shall be responsible for all
Income Taxes imposed upon, or otherwise allocable to, the Payless Group for
the Stub Period. In this regard, the parties acknowledge that, pursuant to
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Sections 2.1(a) and 2.1(b) hereof, May shall file certain Income Tax Returns
on behalf of, or which include, the members of the Payless Group for the Stub
Period. Payless shall reimburse May for any Income Taxes shown due on such
Returns, or which are imposed upon or otherwise allocable to the Payless Group
for the Stub Period, within five (5) days of the earlier to occur of the filing
of any Return by May or the payment by May of any Income Tax (including the
payment of estimated Income Taxes) for the Stub Period.
(b) Payless shall pay any Income Tax shown due on any Return that
includes the Stub Period for which it has filing responsibility pursuant to
Section 2.1 hereof.
(c) Payless shall indemnify and hold harmless May against all
Taxes for the Stub Period. Any payment required to be made by Payless to May
pursuant to this Section 3.4(c) shall be made in accordance with Section 3.8
hereof.
(d) If May receives a refund of Income Taxes for the Stub Period
for which May had previously been reimbursed or otherwise indemnified by Payless
pursuant to paragraph (a) or (c), as the case may be, of this Section 3.4, May
shall pay the amount of such refund to Payless within five (5) days of receipt
thereof. If, in filing any Return for which May has filing responsibility
pursuant to Sections 2.1 or 2.2 hereof, May claims a credit against Income Taxes
that is attributable to Income Taxes for the Stub Period for which May had
previously been reimbursed by Payless pursuant to paragraph (a) of this Section
3.4, May shall pay the amount of such credit to Payless within five (5) days of
the filing of such Return with respect to which such credit is claimed.
Section 3.5. Other Taxes. The May Group shall pay all Other Taxes (and
shall be entitled to receive and retain all refunds of Other Taxes) which are
attributable to members of the May Group. The Payless Group shall pay all Other
Taxes (and shall be entitled to receive and retain all refunds of Other Taxes)
which are attributable to members of the Payless Group.
Section 3.6. Carrybacks. Unless May and Payless otherwise agree in
writing, Payless hereby expressly agrees to elect (under Code section
172(b)(3)(C) and, to the extent feasible, any similar provision of any state and
local Income Tax law) to relinquish any Carryback Item (and hereby acknowledges
that it has no interest in any Carryback Item and that it waives and
relinquishes any claim thereto so that no payment shall be due from May to
Payless in respect of any such Carryback Item).
Section 3.7. Responsibility of Payless Group for an Event of Loss.
Payless and any successor corporation shall be responsible for, and shall
indemnify and hold harmless May and each member of the May Group from all
liability, loss, cost, expense or damage in any way occasioned by an Event of
Loss to the extent such Event of Loss would not have resulted but for a breach
of any covenant contained in Section 6.2 of this Agreement (without regard to
whether an opinion of counsel has been obtained).
Section 3.8. Payment. (a) If Payless is required to make a payment to
a member of the May Group under this Agreement, such payment shall be made by
Payless to May or any successor corporation, and if May is required to make a
payment to a member of the Payless Group under this Agreement, such payment
7
<PAGE>
shall be made to Payless. Any payment by Payless shall be made by the earlier of
5 days after (1) May makes a tax payment to the applicable taxing authority
(including, without limitation, any payment made in connection with either an
estimated or annual tax liability), (2) a Final Determination of the tax
liability in question or (3) with respect to the net operating loss utilization
described in Section 3.1, Payless claims on any Puerto Rican Income Tax Return
any net operating loss deduction. Any payment by May shall be made by the
earlier of 5 days after (1) May receives a refund from any taxing authority or
claims a tax credit on any Return or (2) a Final Determination of the tax
liability in question. May and Payless agree that to the extent permitted, any
payment made shall be reported as non-deductible and any payment received shall
be reported as non-taxable.
(b) Any payment required to be made from one party to the other under
this Agreement and not made when due shall bear interest at the rate per annum
equal the lesser of (i) the maximum rate permitted by applicable law and (ii)
two percentage points in excess of the per annum rate of interest generally
charged from time to time by Citibank, N.A. (or in its absence, the U.S. bank
with the highest market capitalization) at its branches in New York City in
respect of U.S. dollar demand commercial loans to its most credit worthy
commercial borrowers, which per annum rate of interest is customarily referred
to as the "prime rate" of interest. For the purposes of this Agreement, such
"prime rate" of interest shall be ascertained monthly, as of the first business
day of each calendar month, and such rate, as so ascertained, shall be deemed to
be the "prime rate" in effect throughout such calendar month.
Article IV
COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Matters Giving Rise to Indemnity. (a) Whenever May or
Payless becomes aware of an issue which it believes gives rise to an indemnity
from the other party under Article III, May or Payless (as the case may be)
promptly shall give notice of the issue to the other party.
(b) In connection with any pre-Distribution Income Tax liability
arising with respect to a Return for which May had filing responsibilities
pursuant to Section 2.1 or 2.2 hereof, May shall have the sole right to control
any audit or determination by any authority, initiate any claim for refund or
amended return, contest, defend against, resolve and settle any assessment,
notice of deficiency or other adjustment of taxes or otherwise resolve any issue
pertaining to taxes. May acknowledges that, with respect to any negotiation,
settlement or litigation of any Pre-Distribution Tax Liabilities that may give
rise to an indemnification obligation by Payless pursuant to Sections 3.2(a),
3.4 or 3.6(a) hereof in a taxable year beginning after the Distribution, May
shall (i) promptly give notice in writing to Payless of the commencement of the
audit or examination by any taxing authority, (ii) consult in good faith with
Payless in contesting any proposed adjustment to Taxes and (iii) consider any
reasonable advice from Payless concerning such contest. Notwithstanding the
foregoing, all decisions with respect to such negotiation, settlement or
litigation shall be made by May in its sole discretion.
8
<PAGE>
(c) Payless shall have the right, with respect to any Income Tax
Return for which it has filing responsibility pursuant to Sections 2.1 or 2.2
hereof, to control any audit or determination by any authority, initiate any
claim for refund or amended return, contest, defend against, resolve and settle
any assessment, notice of deficiency or other adjustment of such Income Taxes or
otherwise resolve any issue pertaining to such Income Taxes.
(d) The party responsible for the payment of Other Taxes pursuant to
Section 3.5 hereof shall have the right to control any audit or determination by
any authority, initiate any claim for refund or amended return, contest, defend
against, resolve and settle any assessment, notice of deficiency or other
adjustment of such Other Taxes for which such party is responsible or otherwise
resolve any issue pertaining to such Other Taxes.
(e) Except as otherwise provided above, May shall have sole control
over, and shall have no duty to consult with Payless as to, any liability for
Income Taxes of all members of the May Affiliated Group arising on or before the
Distribution Date, including specifically any Income Taxes arising as a result
of the Distribution.
(f) May and Payless hereby agree to pursue and to cooperate in the
pursuit of every opportunity to realize a Tax Benefit for a member of the May
Group or the Payless Group, respectively, unless the Tax Benefit produced
thereby will be less than $25,000.
Section 4.2. Tax Return Information. By July 15, 1996, and November
15, 1996, respectively, Payless shall, and shall cause each appropriate member
of the Payless Group to, provide May with all information reasonably requested
by May to enable May to file the May consolidated Federal Income Tax Return and
those state and local tax Returns required to be filed on a combined,
consolidated or unitary basis for the taxable periods ended February 3, 1996 and
May 4, 1996, respectively.
By January 31, 1997 and January 31, 1998, respectively, May shall
provide Payless with a copy of those portions of the May consolidated Federal
Income Tax Return and those portions of the state and local Income Tax Returns
required to be filed on a combined or consolidated basis relating to the Payless
Group with respect to the taxable periods ended February 3, 1996 and May 3,
1996, respectively. May shall prepare such Returns on a basis consistent with
its past practices, except as to new Tax Items or as to any changes required by
law.
May and Payless agree to cooperate fully with each other in connection
with the preparation of any tax Return or claim for refund or in conducting any
audit or other proceeding in respect of taxes for all open taxable periods. Such
cooperation shall include making personnel and records available promptly and
within 20 days (or such other period as may be reasonable under the
circumstances) after a request for such personnel or records is made by the
tax-imposing authority or the other party. If any member of the May Group or the
Payless Group, as the case may be, fails to provide any information requested
pursuant to this section, then the requesting party shall have the right to
engage a public accountant of its choice to gather such information. Payless and
May, as the case may be, agree to permit any such public accountant full access
to all appropriate records or other information in the possession of any member
of the May Group or the Payless Group, as the case may be, during reasonable
business hours, and to reimburse or pay directly all costs and expenses in
connection with the engagement of such public accountant.
9
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If any member of the May Group or the Payless Group, as the case may
be, supplies information to a member of the other group pursuant to this section
and an officer of the requesting party signs a statement or other document under
penalties of perjury in reliance upon the accuracy of such information, then a
duly authorized officer of the party supplying such information shall certify,
under penalties of perjury, the accuracy and completeness of the information so
supplied. May agrees to indemnify and hold harmless each member of the Payless
Group and its officers and employees, and Payless agrees to indemnify and hold
harmless each member of the May Group and its officers and employees against any
cost, fine, penalty or other expense of any kind attributable to the negligence
of a member of the May Group or the Payless Group, as the case may be, in
supplying a member of the other group with inaccurate or incomplete information.
Payless shall have access to only those portions of the May
consolidated Federal Income Tax Return and those state and local Income Tax
Returns required to be filed on a combined or consolidated basis relating to the
Payless Group. Under no circumstances will Payless have access to any portions
of the May consolidated Federal Income Tax Return pertaining to the May Group
and those state and local Income Tax Returns required to be filed on a combined
or consolidated basis pertaining to the May Group.
Section 4.3. Record Retention. May and Payless agree to retain the
appropriate records for all taxable periods which may affect the determination
of the Income Tax liability of the May Affiliated Group or the Payless
Affiliated Group for such period until such time as a Final Determination occurs
with respect to such taxable period.
Any party intending to destroy any material, records or documents
shall provide the other party with advance notice and the opportunity to copy or
take possession of such records and documents. The parties hereto will notify
each other in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which the foregoing records or other
documents must be retained.
Article V
DISPUTES
Section 5.1. Disputes. If the parties are, after negotiation in good
faith, unable to agree upon the appropriate application of this Agreement, the
controversy shall be settled by arbitration in accordance with the rules of the
American Arbitration Association. Upon written notice by any party to the other
party that the controversy is to be submitted to arbitration, each party shall
appoint an independent arbitrator (who shall be a tax attorney or certified
public accountant) within 30 days, and the two arbitrators so appointed shall
appoint a third arbitrator within 30 days after the appointment of the last
arbitrator appointed within the initial 30-day period. If any party fails to
appoint an arbitrator or the parties agree on a single arbitrator, the
controversy shall be determined by a single arbitrator. If the two arbitrators
are unable to agree on a third arbitrator within 30 days, any party may apply to
the American Arbitration Association to make such appointment, and all parties
shall be bound by any appointment so made. The award of the arbitrators (or
arbitrator) shall be final, and judgment upon the award rendered may be entered
in any court having jurisdiction. The locale of the arbitration shall be St.
Louis, Missouri. The expenses of the arbitration procedure shall be borne in
equal parts by the parties unless the arbitration award specifies otherwise.
10
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Article VI
REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties. As an inducement to
enter into this Agreement, each party represents to and agrees with the other
that:
(a) Payless is a corporation duly organized, validly existing and in
good standing under the laws of the State of Missouri and May is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and each of them has all requisite corporate power to own,
lease and operate its properties, to carry on its business as presently
conducted and to carry out the transactions contemplated by this Agreement;
(b) it has duly and validly taken all corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(c) this Agreement has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms (subject, as to the enforcement of remedies, to (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally from time to time in
effect, and (ii) to general principles of equity), whether enforcement is sought
in a proceeding at law or in equity; and
(d) none of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the compliance with any
of the provisions of this Agreement will (i) conflict with or result in a breach
of any provision of its Certificate of Incorporation or by-laws, (ii) breach,
violate or result in a default under any of the terms of any agreement or other
instrument or obligation to which it is a party or by which it or any of its
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to it or affecting any of its
properties or assets.
Section 6.2. Covenants. (a) Payless hereby covenants and agrees that
during the two year period after the Distribution Date it will not participate
in or enter into a binding commitment to participate in, nor will any of
Payless' directors or shareowners approve or adopt, any of the following
described events or transactions:
a reorganization, consolidation or merger; the sale or disposition of
Payless Assets other than in the ordinary course of business; Payless'
ceasing to conduct an active trade or business; the acquisition or
disposition of shares of stock of Payless by any person or persons;
the redemption or repurchase (except as otherwise provided in Revenue
Procedure 91-63, 1991-2 C.B. 865, or any successor authority) of
shares of its stock by Payless or any successor, the recapitalization
or other reclassification of the shares of Payless or any successor;
the complete or partial liquidation of Payless or any successor; the
exercisability, transferability or repurchase of rights distributed
pursuant to a stock purchase rights plan or any other act or omission
11
<PAGE>
of Payless which results in failure to comply with each representation
and statement made to counsel in connection with requested opinions
with respect to the Distribution.
(b) Payless represents that, as of the date hereof, it has no present
intention to take any actions described in paragraph (a) of this Section 6.2.
(c) Notwithstanding the foregoing, Payless may engage in acts
inconsistent with the covenants contained in paragraph (a) of this Section 6.2
if:
(i) May consents in writing to such action;
or
(ii) on the basis of valid representations, Payless obtains a
ruling from the IRS, or obtains an opinion from a nationally
recognized independent tax counsel selected by Payless and approved by
May, which ruling or opinion states that such action will not cause
either May or its shareowners to recognize taxable income by virtue of
the Distribution.
Article VII
MISCELLANEOUS
Section 7.1. Term of Agreement. This Agreement shall become effective
as of May 4, 1996 and, except as otherwise expressly provided herein, the
respective covenants of the parties contained herein shall continue in full
force and effect until the parties have fully performed.
Section 7.2. Prior Tax Sharing Agreements. This Agreement shall
supersede any other tax-sharing or allocation agreement or arrangement in effect
between the parties hereto prior to the effective date hereof with respect to
the matters expressly dealt with herein.
Section 7.3. Election under Section 1552 of the Code. Nothing in this
Agreement is intended to change or otherwise affect any election made by or on
behalf of the May Affiliated Group with respect to the calculation of earnings
and profits under section 1552 of the Code or the Consolidated Return
Regulations. May, in its sole discretion, is authorized to seek any change in
the method of calculating earnings and profits as it deems desirable.
Section 7.4. Injunctions. The parties acknowledge that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. The parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction,
such remedy being in addition to any other remedy to which they may be entitled
at law or in equity.
Section 7.5. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
12
<PAGE>
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable. In the event that any such term, provision, covenant or
restriction is held to be invalid, void or unenforceable, the parties hereto
shall use their best efforts to find and employ an alternate means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
Section 7.6. Assignment. Except by operation of law (and with respect
thereto, only after two years from the date hereof) or in connection with the
sale of all or substantially all the assets of a party hereto (in either case,
with respect to Payless, subject to the express limitations of Section 6.2),
this Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any party hereto without the written consent of the other party;
and any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, however, that the provisions of
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns.
Section 7.7. Further Assurances. Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each of
the parties shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other parties with all such information as
they may reasonably request in order to be able to comply with the provisions
of this sentence.
Section 7.8. Parties in Interest. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any person, firm or corporation
other than the parties and their respective successors and permitted assigns.
Section 7.9. Waiver, Etc. No failure or delay on the part of the
parties in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by the parties therefrom shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
Section 7.10. Change of Law. If, due to any change in applicable law
or regulations or the interpretation thereof by any court of law or other
13
<PAGE>
governing body having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction contemplated
thereby shall become impracticable or impossible, the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such provision.
Section 7.11. Confidentiality. Subject to any contrary requirement of
law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under, any provision of this Agreement;
provided, however, that such obligation to maintain confidentiality shall not
apply to information which (x) at the time of disclosure was in the public
domain not as a result of acts by the receiving party or (y) was in the
possession of the receiving party at the time of disclosure.
Section 7.12. Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
Section 7.13. Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
Section 7.14. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served, if in writing and delivered by hand, by facsimile, by United
States Postal Service, postage prepaid, registered or certified mail (delivery
verification requested) or by reputable overnight courier service (charges paid
by send, next business day delivery and delivery verification requested) and
shall be deemed given (a) when delivered by hand, (b) when transmitted by
facsimile (with either (i) receipt confirmed or (ii) hard copy deposited within
one business day of such transmission with a reputable overnight courier service
as above provided), (c) three business days after mailing if mailed through the
United States Postal Service as above provided or (d) one business day after
depositing with a reputable overnight courier service as above provided, in each
case addressed to the parties as followed:
(a) if to May:
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101
Attention: General Counsel
Facsimile #: (314) 342-6384
with a copy to:
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101
Attention: Vice President Taxes
Facsimile #: (314) 342-6588
14
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(b) if to Payless:
Payless ShoeSource, Inc.
3231 E. 6th Street
Topeka, Kansas 66607
Attention: Chief Financial Officer
Facsimile #: (913) 295-6804
subject to the right of each party to designate a different address in the
United States and/or addressee by notice similarly given at least 15 days before
the effectiveness of such new designation.
Section 7.15. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the domestic substantive laws of the
State of Delaware without regard to any choice or conflict of laws rule or
provisions that would cause the application of the domestic substantive laws of
any other jurisdiction.
Section 7.16. Costs and Expenses. Unless otherwise specifically
provided herein, each party agrees to pay its own costs and expenses resulting
from the fulfillment of its respective obligations hereunder.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized, all
as of the day and year first above written.
THE MAY DEPARTMENT STORES COMPANY
By: /s/ Louis J. Garr, Jr.
-----------------------------
Executive Vice President
PAYLESS SHOESOURCE, INC.
