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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended Commission file number
January 31, 1998 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2207613
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
770 Cochituate Road
Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508)390-1000
- ----------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ---------------------------------- -----------------------
Common Stock, par value $1.00 New York Stock Exchange
Series E Cumulative Convertible
Preferred Stock, par value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X. NO.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 31, 1998 was $7,266,662,979.
There were 159,691,679 shares of the Registrant's Common Stock, $1 par value,
outstanding as of March 31, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
January 31, 1998 (certain parts as indicated herein) (Parts I and II).
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on June 2, 1998 (Part III).
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ITEM 1. BUSINESS
The TJX Companies, Inc., (together with its wholly-owned subsidiaries,
hereinafter referred to as the "Company"), is the largest off-price apparel
retailer in the world. The Company operates 580 T.J. Maxx stores, 461 Marshalls
stores, and Winners Apparel Ltd., a Canadian off-price family apparel chain with
76 stores. TJX also operates HomeGoods, a U.S. off-price home fashion chain with
23 stores, and T.K. Maxx, an off-price family apparel concept in the United
Kingdom and the Republic of Ireland, which has 31 stores. The Company has
announced plans for a new United States chain of off-price family apparel stores
targeted to moderate income customers.
The Company acquired Marshalls, an off-price family apparel chain, from
Melville Corporation on November 17, 1995. The results of Marshalls are included
in the Company's consolidated results from the date of acquisition.
The Company strives to provide value to its customers by delivering
brand names, fashion, quality and compelling prices. During the fiscal year
ended January 31, 1998 ("fiscal 1998"), the Company's stores derived 33.0% of
its sales from the Northeast, 17.7% from the Midwest, 28.2% from the South, 1.1%
from the Central States, 13.6% from the West, 4.4% from Canada and 2.0% from the
United Kingdom and Ireland.
As a result of the Marshalls acquisition, the Company has continued to
realize improved operating efficiencies for the combined T.J. Maxx / Marshalls
entity through the integration of many administrative and operational functions
as well as through increased purchasing leverage, all of which have allowed the
Company to provide improved values to its customers. The Company has retained
the separate identities of the T.J. Maxx and Marshalls stores, including certain
elements of merchandising, product assortment, marketing and store appearance.
As a result of the acquisition, the Company initiated a store closing program in
an effort to reduce excess retail space. Through the end of fiscal 1998, the
Company closed a total of 32 T.J. Maxx stores and 70 Marshalls stores under this
plan. In total, over the past five years T.J. Maxx has opened 162 stores and
closed 61, while Marshalls, since the date of the acquisition, has opened 30
stores and closed 74.
The majority of the Company's sales volume is achieved through the
Company's T.J. Maxx and Marshalls stores. T.J. Maxx operates 580 stores in 47
states, with an average store size of 29,000 gross square feet, while Marshalls
operates 461 stores in 37 states and Puerto Rico, with an average store size of
32,000 gross square feet. T.J. Maxx and Marshalls sell a broad range of brand
name family apparel, accessories, shoes, domestics, giftware and jewelry at
prices generally 20% to 60% below department and specialty store regular prices.
Winners Apparel Ltd. is an off-price family apparel retailer, which operates 76
stores in Canada. HomeGoods, an off-price business that the Company began
testing in fiscal 1993, sells domestics, giftware and other home fashions and
operates a total of 23 stores. T.K. Maxx operates 31 off-price family apparel
stores in the United Kingdom and Republic of Ireland. Unless otherwise
indicated, all figures herein relating to numbers of stores are as of January
31, 1998.
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In common with the business of apparel retailers generally, the
Company's business is subject to seasonal influences, with higher levels of
sales and income generally realized in the second half of the year.
In December 1996, the Company sold its Chadwick's of Boston catalog
division and in September 1995, the Company sold its Hit or Miss chain of
off-price women's specialty apparel stores. The Company will continue to
evaluate its existing operations and that of other retailers and review
opportunities that would strengthen its position in the apparel retail industry.
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Set forth in the following table are the locations of stores operated
by the Company's United States operations as of January 31, 1998:
<TABLE>
<CAPTION>
T.J. Maxx Marshalls HomeGoods
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<S> <C> <C> <C>
Alabama..................................... 9 2 -
Arizona..................................... 8 4 -
Arkansas.................................... 4 - -
California.................................. 45 65 -
Colorado.................................... 8 3 -
Connecticut................................. 24 19 2
Delaware.................................... 3 2 -
District of Columbia........................ 1 - -
Florida..................................... 40 41 1
Georgia..................................... 21 19 -
Idaho....................................... 1 - -
Illinois.................................... 31 32 3
Indiana..................................... 8 4 -
Iowa........................................ 4 1 -
Kansas...................................... 4 2 -
Kentucky.................................... 7 1 1
Louisiana................................... 4 5 -
Maine....................................... 5 1 -
Maryland.................................... 7 13 -
Massachusetts............................... 40 38 7
Michigan.................................... 27 6 -
Minnesota................................... 12 9 -
Mississippi................................. 2 - -
Missouri.................................... 6 7 -
Montana..................................... 1 - -
Nebraska.................................... 2 1 -
Nevada...................................... 3 3 -
New Hampshire............................... 9 6 2
New Jersey.................................. 16 27 -
New Mexico.................................. 1 - -
New York.................................... 39 35 1
North Carolina.............................. 18 10 -
North Dakota................................ 3 - -
Ohio........................................ 33 7 2
Oklahoma.................................... 3 1 -
Oregon...................................... 5 3 -
Pennsylvania................................ 29 16 -
Puerto Rico................................. - 12 -
Rhode Island................................ 5 3 -
South Carolina.............................. 10 4 -
South Dakota................................ 1 - -
Tennessee................................... 13 7 -
Texas....................................... 23 29 -
Utah........................................ 4 - -
Vermont..................................... 2 - -
Virginia.................................... 21 18 -
Washington.................................. 7 4 -
West Virginia............................... 1 - -
Wisconsin................................... 10 1 4
--- --- --
Total Stores 580 461 23
=== === ==
</TABLE>
Winners Apparel Ltd. operates 76 stores in Canada: 10 in Alberta, 3 in Manitoba,
42 in Ontario, 11 in Quebec, 2 in Nova Scotia, 1 in Saskatchewan, 5 in British
Columbia and 2 in New Brunswick. T.K. Maxx operates 30 stores in the United
Kingdom and 1 store in the Republic of Ireland.
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T.J. MAXX AND MARSHALLS
T.J. Maxx, the largest off-price family apparel chain in the United States,
was founded by the Company in 1976 and operates 580 stores in 47 states.
Marshalls (acquired by the Company in November 1995), is the second largest
off-price family apparel retailer in the United States, and operates 461 stores
in 37 states and Puerto Rico.
T.J. Maxx sells brand name family apparel, accessories, giftware,
domestics, women's shoes and fine jewelry at prices generally 20% to 60% below
department and specialty store regular prices. T.J. Maxx's target customers are
women between the ages of 25 to 50, who typically have families with middle and
upper-middle incomes and who generally fit the profile of a department store
shopper. Marshalls' target customers fit a profile similar to those of T.J.
Maxx. Marshalls' merchandise is also similar to that carried by T.J. Maxx;
however, Marshalls offers its customers a full-line shoe department, a larger
men's department and costume, rather than fine, jewelry.
The T.J. Maxx and Marshalls operations have a common buying and
merchandising organization. The ability to purchase merchandise at favorable
prices and operate with a low cost structure is essential to T.J. Maxx's and
Marshalls' off-price mission, which emphasizes quality brand-name merchandise at
substantial values to its customers. These chains use opportunistic buying
strategies to purchase large quantities of merchandise at significant discounts
from initial wholesale prices. Those strategies include special situation
purchases, closeouts of current season fashions and out-of-season purchases of
basic seasonal items for warehousing until the appropriate selling season. These
buying strategies rely heavily on inventory controls that permit a virtually
continuous "open-to-buy" position. In addition, highly automated storage and
distribution systems track, allocate and deliver an average of 11,000 items per
week to each store. T.J. Maxx's computerized warehouse storage, handling and
shipping systems permit a continuous evaluation and replenishment of store
inventory requirements and the breakdown of manufacturers' bulk shipments into
computer-determined individual store allotments by style, size and quantity.