By: /s/ Richard A. Brickson
-----------------------------
Vice President
15
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<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
$200,000,000
MULTICURRENCY CREDIT AGREEMENT
Dated as of April 22, 1996
among
PAYLESS SHOESOURCE, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BA SECURITIES, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS........................................... 1
1.1 Certain Defined Terms................................. 1
1.2 Other Interpretive Provisions......................... 20
1.3 Accounting Principles................................. 21
1.4 Currency Equivalents Generally........................ 21
ARTICLE II THE CREDITS........................................... 21
2.1 Amounts and Terms of Commitments...................... 21
2.2 Notes................................................. 22
2.3 Procedure for Borrowing............................... 22
2.4 Conversion and Continuation Elections................. 23
2.5 Utilization of Commitments in Offshore Currencies..... 24
2.6 Voluntary Termination or Reduction of Commitments..... 26
2.7 Optional Prepayments.................................. 26
2.8 Currency Exchange Fluctuations........................ 27
2.9 Mandatory Prepayments of Loans........................ 27
2.10 Repayment............................................. 27
2.11 Interest.............................................. 27
2.12 Fees.................................................. 28
(a) Arrangement, Agency Fees......................... 28
(b) Commitment Fees.................................. 28
2.13 Computation of Fees and Interest...................... 29
2.14 Payments by the Company............................... 29
2.15 Payments by the Banks to the Agent.................... 30
2.16 Sharing of Payments, Etc.............................. 31
ARTICLE III THE LETTERS OF CREDIT................................. 31
3.1 The Letter of Credit Subfacility...................... 31
3.2 Issuance, Amendment and Renewal of Letters of Credit.. 33
3.3 Risk Participations, Drawings and Reimbursements...... 35
3.4 Repayment of Participations........................... 36
3.5 Role of the Issuing Bank.............................. 37
3.6 Obligations Absolute.................................. 38
3.7 Letter of Credit Fees................................. 39
3.8 Uniform Customs and Practice.......................... 39
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY................ 39
4.1 Taxes................................................. 39
4.2 Illegality............................................ 41
4.3 Increased Costs and Reduction of Return............... 41
4.4 Funding Losses........................................ 42
4.5 Inability to Determine Rates.......................... 43
4.6 Reserves on Offshore Rate Loans....................... 43
4.7 Certificates of Banks................................. 44
4.8 Survival.............................................. 44
4.9 Replacement of Certain Banks.......................... 44
ARTICLE V CONDITIONS PRECEDENT.................................. 45
5.1 Conditions of Initial Credit Extensions............... 45
(a) Credit Agreement and Notes....................... 45
(b) Resolutions; Incumbency.......................... 46
<PAGE>
(c) Organization Documents; Good Standing............ 46
(d) Legal Opinions................................... 46
(e) Payment of Fees.................................. 46
(f) Certificate...................................... 46
(g) Subsidiary Guaranty.............................. 47
(h) Other Documents.................................. 47
5.2 Conditions to All Credit Extensions................... 47
(a) Notice of Borrowing or Issuance.................. 47
(b) Continuation of Representations and Warranties... 47
(c) No Existing Default.............................. 47
ARTICLE VI REPRESENTATIONS AND WARRANTIES........................ 48
6.1 Corporate Existence and Power......................... 48
6.2 Corporate Authorization; No Contravention............. 48
6.3 Governmental Authorization............................ 48
6.4 Binding Effect........................................ 49
6.5 Litigation............................................ 49
6.6 No Default............................................ 49
6.7 ERISA Compliance...................................... 49
6.8 Use of Proceeds; Margin Regulations................... 50
6.9 Taxes................................................. 50
6.10 Financial Condition................................... 50
6.11 Environmental Matters................................. 51
6.12 Regulated Entities.................................... 51
6.13 Subsidiaries.......................................... 51
6.14 Insurance............................................. 51
6.15 Swap Obligations...................................... 51
6.16 Full Disclosure....................................... 51
ARTICLE VII AFFIRMATIVE COVENANTS................................. 52
7.1 Financial Statements.................................. 52
7.2 Certificates; Other Information....................... 52
7.3 Notices............................................... 53
7.4 Preservation of Corporate Existence, Etc.............. 54
7.5 Maintenance of Property............................... 54
7.6 Insurance............................................. 54
7.7 Payment of Tax Obligations............................ 54
7.8 Compliance with Laws.................................. 55
7.9 Compliance with ERISA................................. 55
7.10 Inspection of Property and Books and Records.......... 55
7.11 Environmental Laws.................................... 55
7.12 Use of Proceeds....................................... 55
7.13 Additional Guarantors................................. 55
ARTICLE VIII NEGATIVE AND FINANCIAL COVENANTS...................... 56
8.1 Limitation on Liens................................... 56
8.2 Disposition of Assets................................. 57
8.3 Consolidations and Mergers............................ 58
8.4 Loans and Investments................................. 59
8.5 Limitation on Indebtedness............................ 60
8.6 Transactions with Affiliates.......................... 60
8.7 Contingent Obligations................................ 60
8.8 Restricted Payments................................... 61
8.9 ERISA................................................. 61
8.10 Change in Business.................................... 62
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8.11 Accounting Changes.................................... 62
8.12 Financial Covenants................................... 62
(a) Fixed Charge Coverage Ratio...................... 62
(b) Leverage Ratio................................... 62
(c) Consolidated Tangible Net Worth.................. 62
ARTICLE IX EVENTS OF DEFAULT..................................... 62
9.1 Event of Default...................................... 62
(a) Non-Payment...................................... 62
(b) Representation or Warranty....................... 62
(c) Specific Defaults................................ 63
(d) Other Defaults................................... 63
(e) Cross-Default.................................... 63
(f) Insolvency; Voluntary Proceedings................ 63
(g) Involuntary Proceedings.......................... 63
(h) ERISA............................................ 64
(i) Monetary Judgments............................... 64
(j) Change of Control................................ 64
9.2 Remedies.............................................. 64
9.3 Rights Not Exclusive.................................. 65
ARTICLE X THE AGENT............................................. 65
10.1 Appointment and Authorization; "Agent"................ 65
10.2 Delegation of Duties.................................. 66
10.3 Liability of Agent.................................... 66
10.4 Reliance by Agent..................................... 66
10.5 Notice of Default..................................... 67
10.6 Credit Decision....................................... 67
10.7 Indemnification of Agent.............................. 67
10.8 Agent in Individual Capacity.......................... 68
10.9 Successor Agent....................................... 68
10.10 Withholding Tax....................................... 69
10.11 Co-Agents............................................. 70
ARTICLE XI MISCELLANEOUS......................................... 70
11.1 Amendments and Waivers................................ 70
11.2 Notices............................................... 71
11.3 No Waiver; Cumulative Remedies........................ 72
11.4 Costs and Expenses.................................... 72
11.5 Company Indemnification............................... 72
11.6 Payments Set Aside.................................... 73
11.7 Successors and Assigns................................ 73
11.8 Assignments, Participations, etc...................... 73
11.9 Confidentiality....................................... 75
11.10 Set-off............................................... 75
11.11 Notification of Addresses, Lending Offices, Etc....... 76
11.12 Counterparts.......................................... 76
11.13 Severability.......................................... 76
11.14 No Third Parties Benefited............................ 76
11.15 Governing Law and Jurisdiction........................ 76
11.16 Waiver of Jury Trial.................................. 77
11.17 Judgment.............................................. 77
11.18 Entire Agreement...................................... 78
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<PAGE>
SCHEDULES
---------
Schedule 2.01 Commitments and Pro Rata Shares
Schedule 6.07 ERISA
Schedule 6.10 Permitted Liabilities
Schedule 6.11 Environmental Matters
Schedule 6.13 Subsidiaries and Minority Interests
Schedule 8.01 Permitted Liens
Schedule 8.04 Permitted Investments
Schedule 8.05 Permitted Indebtedness
Schedule 8.07 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
--------
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Counsel to the Company and the
Guarantors
Exhibit D-2 Form of Legal Opinion of General Counsel of The May Department
Stores Company
Exhibit E Form of Assignment and Acceptance Agreement
Exhibit F Form of Promissory Note
Exhibit G Form of Subsidiary Guaranty
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MULTICURRENCY CREDIT AGREEMENT
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This MULTICURRENCY CREDIT AGREEMENT is entered into as of April 22, 1996,
among Payless ShoeSource, Inc., a Missouri corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and Bank of America
National Trust and Savings Association, as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a revolving
multicurrency credit facility with a letter of credit subfacility upon the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
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1.1 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agent" means BofA in its capacity as agent for the Banks hereunder, and
any successor agent arising under Section 10.09.
"Agent-Related Persons" means, at any time, the Agent at such time,
together with its Affiliates (including, in the case of BofA, the Arranger), and
the officers, directors, employees, agents and attorneys-in-fact of such Persons
and Affiliates.
"Agent's Payment Office" means (a) in respect of payments in Dollars, the
address for payments set forth on Schedule 11.02 or such other address as the
Agent may from time to time specify in accordance with Section 11.02, and
(b) in the case of payments in any Offshore Currency, such address as the Agent
may from time to time specify in accordance with Section 11.02.
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"Agreed Alternative Currency" has the meaning specified in subsection
2.05(d).
"Agreement" means this Multicurrency Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Agreement Currency" has the meaning specified in Section 11.17.
"Applicable Commitment Fee Percentage" means, subject to the last sentence
of this definition, for any period, the applicable of the following percentages
in effect with respect to such period:
Applicable Commitment
Fixed Charge Coverage Ratio Fee Percentage
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Level I Status .15%
Level II Status .1875%
Level III Status .225%
The Fixed Charge Coverage Ratio shall be calculated by the Company as of the end
of each of its fiscal quarters commencing with the first fiscal quarter ending
after the date hereof and shall be reported to the Agent pursuant to the
Compliance Certificate delivered in accordance with subsection 7.02(b). The
Applicable Commitment Fee Percentage shall be adjusted, if necessary, quarterly
as of the tenth day after the delivery of the Compliance Certificate referred to
above; provided that, if such certificate, together with the financial
statements to which such certificate relates, are not delivered by the date
required pursuant to Section 7.01 and subsection 7.02(b), then from and after
such date until such certificate is so delivered, the Applicable Commitment Fee
Percentage shall be equal to .225%. Until adjusted as described above, the
Applicable Commitment Fee Percentage shall be equal to .1875%.
"Applicable Currency" means, as to any particular payment or Loan, Dollars
or the Offshore Currency in which it is denominated or is payable.
"Applicable Margin" means, subject to the second to last sentence of this
definition, for any period, the applicable of the following percentages in
effect with respect to such period:
Fixed Charge Coverage Ratio Applicable Margin
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Level I Status .40%
Level II Status .50%
Level III Status .75%
The Fixed Charge Coverage Ratio shall be calculated by the Company as of the end
of each of its fiscal quarters commencing with the first fiscal quarter ending
after the date hereof and shall be reported to the Agent pursuant to the
Compliance Certificate delivered in accordance with subsection 7.02(b). The
Applicable Margin shall be adjusted, if necessary, quarterly as of the tenth day
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after the delivery of the Compliance Certificate referred to above; provided
that, if such certificate, together with the financial statements to which such
certificate relates, are not delivered by the date required pursuant to Section
7.01 and subsection 7.02(b), then from and after such date until such
certificate is so delivered, the Applicable Margin shall be equal to .75%. Until
adjusted as described above, the Applicable Margin shall be equal to .50%. The
Applicable Margin for any Interest Period shall be the Applicable Margin in
effect on the first day of such Interest Period and shall not change during such
Interest Period.
"Arranger" means BA Securities, Inc., a Delaware corporation.
"Assignee" has the meaning specified in subsection 11.08(a).
"Assignment and Acceptance" has the meaning specified in subsection
11.08(a).
"Attorney Costs" means and includes all reasonable out-of-pocket fees and
disbursements of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
"Banking Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City, Chicago or San Francisco are authorized
or required by law to close and (a) with respect to disbursements and payments
in Dollars, a day on which dealings are carried on in the applicable offshore
Dollar interbank market, and (b) with respect to any disbursements and payments
in and calculations pertaining to any Offshore Currency Loan, a day on which
commercial banks are open for foreign exchange business in London, England, and
on which dealings in the relevant Offshore Currency are carried on in the
applicable offshore foreign exchange interbank market in which disbursement of
or payment in such Offshore Currency will be made or received hereunder.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) 0.50% per annum above the latest Federal Funds Rate; and (b) the
rate of interest in effect for such day as publicly announced from time to time
by BofA in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's costs
and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate.)
Any change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
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"Borrowing" means a borrowing hereunder consisting of Loans of the same
Type and in the same Applicable Currency made to the Company on the same day by
the Banks under Article II and, other than in the case of Base Rate Loans,
having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under Section
2.03.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City, Chicago or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means a Banking Day.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Lease" has the meaning specified in the definition of "Capital
Lease Obligations."
"Capital Lease Obligations" means the principal component of all monetary
obligations of the Company or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, is classified as a capital
lease ("Capital Lease").
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agent, the Issuing Bank and the Banks, as
collateral for the L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance reasonably satisfactory to the Agent and the
Issuing Bank (which documents are hereby consented to by the Banks). Derivatives
of such term shall have corresponding meanings.
"Certificate Bank" has the meaning specified in subsection 4.09(a).
"Change in Control" means (a) the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of the
Company, or (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the Company's board
of directors (together with any new directors whose election by the Company's
board of directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reasons other than death or disability to constitute a majority of the
directors then in office.
"Closing Date" means the date on which all conditions precedent set forth
in Section 5.01 are satisfied or waived by all Banks (or, in the case of
subsection 5.01(e), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder, in each case, as amended from time to time.
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"Commitment", as to each Bank, has the meaning specified in Section 2.01.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C.
"Computation Date" has the meaning specified in subsection 2.05(a).
"Consolidated Interest Expense" means, for any period, the sum of total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Company and its Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of the Company and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, all as determined on a consolidated basis for the Company and its
consolidated Subsidiaries in accordance with GAAP.
"Consolidated Net Income" means, for any period for any Person, the
aggregate of the net income of such Person for such period, determined in
accordance with GAAP on a consolidated basis, provided that (i) the net income
of any other Person which is not a Subsidiary of such Person shall be included
in the Consolidated Net Income of such Person only to the extent of the amount
of cash dividends or distributions paid to such Person or to a consolidated
Subsidiary of such Person and (ii) the net income of any other Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded from the Consolidated Net Income of such Person.
There shall be excluded in computing Consolidated Net Income for any Person the
excess (or the deficit), if any, of (i) any gain which must be treated as an
extraordinary item under GAAP or any gain realized upon the sale or other
disposition of any real property or equipment that is not sold in the ordinary
course of business or of any capital stock owned by such Person or a Subsidiary
of such Person over (ii) any loss which must be treated as an extraordinary item
under GAAP or any loss realized upon the sale or other disposition of any real
property or equipment that is not sold in the ordinary course of business or of
any capital stock owned by such Person or a Subsidiary of such Person. Without
limiting the foregoing, all costs and expenses of the Company relating to
management retention incentive payments which are treated as extraordinary items
shall be excluded in computing Consolidated Net Income of the Company.
"Consolidated Rental Expense" means, for any period, the sum of the
aggregate payments of the Company and its Subsidiaries on a consolidated basis
under agreements to rent or lease any real or personal property (exclusive of
Capital Lease Obligations), all as determined on a consolidated basis for the
Company and its consolidated Subsidiaries in accordance with GAAP.
"Consolidated Tangible Net Worth" of a Person means, without duplication,
(a) total stockholders' equity of such Person less (b) the net book value of all
assets of such Person and its consolidated Subsidiaries which would be treated
as intangibles under GAAP, including, without limitation, goodwill and
trademarks, but excluding, however, lease rights associated with acquisitions of
below-market leases.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
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obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof;
provided that if any Guaranty Obligation (a) is limited to an amount less than
the obligations guaranteed or supported the amount of the corresponding
Contingent Obligation shall be equal to the lesser of the amount determined
pursuant to the initial clause of this sentence and the amount to which such
guaranty is so limited or (b) is limited to recourse against a particular asset
or assets of such Person the amount of the corresponding Contingent Obligation
shall be equal to the lesser of the amount determined pursuant to the initial
clause of this sentence and the fair market value of such asset or assets at the
date for determination of the amount of the Contingent Obligation. In the case
of other Contingent Obligations other than in respect of Swap Contracts, such
Contingent Obligations shall be equal to the maximum reasonably anticipated
liability in respect thereof and, in the case of Contingent Obligations in
respect of Swap Contracts, such Contingent Obligations shall be equal to the
Swap Termination Value.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.04,
the Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Loans hereunder
and (b) the Issuance of any Letters of Credit hereunder.
"Default" means any event or circumstance which, with the giving of notice
pursuant to this Agreement, the expiration of any cure period specified herein,
or both, would (if not cured or otherwise remedied during such cure period)
constitute an Event of Default.
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"Disposition" has the meaning specified in Section 8.02.
"Dollar Equivalent" means, at any time, (a) as to any amount denominated in
Dollars, the amount thereof at such time, (b) as to any amount denominated in an
Offshore Currency, the equivalent amount in Dollars as determined by the Agent
at such time on the basis of the Spot Rate for the purchase of Dollars with such
Offshore Currency on the most recent Computation Date provided for in subsection
2.05(a) and (c) as to any amount denominated in an Offshore L/C Currency, the
equivalent amount in Dollars as determined by the Issuing Bank at such time on
the basis of the Spot Rate for the purchase of Dollars with such Offshore L/C
Currency.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
"EBITR" means, for any period, for the Company and its Subsidiaries on a
consolidated basis, determined in accordance with GAAP, the sum of (a)
Consolidated Net Income for such period plus (b) all amounts treated as expenses
for taxes to the extent included in the determination of such Consolidated Net
Income plus (c) Consolidated Interest Expense to the extent included in the
determination of such Consolidated Net Income plus (d) Consolidated Rental
Expense to the extent included in the determination of such Consolidated Net
Income.
"Effective Amount" means (a) with respect to any Loans on any date, the
aggregate outstanding principal Dollar Equivalent amount thereof after giving
effect to any Borrowings and prepayments or repayments of Loans occurring on
such date; and (b) with respect to any outstanding L/C Obligations on any date,
the Dollar Equivalent amount of such L/C Obligations on such date after giving
effect to any Issuances of Letters of Credit occurring on such date and any
other changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements of outstanding unpaid drawings under
any Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank or financial institution
organized under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $200,000,000; (b) a commercial bank
or financial institution organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, and having a combined
capital and surplus of at least $200,000,000, provided that such bank or
financial institution is acting through a branch or agency located in the United
States; and (c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of
which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization the liability with respect to which has not been satisfied;
(d) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Company or
any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the definition
of "Offshore Rate".
"Event of Default" means any of the events or circumstances specified in
Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder, in each case, as amended from time to time.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.12(a).
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
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"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a) EBITR
to (b) the sum of Consolidated Interest Expense plus Consolidated Rental
Expense, in each case, for such period.
"FX Trading Office" means the Foreign Exchange Trading Center of the Agent,
or such other of the Agent's offices as the Agent may designate from time to
time.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of (a) in the case of
computations pursuant to Section 8.12, the date of this Agreement and (b) in all
other cases, the applicable date.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantors" means, collectively, each of the Material Subsidiaries of the
Company signatory to the Subsidiary Guaranty and such other Material
Subsidiaries from time to time party to such Subsidiary Guaranty pursuant to
Section 7.13.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Honor Date" has the meaning specified in subsection 3.03(b).
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all principal obligations with respect to Capital
Leases; (g) all indebtedness referred to in clauses (a) through (f) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment
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of such Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (g) above. In the event any of the foregoing Indebtedness is limited to
recourse against a particular asset or assets of such Person, the amount of the
corresponding Indebtedness shall be equal to the lesser of the amount of such
Indebtedness and the fair market value of such asset or assets at the date for
determination of the amount of such Indebtedness. In addition, the amount of any
Indebtedness which is also a Contingent Obligation shall be determined as
provided in the definition of "Contingent Obligation."
"Indemnified Liabilities" has the meaning specified in Section 11.05.
"Indemnified Person" has the meaning specified in Section 11.05.
"Independent Auditor" has the meaning specified in subsection 7.01(a).
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a Base Rate Loan,
the last day of each Interest Period applicable to such Loan and, as to any Base
Rate Loan, the last Business Day of each calendar quarter; provided, however,
that if any Interest Period for an Offshore Rate Loan exceeds three months the
date that falls three months after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, with respect to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which a Loan is converted into or continued as an Offshore Rate Loan,
and ending on the date one, two, three or six months thereafter as selected by
the Company in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following Business
Day unless, in the case of an Offshore Rate Loan, the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(c) no Interest Period shall extend beyond the scheduled Revolving
Termination Date.
"Investments" has the meaning specified in Section 8.04.
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"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or to extend
the expiry of, or to renew or increase the amount of, such Letter of Credit; and
the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
"Issuing Bank" means, with respect to any Letter of Credit, BofA or any
Bank which at the request of the Company agrees, in such Bank's sole discretion,
to become an Issuing Bank for purposes of Issuing Letters of Credit pursuant to
Article III.
"Judgment Currency" has the meaning specified in Section 11.17.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby or
commercial documentary letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing under
any Letter of Credit which shall not have been reimbursed on the date when made
nor converted into a Borrowing of Loans under subsection 3.03(b).
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and the
commitment of the Banks severally to participate in, Letters of Credit from time
to time Issued or outstanding under Article III; provided that the L/C
Commitment is a part of the combined Commitments, rather than a separate,
independent commitment.
"L/C Obligations" means, at any time, the sum of (a) the aggregate undrawn
amount of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C Applications,
the L/C Amendment Applications and any other document relating to any Letter of
Credit, including any of the Issuing Bank's standard form documents for letter
of credit issuances.
"Lending Office" means, as to any Bank, the office or offices of such Bank
specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 11.02, or such other office or
offices as such Bank may from time to time notify the Company and the Agent.
"Letters of Credit" means any letters of credit (whether standby letters of
credit or commercial documentary letters of credit) Issued by the Issuing Bank
pursuant to Article III.
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"Level I Status" exists at any date if at such date the Fixed Charge
Coverage Ratio is greater than 2.0:1.0.
"Level II Status" exists at any date if at such date the Fixed Charge
Coverage Ratio is less than or equal to 2.0:1.0 but greater than 1.6:1.0.
"Level III Status" exists at any date if at such date the Fixed Charge
Coverage Ratio is less than or equal to 1.6:1.0.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other), conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) but, in any
such case, not including the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the Company under Article
II, and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of
Loan).
"Loan Documents" means this Agreement, any Notes, the Fee Letter, the
Subsidiary Guaranty, the L/C-Related Documents and all other documents delivered
to the Agent or any Bank by the Company in connection herewith.
"Margin Stock" means "margin stock" as such term is defined in Regulation
G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Company or the Company and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Company to perform its
obligations under any Loan Document; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Company or any
Guarantor of any of the Loan Documents.
"Material Subsidiary" means, at any time, (a) Payless ShoeSource
Merchandising, Inc., a Kansas corporation, Payless ShoeSource Distribution,
Inc., a Kansas corporation, and Payless ShoeSource Worldwide, Inc., a Kansas
corporation, and (b) any other domestic Subsidiary of the Company the total
assets of which constitute 5% or more of the total consolidated assets of the
Company and its Subsidiaries, in each case, determined in accordance with GAAP.
"Minimum Tranche" means, in respect of Loans comprising part of the same
Borrowing, or to be converted or continued under Section 2.04, (a) in the case
of Base Rate Loans, $3,000,000 or any multiple of $1,000,000 in excess thereof,
and (b) in the case of Offshore Rate Loans, the Dollar Equivalent amount of
$3,000,000 or any multiple of 1,000,000 units of the Applicable Currency in
excess thereof.
"Multiemployer Plan" means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
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"Note" means a promissory note executed by the Company in favor of a Bank
pursuant to Section 2.02, in substantially the form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit B.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company or any
Guarantor to any Bank, the Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment pursuant to subsection
11.08(a), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Offshore Currency" means, at any time, Italian lire, Canadian dollars,
British pound sterling and French francs, and any Agreed Alternative Currency.
"Offshore Currency Loan" means any Offshore Rate Loan denominated in an
Offshore Currency.
"Offshore L/C Currency" means, at any time, any Offshore Currency and, with
respect to any Letter of Credit, any other currency agreed to by the Issuing
Bank thereof.
"Offshore Rate" means, for any Interest Period, with respect to Offshore
Rate Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/16th of 1%) determined by the Agent as follows:
Offshore Rate = LIBOR
---------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
Period (a) with respect to Offshore Rate Loans denominated in Dollars, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day (whether or not applicable to any
Bank) under regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency, supplemental or
other marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities") and (b) with respect
to all other Offshore Rate Loans, zero; and
"LIBOR" means the rate of interest per annum determined by the Agent
to be the arithmetic mean of the rates of interest per annum notified to
the Agent by each Reference Bank as the rate of interest at which deposits
in the Applicable Currency in the approximate amount of the amount of the
Loan to be made or continued as, or converted into, an Offshore Rate Loan
by such Reference Bank and having a maturity comparable to such Interest
Period would be offered to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London time) two Banking Days
prior to the commencement of such Interest Period.
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<PAGE>
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on the Offshore
Rate, and may be an Offshore Currency Loan or a Loan denominated in Dollars.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Originating Bank" has the meaning specified in subsection 11.08(d).
"Other Taxes" means any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Overnight Rate" means, for any day, the rate of interest per annum at
which overnight deposits in the Applicable Currency, in an amount approximately
equal to the amount with respect to which such rate is being determined, would
be offered for such day by BofA's London Branch to major banks in the London or
other applicable offshore interbank market.
"Participant" has the meaning specified in subsection 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA (other than a Multiemployer Plan) which the Company
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" and
(b) such Swap Contracts do not contain any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party.
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<PAGE>
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions (other than a Multiemployer Plan)
and includes any Pension Plan.
"Present Value" means, with respect to each lease of the Company and its
Subsidiaries treated as an "operating" lease for purposes of external financial
reporting, the periodic minimum or base rental payments due and payable during
the primary term (giving effect to any extension terms as to which the Company
or its Subsidiaries have become contractually obligated) of such lease on or
after the date of determination discounted to an equivalent value as of the date
of determination. For purposes of computing the Present Value: (a) the discount
rate utilized to calculate the Present Value of any Existing Lease (as defined
below) shall be the rate actually utilized by the Company prior to the date
hereof for purposes of calculating the present value of such operating lease for
disclosure of the present value of all operating leases in the consolidated
external financial reports of the Company and its Affiliates; (b) the discount
rate utilized to calculate the Present Value of any Additional Lease (as defined
below) during the fiscal year in which the term of such lease commences (its
"First Lease Year") shall be the Year-To-Date Rate (as defined below) as of the
end of the fiscal quarter for which the computation is made; and (c) the
discount rate for any Additional Lease during any fiscal year other than its
First Lease Year shall be the Year-To-Date Rate as of the end of its First Lease
Year. For purposes of this definition: (i) "Existing Lease" means any operating
lease with a term commencing before February 4, 1996; (ii) "Additional Lease"
means any operating lease with a term commencing after February 3, 1996; and
(iii) "Year-To-Date Rate" means the weekly year-to-date average of the Friday
rates of the Merrill Lynch Bond Index for corporate issues of "medium" quality
with terms of 10 years or more ("Index") as published in The Wall Street Journal
(or similar publication). In the event that the Index ceases to be published,
the Index shall be replaced by a similar index reflecting rates applicable to
corporate issues with similar terms and credit quality as the Index as jointly
selected by the Company and the Agent. The discount rate applied to any
extension of any Existing Lease or Additional Lease shall be: (A) if the dollar
amount of base rent payable during such extension is prescribed in the original
operating lease, the discount rate originally applicable to such Existing Lease
or Additional Lease, as applicable; and (B) in all other cases, the discount
rate determined as if such extension period constituted an Additional Lease.
"Present Value of Operating Leases" means, at any time, the sum of the
Present Value of each operating lease of the Company and its Subsidiaries.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
"Reference Banks" means BofA, The First National Bank of Chicago and The
Bank of New York.
"Reportable Event" means, any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder, other than any such event for which the 30-
day notice requirement under ERISA has been waived in regulations issued by the
PBGC.
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<PAGE>
"Required Banks" means (a) at any time prior to the Revolving Termination
Date, Banks then holding at least 51% of the then aggregate unpaid principal
amount of the Loans, or, if no Loans are outstanding, Banks then having at least
51% of the aggregate amount of the Commitments and (b) at all other times, Banks
then holding at least 51% of the then aggregate unpaid principal amount of the
Credit Extensions.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, president or any
vice president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.
"Revolving Termination Date" means the earlier to occur of:
(a) April 22, 2001; and
(b) the date on which the Commitments terminate in accordance with
the provisions of this Agreement.
"Same Day Funds" means (a) with respect to disbursements and payments in
Dollars, immediately available funds, and (b) with respect to disbursements and
payments in an Offshore Currency, same day or other funds as may be reasonably
determined by the Agent to be customary in the place of disbursement or payment
for the settlement of international banking transactions in the relevant
Offshore Currency.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Spot Rate" for a currency means the rate quoted by the Agent as the spot
rate for the purchase by the Agent of such currency with another currency
through its FX Trading Office at approximately 11:00 a.m. (Chicago time) on the
date two Banking Days prior to the date as of which the foreign exchange
computation is made.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Company.
"Subsidiary Guaranty" means the Subsidiary Guaranty, in substantially the
form of Exhibit G, executed and delivered by the Guarantors in favor of the
Agent and the Banks, as the same may be amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms and the terms
hereof.
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<PAGE>
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety
bonds, performance bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing, relating to
any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other, similar transaction (including any
option to enter into any of the foregoing) or any combination of the foregoing,
and, unless the context otherwise clearly requires, any master agreement
relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Company
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Bank.)
"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Bank or the Agent, as the case may be, is organized or maintains a lending
office.
"Total Capitalization" means, at any time, the sum at such time of (a) the
Company's total stockholders' equity plus (b) Total Debt plus (c) the
consolidated non-current deferred taxes of the Company and its Subsidiaries.
"Total Debt" means, at any time, the sum of (a) the current and long-term
indebtedness obligations for money borrowed, drawn and unreimbursed letters of
credit, drawn and unreimbursed surety bonds, the current portion of mandatory
redeemable preferred stock of the Company, Capital Lease Obligations and,
without duplication, Contingent Obligations in respect of any of the foregoing,
in each case, of the Company and its Subsidiaries on a consolidated basis, plus
(b) the Present Value of Operating Leases.
"Type" has the meaning specified in the definition of "Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
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"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock of each
class having ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more of the
other Wholly-Owned Subsidiaries, or both.
1.2 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means "to
and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g) This Agreement is the result of negotiations among and has been
reviewed by counsel to the Agent, the Company and the other parties, and is the
product of all parties. Accordingly, it shall not be construed against the Banks
or the Agent merely because of the Agent's or Banks' involvement in its
preparation.
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1.3 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company. Currently, the fiscal year of the Company
ends on the Saturday closest to January 31 of each year.
1.4 Currency Equivalents Generally. For all purposes of this Agreement (but
not for purposes of the preparation of any financial statements delivered
pursuant hereto), the equivalent in any Offshore Currency or other currency of
an amount in Dollars, and the equivalent in Dollars of an amount in any Offshore
Currency or other currency, shall be determined at the Spot Rate.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitments. Each Bank severally agrees, on the
terms and conditions set forth herein, to make loans to the Company from time to
time on any Business Day during the period from the Closing Date to, but not
including, the Revolving Termination Date, in an aggregate principal Dollar
Equivalent amount not to exceed at any time outstanding the amount set forth
opposite the Bank's name in Schedule 2.01 under the heading "Commitment" (such
amount as the same may be reduced pursuant to Section 2.06 or as a result of one
or more assignments pursuant to Section 11.08, the Bank's "Commitment");
provided, however, that, after giving effect to any Borrowing of Loans, the
aggregate principal Dollar Equivalent amount of all outstanding Loans and L/C
Obligations shall not exceed the combined Commitments. Within the limits of each
Bank's Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this Section 2.01, prepay pursuant to Section 2.07
and reborrow pursuant to this Section 2.01.
2.2 Notes. The Loans made by each Bank shall be evidenced by one or more
Notes. Each such Bank shall endorse on the schedules annexed to its Note the
date, amount and maturity of each Loan made by it and the amount and Applicable
Currency of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to endorse its Note and
each Bank's record shall be rebuttably presumptive evidence of the matters set
forth therein absent manifest error; provided, however, that the failure of a
Bank to make, or an error in making, a notation thereon with respect to any Loan
shall not limit or otherwise affect the obligations of the Company hereunder or
under any such Note to such Bank.
2.3 Procedure for Borrowing.
-----------------------
(a) Each Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Agent in the form of a Notice of Borrowing
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(which notice must be received by the Agent prior to 12:00 noon (Chicago time)
(i) four Business Days prior to the requested Borrowing Date, in the case of
Offshore Currency Loans; (ii) three Business Days prior to the requested
Borrowing Date, in the case of Offshore Rate Loans denominated in Dollars; and
(iii) one Business Day prior to the requested Borrowing Date, in the case of
Base Rate Loans, in any such case, specifying:
(A) the amount of the Borrowing, which shall be in an
aggregate amount not less than the Minimum Tranche;
(B) the requested Borrowing Date, which shall be a Business
Day;
(C) the Type of Loans comprising the Borrowing;
(D) the duration of the Interest Period applicable to any
Offshore Rate Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest Period shall
be one month; and
(E) in the case of a Borrowing comprised of Offshore
Currency Loans, the Applicable Currency;
provided, however, that with respect to any Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
12:00 noon (Chicago time) one Business Day before the Closing Date and such
Borrowing will consist of Base Rate Loans only.
(b) The Dollar Equivalent amount of any Borrowing in an Offshore
Currency will be determined by the Agent for such Borrowing on the Computation
Date therefor in accordance with subsection 2.05(a). Upon receipt of the Notice
of Borrowing, the Agent will promptly notify each Bank thereof and of the amount
of such Bank's Pro Rata Share of the Borrowing. In the case of a Borrowing
comprised of Offshore Currency Loans, such notice will provide the approximate
amount of each Bank's Pro Rata Share of the Borrowing, and the Agent will, upon
the determination of the Dollar Equivalent amount of the Borrowing as specified
in the Notice of Borrowing, promptly notify each Bank of the exact Dollar
Equivalent amount of such Bank's Pro Rata Share of the Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office on the Borrowing Date requested by the Company in Same Day Funds
and in the requested currency (i) in the case of a Borrowing comprised of Loans
in Dollars, by 12:00 noon (Chicago time) and (ii) in the case of a Borrowing
comprised of Offshore Currency Loans, by such time as the Agent may specify. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BofA with the aggregate of the amounts made available to the Agent by the Banks
and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than nine different Interest Periods in
effect.
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2.4 Conversion and Continuation Elections.
-------------------------------------
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of any other Type of Loans denominated in Dollars, to convert any such
Loans (or any part thereof in an amount not less than the Minimum Tranche)
into Loans in Dollars of any other Type; or
(ii) elect, as of the last day of the applicable Interest Period,
to continue any Loans having Interest Periods expiring on such day (or any
part thereof in an amount not less than the Minimum Tranche).
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than 12:00 noon (Chicago time) at least (i)
three Business Days in advance of the Conversion/Continuation Date, if the Loans
are to be converted into or continued as Offshore Rate Loans denominated in
Dollars; (ii) four Business Days in advance of the continuation date, if the
Loans are to be continued as Offshore Currency Loans; and (iii) one Business Day
in advance of the Conversion/Continuation Date, if the Loans are to be converted
into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the Type of Loans resulting from the proposed conversion
or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans in Dollars, the Company has failed to timely select a new
Interest Period to be applicable to such Offshore Rate Loans or if any Default
or Event of Default then exists, unless, in either case, the Company has elected
to and does repay such Loans on or prior to the expiration date of such Interest
Period, the Company shall be deemed to have elected to convert such Offshore
Rate Loans into Base Rate Loans effective as of the expiration date of such
Interest Period. If the Company has failed to select a new Interest Period to be
applicable to Offshore Currency Loans prior to the fourth Business Day in
advance of the expiration date of the current Interest Period applicable thereto
as provided in subsection 2.04(b), or if any Default or Event of Default shall
then exist, the Company shall be deemed to have elected to continue such
Offshore Currency Loans on the basis of a one month Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
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(e) Unless the Required Banks otherwise consent, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan in
Dollars converted into or continued as an Offshore Rate Loan in Dollars or an
Offshore Currency Loan continued on the basis of an Interest Period exceeding
one month.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent, there may not be more than nine
different Interest Periods in effect.
2.5 Utilization of Commitments in Offshore Currencies.
-------------------------------------------------
(a) The Agent will determine the Dollar Equivalent amount with respect
to any (i) Borrowing comprised of Offshore Currency Loans as of the requested
Borrowing Date, (ii) outstanding Offshore Currency Loans as of the last Banking
Day of each month, (iii) outstanding Offshore Currency Loans as of any
redenomination date pursuant to this Section 2.05 or Section 4.05, (iv) Issuance
or renewal of any Letter of Credit denominated in an Offshore L/C Currency as of
the requested date of Issuance or renewal and (v) outstanding Letter of Credit
denominated in an Offshore L/C Currency as of the last Banking Day of each month
(each such date under clauses (i) through (v) a "Computation Date").
(b) In the case of a proposed Borrowing comprised of Offshore Currency
Loans, the Banks shall be under no obligation to make Offshore Currency Loans in
the requested Offshore Currency as part of such Borrowing if the Agent has
received notice from any of the Banks by 5:00 p.m. (Chicago time) four Business
Days prior to the day of such Borrowing that such Bank cannot provide Loans in
the requested Offshore Currency, in which event the Agent will give notice to
the Company no later than 12:00 noon (Chicago time) on the third Business Day
prior to the requested date of such Borrowing that the Borrowing in the
requested Offshore Currency is not then available, and notice thereof also will
be given promptly by the Agent to the Banks. If the Agent shall have so notified
the Company that any such Borrowing in a requested Offshore Currency is not then
available, the Company may, by notice to the Agent not later than 5:00 p.m.