Pricing, markdown decisions and store inventory replenishment requirements are
determined centrally, using satellite-transmitted information provided by
point-of-sale computer terminals; this ensures that substantially all
merchandise is sold within targeted selling periods. The Company has a plan for
the realignment of the Marshalls and T.J. Maxx distribution facilities, which is
expected to be implemented over the next several years. Other administrative
functions that have been consolidated include finance, real estate, human
resources and systems.
T.J. MAXX STORES
T.J. Maxx stores are generally located in suburban community shopping
centers and average approximately 29,000 gross square feet in size. In recent
years, T.J. Maxx has enlarged a number of stores to a larger format,
approximately 30,000-40,000 square feet in size, and plans to continue its
program of enlarging other successful stores. This larger format allows T.J.
Maxx to expand all of its departments, with particular emphasis on its giftware
and housewares departments and other non-apparel categories. During fiscal 1998,
18 stores were opened, including 11 of the new larger prototype, and 16 were
closed, including 3 of the larger prototype. In addition, 22 existing stores
were expanded or relocated to the larger
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format, bringing the total number of T.J. Maxx stores in the larger format to
274. In fiscal 1999, approximately 26 new stores are planned, most of which are
expected to be larger stores, along with the planned expansion of about 6
existing locations, the relocation of approximately 14 existing stores, and the
closing of approximately 6 stores. Each T.J. Maxx store is currently serviced by
one of the chain's four distribution centers in Worcester, Massachusetts;
Evansville, Indiana; Las Vegas, Nevada; and Charlotte, North Carolina.
MARSHALLS STORES
Marshalls stores average approximately 32,000 gross square feet. During
fiscal 1998, 18 Marshalls stores were opened and 11 were closed. In fiscal 1999,
approximately 16 new stores are planned, along with approximately 5 closings.
The operations and strategies of T.J. Maxx and Marshalls have historically
been very similar. Prior to the acquisition of Marshalls by TJX, Marshalls had
deviated from some of its key strategies, such as everyday low prices, in favor
of other marketing ideas, including frequent promotional pricing. The Company
believes that restoring Marshalls historical strategies and effecting other
improvements, were significant factors in increasing Marshalls level of
continued profitability and performance in fiscal 1998. Each Marshalls store is
currently serviced by one of four main distribution centers located in Woburn,
Massachusetts; Decatur, Georgia; Bridgewater, Virginia; and Chatsworth,
California.
WINNERS APPAREL LTD.
The Company acquired the Winners chain in 1990. The Winners acquisition has
provided the Company with the opportunity to introduce the concept of off-price
apparel retailing to the Canadian market. Since the acquisition, Winners has
increased its number of stores from 5 to 76.
Winners' merchandising concept is substantially similar to that of T.J.
Maxx. Winners' stores average 26,000 square feet, and emphasize off-price
designer and brand name women's apparel and shoes, lingerie, accessories,
domestics, giftware, menswear and children's clothing. In fiscal 1998, Winners
expanded certain merchandise categories, including ladies footwear, special
sizes, giftware and domestics. In addition, Winners opened 11 stores and expects
to open approximately 12 stores in fiscal 1999.
HOMEGOODS
HomeGoods is a chain of off-price home fashion stores opened in 1992 to
expand the Company's off-price presence in the home fashions market. The Company
is continuing to develop this business and, during fiscal 1998, store layouts
were revamped, inventory levels were reduced to allow more opportunistic buying,
and categories such as specialty and seasonal merchandise were refined to help
generate repeat business. In addition, the concept of coupling this business
with the T.J. Maxx and Marshalls formats was expanded by adding an additional
T.J. Maxx N' More store in Massachusetts to the three existing stores in
Chicago, and by opening two Marshalls Mega-Stores, one in Florida and one in
New York. The HomeGoods stores
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offer a broad and deep range of home fashion products, including giftware,
domestics, rugs, bath accessories, lamps and seasonal merchandise in a
no-frills, multi-department format.
HomeGoods' stand-alone stores currently average approximately 38,000 square
feet. HomeGoods occupies approximately 21,000 square feet in the superstore
combination formats with T.J. Maxx and Marshalls. HomeGoods opened 3
superstores and closed 1 stand-alone store in fiscal 1998. At fiscal 1998 year
end, HomeGoods operated a total of 23 stores, including 6 superstore
combinations with the T.J. Maxx and Marshalls formats. For fiscal 1999,
approximately 5 new stand-alone stores and 7 additional superstore combinations
are planned, along with 1 store closing.
T.K. MAXX
During fiscal 1995, the Company began testing the off-price family apparel
concept in Europe by opening T.K. Maxx stores in the United Kingdom. T.K. Maxx
utilizes the same off-price strategy employed by T.J. Maxx, Marshalls and
Winners. At the end of fiscal 1998, the Company had a total of 31 stores in the
United Kingdom and Ireland and has plans to open approximately 10 stores in
fiscal 1999, including 2 stores in the Netherlands.
EMPLOYEES
At January 31, 1998, the Company had approximately 59,000 employees, many
of whom work less than 40 hours per week. In addition, temporary employees are
hired during the peak back-to-school and holiday seasons. The Company has
collective bargaining agreements with the Union of Needletrades and Textile
Employees ("UNITE"), formerly the International Ladies' Garment Workers' Union,
covering approximately 3,900 employees in its distribution facilities in
Worcester and Mansfield, Massachusetts; Evansville, Indiana; Las Vegas, Nevada;
Charlotte, North Carolina; Decatur, Georgia; and Bridgewater, Virginia. New
three year agreements, effective January 1, 1998, were ratified by the union
workers in Worcester and Las Vegas. Negotiations are currently being conducted
with UNITE for an agreement covering Mansfield union workers. The Company
considers its labor/management relations and overall employee relations to be
good.
COMPETITION
The retail apparel business is highly competitive. The Company generally
competes for customers with a variety of conventional and discount retail
stores, including national, regional and local independent department and
specialty stores, as well as with catalog operations, factory outlet stores and
other off-price stores. In recent years, the Company has encountered increased
competition from department stores which have become more focused on promotions
in an effort to increase their sales volume. Competitive factors important to
the Company's customers include fashion, value, merchandise selection, brand
name recognition and, to a lesser degree, store location. In addition, because
the Company purchases much of its inventory opportunistically, the Company
competes for merchandise with other national and regional off-price apparel and
other discount outlets. Also, many of the Company's competitors handle identical
or similar lines of merchandise and have comparable locations, and some
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have greater financial resources than the Company. The Company believes that the
Marshalls acquisition has enhanced its competitiveness.
CREDIT
The Company's stores operate primarily on a cash-and-carry basis. Each
chain accepts credit sales through programs offered by banks and others.
BUYING AND DISTRIBUTION
The T.J. Maxx and Marshalls chains are serviced by a single centralized
buying organization, while each of the other chains has its own centralized
buying organization. All of the Company's chains are serviced through their own
distribution network. Each T.J. Maxx store is serviced by one of the chain's
four distribution centers in Worcester, Massachusetts; Evansville, Indiana; Las
Vegas, Nevada; and Charlotte, North Carolina. Shipments are generally made twice
a week by contract carrier to each store. Each Marshalls store is serviced by
one of the chain's four main distribution centers in Woburn, Massachusetts;
Decatur, Georgia; Chatsworth, California; and Bridgewater, Virginia. Winners
Apparel Ltd. stores are serviced from a distribution center in Brampton,
Ontario, HomeGoods stores are serviced from a distribution center in Mansfield,
Massachusetts, and T.K. Maxx stores are serviced from a distribution center in
Milton Keynes, England.