(Chicago time) three Business Days prior to the requested date of such
Borrowing, withdraw the Notice of Borrowing relating to such requested
Borrowing. If the Company does so withdraw such Notice of Borrowing, the
Borrowing requested therein shall not occur and the Agent will promptly so
notify each Bank. If the Company does not so withdraw such Notice of Borrowing,
the Agent will promptly so notify each Bank and such Notice of Borrowing shall
be deemed to be a Notice of Borrowing that requests a Borrowing comprised of
Base Rate Loans in an aggregate amount equal to the amount of the originally
requested Borrowing as expressed in Dollars in the Notice of Borrowing; and in
such notice by the Agent to each Bank the Agent will state such aggregate amount
of such Borrowing in Dollars and such Bank's Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore Currency Loans
for an additional Interest Period pursuant to Section 2.04, the Banks shall be
under no obligation to continue such Offshore Currency Loans if the Agent has
received notice from any of the Banks by 5:00 p.m. (Chicago time) four Business
Days prior to the day of such continuation that such Bank cannot continue to
provide Loans in the relevant Offshore Currency, in which event the Agent will
give notice to the Company not later than 12:00 noon (Chicago time) on the third
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Business Day prior to the requested date of such continuation that the
continuation of such Offshore Currency Loans in the relevant Offshore Currency
is not then available, and notice thereof also will be given promptly by the
Agent to the Banks. If the Agent shall have so notified the Company that any
such continuation of Offshore Currency Loans is not then available, any Notice
of Continuation/Conversion with respect thereto shall be deemed withdrawn and
such Offshore Currency Loans shall be redenominated into Base Rate Loans in
Dollars with effect from the last day of the Interest Period with respect to any
such Offshore Currency Loans. The Agent will promptly notify the Company and the
Banks of any such redenomination and in such notice by the Agent to each Bank
the Agent will state the aggregate Dollar Equivalent amount of the redenominated
Offshore Currency Loans as of the Computation Date with respect thereto and
such Bank's Pro Rata Share thereof.
(d) The Company shall be entitled to request that Loans hereunder also
be permitted to be made in any other lawful currency (other than Dollars), in
addition to the currencies specified in the definition of "Offshore Currency"
herein, that in the opinion of the Required Banks is at such time freely traded
in the offshore interbank foreign exchange markets and is freely transferable
and freely convertible into Dollars (an "Agreed Alternative Currency"). The
Company shall deliver to the Agent any request for designation of an Agreed
Alternative Currency in accordance with Section 11.02, to be received by the
Agent not later than 12:00 noon (Chicago time) at least 10 Business Days in
advance of the date of any Borrowing hereunder proposed to be made in such
Agreed Alternative Currency. Upon receipt of any such request the Agent will
promptly notify the Banks thereof, and each Bank will use its best efforts to
respond to such request within two Business Days of receipt thereof. Each Bank
may grant or accept such request in its sole discretion. The Agent will promptly
notify the Company of the acceptance or rejection of any such request.
2.6 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than three Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
Dollar Equivalent amount of $5,000,000 or any Dollar Equivalent multiple of
$1,000,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the then outstanding
principal Dollar Equivalent amount of the Loans and L/C Obligations would exceed
the amount of the combined Commitments then in effect. Once reduced in
accordance with this Section 2.06, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Bank according to its Pro
Rata Share. All accrued commitment fees to, but not including the effective date
of any reduction or termination of Commitments, shall be paid on the effective
date of such reduction or termination.
2.7 Optional Prepayments. Subject to Section 4.04, the Company may, at any
time or from time to time, upon irrevocable notice to the Agent as described
below, ratably prepay Loans in whole or in part, in minimum Dollar Equivalent
amounts of $3,000,000 or any Dollar Equivalent multiple of $1,000,000 in excess
thereof or such other amount necessary to repay any Offshore Currency Loan in
full. The Company shall deliver a notice of prepayment in accordance with
Section 11.02 to be received by the Agent not later than 12:00 noon (Chicago
time) (a) at least four Business Days in advance of the prepayment date if the
Loans to be prepaid are Offshore Currency Loans, (b) at least three Business
Days in advance of the prepayment date if the Loans to be prepaid are Offshore
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Rate Loans in Dollars, and (iii) at least one Business Day in advance of the
prepayment date if the Loans to be prepaid are Base Rate Loans. Such notice of
prepayment shall specify the date and amount of such prepayment and whether such
prepayment is of Base Rate Loans or Offshore Rate Loans, or any combination
thereof, and the Applicable Currency. Such notice shall not thereafter be
revocable by the Company and the Agent will promptly notify each Bank thereof
and of such Bank's Pro Rata Share of such prepayment. If such notice is given by
the Company, the Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified therein,
together with accrued interest to each such date on the amount prepaid and
any amounts required pursuant to Section 4.04.
2.8 Currency Exchange Fluctuations. Subject to Section 4.04, if on any
Computation Date the Agent shall have determined that the aggregate Dollar
Equivalent principal amount of all Loans and L/C Obligations then outstanding
exceeds the combined Commitments of the Banks by more than $500,000, due to a
change in applicable rates of exchange between Dollars and Offshore Currencies,
then the Agent shall give notice to the Company that a prepayment is required
under this Section 2.08, and the Company agrees thereupon to make prepayments of
Loans within one Business Day of such notice such that, after giving effect to
such prepayment the aggregate Dollar Equivalent amount of all Loans does not
exceed the combined Commitments.
2.9 Mandatory Prepayments of Loans. Subject to Section 4.04, if on any date
the Effective Amount of all Loans then outstanding plus the Effective Amount of
all L/C Obligations exceeds the aggregate Commitments (other than as a result of
currency exchange fluctuations), the Company shall immediately, and without
notice or demand, prepay the outstanding principal amount of the Loans in an
amount equal to the lesser of such excess and the amount of the outstanding
Loans and, if any excess shall still remain, shall Cash Collateralize the L/C
Obligations to the extent of such remaining excess.
2.10 Repayment. The Company shall repay to the Banks on April 22, 2001 or
on such earlier date as such Loans may become due and payable pursuant to
subsection 9.02(b) the aggregate principal amount of Loans outstanding on such
date.
2.11 Interest.
--------
(a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
Offshore Rate plus the Applicable Margin or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.04).
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of Loans
under Section 2.07, 2.08 or 2.09 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be paid on demand of the Agent at the
request or with the consent of the Required Banks.
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(c) Notwithstanding subsections 2.11(a) and 3.03(d), while any Event
of Default exists, for the period commencing after the Company's receipt of
notice from the Agent at the request, or with the consent, of the Required Banks
or after acceleration, the Company shall pay interest (after as well as before
entry of judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Loans and other Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect
for such Loans and, in the case of Obligations not subject to an Applicable
Margin, at a rate per annum equal to the Base Rate plus 2%; provided, however,
that, on and after the expiration of any Interest Period applicable to any
Offshore Rate Loan outstanding on the date of occurrence of such Event of
Default for the period commencing after the Company's receipt of notice from
the Agent at the request, or with the consent, of the Required Banks or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the Obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.12 Fees.
----
(a) Arrangement, Agency Fees. The Company shall pay an arrangement fee
to the Arranger for the Arranger's own account, and shall pay an agency fee to
the Agent for the Agent's own account, as required by the letter agreement ("Fee
Letter") between the Company and the Arranger and Agent dated March 13, 1996.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee equal to the Applicable Commitment Fee
Percentage times the average daily unused portion of such Bank's Commitment,
computed on a quarterly basis in arrears on the last Business Day of each
calendar quarter based upon the daily utilization for that quarter as calculated
by the Agent. For purposes hereof, each Bank's Commitment shall be deemed
utilized to the extent of its Pro Rata Share of all outstanding Loans and L/C
Obligations. Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
the last Business Day of each calendar quarter commencing with the first
calendar quarter ending after the date hereof through the Revolving Termination
Date, with the final payment to be made on the Revolving Termination Date;
provided that, in connection with any reduction or termination of Commitments
under Section 2.06, the accrued commitment fee calculated for the period ending
on such date shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the basis of the period
from such reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article V are not met.
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2.13 Computation of Fees and Interest.
--------------------------------
(a) All computations of interest for Base Rate Loans and of fees shall
be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All computations of interest for Offshore Rate Loans shall
be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) For purposes of determining utilization of each Bank's Commitment
in order to calculate the commitment fee due under subsection 2.12(b), the
amount of any outstanding Offshore Currency Loan on any date shall be determined
based upon the Dollar Equivalent amount as of the most recent Computation Date
with respect to such Offshore Currency Loan.
(c) Each determination of an interest rate or a Dollar Equivalent
amount by the Agent shall be rebuttably presumptive evidence thereof in the
absence of manifest error. The Agent will, at the request of the Company or any
Bank, deliver to the Company or the Bank, as the case may be, a statement
showing the quotations used by the Agent in determining any interest rate or
Dollar Equivalent amount.
(d) If any Reference Bank's Commitment terminates (other than on
termination of all the Commitments), or for any reason whatsoever such Reference
Bank ceases to be a Bank hereunder, such Reference Bank shall thereupon cease to
be a Reference Bank, and the Offshore Rate shall be determined on the basis of
the rates as notified by the remaining Reference Bank(s). In such event, the
Company (with the consent of the Agent) may designate another Bank as a
Reference Bank hereunder.
(e) Each Reference Bank shall use its best efforts to furnish
quotations of rates to the Agent as contemplated hereby. If any of the Reference
Banks fails to supply such rates to the Agent upon its request, the rate of
interest shall be determined on the basis of the quotations of the remaining
Reference Bank(s).
2.14 Payments by the Company.
-----------------------
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Agent for the account
of the Banks at the Agent's Payment Office, and, with respect to principal of,
interest on, and any other amounts relating to, any Offshore Currency Loan,
shall be made in the Offshore Currency in which such Loan is denominated or
payable, and, with respect to all other amounts payable hereunder, shall be made
in Dollars. Such payments shall be made in Same Day Funds, and (i) in the case
of Offshore Currency payments, no later than such time on the dates specified
herein as may be determined by the Agent to be necessary for such payment to be
credited on such date in accordance with normal banking procedures in the place
of payment, and (ii) in the case of any Dollar payments, no later than 12:00
noon (Chicago time) on the date specified herein. The Agent will promptly
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distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such principal, interest, fees or other amounts,
in like funds as received. Any payment which is received by the Agent later than
12:00 noon (Chicago time), or later than the time specified by the Agent as
provided in clause (i) above (in the case of Offshore Currency payments), shall
be deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in Same Day Funds and
the Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent the Company has not made such payment in full to
the Agent, each Bank shall repay to the Agent on demand such amount distributed
to such Bank, together with interest thereon at the Federal Funds Rate or, in
the case of a payment in an Offshore Currency, the Overnight Rate, for each day
from the date such amount is distributed to such Bank until the date repaid.
2.15 Payments by the Banks to the Agent.
----------------------------------
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at least
one Business Day prior to the date of such Borrowing, that such Bank will not
make available as and when required hereunder to the Agent for the account of
the Company the amount of that Bank's Pro Rata Share of the Borrowing, the Agent
may assume that each Bank has made such amount available to the Agent in Same
Day Funds on the Borrowing Date and the Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any Bank shall not have
made its full amount available to the Agent in Same Day Funds and the Agent in
such circumstances has made available to the Company such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate or, in
the case of any Borrowing consisting of Offshore Currency Loans, the Overnight
Rate, for each day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this subsection 2.15(a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made available to the
Agent on the Business Day following the Borrowing Date, the Agent will notify
the Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
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(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.16 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section 2.16 and will in each case notify
the Banks following any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT
---------------------
3.1 The Letter of Credit Subfacility.
--------------------------------
(a) On the terms and conditions set forth herein (i) the Issuing Bank
agrees, (A) from time to time on any Business Day during the period from the
Closing Date to, but not including, the Revolving Termination Date to issue
Letters of Credit denominated in Dollars or an Offshore L/C Currency for the
account of the Company, and to amend or renew Letters of Credit previously
issued by it, in accordance with subsections 3.02(c) and 3.02(d), and (B) to
honor drafts under the Letters of Credit; and (ii) the Banks severally agree to
participate in Letters of Credit Issued for the account of the Company;
provided that the Issuing Bank shall not be obligated to Issue, and no Bank
shall be obligated to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "Issuance Date"): (A) the Effective
Amount of all L/C Obligations plus the Effective Amount of all Loans exceeds the
aggregate Commitments or (B) the participation of any Bank in the Effective
Amount of all L/C Obligations plus the Effective Amount of the Loans of such
Bank exceeds such Bank's Commitment. Within the foregoing limits, and subject to
the other terms and conditions hereof, the Company's ability to obtain Letters
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of Credit shall be fully revolving, and, accordingly, the Company may, during
the foregoing period, obtain Letters of Credit to replace Letters of Credit
which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank shall be under no obligation to Issue any Letter
of Credit if:
(i) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the Issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Issuing Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for
which the Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuing Bank in good faith deems material to it and for
which the Issuing Bank is not compensated hereunder.
(ii) the Issuing Bank has received written notice from any Bank,
the Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than 360 days after the date of Issuance, unless the Required Banks
and the Issuing Bank have approved such expiry date in writing, or (B)
after five Business Days prior to the scheduled Revolving Termination Date,
unless all of the Banks have approved such expiry date in writing;
(iv) any requested Letter of Credit is not in a form reasonably
acceptable to the Issuing Bank, or the Issuance of a Letter of Credit shall
violate any applicable policies of the Issuing Bank; or
(v) any standby Letter of Credit is for the purpose of supporting
the issuance of any letter of credit by any other Person.
3.2 Issuance, Amendment and Renewal of Letters of Credit.
----------------------------------------------------
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least two Business Days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of issuance. Each such request for issuance of a Letter of
Credit shall be by facsimile or electronic transmission, confirmed immediately
in an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the proposed date of
issuance of the Letter of Credit (which shall be a Business Day); (ii) the face
amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit;
(iv) the name and address of the beneficiary thereof; (v) the documents to be
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presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; (vii) the currency (which shall
be Dollars or an Offshore L/C Currency) in which the Letter of Credit is to be
denominated; and (viii) such other matters as the Issuing Bank may reasonably
require.
(b) If the Agent is not the Issuing Bank, by 12:00 noon (Chicago time)
on the Business Day next preceding the requested date of issuance of a Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (i) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.01(a)(ii) as a result of the limitations set
forth in clauses (A) and (B) thereof or subsection 3.01(b)(ii); or (ii) that one
or more conditions specified in Article V are not then satisfied; then, subject
to the terms and conditions hereof, the Issuing Bank shall, on the requested
date, issue a Letter of Credit for the account of the Company in accordance with
the Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least two Business Days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of amendment, amend any Letter of Credit issued by it. Each
such request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may reasonably require. The Issuing Bank shall be under no obligation to
amend any Letter of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue such Letter of Credit in its amended form under the terms of
this Agreement; or (B) the beneficiary of any such Letter of Credit does not
accept the proposed amendment to the Letter of Credit.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Company and upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least two
Business Days (or such shorter time as the Issuing Bank may agree in a
particular instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Bank shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it; provided that the
Issuing Bank shall not be entitled to authorize such automatic renewal if, at
least one Business Day prior to the proposed date of notification of renewal, it
shall have received notice from the Agent (i) directing the Issuing Bank not to
renew such Letter of Credit because such renewal is not then permitted under
subsection 3.01(a)(ii) as a result of the limitations set forth in clauses (A)
and (B) thereof or subsection 3.01(b)(ii); or (ii) that one or more conditions
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specified in Article V are not then satisfied. Each such request for renewal of
a Letter of Credit shall be made by facsimile, confirmed immediately in an
original writing, in the form of an L/C Amendment Application, and shall specify
in form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to
be renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Bank may require.
The Issuing Bank shall be under no obligation to renew, and no Bank shall be
obligated to participate in, any Letter of Credit if: (A) the Issuing Bank would
have no obligation at such time to issue or amend, and no Bank would be
obligated to participate in, such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be required to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.02(d) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Bank shall nonetheless renew such Letter of
Credit, and the Company and the Banks hereby authorize such renewal, and,
accordingly, the Issuing Bank shall be deemed to have received an L/C Amendment
Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the Agent
at the direction of the Required Banks), deliver any notices of termination or
other communications to any Letter of Credit beneficiary or transferee, and take
any other action as necessary or appropriate, at any time and from time to time,
in order to cause the expiry date of such Letter of Credit to be a date not
later than the scheduled Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict with any
L/C-Related Document (other than any Letter of Credit). In addition, unless the
Company and the Issuing Bank shall otherwise expressly agree in writing, any
purported grant of a Lien (or any requirement to do so) contained in any L/C
Related Document shall be ineffective and null and void.
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
(h) Within five Business Days after the end of each month, the Agent
will send to each Bank a statement reflecting the outstanding Letters of Credit
as of the end of such month.
3.3 Risk Participations, Drawings and Reimbursements.
------------------------------------------------
(a) Immediately upon the Issuance of each Letter of Credit, each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
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of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
Section 2.01, each Issuance of a Letter of Credit shall be deemed to utilize the
Commitment of each Bank by an amount equal to the amount of such participation
for so long as any related L/C Obligations shall be outstanding.
(b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Bank will promptly notify
the Company and the Agent. Provided that it shall have received such notice, the
Company shall reimburse the Issuing Bank prior to 12:00 noon (Chicago time) on
each date that any amount is paid by the Issuing Bank under any Letter of Credit
(each such date, an "Honor Date") in an amount equal to the amount so paid by
the Issuing Bank; provided that, if such Letter of Credit is denominated in an
Offshore L/C Currency, the Company shall pay to the Issuing Bank the Dollar
Equivalent of the amount of such Offshore L/C Currency paid by the Issuing Bank
under such Letter of Credit. In the event the Company fails to reimburse the
Issuing Bank for the full amount of any drawing under any Letter of Credit by
12:00 noon (Chicago time) on the Honor Date, the Issuing Bank will promptly
notify the Agent and the Agent will promptly notify each Bank thereof, and the
Company shall be deemed to have requested that Base Rate Loans be made by the
Banks to be disbursed on the Honor Date under such Letter of Credit, subject to
the amount of the unutilized portion of the Commitment and subject to the
conditions set forth in Section 5.02 other than any notice requirements. Any
notice given by the Issuing Bank or the Agent pursuant to this subsection
3.03(b) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c) Each Bank shall upon any notice pursuant to subsection 3.03(b)
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the amount of the Dollar Equivalent of the drawing, whereupon the
participating Banks shall (subject to subsection 3.03(d)) each be deemed to have
made a Loan consisting of a Base Rate Loan to the Company in that amount. If any
Bank so notified fails to make available to the Agent for the account of the
Issuing Bank the amount of such Bank's Pro Rata Share of such amount by no later
than 2:00 p.m. (Chicago time) on the Honor Date, then interest shall accrue on
such Bank's obligation to make such payment, from the Honor Date to the date
such Bank makes such payment, at a rate per annum equal to the Federal Funds
Rate in effect from time to time during such period. The Agent will promptly
give notice of the occurrence of the Honor Date, but failure of the Agent to
give any such notice on the Honor Date or in sufficient time to enable any Bank
to effect such payment on such date shall not relieve such Bank from its
obligations under this Section 3.03.
(d) With respect to any unreimbursed drawing that is not converted
into Loans consisting of Base Rate Loans to the Company in whole or in part as
contemplated by subsection 3.03(b), because of the Company's failure to satisfy
the conditions set forth in Section 5.02 other than any notice requirements or
for any other reason, the Company shall be deemed to have incurred from the
Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing
shall be due and payable on demand (together with interest) and shall bear
interest at a rate per annum equal to the Base Rate, and each Bank's payment to
the Issuing Bank pursuant to subsection 3.03(c) shall be deemed payment in
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respect of its participation in such L/C Borrowing and shall constitute an L/C
Advance from such Bank in satisfaction of its participation obligation under
this Section 3.03.
(e) Each Bank's obligation in accordance with this Agreement to make
the Loans or L/C Advances, as contemplated by this Section 3.03, as a result of
a drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against the Issuing Bank, the Company or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default, an Event of Default or a Material Adverse Effect; or (iii) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing; provided, however, that each Bank's obligation to make Loans
under this Section 3.03 is subject to the conditions set forth in Section 5.02.
3.4 Repayment of Participations.
---------------------------
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of immediately available funds from the Company (i) in
reimbursement of any payment made by the Issuing Bank under the Letter of Credit
with respect to which any Bank has paid the Agent for the account of the Issuing
Bank for such Bank's participation in the Letter of Credit pursuant to Section
3.03 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in
the same funds as those received by the Agent for the account of the Issuing
Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing
Bank shall receive the amount of the Pro Rata Share of such funds of any Bank
that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to return
to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of the Issuing Bank pursuant to subsection
3.04(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Agent or the Issuing Bank plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds
Rate in effect from time to time.
3.5 Role of the Issuing Bank.
------------------------
(a) Each Bank and the Company agree that, in paying any drawing under
a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft and certificates expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or the
authority of the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Bank for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Banks (including the Required Banks, as applicable); (ii)
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any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No Agent-
Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (a) through (g) of Section 3.06; provided, however,
anything in such clauses to the contrary notwithstanding, that the Company may
have a claim against the Issuing Bank, and the Issuing Bank may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Bank's willful misconduct or gross negligence
or the Issuing Bank's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation; and (ii) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason.
3.6 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Loans, shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(a) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
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(e) any payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
3.7 Letter of Credit Fees.
---------------------
(a) The Company shall pay to the Agent for the account of each of the
Banks a letter of credit fee with respect to the Letters of Credit equal to the
Applicable Margin times the average daily maximum amount available to be drawn
on the outstanding Letters of Credit, computed on a quarterly basis in arrears
on the last Business Day of each calendar quarter based upon Letters of Credit
outstanding for that quarter as calculated by the Agent. Such letter of credit
fees shall be due and payable quarterly in arrears on the last Business Day of
each calendar quarter during which Letters of Credit are outstanding, commencing
on the first such quarterly date to occur after the Closing Date, through the
Revolving Termination Date (or such later date upon which the outstanding
Letters of Credit shall expire), with the final payment to be made on the
Revolving Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank in an amount
agreed to by the Company and the Issuing Bank. Such Letter of Credit fronting
fee shall be due and payable on each date of Issuance of a Letter of Credit or
at such other time as may be agreed upon between the Company and the Issuing
Bank.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.8 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
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ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.1 Taxes.
(a) Any and all payments by the Company to each Bank or the Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section
4.01), such Bank or the Agent, as the case may be, receives and retains an
amount equal to the sum it would have received and retained had no such
deductions or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to each Bank or the Agent for the
account of such Bank, at the time interest is paid, Further Taxes in the
amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or the
Agent pursuant to subsection (b) or (c) of this Section 4.01, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
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(f) Notwithstanding anything to the contrary contained in this
Agreement, in no event shall the Company be either (i) obligated to pay any
amount to any Bank or the Agent pursuant to subsection (b) or (c) of this
Section 4.01 or (ii) prohibited from deducting or withholding for any applicable
Taxes pursuant to subsection (a) of this Section 4.01, if the Bank or Agent
fails to deliver forms to the Company in accordance with Section 10.10 on a
timely basis, unless such failure would not have occurred but for a change in
law or regulation or in the interpretation thereof by any governmental or
regulatory agency or body charged with the administration or interpretation
thereof, or the introduction of any law or regulation, that occurs on or after
the date hereof.
4.2 Illegality.
----------
(a) If any Bank determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make Offshore Rate Loans
(including Offshore Rate Loans in any Applicable Currency), then, on notice
thereof by the Bank to the Company through the Agent, any obligation of that
Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the
Agent and the Company that the circumstances giving rise to such determination
no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), prepay in full such Offshore Rate
Loans of that Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.04, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so prepay any
Offshore Rate Loan, then concurrently with such prepayment, the Company shall
(without regard to whether the conditions specified in Section 5.02 have been
satisfied) borrow from the affected Bank, in the amount of such repayment, a
Base Rate Loan.
(c) Before giving any notice to the Agent under this Section 4.02, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
4.3 Increased Costs and Reduction of Return.
---------------------------------------
(a) If any Bank determines that, due to either (i) the introduction of
or any change (other than any change by way of imposition of or increase in
reserve requirements included in the calculation of the Offshore Rate) in the
interpretation of any law or regulation after the date of this Agreement or (ii)
the compliance by that Bank with any
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guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) after the date of this Agreement, there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or participating in Letters of
Credit, or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Company shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, in any such case, after the date of this Agreement affects
or would affect the amount of capital required or expected to be maintained by
the Bank or any corporation controlling the Bank and (taking into consideration
such Bank's or such corporation's policies with respect to capital adequacy and
such Bank's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the Company
through the Agent, the Company shall pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to compensate the Bank for
such increase.
4.4 Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation except as set forth in subsection 2.05(b)
or (c);
(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.07;
(d) the prepayment (including pursuant to Section 2.07 or 2.08) or
other payment (including after acceleration thereof) of an Offshore Rate Loan on
a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
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to terminate the deposits from which such funds were obtained or from charges
relating to any Offshore Currency Loans. For purposes of calculating amounts
payable by the Company to the Banks under this Section 4.04 and under subsection
4.03(a), each Offshore Rate Loan made by a Bank (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the LIBOR used in determining the Offshore Rate for such Offshore
Rate Loan by a matching deposit or other borrowing in the interbank market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
4.5 Inability to Determine Rates. If any two of the three Reference Banks
determine that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or the Required Banks determine that the Offshore
Rate applicable pursuant to subsection 2.11(a) for any requested Interest Period
with respect to a proposed Offshore Rate Loan does not adequately and fairly
reflect the cost to the Banks of funding such Loan, the Agent will promptly so
notify the Company and each Bank. Thereafter, the obligation of the Banks to
make or maintain Offshore Rate Loans hereunder shall be suspended until the
Agent upon the instruction of the Required Banks revokes such notice in writing.
Upon receipt of such notice, the Company may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Company does not
revoke such Notice, the Banks shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Offshore Rate Loans. In the case of any Offshore
Currency Loans, the Borrowing or continuation shall be in an aggregate amount
equal to the Dollar Equivalent amount of the originally requested Borrowing or
continuation in the Offshore Currency, and to that end any outstanding Offshore
Currency Loans which are the subject of any continuation shall be redenominated
and converted into Base Rate Loans in Dollars with effect from the last day of
the Interest Period with respect to any such Offshore Currency Loans.
4.6 Reserves on Offshore Rate Loans. The Company shall pay to each Bank, in
respect of any Offshore Currency Loans, additional costs arising under any
applicable regulations of the central bank or other relevant Governmental
Authority in the country in which the Offshore Currency of such Offshore Rate
Loan circulates on the unpaid principal amount of each Offshore Rate Loan equal
to the actual costs of such reserves allocated to such Loan by the Bank (as
determined by the Bank in good faith, which determination shall be conclusive),
payable on each date on which interest is payable on such Loan, provided the
Company shall have received at least 15 days' prior written notice (with a copy
to the Agent) of such additional interest from the Bank. If a Bank fails to give
notice 15 days prior to the relevant Interest Payment Date, such additional
interest shall be payable 15 days from receipt of such notice.
4.7 Certificates of Banks. Any Bank or any Bank's participant claiming
reimbursement or compensation under this Article IV shall deliver to the Company
(with a copy to the Agent) a certificate setting forth in reasonable detail the
amount payable to the Bank hereunder and such certificate shall be conclusive
and binding on the Company in the absence of manifest error. Notwithstanding
anything to the contrary contained in this Agreement, no amounts shall be
payable by the Company pursuant to Section 4.03, 4.04 or 4.06 with respect to
any period commencing more than 180 days before the delivery of the certificate
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contemplated by this Section 4.07 unless such amounts are claimed as a result of
the retroactive effect of any newly enacted or adopted law, rule or regulation
and such certificate is delivered within 180 days after such enactment or
adoption.
4.8 Survival. The agreements and obligations of the Company in this Article
IV shall survive the payment of all other Obligations.
4.9 Replacement of Certain Banks.
(a) Notwithstanding any other provision of this Agreement, the
Company, at any time after any Bank or any Bank's participant has (i) delivered
a certificate pursuant to Section 4.07 or notified the Agent that it is unable
to extend or maintain any Offshore Rate Loans (including Offshore Currency
Loans) or (ii) failed to fund a Loan at any time that such Bank shall have been
committed to make such Loan or in the event such Bank may be replaced pursuant
to the provisions of subsection 11.08(e) (in any such case, a "Certificate
Bank"), shall have the right to replace the Certificate Bank in accordance with
this Section 4.09. Notwithstanding the foregoing, in no event may the Company
replace the Certificate Bank pursuant to this Section 4.09 if (i) the Agent
shall have received notice from the Required Banks specifying that a Default or
an Event of Default shall have occurred and be continuing and (ii) such Default
or Event of Default shall not have been subsequently cured or waived.
(b) The Company, in exercising its right to replace the Certificate
Bank, shall (i) reduce the Commitment of such Bank to zero and (ii) (A) agree
with one or more Banks to concurrently increase the respective Commitments of
such Bank or Banks by an aggregate amount not in excess of the amount of the
Commitment of the Certificate Bank prior to the exercise of this Section 4.09,
in full substitution of the Certificate Bank, (B) add one or more additional
Eligible Assignees as signatories to this Agreement for Commitments equal to the
amount of the Commitment of the Certificate Bank prior to the Company's exercise
of this Section 4.09, in full substitution of the Certificate Bank or (C) any
combination of increases in Commitments pursuant to (A) above and additional new
lenders pursuant to (B) above, so long as the aggregate sum of the increases in
Commitments plus the additional Commitments of the additional lenders equals the
amount of the Commitment of the Certificate Bank prior to the exercise of this
Section 4.09 and no new lender has a Commitment of less than $5,000,000. Any new
lender becoming a signatory to this Agreement shall, without further action, be
considered a Bank for all purposes of this Agreement at the time of execution of
an appropriate Assignment and Acceptance.
(c) The Company shall have the right to select any additional Eligible
Assignee or Eligible Assignees to become signatories to this Agreement pursuant
to subsection 4.09(b) above, subject to the consent of the Agent, which consent
shall not be unreasonably withheld.
(d) The Company shall give the Agent and any Certificate Bank being
replaced not less than five Business Days' notice of the date (which shall be a
Business Day) on which such Certificate Bank shall be replaced.
(e) Each Bank or additional lender which replaces a Certificate Bank
pursuant to this Section 4.09 shall acquire all (or if more than one Bank or
lender is replacing a Certificate Bank the aggregate shall severally acquire
all) of the then outstanding Loans and L/C Obligations of the Certificate Bank.
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(f) At the time of replacement, the Certificate Bank shall have been
paid in full the principal of, and interest accrued and unpaid to the date of
replacement on, all outstanding Loans and unreimbursed L/C Obligations of the
Certificate Bank, and all accrued and unpaid to the date of replacement fees
owing to the Certificate Bank.
(g) After a Certificate Bank is replaced pursuant to this Section
4.09, it shall have no further rights (other than rights which by the terms
hereof survive the termination hereof) or obligations hereunder (and shall no
longer be a "Bank" for purposes hereof); provided that a replaced Certificate
Bank shall retain its rights and obligations as a Bank hereunder with respect to
the period before it was so replaced (except to the extent that it shall have
assigned or otherwise transferred such rights).
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.1 Conditions of Initial Credit Extensions. The obligation of each Bank to
make its initial Credit Extension hereunder is subject to the condition that the
Agent shall have received on or before the date of the initial Credit Extension
all of the following, in form and substance reasonably satisfactory to the Agent
and each Bank, and in sufficient copies for each Bank:
(a) Credit Agreement and Notes. This Agreement and the Notes executed
by each party thereto;
(b) Resolutions; Incumbency.
(i) copies of the resolutions of the board of directors of the
Company and each Guarantor authorizing the transactions contemplated
hereby, certified by the Secretary or an Assistant Secretary of the Company
and such Guarantor; and
(ii) a certificate of the Secretary or Assistant Secretary of the
Company and each Guarantor certifying the names and true signatures of the
officers of the Company and such Guarantor authorized to execute, deliver
and perform, as applicable, this Agreement and all other Loan Documents to
be delivered by such Person hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the bylaws
of the Company and each Guarantor as in effect on the date hereof,
certified by the Secretary or Assistant Secretary of the Company and such
Guarantor as of such date; and
(ii) a good standing certificate for the Company from the
Secretary of State (or similar, applicable Governmental Authority) of the
states of Missouri, its state of incorporation, and Kansas and for each
Guarantor from the Secretary of State (or similar, applicable Governmental
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Authority) of its state of incorporation as of a recent date, together with
bring-down certificates by facsimile, dated the date hereof;;
(d) Legal Opinions. An opinion of each of (i) Latham & Watkins,
counsel to the Company and the Guarantors, substantially in the form of Exhibit
D-1, and (ii) Louis J. Garr, Jr., general counsel of The May Department Stores
Company, substantially in the form of Exhibit D-2, addressed to the Agent and
the Banks;
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees to the extent then due and payable on the Closing Date;
(f) Certificate. A certificate signed by a Responsible Officer on
behalf of the Company, dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article VI
are true and correct on and as of such date, as though made on and as of
such date;
(ii) no Default or Event of Default exists or would result from
the initial Credit Extension;
(iii) there has occurred since February 3, 1996, no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect; and
(iv) as of February 3, 1996, the Present Value of Operating
Leases was $885,500,000;
(g) Subsidiary Guaranty. The Subsidiary Guaranty executed and
delivered by a duly authorized officer of each of the Guarantors party thereto;
and
(h) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may reasonably request.
5.2 Conditions to All Credit Extensions. The obligation of each Bank to
make any Loan to be made by it (including its initial Loan) and the obligation
of the Issuing Bank to issue, and of each Bank to participate in, any Letter of
Credit are subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date or Issuance Date:
(a) Notice of Borrowing or Issuance. The Agent shall have received
(with, in the case of the initial Loan only, a copy for each Bank) a Notice of
Borrowing or in the case of any Issuance of any Letter of Credit, the Agent and
the Issuing Bank shall have received an L/C Application or L/C Amendment
Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Issuance Date with the same effect as if made on and
as of such Borrowing Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date); and
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(c) No Existing Default. No Default or Event of Default shall exist
or shall result from such Borrowing or Issuance.
Each Notice of Borrowing and L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice and as of
each Borrowing Date or Issuance Date, that the conditions in subsection 5.02(a),
(b) and (c) are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
6.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect; and
(d) is in compliance with all Requirements of Law; except where the
failure to do so or to so comply could not reasonably be expected to have a
Material Adverse Effect.
6.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company and the Guarantors of this Agreement and each
other Loan Document have been duly authorized by all necessary corporate action,
and do not and will not:
(a) contravene the terms of any of such Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any material Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its property is
subject; or
(c) violate any Requirement of Law applicable to such Person.
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6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any Guarantor of the Agreement or any other Loan Document.
6.4 Binding Effect. This Agreement and each other Loan Document
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.5 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or, to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of their respective
properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) may reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery or performance of this Agreement
or any other Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein provided.
6.6 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 9.01(e).
6.7 ERISA Compliance. Except as specifically disclosed in Schedule
6.07:
(a) Each Plan is in compliance with the applicable provisions of
ERISA, the Code and other federal or state law except where the failure to do so
or to so comply could not reasonably be expected to have a Material Adverse
Effect. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and, to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
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(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.12.
Neither the Company nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.
6.9 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
6.10 Financial Condition.
(a) The audited consolidated financial statements of the Company and
its Subsidiaries for the fiscal year ended February 3, 1996 and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein;
(ii) fairly present the financial condition of the Company and its
Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.10, show all
material indebtedness and other liabilities, direct or contingent, of the
Company and
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its consolidated Subsidiaries as of the date thereof, including liabilities
for taxes, material commitments and Contingent Obligations.
(b) Since February 3, 1996, there has been no Material Adverse Effect.
6.11 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.11, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
6.12 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.13 Subsidiaries. As of the date of this Agreement, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.13. The Company has no Material Subsidiaries other than those specifically
disclosed in part (b) of Schedule 6.13 or as disclosed pursuant to subsection
7.03(e) (including their jurisdictions of incorporation). As of the date of this
Agreement, the Company has no equity investments in any other corporation or
entity other than those specifically disclosed in part (c) of Schedule 6.13.
6.14 Insurance. The properties of the Company and its Subsidiaries are
insured as required by Section 7.06.
6.15 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations.
6.16 Full Disclosure. None of the representations or warranties made by the
Company in the Loan Documents as of the date such representations and warranties
are made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the Company or any
Subsidiary in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of the Company to the Banks prior
to the Closing Date) taken as a whole, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid, unless the Required Banks waive compliance
in writing:
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7.1 Financial Statements. The Company shall deliver to the Agent, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 120 days after the end of
each fiscal year (commencing with fiscal year ending January 1997), a copy of
the audited consolidated balance sheet of the Company and its Subsidiaries as at
the end of such year and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Arthur Andersen LLP or another
nationally-recognized independent public accounting firm ("Independent Auditor")
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a consistent basis. Such opinion shall not be qualified or limited,
in either case, because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any Subsidiary's
records; and
(b) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with the
first fiscal quarter ending after the date hereof, a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day and ending on
the last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments and the absence of notes thereto), the financial position and
the results of operations of the Company and the Subsidiaries.
To the extent included therein, the information required to be
delivered pursuant to this Section 7.01 may be delivered by delivery of the
financial statements and reports required to be delivered pursuant to subsection
7.02(c).
7.2 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(c) promptly, but not later than five days after the date of filing
with the SEC, copies of all financial statements and reports that the Company
sends to its shareholders, and copies of all financial statements and regular,
periodical or special reports (including Forms 10-K, 10-Q and 8-K) that the
Company or any Subsidiary may make to, or file with, the SEC;
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(d) promptly after the creation or acquisition of any Material
Subsidiary, the name of such Material Subsidiary, a description of its business,
its net worth and the value of its assets; and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time request.
7.3 Notices. The Company shall promptly notify the Agent:
(a) upon any Responsible Officer becoming aware of the occurrence of
any Default or Event of Default;
(b) of any matter that has resulted, or may, in the judgment of the
Company, reasonably be expected to result in a Material Adverse Effect,
including (i) breach or non-performance of, or any default under, a Contractual
Obligation of the Company or any Subsidiary; (ii) any dispute, litigation,
investigation, proceeding or suspension between the Company or any Subsidiary
and any Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company or any
Subsidiary, including pursuant to any applicable Environmental Laws;
(c) upon any Responsible Officer becoming aware of the occurrence of
any ERISA Event (but in no event more than 10 days after such ERISA Event), and
deliver to the Agent and each Bank a copy of any notice with respect to such
ERISA Event that is filed with a Governmental Authority and any notice delivered
by a Governmental Authority to the Company or any ERISA Affiliate with respect
to such ERISA Event;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries; and
(e) of any Subsidiary (including its jurisdiction of incorporation)
which is not a Guarantor being or becoming a Material Subsidiary.