SAFE HARBOR STATEMENTS UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained in this report are forward-looking and involve
a number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: general economic conditions and
consumer demand and consumer preferences and weather patterns in the U.S.,
Canada and Europe, particularly the United Kingdom; competitive factors,
including continuing pressure from pricing and promotional activities of major
competitors; impact of excess retail capacity and the availability of desirable
store locations on suitable terms; the availability, selection and purchasing of
attractive merchandise on favorable terms; import risks, including potential
disruptions and duties, tariffs and quotas on imported merchandise, including
economic and political problems in countries from which merchandise is imported;
currency and exchange rate factors in the Company's foreign operations; risks in
the development of new businesses and application of the Company's off-price
strategies in foreign countries; acquisition and divestment activities; and
other factors that may be described in the Company's filings with the Securities
and Exchange Commission. The Company does not undertake to publicly update or
revise its forward-looking statements even if experience or future changes make
it clear that any projected results expressed or implied therein will not be
realized.
ITEM 2. PROPERTIES
The Company's chains lease virtually all of their store locations. Leases
are generally for 10 years with options to extend for one or more 5 year
periods. The Company has the right to terminate certain leases before the
expiration date under certain circumstances and for a specified payment.
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The approximate average size of a T.J. Maxx store is 29,000 square feet,
Marshalls stores average approximately 32,000 square feet, Winners stores are
approximately 26,000 square feet on average and T.K. Maxx stores average
approximately 26,000 square feet. HomeGoods' stand-alone stores currently
average approximately 38,000 square feet and a HomeGoods' portion of a
superstore combination format with a T.J. Maxx or Marshalls averages
approximately 21,000 square feet. The Company owns four T.J. Maxx distribution
facilities - a 526,000 square foot facility in Worcester, Massachusetts; a
983,000 square foot facility in Evansville, Indiana; a 400,000 square foot
facility in Las Vegas, Nevada; and a 600,000 square foot facility in Charlotte,
North Carolina. The Company owns one of the Marshalls distribution facilities,
a 802,000 square foot facility in Decatur, Georgia. In addition, Marshalls
leases its other three main distribution facilities - a 824,000 square foot
facility in Woburn, Massachusetts; a 190,000 square foot facility in
Chatsworth, California; and a 850,000 square foot facility in Bridgewater,
Virginia. Winners leases a 391,000 square foot distribution center in Brampton,
Ontario and 56,000 square feet of office space in Mississaugau, Ontario.
HomeGoods leases a 205,000 square foot distribution center in Mansfield,
Massachusetts. T.K. Maxx in the United Kingdom has leased a 158,000 square foot
office and distribution facility in Milton Keynes, England and a 16,500 square
foot office space in Watford, England. The Company's, T.J. Maxx's, Marshalls'
and HomeGoods' executive and administrative offices are located in a 517,000
square foot office facility, which the Company leases in Framingham,
Massachusetts along with an additional 192,000 square feet of office space in
the Framingham area.
The table below indicates the approximate gross square footage of stores
and distribution center facilities, by division, in operation as of
January 31, 1998.
<TABLE>
<CAPTION>
(Sq. Ft. in Thousands)
Stores Distribution Centers
------ --------------------
Leased Owned
------ -----
<S> <C> <C> <C>
T.J. Maxx 16,873 - 2,509
Marshalls 14,569 1,864 802
Winners 1,998 391 -
HomeGoods 779 205 -
T.K. Maxx 798 158 -
------ ----- -----
Total 35,017 2,618 3,311
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</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending against the Company or any of its
subsidiaries which the Company believes is material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 1998.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons are the executive officers of the Company as of the
date hereof:
Office and Employment
Name Age During Last Five Years
- ---- --- ----------------------
Bernard Cammarata 58 President, Chief Executive Officer and
Director since 1989, Chairman of the
Company's T.J. Maxx Division from 1986 to
1995 and of the Company's T.J. Maxx and
Marshalls Division ("The Marmaxx Group")
since 1995. Executive Vice President of the
Company from 1986 to 1989. President, Chief
Executive Officer and Director of the
Company's former TJX subsidiary from 1987 to
1989; President of T.J. Maxx, 1976 to 1986.
Donald G. Campbell 46 Executive Vice President - Finance since 1996
and Chief Financial Officer of the Company
since 1989. Senior Vice President - Finance,
from 1989 to 1996. Senior Financial Executive
of the Company, 1988 to 1989; Senior Vice
President - Finance and Administration Zayre
Stores Division 1987-1988; Vice President and
Corporate Controller of the Company prior to
1987.
Richard Lesser 63 Executive Vice President of the Company since
1991, Chief Operating Officer of the Company
since 1994 and Director of the Company and
President of The Marmaxx Group since 1995.
Senior Vice President of the Company
1989-1991 and President of the T.J. Maxx
Division from 1986 to 1994. Senior Executive
Vice President - Merchandising and
Distribution 1986. Executive Vice President -
General Merchandise Manager 1984 to 1986;
Senior Vice President - General Merchandise
Manager 1981 to 1984.
The foregoing were elected to their current Company offices by the Board of
Directors in June 1997. All officers hold office until the next annual meeting
of the Board in June 1998 and until their successors are elected and qualified.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required by this Item is incorporated herein by reference
from page 36 of the Annual Report, under the caption "Price Range of Common
Stock," and from inside the back cover of the Annual Report, under the caption
"Shareholder Information."
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
from page 36 of the Annual Report, under the caption "Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference
from pages 37 through 41 of the Annual Report, under the caption "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this Item is incorporated herein by reference
from the last two paragraphs on page 41 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item and not filed with this report as
Financial Statement Schedules is incorporated herein by reference from pages 16
through 34 of the Annual Report, under the captions; "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Shareholders' Equity," "Selected Information by
Major Business Segment" and "Notes to Consolidated Financial Statements."
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement no later than 120 days after the close of its fiscal
year ended January 31, 1998 (the "Proxy Statement"). The information required by
this Item and not given in Item 4A, Executive Officers of the Registrant, is
incorporated by reference to the Proxy
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Statement. However, information under the captions "Executive Compensation
Committee Report" and "Performance Graph" in the Proxy Statement is not so
incorporated.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENT SCHEDULES
The Financial Statements filed as part of this report are listed and
indexed at Page F-1.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended January 31, 1998.
(c) EXHIBITS
Listed below are all Exhibits filed as part of this report. Certain
Exhibits are incorporated by reference to documents previously filed by the
Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32
under the Securities Exchange Act of 1934, as amended.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3(i).1 Third Restated Certificate of Incorporation is incorporated
herein by reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-8 No. 333-35073.
3(ii).1 The by-laws of the Company, as amended, are incorporated herein
by reference to Exhibit (3ii)(a) to the Form 10-K filed for the
fiscal year ended January 28, 1995.
4.1 Credit Agreement dated as of September 18, 1997, together with
Amendment and Waiver Number 1 dated as of December 17, 1997,
among the financial institutions as lenders, The First National
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Bank of Chicago, Bank of America National Trust and Savings
Association, The Bank of New York, BankBoston, N.A., certain
parties as co-agents, and the Company is filed herewith.
Each other instrument relates to securities the total amount of
which does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish to
the Securities and Exchange Commission copies of each such instrument
not otherwise filed herewith or incorporated herein by reference.
10.2 The Employment Agreement dated as of January 26, 1997 with
Bernard Cammarata is incorporated herein by reference to Exhibit
10.2 to the Form 10-K filed for the fiscal year ended January 25,
1997. The Amendment dated as of January 26, 1998 and the
Amendment dated as of April 8, 1998 to such Employment Agreement
are filed herewith. *
10.3 The Amended and Restated Employment Agreement dated as of January
31, 1998 with Richard Lesser is filed herewith. *
10.4 The Amended and Restated Employment Agreement dated as of January
31, 1998 with Donald G. Campbell is filed herewith. *
10.5 The TJX Companies, Inc. Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10.2 to the Form 10-Q
filed for the quarter ended July 26, 1997. *
10.6 The 1982 Long Range Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to the Form
10-K filed for the fiscal year ended January 29, 1994. *
10.7 The 1986 Stock Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-8 No. 333-35073. *
10.8 The TJX Companies, Inc. Long Range Performance Incentive Plan, as
amended, is incorporated herein by reference to Exhibit 10.3 to
the Form 10-Q filed for the quarter ended July 26, 1997. *
10.9 The General Deferred Compensation Plan, as amended, is
incorporated herein by reference to Exhibit 10(n) to the Form
10-K filed for the fiscal year ended January 27, 1990. *
10.10 The Supplemental Executive Retirement Plan, as amended, is
incorporated herein by reference to Exhibit 10(l) to the Form
10-K filed for the fiscal year ended January 25, 1992. *
10.11 The 1993 Stock Option Plan for Non-Employee Directors, as
amended, is filed herewith. *
10.12 The Deferred Stock Plan for Non-Employee Directors effective
January 1, 1998 is filed herewith. *
10.13 The form of Indemnification Agreement between the Company and
each of its officers and directors is incorporated herein by
14
<PAGE> 15
PAGE 15
reference to Exhibit 10(r) to the Form 10-K filed for the fiscal
year ended January 27, 1990. *
10.14 The Trust Agreement dated as of April 8, 1988 between the Company
and State Street Bank and Trust Company is incorporated herein by
reference to Exhibit 10(y) to the Form 10-K filed for the fiscal
year ended January 30, 1988. *
10.15 The Trust Agreement dated as of April 8, 1988 between the Company
and Fleet Bank (formerly Shawmut Bank of Boston, N.A.) is
incorporated herein by reference to Exhibit 10(z) to the Form
10-K filed for the fiscal year ended January 30, 1988. *
10.16 Stock Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by
reference to the Current Report on Form 8-K dated October 14,
1995.
10.17 Amendment Number One dated as of November 17, 1995 to the Stock
Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by
reference to the Current Report on Form 8-K dated November 17,
1995.
10.18 Asset Purchase Agreement dated as of October 18, 1996 between the
Company and Brylane, L.P. is incorporated herein by reference to
the Current Report on Form 8-K dated October 18, 1996.
10.19 The Distribution Agreement dated as of May 1, 1989 between the
Company and HomeBase, Inc. (formerly Waban Inc.) is incorporated
herein by reference to Exhibit 3 to the Company's Current Report
on Form 8-K dated June 21, 1989. The First Amendment to
Distribution Agreement dated as of April 18, 1997 between the
Company and HomeBase, Inc. (formerly Waban Inc.) is incorporated
herein by reference to Exhibit 10.22 to the Form 10-K filed for
the fiscal year ended January 25, 1997.
10.20 The Indemnification Agreement dated as of April 18, 1997 by and
between the Company and BJ's Wholesale Club, Inc. is incorporated
herein by reference to Exhibit 10.23 to the Form 10-K filed for
the fiscal year ended January 25, 1997.
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
This statement is filed herewith.
13 ANNUAL REPORT TO SECURITY HOLDERS.
Portions of the Annual Report to Stockholders for the fiscal year
ended January 31, 1998 are filed herewith.
21 SUBSIDIARIES.
A list of the Registrant's subsidiaries is filed herewith.
23 CONSENTS OF EXPERTS AND COUNSEL.
15
<PAGE> 16
PAGE 16
The Consent of Coopers & Lybrand L.L.P. is contained on Page F-2
of the Financial Statements filed herewith.
24 POWER OF ATTORNEY.
The Power of Attorney given by the Directors and certain
Executive Officers of the Company is filed herewith.
* Management contract or compensatory plan or arrangement.
16
<PAGE> 17
PAGE 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE TJX COMPANIES, INC.
Dated: April 29, 1998
/s/ Donald G. Campbell
-----------------------------------
Donald G. Campbell
Executive Vice President - Finance
17
<PAGE> 18
PAGE 18
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ Bernard Cammarata /s/ Donald G. Campbell
- ----------------------------------- ------------------------------
Bernard Cammarata, President Donald G. Campbell, Executive
and Principal Executive Officer Vice President - Finance,
and Director Principal Financial and
Accounting Officer
PHYLLIS B. DAVIS* JOHN F. O'BRIEN*
- ----------------------------------- ------------------------------
Phyllis B. Davis, Director John F. O'Brien, Director
DENNIS F. HIGHTOWER* ROBERT F. SHAPIRO*
- ----------------------------------- ------------------------------
Dennis F. Hightower, Director Robert F. Shapiro, Director
RICHARD LESSER* WILLOW B. SHIRE*
- ----------------------------------- ------------------------------
Richard Lesser, Director Willow B. Shire, Director
ARTHUR F. LOEWY* FLETCHER H. WILEY*
- ----------------------------------- ------------------------------
Arthur F. Loewy, Director Fletcher H. Wiley, Director
JOHN M. NELSON*
- -----------------------------------
John M. Nelson, Director
* BY /s/ DONALD G. CAMPBELL
------------------------------
Donald G. Campbell
Dated: April 29, 1998 as attorney-in-fact
18
<PAGE> 19
PAGE 20
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
THE TJX COMPANIES, INC.
FORM 10-K
ANNUAL REPORT
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended
January 31, 1998, January 25, 1997
and January 27, 1996
20
<PAGE> 20
THE TJX COMPANIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended January 31, 1998, January 25, 1997 and
January 27, 1996
Report of Independent Accountants 35*
Consent of Independent Accountants F-2
Selected Quarterly Financial Data (Unaudited) 42*
Consolidated Financial Statements:
Consolidated Statements of Income for the fiscal years
ended January 31, 1998, January 25, 1997 and
January 27, 1996 16*
Consolidated Balance Sheets as of January 31, 1998
and January 25, 1997 17*
Consolidated Statements of Cash Flows for the fiscal
years ended January 31, 1998, January 25, 1997 and
January 27, 1996 18*
Consolidated Statements of Shareholders' Equity for
the fiscal years ended January 31, 1998, January 25,
1997 and January 27, 1996 19*
Notes to Consolidated Financial Statements 21-34*
* Refers to page numbers in the Company's Annual Report to Stockholders for
the fiscal year ended January 31, 1998, certain portions of which pages are
incorporated by reference in Part II, Item 8 of this report as indicated.
21
<PAGE> 21
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of The TJX Companies, Inc. on Form S-3 (File Nos. 333-5501 and 33-60059) and on
Forms S-8 (File Nos. 333-23613, 33-49747, 33-12220 and 333-35073) of our report
dated March 3, 1998 on our audits of the consolidated financial statements of
The TJX Companies, Inc. as of January 31, 1998 and January 25, 1997 and for the
years ended January 31, 1998, January 25, 1997 and January 27, 1996 which report
is incorporated by reference in this Annual Report on Form 10-K.
Boston, Massachusetts
April 29, 1998 Coopers & Lybrand L.L.P.
F-2
<PAGE> 22
Exhibit Index
Exhibit
No. Description of Exhibit
- --- ----------------------
3(i).1 Third Restated Certificate of Incorporation is incorporated
herein by reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-8 No. 333-35073.
3(ii).1 The by-laws of the Company, as amended, are incorporated herein
by reference to Exhibit (3ii)(a) to the Form 10-K filed for the
fiscal year ended January 28, 1995.
4.1 Credit Agreement dated as of September 18, 1997, together with
Amendment and Waiver Number 1 dated as of December 17, 1997,
among the financial institutions as lenders, The First National
Bank of Chicago, Bank of America National Trust and Savings
Association, The Bank of New York, BankBoston, N.A., certain
parties as co-agents, and the Company is filed herewith.