Each notice under this Section 7.03 shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time (although the
failure to take any such action shall not constitute a Default or Event of
Default under this Agreement). Each notice under subsection 7.03(a) shall
describe the provisions of this Agreement or other Loan Document that have been
breached or violated.
7.4 Preservation of Corporate Existence, Etc. The Company shall, and shall
cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation except as otherwise permitted by this Agreement;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
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transactions permitted by Section 8.03 and sales of assets permitted by Section
8.02 and except for any of the foregoing the expiration or termination of which
could not reasonably be expected to have a Material Adverse Effect;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.5 Maintenance of Property. The Company shall maintain, and shall cause
each Subsidiary to maintain, and preserve all its material property which is
used in its business in good working order and condition, ordinary wear and tear
excepted except where the failure to so maintain or preserve could not
reasonably be expected to have a Material Adverse Effect.
7.6 Insurance. The Company shall maintain, and shall cause each Subsidiary
to maintain, with financially sound and reputable independent insurers,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons, provided that the Company and its
Subsidiaries may self-insure against such risks and in such amounts as is
usually self-insured by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company and its
Subsidiaries operate.
7.7 Payment of Tax Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
tax liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary.
7.8 Compliance with Laws. The Company shall comply, and shall cause each
Subsidiary to comply, with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business, except where the failure to so
comply could not reasonably be expected to cause a Material Adverse Effect.
7.9 Compliance with ERISA. The Company shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent and representatives of any Bank to
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visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and, in the presence of the
Company if the Company shall so request, independent public accountants, all at
such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company.
7.11 Environmental Laws. The Company shall, and shall cause each Subsidiary
to, conduct its operations and keep and maintain its property in compliance with
all Environmental Laws except where the failure to do so or to so comply could
not reasonably be expected to have a Material Adverse Effect.
7.12 Use of Proceeds. The Company shall use the proceeds of the Loans for
general corporate purposes and not in contravention of any Requirement of Law
(including Regulation G, T, U and X of the FRB) or of any Loan Document.
7.13 Additional Guarantors. In the event any Person shall hereafter become
a Material Subsidiary, the Company shall promptly cause such Material Subsidiary
to become a party to the Subsidiary Guaranty.
ARTICLE VIII
NEGATIVE AND FINANCIAL COVENANTS
--------------------------------
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid, unless the Required Banks waive
compliance in writing:
8.1 Limitation on Liens. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any Subsidiary on
the Closing Date and set forth in Schedule 8.01 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.07; provided that no notice
of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent for more than 90 days or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
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(e) Liens (other than any Lien imposed by ERISA) consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or any Subsidiary securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, (ii) contingent obligations on
surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business and treating
as non-delinquent any delinquency which is being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
(g) Liens consisting of judgment or judicial attachment liens with
respect to judgments that do not constitute an Event of Default and in the
aggregate do not exceed $10,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the businesses of the Company
and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement; provided, however, that such Liens existed at the
time the respective corporations became Subsidiaries and were not created in
anticipation thereof;
(j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(k) Liens securing reimbursement obligations incurred in the ordinary
course of business for letters of credit, which Liens encumber only goods, or
documents of title covering goods, which are purchased in transactions for which
such letters of credit are issued;
(l) any extension, renewal or substitution of or for any of the
foregoing Liens; provided that (i) the Indebtedness or other obligation or
liability secured by the applicable Lien shall not exceed the Indebtedness or
other obligation or liability existing immediately prior to such extension,
renewal or substitution and (ii) the Lien securing such Indebtedness or other
obligation or liability shall be limited to the property which, immediately
prior to such extension, renewal or substitution, secured such Indebtedness or
other obligation or liability; and
(m) other Liens securing Indebtedness or other obligations not at any
time exceeding $50,000,000 in aggregate principal amount.
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8.2 Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (collectively, a "Disposition")
(whether in one or a series of transactions) any property (including accounts
and notes receivable, with or without recourse) or enter into any agreement to
do any of the foregoing, except:
(a) Dispositions of inventory, or used, worn-out, obsolete or surplus
equipment and other assets, all in the ordinary course of business;
(b) Dispositions of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) Dispositions of assets (including leasehold interests and related
assets) in connection with sale/leasebacks of stores developed by the Company or
any of its Subsidiaries in the ordinary course of business in amounts and under
circumstances consistent with past practices;
(d) Dispositions of assets received in connection with the bankruptcy
or reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;
(e) Dispositions of assets between and among the Company and its
Wholly-Owned Subsidiaries and the Disposition of assets from any other
Subsidiary to the Company or a Wholly-Owned Subsidiary of the Company; and
(f) Dispositions not otherwise permitted hereunder which are made for
fair market value; provided that (i) at the time of any Disposition, no Event of
Default shall exist or shall result from such Disposition and (ii) the aggregate
sales price of all assets so sold by the Company and its Subsidiaries, together,
shall not exceed in any fiscal year 5% (but for the fiscal year ending January
1997, 10%) of the total consolidated assets of the Company and its Subsidiaries,
determined in accordance with GAAP, as of the beginning of such fiscal year.
Upon the permitted Disposition by any Guarantor of all or
substantially all of its assets to any Person (and after the subsequent
distribution of the consideration received therefor by such Guarantor to the
Company or another Guarantor), such Guarantor shall be automatically released
from its obligations under the Subsidiary Guaranty. The Agent shall provide
written confirmation of such release to the Company upon the Company's request
therefor.
8.3 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge with or consolidate into any Person,
except:
(a) the Company or any Subsidiary may merge with or consolidate into
any Person, provided that (i) at the time of such merger or consolidation, no
Event of Default shall exist or result from the consummation of such merger or
consolidation and (ii) the Company or such Subsidiary shall be the continuing or
surviving corporation;
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(b) any Subsidiary may merge with or consolidate into the Company,
provided that the Company shall be the continuing or surviving corporation, or
with any one or more Subsidiaries, provided that if any transaction shall be
between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary
shall be the continuing or surviving corporation and if any transaction shall be
between a Subsidiary and a Guarantor, the Guarantor shall be the continuing or
surviving corporation or the surviving Subsidiary becomes a Guarantor; and
(c) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another Wholly-
Owned Subsidiary or as otherwise permitted by Section 8.02.
Any Disposition of assets which would be permitted by Section 8.02 may also be
accomplished via a merger or consolidation of a Subsidiary and such merger or
consolidation shall be permitted pursuant to this Section 8.03.
8.4 Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person (other than the Company), or
make or commit to make any Acquisitions, or make or commit to make any advance,
loan, extension of credit or capital contribution to or any other investment in,
any Person (other than the Company) including any Affiliate of the Company
(together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in the form of cash
equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(c) extensions of credit by the Company to any of its Wholly-Owned
Subsidiaries or by any of its Subsidiaries to the Company or one of its Wholly-
Owned Subsidiaries;
(d) advances to employees for moving, relocation and travel expenses,
drawing accounts and similar expenditures and loans to employees in the ordinary
course of business;
(e) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, suppliers and customers arising in the
ordinary course of business;
(f) Investments of the Company and its Subsidiaries in existence as of
the Closing Date and set forth on Schedule 8.04;
(g) any extension or renewal of any of the foregoing;
(h) Investments incurred in order to consummate an Acquisition of any
Person principally engaged in a business substantially similar to the business
of the Company; provided that (i) such Acquisition is undertaken in accordance
with all applicable Requirements of Law and (ii) the prior, effective written
consent or approval to such Acquisition of the board of directors or equivalent
governing body of the acquiree is obtained; and
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(i) other Investments made in any fiscal year not exceeding $5,000,000
in the aggregate in such fiscal year.
8.5 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.07;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.05;
(d) Indebtedness constituting an Investment permitted pursuant to
Section 8.04; and
(e) Other Indebtedness of the Company and its Subsidiaries so long as
after giving pro forma effect to the incurrence of such Indebtedness as if such
Indebtedness had been incurred on the last date of the most recently completed
fiscal quarter the ratio of (i) Total Debt to (ii) Total Capitalization would
not have been greater than 60%; provided, however, that not more than
$10,000,000 of such other Indebtedness outstanding at any time shall be
Indebtedness of the Subsidiaries; provided further, however, that solely for
purposes of computations under this subsection 8.05(e), all such other
Indebtedness outstanding at the time of such incurrence shall be included in the
definitions of "Total Debt" and "Total Capitalization".
8.6 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
8.7 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.07;
(d) Contingent Obligations with respect to Surety Instruments incurred
in the ordinary course of business;
(e) in addition to other Contingent Obligations permitted hereunder,
Contingent Obligations which do not exceed $1,000,000 in the aggregate at any
one time outstanding;
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(f) Guaranty Obligations of the Company or of any Guarantor with
respect to any Indebtedness permitted pursuant to subsection 8.05(e); and
(g) the Subsidiary Guaranty.
8.8 Restricted Payments. The Company shall not, and shall not suffer
or permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding, except
that:
(a) any Wholly-Owned Subsidiary may pay dividends and make
distributions to the Company or to any other Wholly-Owned Subsidiary;
(b) the Company and any Subsidiary may declare and make dividend
payments or other distributions payable solely in its common stock; and
(c) the Company may declare or pay cash dividends to its stockholders
and purchase, redeem or otherwise acquire shares of its capital stock or
warrants, rights or options to acquire any such shares for cash in an aggregate
amount not in excess of 50% of Consolidated Net Income of the Company and its
Subsidiaries arising after the date hereof, and computed on a cumulative
consolidated basis; provided that, immediately after giving effect to such
proposed action (or, in the case of dividends declared not earlier than 45 days
prior to the payment thereof, at the time of such declaration), no Default or
Event of Default would exist.
8.9 ERISA. The Company shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably expected to result in liability of the Company in
an aggregate amount in excess of $10,000,000; or (b) engage in a transaction
that could be reasonably expected to be subject to Section 4069 or 4212(c) of
ERISA.
8.10 Change in Business. The Company shall not, and shall not suffer
or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and its Subsidiaries on the date hereof. The Company shall (a) cause assets
generating at least 90% of the consolidated revenues of the Company and its
Subsidiaries to be owned or leased by the Company at all times and (b) cause
assets generating at least 90% of Consolidated Net Income of the Company and its
Subsidiaries to be owned or leased by the Company and the Material Subsidiaries
existing as of the date of this Agreement at all times.
8.11 Accounting Changes. The Company shall not, and shall not suffer
or permit any Subsidiary to, make any significant change in accounting treatment
or reporting practices, except as permitted by GAAP or SEC reporting
requirements, or change the fiscal year of the Company or of any Subsidiary.
8.12 Financial Covenants.
(a) Fixed Charge Coverage Ratio. For the period of four consecutive
fiscal quarters ending on the last day of each fiscal quarter, the Company shall
not permit the Fixed Charge Coverage Ratio to be less than 1.5:1.0.
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(b) Leverage Ratio. The Company shall not permit the ratio of (i)
Total Debt to (ii) Total Capitalization to be greater than 60% as of the last
day of any fiscal quarter.
(c) Consolidated Tangible Net Worth. The Company shall not permit
Consolidated Tangible Net Worth to be less than $600,000,000 as of the last day
of any fiscal quarter.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.1 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required to
be paid herein, any amount of principal of any Loan, or (ii) within five days
after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement (i) contained in Section 8.01, 8.04 or 8.07 and such
failure continues unremedied for five Business Days or (ii) contained in either
subsection 7.03(a) or Section 7.12 or in any other provision of Article VIII; or
(d) Other Defaults. The Company fails to perform or observe any other
term or covenant contained in this Agreement or any other Loan Document, and
such default shall continue unremedied for a period of 20 days after the date
upon which written notice thereof is given to the Company by the Agent or any
Bank; or
(e) Cross-Default. The Company or any Subsidiary (i) fails to make any
payment in respect of any Indebtedness or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or condition is to
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cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding
is commenced or filed against the Company or any Material Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Material
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Material Subsidiary admits
the material allegations of a petition against it in any Insolvency Proceeding,
or an order for relief (or similar order under non-U.S. law) is ordered in
any Insolvency Proceeding; or (iii) the Company or any Material Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other similar Person
for itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted in liability of the Company under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an
aggregate amount in excess of $10,000,000; (ii) the aggregate amount of Unfunded
Pension Liability among all Pension Plans at any time exceeds $10,000,000; or
(iii) the Company or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan in an aggregate amount in excess of $10,000,000; or
(i) Monetary Judgments. One or more final judgments, final orders,
decrees or arbitration awards is entered against the Company or any Subsidiary
involving in the aggregate a liability (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute coverage) as to
any single or related series of transactions, incidents or conditions, of
$10,000,000 or more (determined after allowance for the application of any
insurance proceeds to such judgment or order), and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after
the entry thereof; or
(j) Change of Control. There occurs any Change of Control; or
(k) Subsidiary Guaranty. The Subsidiary Guaranty shall fail to remain
in full force and effect (except, with respect to any Material Subsidiary, upon
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the merger or consolidation of such Material Subsidiary with and into the
Company or any other Material Subsidiary which is a Guarantor), or any action
shall be taken to discontinue or to assert the invalidity or unenforceability of
the Subsidiary Guaranty (after giving effect to any applicable grace period set
forth therein), or any Guarantor shall fail to comply with any of the terms or
provisions of the Subsidiary Guaranty, or any Guarantor denies that it has any
further liability under the Subsidiary Guaranty, or gives notice to such effect
other than as a consequence of the satisfaction of its obligations thereunder.
9.2 Remedies. If any Event of Default occurs and is continuing, the
Agent shall, at the request of, or may, with the consent of, the Required Banks,
(a) declare the commitment of each Bank to make Loans and to issue and
participate in Letters of Credit to be terminated, whereupon such commitments
shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence and during the continuance of any
Event of Default specified in subsection (f) or (g) of Section 9.01 with respect
to the Company, the obligation of each Bank to make Loans and the obligation of
any Issuing Bank to issue Letters of Credit shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Agent or any Bank. In addition, following the occurrence and during
the continuance of an Event of Default, so long as any Letter of Credit has not
been fully drawn and has not been canceled or expired by its terms, upon demand
by the Agent, the Company shall, upon the request of the Required Banks, Cash
Collateralize the dollar amount of the aggregate undrawn amount of all Letters
of Credit. Such funds shall be promptly applied by the Agent to reimburse the
Issuing Bank for drafts drawn from time to time under the Letters of Credit.
Such funds, if any, remaining following the payment of all Obligations in full
or the earlier termination of all Events of Default shall, unless the Agent is
otherwise directed by a court of competent jurisdiction, be promptly paid over
to the Company.
9.3 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
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ARTICLE X
THE AGENT
---------
10.1 Appointment and Authorization; "Agent". Each Bank hereby
irrevocably (subject to Section 10.09) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
10.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.3 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No Agent-
Related Person shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
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affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Banks as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Required
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
10.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Banks in
accordance with Article IX; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
10.6 Credit Decision. Each Bank acknowledges that none of the Agent-
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
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Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of any of the Agent-Related Persons.
10.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section 10.07 shall survive the payment of all Obligations hereunder and
the resignation or replacement of the Agent.
10.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
10.9 Successor Agent. The Agent may, and at the request of the
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor agent for the Banks which successor agent shall be
approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
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After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above.
10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent and the Company, to deliver to the
Agent and the Company:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with the conduct of a United States trade or business by such
Bank, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such Bank
and in each succeeding taxable year of such Bank during which interest may
be paid under this Agreement; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent and the Company of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent and the Company of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent and the Company will treat such Bank's IRS
Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
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(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent or the Company may withhold from any interest payment
to such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction.
However, if the forms or other documentation required by subsection (a) of this
Section 10.10 are not delivered to the Agent or the Company, then the Agent or
the Company may withhold from any interest payment to such Bank not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent or the Company did
not properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Agent or the Company of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the Agent
and the Company fully for all amounts paid, directly or indirectly, by the Agent
or the Company as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Agent or the Company under this Section 10.10, together with all costs and
expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
10.11 Co-Agents. None of the Banks identified on the facing page or
signature pages of this Agreement as a "co-agent" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, none of
the Banks so identified as a "co-agent" shall have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on any of the Banks so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any Guarantor therefrom, shall be effective unless
the same shall be in writing and signed by the Required Banks (or by the Agent
at the written request of the Required Banks) and the Company or any Guarantor,
as applicable, and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Company and acknowledged by the Agent, do any of
the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 9.02);
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(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest other than default
interest, fees or other amounts due to the Banks (or any of them) hereunder or
under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder;
(e) release (other than a release provided for in the last paragraph
of Section 8.02) any Guarantor from the Subsidiary Guaranty; or
(f) amend this Section 11.01, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Required Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
11.2 Notices.
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 11.02, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 11.02; or, as directed to the Company or the Agent, to such
other address as shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Company and the
Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or X to the Agent shall not be effective until
actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Company to
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give such notice and the Agent and the Banks shall not have any liability to the
Company or other Person on account of any action taken or not taken by the Agent
or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans shall not be affected in any way or
to any extent by any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the Agent
and the Banks of a confirmation which is at variance with the terms understood
by the Agent and the Banks to be contained in the telephonic or facsimile
notice.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
11.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent promptly after demand for all reasonable
out-of-pocket costs and expenses incurred by the Agent in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs incurred by
the Agent with respect thereto; and
(b) pay or reimburse the Agent, the Arranger and each Bank promptly
after demand for all reasonable out-of-pocket costs and expenses (including
reasonable Attorney Costs) incurred by them in connection with the exercise,
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
11.5 Company Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify, defend and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, agents and attorneys-in-fact (each, an "Indemnified
Person") harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever which
may at any time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any Loan Document, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with
respect to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, or related to any Offshore
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Currency transactions entered into in connection herewith, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities to
the extent resulting from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section 11.05 shall survive payment
of all other Obligations.
11.6 Payments Set Aside. To the extent that the Company makes a payment to
the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
11.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
11.8 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Company (which
consent shall not be unreasonably withheld) at all times other than during the
existence of an Event of Default, the Agent and the Issuing Bank, if applicable,
at any time assign and delegate to one or more Eligible Assignees (provided that
no written consent of the Company, the Agent or the Issuing Bank, if applicable,
shall be required in connection with any assignment and delegation by a Bank to
an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee")
all, or any ratable part of all, of the Loans, the Commitments and the other
rights and obligations of such Bank hereunder, in a minimum amount of
$5,000,000; provided, however, that the Company and the Agent may continue to
deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company and the Agent by such Bank and
the Assignee; (ii) such Bank and its Assignee shall have delivered to the
Company and the Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Bank or Assignee has paid to the Agent a
processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
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Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the Agent
that it has received an executed Assignment and Acceptance and payment of the
processing fee, (and provided that it consents to such assignment in accordance
with subsection 11.08(a)), the Company shall execute and deliver to the Agent,
new Notes evidencing such Assignee's assigned Loans and Commitment and, if the
assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto. The Agent shall not deliver any new
Notes executed by the Company unless the Agent shall have received the old Notes
to be replaced or customary indemnification in favor of the Agent and the
Company with respect to lost or destroyed notes. Such old Notes shall be
promptly returned to the Company.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Agent shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Banks as described in the first proviso
to Section 11.01. In the case of any such participation, the Participant shall
be entitled to the benefit of Sections 4.01, 4.03 and 11.05 as though it were
also a Bank hereunder. Notwithstanding the immediately preceding sentence, all
amounts payable by the Company or any Subsidiary under this Agreement and each
other Loan Document shall be determined as if no such participation had been
sold.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Note held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
Notwithstanding any such pledge, such Bank shall remain liable to the Company
and the Issuing Bank as if such pledge had not been made. In the event of any
enforcement or proposed enforcement of such pledge the Company shall have the
right to replace such Bank pursuant to the provisions of Section 4.09.