Each other instrument relates to securities the total amount of
which does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish to
the Securities and Exchange Commission copies of each such instrument
not otherwise filed herewith or incorporated herein by reference.
10.2 The Employment Agreement dated as of January 26, 1997 with
Bernard Cammarata is incorporated herein by reference to Exhibit
10.2 to the Form 10-K filed for the fiscal year ended January 25,
1997. The amendment dated January 26, 1998 and the amendment
dated as of April 8, 1998 to such Employment Agreement are filed
herewith. *
10.3 The Amended and Restated Employment Agreement dated as of
January 31, 1998 with Richard Lesser is filed herewith. *
10.4 The Amended and Restated Employment Agreement dated as of
January 31, 1998 with Donald G. Campbell is filed herewith. *
10.5 The TJX Companies, Inc. Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10.2 to the Form 10-Q
filed for the quarter ended July 26, 1997. *
10.6 The 1982 Long Range Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to the Form
10-K filed for the fiscal year ended January 29, 1994. *
10.7 The 1986 Stock Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-8 No. 333-35073.
10.8 The TJX Companies, Inc. Long Range Performance Incentive Plan, as
amended, is incorporated herein by reference to Exhibit 10.3 to
the Form 10-Q filed for the quarter ended July 26, 1997. *
10.9 The General Deferred Compensation Plan, as amended, is
incorporated herein by reference to Exhibit 10(n) to the Form
10-K filed for the fiscal year ended January 27, 1990. *
<PAGE> 23
10.10 The Supplemental Executive Retirement Plan, as amended, is
incorporated herein by reference to Exhibit 10(l) to the Form
10-K filed for the fiscal year ended January 25, 1992. *
10.11 The 1993 Stock Option Plan for Non-Employee Directors, as
amended, is filed herewith.*
10.12 The Deferred Stock Plan for Non-Employee Directors effective
January 1, 1998 is filed herewith. *
10.13 The form of Indemnification Agreement between the Company and
each of its officers and directors is incorporated herein by
reference to Exhibit 10(r) to the Form 10-K filed for the fiscal
year ended January 27, 1990. *
10.14 The Trust Agreement dated as of April 8, 1988 between the Company
and State Street Bank and Trust Company is incorporated herein by
reference to Exhibit 10(y) to the Form 10-K filed for the fiscal
year ended January 30, 1988. *
10.15 The Trust Agreement dated as of April 8, 1988 between the Company
and Fleet Bank (formerly Shawmut Bank of Boston, N.A.) is
incorporated herein by reference to Exhibit 10(z) to the Form
10-K filed for the fiscal year ended January 30, 1988. *
10.16 Stock Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by
reference to the Current Report on Form 8-K dated October 14,
1995.
10.17 Amendment Number One dated as of November 17, 1995 to the Stock
Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by
reference to the Current Report on Form 8-K dated November 17,
1995.
10.18 Asset Purchase Agreement dated as of October 18, 1996 between the
Company and Brylane, L.P. is incorporated herein by reference to
the Current Report on Form 8-K dated October 18, 1996.
10.19 The Distribution Agreement dated as of May 1, 1989 between the
Company and HomeBase, Inc. (formerly Waban Inc.) is incorporated
herein by reference to Exhibit 3 to the Company's Current Report
on Form 8-K dated June 21, 1989. The First Amendment to
Distribution Agreement dated as of April 18, 1997 between the
Company and HomeBase, Inc. (formerly Waban Inc.) is incorporated
herein by reference to Exhibit 10.22 to the Form 10-K filed for
the fiscal year ended January 25, 1997.
10.20 The Indemnification Agreement dated as of April 18, 1997 by and
between the Company and BJ's Wholesale Club, Inc. is incorporated
herein by reference to Exhibit 10.23 to the Form 10-K filed for
the fiscal year ended January 25, 1997.
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
This statement is filed herewith.
<PAGE> 24
13 ANNUAL REPORT TO SECURITY HOLDERS.
Portions of the Annual Report to Stockholders for the fiscal year
ended January 31, 1998 are filed herewith.
21 SUBSIDIARIES.
A list of the Registrant's subsidiaries is filed herewith.
23 CONSENTS OF EXPERTS AND COUNSEL.
The Consent of Coopers & Lybrand L.L.P. is contained on Page F-2
of the Financial Statements filed herewith.
24 POWER OF ATTORNEY.
The Power of Attorney given by the Directors and certain
Executive Officers of the Company is filed herewith.
* Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 4.1
AMENDMENT AND WAIVER NO. 1
DATED AS OF DECEMBER 17, 1997
TO CREDIT AGREEMENT
DATED AS OF SEPTEMBER 18, 1997
THIS AMENDMENT AND WAIVER NO. 1 TO CREDIT AGREEMENT ("AMENDMENT") is made
as of this 17th day of December, 1997 by and among THE TJX COMPANIES, INC., (the
"BORROWER"), the financial institutions parties thereto as lenders (the
"LENDERS"), THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent (the
"ADMINISTRATIVE AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Syndication Agent, THE BANK OF NEW YORK, as Documentation Agent, BANKBOSTON,
N.A., as Managing Agent and CIBC, INC., DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH, FLEET NATIONAL BANK, MELLON BANK, N.A. AND PNC BANK,
NATIONAL ASSOCIATION, as Co-Agents under that certain Credit Agreement dated as
of September 18, 1997 by and among the Borrower, the Lenders, the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Managing Agent and
the Co-Agents (the "CREDIT AGREEMENT"). Capitalized terms used herein and not
otherwise defined herein shall have the meaning given to them in the Credit
Agreement.
WITNESSETH
WHEREAS, the Borrower, the Lenders, and the Administrative Agent are
parties to the Credit Agreement; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended;
WHEREAS, the Borrower, the Lenders and the Administrative Agent have agreed
to amend the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders and the Administrative Agent have agreed to the following amendment to
the Credit Agreement.
1. AMENDMENT TO CREDIT AGREEMENT. Effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in Section 3
below, SECTION 6.13 of the Credit Agreement is amended to add a new clause (g)
which reads in its entirety as follows:
-1-
<PAGE> 2
(g) Loans, capital contributions and other Investments made by any
Subsidiary in the Borrower.
2. WAIVER. UPON THE EFFECTIVENESS OF THIS AMENDMENT AND WAIVER IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3 BELOW, THE LENDERS HEREBY WAIVE ANY
DEFAULT OR UNMATURED DEFAULT WHICH MAY HAVE OCCURRED AS A RESULT OF ANY LOAN,
CAPITAL CONTRIBUTION OR OTHER INVESTMENT MADE BY ANY SUBSIDIARY IN THE BORROWER
PRIOR TO THE EFFECTIVE DATE HEREOF.
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become effective
unless this Amendment shall have been executed by the Borrower, the
Administrative Agent and the Required Lenders on or before December 17, 1997.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Credit Agreement as previously executed and as
amended hereby, constitute legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their terms (except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditor's rights generally).
(b) Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement and the other Transaction Documents to the extent the same are not
amended hereby, agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date of this Amendment.
(c) Upon the effectiveness of this Amendment, there exists no Default or
Unmatured Default.
5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power of
remedy of the Agent or the Lenders, nor constitute a waiver of any provision of
the Credit Agreement or any other documents, instruments and agreements executed
and/or delivered in connection therewith.
<PAGE> 3
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
7. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Administrative Agent and the Required Lenders and each such party
has notified the Administrative Agent by facsimile or telephone that it has
taken such action.
- - - - Remainder of this page intentionally blank - - - -
<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.
THE TJX COMPANIES, INC.
By: /s/ Steven Wishner
----------------------------------------
Name: Steven Wishner
Title: Vice President, Finance-Treasurer
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ John Runger
----------------------------------------
Name: John Runger
Title: Manager Director
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Sandra S. Ober
----------------------------------------
Name: Sandra S. Ober
Title: Managing Director
THE BANK OF NEW YORK
By: /s/ Howard F. Bascom, Jr.