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11.9 Confidentiality. Each Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by
the Company and provided to it by the Company or any Subsidiary, or by the Agent
on the Company's or such Subsidiary's behalf, under this Agreement or any other
Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any Subsidiary; except to
the extent such information (a) was or becomes generally available to the public
other than as a result of disclosure by the Bank, or (b) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (i) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (ii) pursuant to subpoena or
other court process; (iii) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (iv) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (v) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (vi) to such Bank's independent auditors and other
professional advisors; (vii) to any Participant or Assignee, actual or
potential, provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (viii) as to
any Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Bank or such Affiliate; and
(ix) to its Affiliates, provided that such Affiliate uses such information only
in connection with this Agreement and agrees in writing to keep such information
confidential.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held
by, and other indebtedness at any time owing by, such Bank to or for the credit
or the account of the Company against any and all Obligations owing to such
Bank, now or hereafter existing, irrespective of whether or not the Agent or
such Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Company and the Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
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11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
11.14 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Banks, the Agent
and the Agent-Related Persons, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
ILLINOIS LAW.
11.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION 11.16 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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11.17 Judgment. If, for the purposes of obtaining judgment in any court, it
is necessary to convert a sum due hereunder or any other Loan Document in one
currency into another currency, the rate of exchange used shall be that at which
in accordance with normal banking procedures the Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given. The obligation of the Company in respect of any such
sum due from it to the Agent hereunder or under the other Loan Documents shall,
notwithstanding any judgment in a currency (the "Judgment Currency") other than
that in which such sum is denominated in accordance with the applicable
provisions of this Agreement (the "Agreement Currency"), be discharged only to
the extent that on the Business Day following receipt by the Agent of any sum
adjudged to be so due in the Judgment Currency, the Agent may in accordance with
normal banking procedures purchase the Agreement Currency with the Judgment
Currency. If the amount of the Agreement Currency so purchased is less than the
sum originally due to the Agent in the Agreement Currency, the Company agrees,
as a separate obligation and notwithstanding any such judgment, to indemnify the
Agent or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement currency so purchased is greater than the sum originally
due to the Agent in such currency, the Agent agrees to return the amount of any
excess to the Company (or to any other Person who may be entitled thereto under
applicable law).
11.18 Entire Agreement. This Agreement, together with the other Loan
Documents supersedes the commitment letter dated March 13, 1996 among the
Company, BofA and the Arranger and embodies the entire agreement and
understanding among the Company, the Banks and the Agent, and supersedes all
prior or contemporaneous agreements and understandings of such Persons, verbal
or written, relating to the subject matter hereof and thereof.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
PAYLESS SHOESOURCE, INC.
By: /s/ Ullrich E. Porzig
------------------------------------
Name: Ullrich E. Porzig
----------------------------------
Title: SVP/Chief Financial Officer
---------------------------------
By: /s/ Ronald A. Cooperman
------------------------------------
Name: Ronald A. Cooperman
----------------------------------
Title: VP/Controller
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ Alice Zane
------------------------------------
Name: Alice Zane
----------------------------------
Title: Vice President
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ Sandra S. Ober
------------------------------------
Name: Sandra S. Ober
----------------------------------
Title: Vice President
---------------------------------
<PAGE>
BANK IV, N.A.
By: /s/ Carol A. Pecis
------------------------------------
Name: Carol A. Pecis
----------------------------------
Title: Senior Vice President
---------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter L. Griswold
------------------------------------
Name: Peter L. Griswold
----------------------------------
Title: Director
---------------------------------
THE BANK OF NEW YORK
By: /s/ Charlotte Sohn
------------------------------------
Name: Charlotte Sohn
----------------------------------
Title: Vice President
---------------------------------
COMMERCE BANK, N.A.
By: /s/ Jeffrey R. Gray
------------------------------------
Name: Jeffrey R. Gray
----------------------------------
Title: Vice President
---------------------------------
CORESTATES BANK
By: /s/ Randal D. Southern
------------------------------------
Name: Randal D. Southern
----------------------------------
Title: Vice President
---------------------------------
S-2
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THE DAI-ICHI KANGYO BANK, LTD.,
BRANCH
By: /s/ Takeshi Hemmi
------------------------------------
Name: Takeshi Hemmi
----------------------------------
Title: Vice President
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Lynn R. Dillon
------------------------------------
Name: Lynn R. Dillon
----------------------------------
Title: As authorized
---------------------------------
WELLS FARGO BANK, N.A.
By: /s/ Peter G. Olson
------------------------------------
Name: Peter G. Olson
----------------------------------
Title: Senior Vice President
---------------------------------
THE FUJI BANK, LIMITED
By: /s/ Peter L. Chinnici
------------------------------------
Name: Peter L. Chinnici
----------------------------------
Title: Joint General Manager
---------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ David M. Eichenlaub
------------------------------------
Name: David M. Eichenlaub
----------------------------------
Title: Vice President
---------------------------------
S-3
<PAGE>
UNION BANK, a division of Union Bank of
California, N.A.
By: /s/ Cecilia M. Valente
------------------------------------
Name: Cecilia M. Valente
----------------------------------
Title: Vice President
---------------------------------
UMB BANK, n.a.
By: /s/ Douglas F. Page
------------------------------------
Name: Douglas F. Page
----------------------------------
Title: Executive Vice President
---------------------------------
S-4
<PAGE>
<PAGE>
Exhibit 10.3
EXECUTIVE INCENTIVE COMPENSATION PLAN
FOR PAYLESS EXECUTIVES
(Amended and Restated, as of May 4, 1996)
This document constitutes and sets forth the terms of the Payless
ShoeSource, Inc. Executive Incentive Compensation Plan for Payless
Executives.
Section 1. PURPOSES OF THE PLAN. The purposes of the Plan are (i) to
provide a means to attract, retain and motivate talented personnel and
(ii) to provide to participating management employees added incentive
for high levels of performance and for additional effort to improve the
Company's financial performance. Payments of awards under this Plan are
intended to qualify for tax deductibility under the provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Notwithstanding any other provisions of this Plan, if any decision must
be made before a specified date in order for payments to qualify for
such tax deductibility under the tax rules in effect from time to time,
then such decision is to be made before such date.
Section 2. DEFINITIONS. Whenever used herein, the following terms
shall have the following meanings:
(a) "Annual Award" means, for a Participant for a Fiscal Year,
the product of the Participant's Minimum Annual Compensation for such
Fiscal Year multiplied by the aggregate of:
(i) the Participant's Annual EPS Factor for such Fiscal Year, plus
(ii) the Participant's Annual RONA Factor for such Fiscal Year.
(b) "Annual EPS Factor" means, for a Participant for a Fiscal Year
(i)five percent, if actual EPS Growth for such Fiscal Year equals or
exceeds the Participant's Threshold Annual EPS Growth Objective for
such Fiscal Year, plus (ii) ten percent multiplied by a fraction (not less
than zero and not greater than one), the numerator of which is the actual
EPS Growth for such Fiscal Year less the Participant's Threshold
Annual EPS Growth Objective for such Fiscal Year and the
denominator of which is the Participant's Maximum Annual EPS Growth
Objective for such Fiscal Year less the Participant's Threshold Annual
EPS Growth Objective for such Fiscal Year; provided, however,
(i) that the Annual EPS Factor shall be subject to adjustment as
provided in Section 6(b);
(ii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(b); and
(iii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(c).
(c) "Annual RONA Factor" means, for a Participant for a Fiscal
Year (i) five percent if actual RONA for such Fiscal Year equals or
exceeds the Participant's Threshold Annual RONA Objective for such
Fiscal Year, plus (ii) ten percent multiplied by a fraction (not
less than zero and not greater than one), the numerator of which is the
<PAGE>
actual RONA for such Fiscal Year less the Participant's Threshold Annual
RONA Objective for such Fiscal Year and the denominator of which is the
Participant's Maximum Annual RONA Objective for such Fiscal Year less the
Participant's Threshold Annual RONA Objective for such Fiscal Year;
provided, however,
(i) that the Annual RONA Factor shall be subject to adjustment as
provided in Section 6(b);
(ii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(b); and
(iii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 4(c).
(d) "Average Annual Compensation" means, for a Long-Term
Performance Period, the Participant's average annual salary rate during
such period, determined on a monthly basis, or such lesser amount as the
Participant and the Company shall agree to, in writing.
(e) "Board" means the Board of Directors of the Company.
(f) "Committee" means a committee designated by the Board, which
shall consist of not less than two members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"outside" directors within the meaning of Section 162(m) of the Code.
(g) "Company" means Payless ShoeSource, Inc.
(h) "Disability" means the inability of a Participant to
perform the normal duties of the Participant's regular occupation.
(i) "EPS Growth" means (i) for a Fiscal Year, the annual growth
rate in EPS measured from the immediately preceding Fiscal Year; and
(ii) for a Long-Term Performance Period, the compound annual growth
rate in EPS measured from the Fiscal Year immediately preceding
the Long-Term Performance Period to the last Fiscal Year in the
Long-Term Performance Period. For purposes of this definition, "EPS" for
a Fiscal Year means the Company's EPS for such Fiscal Year as reported
in the Company's annual report to its shareholders for the year of
determination (or, in the event that such item is not included in such
annual report, such comparable figure as may be determined by the
Committee) adjusted by the Company's independent certified public
accountants to exclude such non-recurring or extraordinary items as the
Committee shall determine are not representative of the on-going
operations of the Company.
(j) "Fiscal Year" means the fiscal year of the Company.
(k) "Long-Term Award" means, for a Participant for a Long-Term
Performance Period, the product of the Participant's Average
Annual Compensation for such period multiplied by the aggregate of:
(i) the Participant's Long-Term EPS Factor for such period, plus
2
<PAGE>
(ii) the Participant's Long-Term RONA Factor for such period
as such product is adjusted in accordance with Section 5(b) of the Plan.
(l) "Long -Term EPS Factor" means, for a Participant for a
Long-Term Performance Period, (i) five percent if actual EPS Growth for
such period equals or exceeds the Participant's Threshold Long-Term EPS
Growth Objective for such period, plus (ii) ten percent multiplied by a
fraction (not less than zero and not greater than one) the numerator of
which is the actual EPS Growth for such period less the Participant's
Threshold Long-Term EPS Growth Objective for such period and the
denominator of which is the Participant's Maximum Long-Term EPS Growth
Objective for such period less the Participant's Threshold Long-Term EPS
Growth Objective for such period; provided, however,
(i) that the Long-Term EPS Factor shall be subject to adjustment as
provided in Section 6(b); and
(ii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 5(c).
(m) "Long-Term Performance Period" means three consecutive Fiscal
Years; provided, however, that the first Long-Term Performance Period
under the Plan shall be Fiscal Year 1996 and the second Long-Term
Performance Period under the Plan shall be Fiscal Years 1996 and 1997.
(n) "Long-Term RONA Factor" means, for a Participant for a
Long-Term Performance Period (i) five percent if actual RONA for such
period equals or exceeds the Participant's Threshold Long-Term RONA
Objective for such period plus (ii) ten percent multiplied by a fraction
(not less than zero and not greater than one), the numerator of which is
the actual RONA for such period less the Participant's Threshold
Long-Term RONA Objective for such period and the denominator of which is
the Participant's Maximum Long-Term RONA Objective for such period less
the Participant's Threshold Long-Term RONA Objective for such period;
provided, however,
(i) that the Long-Term RONA Factor shall be subject to adjustment
as provided in Section 6(b); and
(ii) that the percentages referred to in this definition may be
adjusted by the Committee as provided in Section 5(c).
(o) "Market Value" means the average closing price of the Stock
on the New York Stock Exchange, Inc. during the month of February of
the year specified; provided, however, that "Market Value" for Fiscal Year
1996 means the arithmetic average of the high and low trading prices of
the Stock on the New York Stock Exchange for each of the first 30 trading
days on which trading in the Stock on that exchange occurs
(p) "Minimum Annual Compensation" means, for a Fiscal Year,
the Participant's rate of minimum annual salary on the first day of the
fiscal month of November in the Fiscal Year.
(q) "Participant" means an individual who has been designated to
participate in the Plan in accordance with Section 3 of the Plan.
3
<PAGE>
(r) "Plan" mean the Payless ShoeSource, Inc. Executive Incentive
Compensation Plan for Payless Executives.
(s) "Relative Performance Rank" means, for a Fiscal Year or for a
Long-Term Performance Period, the relative rank of the Company (as among
the Company and a group of competitors designated by the Committee) based
on the EPS Growth and RONA, respectively, of all such corporations for such
corporations' comparable fiscal periods, as determined by the Committee.
Relative Performance Rank shall be determined based on data provided by the
Company's independent certified public accountants from publicly available
information about all such corporations, and adjusted by such independent
certified public accountants for comparability (adjustments for LIFO, major
non-recurring transactions, etc.) subject to the direction and approval of
the Committee. The Committee may change the number of competitors or
corporations included in the group when, as a result of extraordinary or
unforeseen events, it is no longer appropriate for a particular corporation
to be included in the competitor group (such as when one of the group
ceases operations, merges with another corporation, files for bankruptcy
protection or significantly changes the nature of its business).
(t) "Retirement" means, as to a Participant, retirement as that
word is defined in the Company's Profit Sharing Plan.
(u) "RONA" means (i) for a Fiscal Year, the Company's return on
beginning net assets for such Fiscal Year as reported in the Company's
annual report to its shareowners for the year of determination (or,in the
event that such item is not included in such annual report, such comparable
figure as may be determined by the Committee) adjusted by the Company's
independent certified public accountants to exclude such non-recurring or
extraordinary items as the Committee shall determine are not representative
of the ongoing operations of the Company; and (ii) for a Long-Term
Performance Period, the sum of the RONA for each Fiscal Year in the Long-
Term Performance Period divided by three.
(v) "Stock" means the common stock of the Company.
(w) "Subsidiary" means a subsidiary corporation of the Company
within the meaning of Section 425(f) of Code.
(x) The terms "Maximum Annual EPS Growth Objective," "Maximum
Long-Term EPS Growth Objective," "Target Annual EPS Growth Objective,"
"Target Long-Term EPS Growth Objective," "Threshold Annual EPS
Growth Objective," "Threshold Long-Term EPS Growth Objective," "Maximum
Annual RONA Objective," "Maximum Long-Term RONA Objective," "Target
Annual RONA Objective," "Target Long-Term RONA Objective," "Threshold
Annual RONA Objective" and "Threshold Long-Term RONA Objective" shall mean
the respective objectives determined by the Committee for each Participant
pursuant to Section 7 of the Plan.
Section 3. ELIGIBILITY. Management employees of the Company and its
Subsidiaries shall be eligible to participate in the Plan. The Committee
may, in its sole discretion, designate any such individual as a
Participant for a particular Fiscal Year and/or for a particular Long-Term
Performance Period before the end of such Fiscal Year and Long-Term
Performance Period, respectively. Designation of an individual as a
Participant for any period shall not require designation of such individual
4
<PAGE>
as a Participant in any other period, and designation of one individual as
a Participant shall not require designation of any other individual as a
Participant in such period or in any other period.
Section 4. ANNUAL AWARD. (a) Subject to the other provisions of the
Plan, a Participant for a Fiscal Year who is designated as such for an
entire Fiscal Year shall be entitled to an Annual Award for such Fiscal
Year. Subject to the other provisions of the Plan, a Participant for a
Fiscal Year who is designated as such for less than an entire Fiscal Year
shall be entitled to a reduced Annual Award for such Fiscal Year equal to
the Annual Award for such Fiscal Year multiplied by a fraction, the
numerator of which shall be the number of complete fiscal months between
(i) the first day of the fiscal month in which occurs the date as of which
the Participant was so designated and (ii) the end of such Fiscal Year
and the denominator of which shall be twelve.
(b) The Committee may change the percentages referred to in the
definitions of "Annual EPS Factor" and "Annual RONA Factor" for any Fiscal
Year, provided that the maximum Annual Award which may be paid under such
different percentage may not be greater than 45% of the Participant's
Minimum Annual Compensation for such Fiscal Year.
(c) The percentages referred to in the definitions of "Annual EPS
Factor" and "Annual RONA Factor" may be adjusted by the Committee, in its
sole discretion, to provide that such percentages
(i) with respect to the chairman of the Board and chief executive
officer of the Company may be up to two times the percentages stated in
such definitions (subject to a maximum of 37.5% for each factor), and
(ii) with respect to the president of the Company may be up to one and
two-thirds times the percentages stated in such definitions (subject to a
maximum of 31.25% for each factor).
(d) Notwithstanding any other provision of the Plan, the maximum
dollar amount of any Annual Award for any Participant for any Fiscal Year
shall not exceed $1,500,000.
Section 5. LONG-TERM AWARD. (a) Subject to the other provisions of the
Plan, a Participant for a Long-Term Performance Period who is designated as
such for an entire Long-Term Performance Period shall be entitled to a
Long-Term Award for such period. Subject to the other provisions of the
Plan, a Participant for a Long-Term Performance Period who is designated as
such for less than an entire Long-Term Performance Period shall be entitled
to a reduced Long-Term Award for such period equal to the Long-Term Award
for such period multiplied by a fraction, the numerator of which shall be
the number of complete fiscal months between (i) the first day of the
fiscal month in which occurs the date as of which the Participant was so
designated and (ii) the end of such Long-Term Performance Period and the
denominator of which shall be thirty-six.
(b) The Long-Term Award otherwise payable pursuant to Section 5(a) of
the Plan for a Long-Term Performance Period shall be adjusted by
multiplying such Long-Term Award by a percentage equal to a fraction, the
numerator of which shall be the Market Value of the Stock in February of
the calendar year in which such Long-Term Performance Period ends and the
5
<PAGE>
denominator of which shall be the Market Value of the Stock in February of
the calendar year in which such Long-Term Performance Period begins;
provided, however, that such percentage shall in no event be greater than
one hundred fifty percent nor less than seventy-five percent.
(c) The percentages referred to in the definitions of "Long-Term EPS
Factor" and "Long-Term RONA Factor" may be adjusted by the Committee, in
its sole discretion, to provide that such percentages
(i) with respect to the chairman of the Board and chief executive
officer of the Company may be up to two times the percentages stated in
such definitions (subject to a maximum of 37.5% for each factor), and
(ii) with respect to the president of the Company may be up to one and
two-thirds times the percentages stated in such definitions (subject to a
maximum of 31.25% for each factor).