----------------------------------------
Name: Howard F. Bascom, Jr.
Title: Vice President
<PAGE> 5
BANKBOSTON, N.A.
By: /s/ Linda H. Thomas
----------------------------------------
Name: Linda H. Thomas
Title: Managing Director
CIBC, INC.
By: /s/ Christopher P. Kleczkowski
----------------------------------------
Name: Christopher P. Kleczkowski
Title: Executive Director, CIBC
Oppenheime Corp., as Agent
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Susan M. O'Connor
----------------------------------------
Name: Susan M. O'Connor
Title: Director
By: /s/ Joel D. Makowsky
----------------------------------------
Name: Joel D. Makowsky
Title: Assistant Vice President
MELLON BANK, N.A.
By: /s/ Maribeth Donnelly
----------------------------------------
Name: Maribeth Donnelly
Title: Vice President
<PAGE> 6
FLEET NATIONAL BANK
By: /s/ Richard M. Seufert
----------------------------------------
Name: Richard M. Seufert
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Mark Williams
----------------------------------------
Name: Mark Williams
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ Carol A. Levine
----------------------------------------
Name: Carol A. Levine
Title: SVP
By: /s/ James E. Davis
----------------------------------------
Name: James E. Davis
Title: GVP
BARNETT BANK, N.A.
By: /s/ Scott M. Hesketh
----------------------------------------
Name: Scott M. Hesketh
Title: VP - US Banking
<PAGE> 7
FIRST AMERICAN NATIONAL BANK
By: /s/ Andrew S. Zimberg
----------------------------------------
Name: Andrew S. Zimberg
Title: Vice President
STANDARD CHARTERED BANK
By: /s/ Leonardo A. Tee
----------------------------------------
Name: Leonardo A. Tee
Title: V.P.
By: /s/ Kristina McDavid
----------------------------------------
Name: Kristina McDavid
Title: V.P.
STATE STREET BANK AND TRUST COMPANY
By: /s/ F. Andrew Beise
----------------------------------------
Name: F. Andrew Beise
Title: Vice President
THE TOYO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By: /s/ T. Mikumo
----------------------------------------
Name: T. Mikumo
Title: Vice President
<PAGE> 8
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Dana C. Fenwick
----------------------------------------
Name: Dana C. Fenwick
Title: Vice President
<PAGE> 9
EXECUTION COPY
================================================================================
U.S. $500,000,000
CREDIT AGREEMENT
Dated as of September 18, 1997
Among
THE TJX COMPANIES, INC.,
as the Borrower,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as the Lenders,
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Syndication Agent,
THE BANK OF NEW YORK,
as Documentation Agent,
BANKBOSTON, N.A.,
as Managing Agent,
and
CIBC, INC.,
DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH,
FLEET NATIONAL BANK,
MELLON BANK, N.A., and
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agents.
================================================================================
<PAGE> 10
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
1.1. Certain Defined Terms ........................................... 1
ARTICLE II
THE CREDITS
2.1. The Syndicated Loans ......................................... 15
2.2. Repayment of the Syndicated Loans ............................ 15
2.3. Ratable Loans; Types of Syndicated Advances .................. 15
2.4. Minimum Amount of Each Syndicated Advance .................... 16
2.5. Optional Prepayments of Syndicated Loans ..................... 16
2.6. Method of Selecting Types and Interest Periods
for New Syndicated Advances .................................. 16
2.7. Conversion and Continuation of Outstanding
Syndicated Advances .......................................... 17
2.8. Payment of Interest on Syndicated Advances; Changes
in Interest Rate ............................................. 17
2.9. Swing Line Loans ............................................. 18
2.10. The Bid Rate Advances ........................................ 19
2.11. Facility Fee; Reductions in Aggregate Commitment ............. 22
2.12. Rates Applicable After Default ............................... 23
2.13. Method of Payment ............................................ 23
2.14. Notes; Telephonic Notices .................................... 23
2.15. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions .................................... 23
2.16. Lending Installations ........................................ 24
2.17. Non-Receipt of Funds by the Administrative Agent ............. 24
2.18. Withholding Tax Exemption .................................... 24
2.19. Termination .................................................. 25
2.20. Letter of Credit Facility. ................................... 25
2.20.1. Obligation to Issue. ......................................... 25
2.20.2. Types and Amounts ............................................ 25
2.20.3. Conditions. .................................................. 25
2.20.4. Procedure for Issuance of Letters of Credit .................. 26
2.20.5. Letter of Credit Participation ............................... 26
2.20.6. Reimbursement Obligation ..................................... 27
2.20.7. Letter of Credit Fees ........................................ 27
2.20.8. Issuing Lender Reporting Requirements. ....................... 27
2.20.9. Indemnification; Exoneration ................................. 28
2.20.10. Cash Collateral .............................................. 29
2.21. Pricing. ..................................................... 29
-ii-
<PAGE> 11
Section Page
- ------- ----
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection ............................................... 30
3.2. Changes in Capital Adequacy Regulations ........................ 31
3.3. Availability of Types of Syndicated Advances ................... 31
3.4. Funding Indemnification ........................................ 32
3.5. Mitigation; Lender Statements; Survival of Indemnity ........... 32
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Effectiveness; Initial Advance ................................. 33
4.2. Each Advance and Letter of Credit .............................. 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Corporate Existence and Standing ............................... 35
5.2. Authorization and Validity ..................................... 35
5.3. No Conflict; Government Consent ................................ 36
5.4. Financial Statements ........................................... 37
5.5. Material Adverse Change ........................................ 37
5.6. Taxes .......................................................... 37
5.7. Litigation and Contingent Obligations .......................... 37
5.8. Subsidiaries ................................................... 37
5.9. ERISA .......................................................... 38
5.10. Accuracy of Information ........................................ 38
5.11. Regulations G, T, U and X ...................................... 38
5.12. Material Agreements ............................................ 38
5.13. Compliance With Laws ........................................... 38
5.14. Ownership of Property .......................................... 39
5.15. Labor Matters .................................................. 39
5.16. Investment Company Act ......................................... 39
5.17. Public Utility Holding Company Act ............................. 39
ARTICLE VI
COVENANTS
6. Covenants ...................................................... 40
6.1. Financial Reporting ............................................ 40
6.2. Use of Proceeds ................................................ 41
6.3. Other Notices .................................................. 42
6.4. Conduct of Business ............................................ 42
6.5. Taxes .......................................................... 42
-iii-
<PAGE> 12
Section Page
- ------- ----
6.6. Insurance ...................................................... 42
6.7. Compliance with Laws ........................................... 42
6.8. Maintenance of Properties ...................................... 43
6.9. Inspection ..................................................... 43
6.10. Merger ......................................................... 43
6.11. Sale of Assets ................................................. 43
6.12. Affiliates ..................................................... 44
6.13. Investments .................................................... 45
6.14. Contingent Obligations ......................................... 45
6.15. Liens .......................................................... 46
6.16. Maximum Leverage Ratio ......................................... 48
6.17. Minimum Fixed Charge Coverage .................................. 48
6.18. Acquisitions ................................................... 48
6.19. Rate Hedging Obligations. ...................................... 49
6.20. Material Subsidiaries .......................................... 49
6.21. Subsidiary Indebtedness. ....................................... 49
6.22. Subordination of Intercompany Indebtedness. .................... 50
ARTICLE VII
DEFAULTS .............................................................. 50
7. Defaults ....................................................... 50
7.1. Breach of Representation or Warranty. .......................... 50
7.2. Payment Default. ............................................... 50
7.3. Breach of Certain Covenants. ................................... 50
7.4. Breach of Other Provisions. .................................... 50
7.5. Default on Material Indebtedness. .............................. 51