(d) Notwithstanding any other provision of the Plan, the maximum
dollar amount of any Long-Term Award for any Participant for any Long-Term
Performance Period shall not exceed $1,500,000.
Section 6. ADJUSTMENTS. (a) DISCRETIONARY ADJUSTMENT OF AWARDS. In
the event that the Committee determines, in its absolute discretion, that
an Annual Award or a Long-Term Award payable to a Participant in accordance
with the other terms of the Plan should be adjusted, upwards or downwards,
based on all the facts and circumstances known to the Committee at the
time, then, the Committee may, in its sole and absolute discretion,
increase or decrease any such Annual Award or Long-Term Award to such
amount as it determines; provided, however, that the Committee may not
adjust upwards any Annual Award or Long-Term Award of any Participant who
is a "covered employee" (as defined in Section 162 (m) of the Code and the
regulations thereunder) with respect to the particular performance period
for which the Annual Award or Long-Term Award is being granted.
(b) ADJUSTMENT FOR RELATIVE RANK. A Participant's Annual EPS Factor,
Annual RONA Factor, Long-Term EPS Factor and Long-Term RONA Factor shall be
adjusted in the following manner based upon the number of competitors in
the group of competitors used to determine the Company's Relative
Performance Rank and the Company's Relative Performance Rank therein:
<TABLE>
<CAPTION>
Number of Competitor Companies (not including the Company)
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Factor will be no less than
"Target" if the Company's 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st - 1st
rank is: 6th 5th 5th 5th 5th 4th 4th 4th 4th 3rd 3rd 3rd 3rd 2nd 2nd 2nd 2nd
Factor will be no less than
"Threshold" if the Company's 7th - 7th - 6th - 6th - 6th - 6th - 5th - 5th - 5th - 4th - 4th - 4th - 4th - 3rd - 3rd - 3rd - 3rd
rank is: 11th 10th 10th 9th 9th 8th 8th 8th 7th 6th 6th 6th 6th 4th 4th 4th 4th
6
<PAGE>
Factor will be no higher than
"Threshold" if the Company's 16th- 16th- 15th- 14th- 13th- 13th- 12th- 11th- 10th- 10th- 9th - 8th - 7th - 7th - 6th - 5th - 5th
rank is: 21st 20th 19th 18th 17th 16th 15th 14th 13th 12th 11th 10th 9th 8th 7th 6th
</TABLE>
Section 7. ANNUAL AND LONG-TERM TARGETS. Threshold, target and
maximum annual and long-term objectives with respect to EPS Growth and with
respect to RONA shall be determined by the Committee as soon as
practicable prior to the commencement of each Fiscal Year and each Long-
Term Performance Period for each Participant or within the period
permitted by applicable law. The Committee shall cause the respective
objectives for each Participant to be provided to such Participant as soon
thereafter as practicable. Such objectives shall remain in effect for the
entire Fiscal Year or Long-Term Performance Period, as appropriate.
Section 8. PAYMENT OF AWARDS. (a) Annual Awards for a Fiscal Year
shall be payable in cash within three months after the close of such Fiscal
Year or as soon thereafter as practicable.
(b) Long-Term Awards for a Long-Term Performance Period shall be
payable in cash within three months after the close of such Long-Term
Performance Period or as soon thereafter as practicable.
(c) A Participant may elect to defer all or a portion of an award by
making such election under the Deferred Compensation Plan with respect to
such award Such election must be made not later than December 31 of the
calendar year preceding the commencement of the Fiscal Year or Long-Term
Performance Period, as appropriate.
(d) The Company shall have the right to deduct any sums that federal,
state or local tax laws require to be withheld with respect to any payment
of awards.
(e) Before any award is paid to a Participant who is a "covered
employee" (as defined in Section 162(m) of the Code and the regulations
thereunder), the Committee shall certify in writing that the material terms
of the Plan have been satisfied.
Section 9. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. In the event of either the death or
Disability of the Participant while employed (a "Section 9(a) Event"), the
Participant shall be entitled to the following:
(i) An Annual Award with respect to the Fiscal Year in which the
Section 9(a) Event occurs equal to the Annual Award otherwise payable (if
any) for that Fiscal Year, prorated to the end of the fiscal month in which
such Section 9(a) Event occurs; and
(ii) A Long-Term Award with respect to each Long-Term Performance
Period which includes the Fiscal Year of the Section 9(a) Event; provided,
however, that for purposes of this Section 9(a)(ii) the Long-Term Award for
any Long-Term Performance Period (1) shall be determined at the end of the
Fiscal Year in which the Section 9(a) Event occurs, (2) shall be determined
(and averages used in that determination shall be calculated) based only on
the Fiscal Year and any preceding Fiscal Years otherwise included in the
7
<PAGE>
Long-Term Performance Period and (3) shall be prorated to the end of the
fiscal month in which the Section 9(a) Event occurs.
(b) Retirement.
(i) In the event of the Retirement of the Participant with the
written consent of the Company, such event shall be deemed to be a Section
9(a) Event, and the Participant shall be entitled to an Annual Award and to
a Long-Term Award as provided in Section 9(a).
(ii) In the event of the Retirement of the Participant without the
consent of the Company (a "Section 9(b)(ii) Event"), the Participant shall
be entitled to the following:
(1) An Annual Award with respect to the Fiscal Year in which the
Section 9(b)(ii) Event occurs equal to the Annual Award otherwise payable
(if any) for the Fiscal Year, prorated to the end of the fiscal month in
which the Section 9(b)(ii) Event occurs; and
(2) No Long-Term Award following the Section 9(b)(ii) Event.
The Participant shall forfeit any right or entitlement to any award with
respect to any Long-Term Performance Period which has not been completed on
the date of the Section 9(b)(ii) Event. Any Long-Term Award for a period
which ended prior to the Section 9(b)(ii) Event shall remain unaffected.
(c) Termination of Employment.
(i) In the event of the termination of employment of the
Participant not covered by Sections 9(a) or 9(b) above which occurs at the
end of the term of the Participant's then-current written employment
agreement (if any) with the Company or Subsidiary, or in the event of such
a termination of a Participant who has no current written employment
agreement with the Company or Subsidiary, such event shall be deemed to be
a Section 9(b)(ii) Event, and the Participant shall be entitled to an
Annual Award (but not to a Long-Term Award) as provided in Section
9(b)(ii).
(ii) In the event of the termination of employment of the
Participant not covered by Sections 9(a) or 9(b) above before the end of
the term of the Participant's then-current written employment agreement (if
any) with the Company or Subsidiary, with the written consent of the
Company (a "Section 9(c)(ii) Event"), the Participant shall be entitled to
the following:
(1) An Annual Award with respect to the Fiscal Year in which
the Section 9(c)(ii) Event occurs equal to the actual award otherwise
payable for the Fiscal Year (if any); provided, however, that in the event
that the term of the Participant's then-current employment agreement is due
to expire during that Fiscal Year, then the Annual Award shall be prorated
to the end of the fiscal month in which such term is due to expire; and
8
<PAGE>
(2) A Long-Term Award with respect to each Long-Term
Performance Period which includes the Fiscal Year of the 9(c)(ii) Event
equal to the Long-Term Award otherwise payable with respect to each Long-
Term Performance Period; provided, however, that in the event that the term
of the Participant's then-current employment agreement (if any) with the
Company is otherwise due to expire during any such period, then the Long-
Term Award with respect to such period shall be prorated to the end of the
calendar month in which such term is due to expire.
(iii) In the event of the termination of employment of the
Participant not otherwise covered by this Section 9 before the end of the
term of the then-current written employment agreement (if any) with the
Company or Subsidiary, without the written consent of the Company, the
Participant shall not be entitled to any Annual Award or to any Long-Term
Award with respect to any Fiscal Year or Long-Term Performance Period which
has not been completed as of the date of such termination of employment.
The Participant shall forfeit any right or interest in any award for any
such Fiscal Year or Long-Term Performance Period. Annual Awards and Long-
Term Awards with respect to Fiscal Years and Long-Term Performance Periods
which ended prior to the date of such termination of employment shall
remain unaffected.
(d) For purposes of this Section 9, the term "written consent of the
Company" shall refer to an express written consent of the Company, duly
executed by the Company, which, by its own terms, expressly refers to this
Section 9 of the Plan.
Section 10. CHANGES IN RESPONSIBILITIES. In the event that (i) the
duties of a Participant change and the Participant becomes eligible to
participate in another bonus plan of the Company, or (ii) the duties of an
employee who is a participant in another bonus plan of the Company change
and the employee is newly designated by the Committee as a Participant in
this Plan, then the maximum amount that such Participant would be entitled
to receive under the Plan shall be
(1) the Annual Award determined in accordance with the provisions of
the Plan with respect to the entire Fiscal Year in which such event
occurred; and
(2) a Long-Term Award with respect to each Long-Term Performance
Period which has commenced at the time of the event, determined in
accordance with the provisions of the Plan,
subject, in all events, to the Committee's right to adjust such awards in
accordance with and subject to the restrictions set forth in Section 6(a),
in its absolute discretion, which may be exercised in such a way that the
Committee deems fair and equitable based on the performance of Participant
while participating in the other bonus plan of the Company.
Section 11. RIGHTS OF PARTICIPANTS AND BENEFICIARIES. (a) Nothing
contained in the Plan shall confer upon any Participant any right to
continue in the employ of the Company or constitute any contract or
agreement of employment or interfere in any way with the right of the
Company to terminate or change the conditions of employment.
9
<PAGE>
(b) The Company shall pay all amounts payable hereunder only to the
Participant or his or her personal representatives. In the event of the
death of a Participant, payments of all amounts otherwise due to the
Participant under the Plan shall be made to the Participant's beneficiary
at the time of death under the Company Paid Life Plan of Payless
ShoeSource, Inc. or to such other beneficiary as the Participant shall have
designated, in writing, for purposes of this Plan on a form provided by the
Company.
(c) Subject to the provisions of Section 11(d), rights to payments
under the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or
charge, and any attempt to do so shall be void; nor shall any such amounts
be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the Participant or his or her
beneficiaries.
(d) Nothing in this Section 11 shall prohibit the personal
representatives of a Participant from designating that any amount that
would otherwise be distributed to the Participant's estate should be
distributed in accordance with the terms of the Participant's last will and
testament or pursuant to the laws of descent and distribution.
Section 12. UNFUNDED CHARACTER OF THE PLAN. The right of a
Participant to receive any Annual Award or Long-Term Award hereunder shall
be an unsecured claim against the general assets of the Company. Nothing
in the Plan shall require the Company to invest any amounts in Stock or in
any other medium.
Section 13. CHANGES IN CAPITAL STRUCTURE. In the event that there is
any change in the Stock through merger, consolidation, reorganization,
recapitalization, spin-off or otherwise, or if there shall be any dividend
on the Stock, payable in such Stock, or if there shall be a stock split or
combination of shares, then the fraction provided for in Section 5(b) of
the Plan shall be adjusted by the Committee as it deems desirable, in its
absolute discretion, to prevent dilution or enlargement of the rights of
Participants. The issuance of Stock for consideration and the issuance of
Stock rights shall not be considered a change in the Company's capital
structure.
Section 14. AMENDMENT OR TERMINATION. The Committee may, by
resolution, amend or terminate the Plan at any time. Any amendment
necessary to bring the Plan into compliance with Section 162(m) of the Code
and any regulations thereunder shall not require shareowner approval and
the effectiveness of such amendment shall be as of the effective date of
the provision in Section 162(m) of the Code or regulations thereunder
giving rise to the amendment. However, (i) shareowner approval shall be
sought for any changes to the Plan which would require shareowner approval
under Section 162(m) of the Code and (ii) except as provided in the
preceding sentence, the Committee may not, without the consent of the
Participant, amend or terminate the Plan in such a manner as to affect
adversely any Annual Award or Long-Term Award which would have been
payable, based on the terms of the Plan immediately prior to any such
amendment or termination, for any Fiscal Year or Long-Term Performance
Period which has already commenced as of the effective date of the
amendment or termination.
10
<PAGE>
<PAGE>
Exhibit 11
PAYLESS SHOESOURCE, INC.
COMPUTATION OF NET EARNINGS PER SHARE
13 Weeks Ended
(Thousands, except per share) ------------------------
May 4, April 29,
1996 1995
---------- ---------
Net earnings $ 24,226 $ 26,530
Common shares outstanding 40,365 40,365
---------- ---------
Net earnings per share $ .60 $ .66
========== =========
Primary Computation:
- -------------------
Net earnings $ 24,226 $ 26,530
Common shares outstanding 40,365 40,365
Net effect of dilutive stock
options based on the treasury
stock method 16 0
---------- ---------
Outstanding shares for primary
earnings per share $ 40,381 $ 40,365
========== =========
Primary earnings per share $ .60 $ .66
========== =========
Fully Diluted Computation:
- -------------------------
Net earnings $ 24,226 $ 26,530
Common shares outstanding 40,365 40,365
Net effect of dilutive stock
options based on the treasury
stock method 16 0
---------- ---------
Outstanding shares for fully
diluted earnings per share $ 40,381 $ 40,365
========== =========
Fully Diluted earnings per share $ .60 $ .66
========== =========
Note: Outstanding shares used in earnings per share calculation
is the number of shares issued and outstanding as of May 4, 1996,
the date of the spin-off from The May Department Stores Company.
<PAGE>
<PAGE>
Exhibit 20
PAYLESS SHOESOURCE, INC.
PRESS RELEASE OF SALES AND EARNINGS
For Immediate Release Contact: Rick Nida
(913) 295-6695
PAYLESS SHOESOURCE REPORTS FIRST QUARTER EARNINGS
ROSE 5.1 PERCENT BEFORE SPIN-OFF COSTS
TOPEKA, Kan., May 13, 1996 -- Payless ShoeSource Inc. (NYSE:PSS)
today reported first quarter earnings of $27.9 million, or 69
cents a share, excluding special costs associated with Payless'
spin-off from The May Department Stores Company. The 1996 first
quarter earnings before spin-off costs rose 5.1 percent from 1995
net earnings of $26.5 million, or 66 cents a share.
For the 13 weeks ended May 4, Payless net earnings totaled
$24.2 million, or 60 cents a share, including the spin-off costs.
During the first quarter of 1996, Payless incurred $6.1 million
in costs ($3.7 million, or 9 cents a share, after tax) associated
with Payless spin-off from The May Department Stores Company.
Payless currently estimates these costs will total an additional
$3.9 million after tax during the remainder of the current fiscal
year.
Payless was spun off from The May Department Stores Company
on May 4, 1996, the end of Payless fiscal first quarter. May
shareowners received 0.16 share of Payless stock for each May
share they held.
Payless store-for-store sales rose 5.3 percent in the first
quarter. Total sales were $601.4 million, up 5.6 percent from
$569.6 million in 1995. Sales comparisons for the quarter
benefited from a one-week shift in reporting periods. Store-for-
store sales for the quarter ended May 4 rose 1.4 percent when
adjusted to reflect the change in reporting periods.
"We're pleased to report that our results are in line with
our expectations as we become an independent company," said
Steven J. Douglass, chairman of the board and chief executive
officer of Payless. Mr. Douglass noted that Payless benefited in
the first quarter from reduced competition in key locations.
More than 500 self-service, discount shoe stores were closed by
competitors in late 1995 and early 1996. We worked diligently to
position our inventories and focus our store associates to
capture transfer sales from closed competitors, and we are
encouraged by the results, said Mr. Douglass.
During the first quarter, Payless closed 115 stores. In May,
Payless will close an additional 225 stores as part of its
previously announced plan to close underperforming stores. The
projected cost of the store-closing program was recorded as a
charge to earnings in the fourth quarter of 1995.
Payless is the nation's largest footwear retailer. Payless
operated 4,477 stores in 49 states, Puerto Rico and the U.S.
Virgin Islands at the end of the first quarter.
<PAGE>
Payless ShoeSource Inc.
Unaudited First Quarter Results of Operations (A, B)
(Millions, except per share data) 13 Weeks Ended
-----------------------------
May 4, 1996 April 29, 1995
----------- --------------
Net Sales 601.4 569.6
Cost of Sales 426.6 403.6
Selling, general and admini-
strative expenses before
spin-off costs 128.1 121.8
Spin-off costs (C) 6.1 --
Interest expense, net 0.3 0.3
------- -------
Earnings before income taxes 40.3 43.9
Provision for income taxes 16.1 17.4
Net Earnings 24.2 26.5
------- -------
Earnings per share (D) 0.60 0.66
======= =======
Shares Outstanding (D) 40.4 40.4
NOTES TO INTERIM RESULTS OF OPERATIONS
A. The unaudited interim results of operations have been
prepared in accordance with the company's accounting policies as
described in the company's Form 10 Registration Statement, on
file with the Securities and Exchange Commission, and should be
read in conjunction with the Registration Statement. In the
opinion of management, this information is fairly presented and
all adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods have been included. However, certain items are included
in this statement based on estimates for the entire year.
B. The financial information for both quarters reflects the
results of operations of the business when it was a division of
The May Department Stores Company. The financial statements were
prepared based on certain assumptions about Payless operations,
assets and liabilities had it been an independent company during
these periods. Payless was spun off from The May Department
Stores Company on May 4, 1996, and is now an independent company.
2
<PAGE>
C. As disclosed in the company's registration statement, Payless
is incurring retention costs associated with the spin-off that
established Payless as an independent company. Those costs
totaled $6.1 million pre-tax in the first quarter of 1996, and
are expected to total $6.6 million for the remainder of this
year.
D. Payless earnings per share and outstanding shares were
calculated based on the number of Payless shares issued and
outstanding as of May 4, 1996, the date of the spin-off from The
May Department Stores Company.
3
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PAYLESS
SHOESOURCE, INC. CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE 13
WEEKS ENDED MAY 4, 1996, AND CONDENSED CONSOLIDATED BALANCE SHEET AS AT
MAY 4, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001008802
<NAME> PAYLESS SHOESOURCE,INC.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 92,300<F1>
<SECURITIES> 0<F2>
<RECEIVABLES> 5,900<F3>
<ALLOWANCES> 0<F3>
<INVENTORY> 366,300
<CURRENT-ASSETS> 510,100
<PP&E> 865,100
<DEPRECIATION> 321,500
<TOTAL-ASSETS> 1,057,000
<CURRENT-LIABILITIES> 234,300
<BONDS> 9,400<F4>
<COMMON> 400
0
0
<OTHER-SE> 780,700<F5>
<TOTAL-LIABILITY-AND-EQUITY> 1,057,000
<SALES> 601,400<F6>
<TOTAL-REVENUES> 601,400
<CGS> 426,600
<TOTAL-COSTS> 426,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 40,300
<INCOME-TAX> 16,100
<INCOME-CONTINUING> 24,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,200
<EPS-PRIMARY> .60<F7>
<EPS-DILUTED> .60<F7>
<FN>
<F1>Includes any marketable securities
<F2>Any "securities" are shown under "Cash"
<F3>Receivables are net after deduction of allowances.
<F4>Consists of Capital Lease Obligations
<F5>Reflects Retained Earnings and Additional Paid In Capital.
<F6>Reflects net sales.
<F7> Expressed in dollars
</FN>
<PAGE>
</TABLE>