7.6. Voluntary Insolvency Proceedings. .............................. 51
7.7. Involuntary Insolvency Proceedings. ............................ 51
7.8. Condemnation. .................................................. 51
7.9. Judgments. ..................................................... 52
7.10. ERISA Matters. ................................................. 52
7.11. Environmental Matters. ......................................... 52
7.12. Change of Control. ............................................. 52
7.13. Change of Subsidiary Ownership; Guaranty Defaults. ............. 52
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration ................................................... 53
8.2. Amendments ..................................................... 53
8.3. Preservation of Rights ......................................... 54
-iv-
<PAGE> 13
Section Page
- ------- ----
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations .................................... 54
9.2. Governmental Regulation ........................................ 54
9.3. Taxes; Stamp Duties ............................................ 54
9.4. Headings ....................................................... 55
9.5. Entire Agreement ............................................... 55
9.6. Several Obligations; Benefits of this Agreement ................ 55
9.7. Expenses; Indemnification ...................................... 55
9.8. Numbers of Documents ........................................... 57
9.9. Accounting ..................................................... 57
9.10. Severability of Provisions ..................................... 57
9.11. Nonliability of Lenders ........................................ 57
9.12. Governing Law. ................................................. 58
9.13. Consent to Jurisdiction; Service of Process; Jury Trial. ....... 58
9.14. Confidentiality ................................................ 60
9.15. Facility Guaranty Releases ..................................... 60
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment; Nature of Relationship ............................ 60
10.2. Powers ......................................................... 61
10.3. General Immunity ............................................... 61
10.4. No Responsibility for Loans, Creditworthiness,
Collateral, Recitals, Etc. ..................................... 61
10.5. Action on Instructions of Lenders .............................. 62
10.6. Employment of Agents and Counsel ............................... 62
10.7. Reliance on Documents; Counsel ................................. 62
10.8. The Administrative Agent's Reimbursement and
Indemnification ................................................ 63
10.9. Rights as a Lender ............................................. 63
10.10. Lender Credit Decision ......................................... 63
10.11. Successor Administrative Agent ................................. 63
10.12. Administrative Agent's Fee. .................................... 64
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff ......................................................... 64
11.2. Ratable Payments ............................................... 64
11.3. Application of Payments ........................................ 65
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Section Page
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ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns ......................................... 66
12.2. Participations ................................................. 66
12.3. Assignments .................................................... 67
12.4. Dissemination of Information ................................... 68
12.5. Tax Treatment .................................................. 68
ARTICLE XIII
NOTICES
13.1. Giving Notice .................................................. 68
13.2. Change of Address .............................................. 69
ARTICLE XIV
COUNTERPARTS
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SCHEDULES
Schedule 1 Disclosure Schedule
Schedule 2.20 Issuing Lender's Maximum Amounts
Schedule 5.3 Governmental Authorizations
Schedule 5.6 Tax Liens
Schedule 5.7 Litigation
Schedule 5.8 Subsidiaries
Schedule 5.13 Environmental, Health or Safety Requirements of Law
Schedule 5.14 Liens and Encumbrances
Schedule 6.11 Asset Sales
Schedule 6.13 Investments
Schedule 6.14 Contingent Obligations
Schedule 6.21 Subsidiary Indebtedness
Schedule 6.22 Subordination
EXHIBITS
Exhibit A-1 Form of Syndicated Note
Exhibit A-2 Form of Bid Rate Note
Exhibit A-3 Form of Swing Line Note
Exhibit B Required Opinions
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment Agreement
Exhibit E Form of Loan/Credit Related Money Transfer Instruction
Exhibit F-1 Form of Syndicated Advance Borrowing Notice
Exhibit F-2 Form of Bid Rate Advance Borrowing Notice
Exhibit G Form of Prepayment Notice
Exhibit H Form of Conversion/Continuation Notice
Exhibit I Form of Facility Guaranty
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<PAGE> 16
THIS CREDIT AGREEMENT, dated as of September 18, 1997, is among THE TJX
COMPANIES, INC., as the Borrower, THE FINANCIAL INSTITUTIONS NAMED HEREIN, as
the Lenders, and THE FIRST NATIONAL BANK OF CHICAGO, as the Administrative
Agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Syndication
Agent, THE BANK OF NEW YORK, as Documentation Agent, and BANKBOSTON, N.A., as
Managing Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. As used in this Agreement the following
terms shall have the following meanings, such meanings being equally applicable
to both the singular and plural forms of the terms defined:
"ABSOLUTE RATE AUCTION" has the meaning specified in
SECTION 2.10(b)(i).
"ACCOUNTING CHANGES" has the meaning specified in SECTION 9.9.
"ACQUISITION" means any transaction, or any series of related
transactions, by which the Borrower or any of its Subsidiaries (a) acquires any
going business or all or substantially all of the assets of any firm,
corporation or division thereof which constitutes a going business, whether
through purchase of assets, merger or otherwise or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency), or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership or a majority (by percentage or voting
power) of the outstanding ownership interests of a limited liability company.
"ADMINISTRATIVE AGENT" means First Chicago in its capacity as
contractual representative for the Lenders pursuant to ARTICLE X, and not in its
capacity as a Lender, and any successor Administrative Agent appointed pursuant
to ARTICLE X.
"ADVANCE" means a Syndicated Advance or a Bid Rate Advance.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 20% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise; PROVIDED THAT no
individual shall be an Affiliate solely by reason of being, or actions taken as,
a director, officer or employee.
"AGGREGATE COMMITMENT" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"AGREEMENT" means this Credit Agreement, as it may from time to time be
amended, restated, supplemented or otherwise modified.
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"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles as in effect as of the date of this Agreement, applied in a manner
consistent with that used in preparing the financial statements referred to in
Section 5.4. An Affiliate of the Borrower which is consolidated with the
accounts of the Borrower in accordance with Agreement Accounting Principles
shall for all accounting and financial tests contained in this Agreement be
treated as a Subsidiary hereunder.
"ALTERNATE BASE RATE" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day and (b) the sum
of Federal Funds Effective Rate for such day plus 0.50% per annum.
"APPLICABLE FACILITY FEE RATE" means, from time to time, the Applicable
Facility Fee Rate set forth in SECTION 2.21.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any of the President, the Chief Executive
Officer, the Chief Financial Officer, the Chief Operating Officer, the
Controller or the Treasurer of the Borrower, acting singly.
"BID RATE ADVANCE" means a borrowing consisting of simultaneous Bid
Rate Loans to the Borrower from each of the Lenders whose offer to make a Bid
Rate Loan as part of such borrowing has been accepted by the Borrower under the
applicable auction bidding procedure described in SECTION 2.10.
"BID RATE ADVANCE BORROWING NOTICE" has the meaning specified in
SECTION 2.10(b)(i).
"BID RATE LOAN" means a loan by a Lender to the Borrower as part of a
Bid Rate Advance resulting from the applicable auction bidding procedure
described in SECTION 2.10.
"BID RATE NOTE" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of EXHIBIT A-2 hereto, evidencing
the indebtedness of the Borrower to such Lender resulting from the Bid Rate
Loans made by such Lender to the Borrower.
"BID RATE REDUCTION" has the meaning specified in SECTION 2.1.
"BORROWER" means The TJX Companies, Inc., a Delaware corporation, and
its successors and assigns.
"BORROWING DATE" means a date on which an Advance or a Swing Line Loan
is made hereunder.
"BORROWING NOTICE" means a Syndicated Advance Borrowing Notice or a Bid
Rate Advance Borrowing Notice.
"BUSINESS DAY" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open
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in Chicago, Pittsburgh, New York City and London for the conduct of
substantially all of their commercial lending activities and (b) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago for the conduct of substantially all of their commercial lending
activities.
"CAPITALIZED LEASE" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"CHANGE" has the meaning specified in SECTION 3.2.
"CHANGE IN CONTROL" means:
(a) the acquisition by any Person, or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended) of 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, as
amended), directly or indirectly, of 50% or more of the outstanding
shares of voting stock of the Borrower; or
(b) during any period of twelve (12) consecutive calendar
months, individuals:
(i) who were directors of the Borrower on the first day of
such period; or
(ii) whose election or nomination for election to the board of
directors of the Borrower was recommended or approved by at
least a majority of the directors then still in office who
were directors of the Borrower on the first day of such
period, or whose election or nomination for election was so
approved,
shall cease to constitute a majority of the board of directors of the
Borrower.
"CHIEF FINANCIAL OFFICER" means, at any time, the Person who reports to
the board of directors of the Borrower on the financial affairs of the Borrower
and its Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COMMITMENT" means, for each Lender, the obligation of such Lender to
make Syndicated Loans and to purchase participations in Letters of Credit and in
Swing Line Loans not exceeding, in the aggregate, the amount set forth opposite
its signature below or as set forth in any Notice of Assignment relating to any
assignment that has become effective pursuant to SECTION 12.3.2, as such amount
may be modified from time to time pursuant to the terms hereof.
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"CONDEMNATION" has the meaning specified in SECTION 7.8.
"CONSOLIDATED FIXED CHARGES" for any period means, on a consolidated
basis for the Borrower and all of its Subsidiaries for such period, the sum of
(a) Consolidated Interest Expense (net of consolidated interest income) and (b)
all payments of Consolidated Rentals by the Borrower or any of its Subsidiaries,
all as determined in accordance with Agreement Accounting Principles.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate
amount of interest, including payments in the nature of interest under
Capitalized Lease Obligations, paid in cash by the Borrower and its Subsidiaries
on a consolidated basis in accordance with Agreement Accounting Principles.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries for such period determined
in accordance with Agreement Accounting Principles; provided, that there shall
be excluded (i) the income (or loss) of any Affiliate of the Borrower or other
Person (other than a Subsidiary of the Borrower) in which any Person (other than
the Borrower or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of its Subsidiaries by such Affiliate or other Person during
such period and (ii) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or consolidated
with the Borrower or any of its Subsidiaries or that Person's assets are
acquired by the Borrower or any of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the consolidated shareholders' equity of the Borrower and its
Subsidiaries determined in accordance with Agreement Accounting Principles.
"CONSOLIDATED RENTALS" means, for any period, the aggregate rental
amounts payable by the Borrower and its Subsidiaries for such period under any
lease of Property having an original term (including any required renewals or
any renewals at the option of the lessor or lessee) of one year or more (but
does not include any amounts payable under Capitalized Leases), determined in
accordance with Agreement Accounting Principles; provided, however, that there
shall be excluded from such calculation rentals in respect of discontinued
operations and other store closings reflected in the Borrower's consolidated
financial statements (or the footnotes thereto) to the extent such rentals
relate to operations for which a charge has been taken and/or reserve
established in accordance with Agreement Accounting Principles and which do not
exceed the amount of such charge and/or reserve, the amount of which charge
and/or reserve has been established consistent with Agreement Accounting
Principles.
"CONTINGENT OBLIGATION" of a Person means any agreement, written
undertaking or contractual arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon, the financial or monetary
obligation or financial or monetary liability of any other Person (excluding
customary indemnification obligations arising from a purchase and sale agreement
negotiated at arm's length and typical for transactions of a similar nature),
or agrees in writing to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person in writing against loss, including, without limitation, any
operating agreement,
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<PAGE> 20
take-or-pay contract or application for or reimbursement agreement with respect
to a letter of credit (including any Letter of Credit).
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under SECTION 414 of the Code.
"CONVERSION/CONTINUATION NOTICE" has the meaning specified in SECTION
2.7.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"CREDIT RATINGS" has the meaning specified in SECTION 2.21.
"DEFAULT" means an event described in ARTICLE VII.
"DOLLARS" and "$" mean the lawful money of the United States.
"EBITDAR" for any period means the sum, without duplication, of (a)
Consolidated Net Income during such period, PLUS (to the extent deducted in
determining Consolidated Net Income) (b) all provisions for any foreign,
federal, state and local taxes paid or accrued by the Borrower or any of its
Subsidiaries during such period, PLUS (to the extent deducted in determining
Consolidated Net Income) (c) Consolidated Interest Expense of the Borrower or
any of its Subsidiaries during such period, MINUS (to the extent included in
determining Consolidated Net Income) (d) extraordinary gains (and any unusual
gains whether or not arising in the ordinary course of business not included in
extraordinary gains) to the extent not included in income from continuing
operations, PLUS (to the extent deducted in determining Consolidated Net Income)
(e) consolidated depreciation, PLUS (to the extent deducted in determining
Consolidated Net Income) (f) consolidated amortization expense, including
without limitation, amortization of goodwill and other intangible assets and
other non-cash charges but excluding reserves, PLUS (to the extent deducted in
determining Consolidated Net Income) (g) Consolidated Rentals; (to the extent
deducted in determining Consolidated Net Income) PLUS (h) extraordinary losses
(but only to the extent such losses do not exceed extraordinary gains); all of
such items as determined in accordance with Agreement Accounting Principles.
"ELIGIBLE PARTICIPANT" means (i) a Lender or any Affiliate thereof
which is a commercial bank or (ii) any other commercial bank having capital and
surplus in excess of $100,000,000.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C.ss 9601 ET SEQ., the Occupational Safety and Health Act of 1970,
29 U.S.C.ss 651 et seq., and the Resource Conservation and Recovery Act of 1976,
42 U.S.C.ss 6901 ET SEQ., in each case including any amendments thereto, any
successor statutes, and any regulations or guidance promulgated thereunder, and
any state or local equivalent thereof.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EURODOLLAR ADVANCE" means a Syndicated Advance denominated in Dollars
that bears interest at a Eurodollar Rate.
"EURODOLLAR APPLICABLE MARGIN" means, from time to time, the Eurodollar
Applicable Margin set forth in SECTION 2.21.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, or a Bid Rate Advance priced based on
the Eurodollar Base Rate for an interest period designated by the Borrower, the
applicable London interbank offered rate for deposits in U.S. dollars appearing
on Dow Jones Markets (Telerate) Page 3750 as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity approximately equal to such Eurodollar Interest Period or, in the event
of a Bid Rate Advance, approximately equal to the interest period designated by
the Borrower. If no London interbank offered rate of such maturity then appears
on Dow Jones Markets (Telerate) Page 3750, then the Eurodollar Base Rate shall
be equal to the London interbank offered rate for deposits in U.S. dollars
maturing immediately before or immediately after such maturity, whichever is
higher, as determined by the Administrative Agent from Dow Jones Markets
(Telerate) Page 3750. If Dow Jones Markets (Telerate) Page 3750 is not
available, the applicable Eurodollar Base Rate for the relevant Eurodollar
Interest Period or interest period designated by the Borrower, as applicable,
shall be the rate determined by the Administrative Agent to be the rate at which
First Chicago offers to place deposits in U.S. dollars with first-class banks in
the London interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Eurodollar Interest Period or
interest period designated by the Borrower, as applicable, in the approximate
amount of First Chicago's relevant portion of the Eurodollar Advance or Bid Rate
Advance, as applicable, and having a maturity approximately equal to such
Eurodollar Interest Period or interest period designated by the Borrower, as
applicable.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Eurodollar
Advance, a period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date one, two, three or six months thereafter, unless there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, in which case such Eurodollar Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a Business
Day, such Eurodollar Interest Period shall end on the next succeeding Business
Day, unless said next succeeding Business Day falls in a new calendar month, in
which case such Eurodollar Interest Period shall end on the immediately
preceding Business Day.
"EURODOLLAR LOAN" means a Syndicated Loan or Bid Rate Loan denominated
in Dollars which bears interest at a Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the sum of (a) the quotient of (i) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(ii) one minus the Reserves (expressed as a decimal) applicable to such
Eurodollar Interest Period, plus (b) the Eurodollar Applicable Margin in effect
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from time to time during such Eurodollar Interest Period. The Eurodollar Rate
shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not
such a multiple.
"FACILITY GUARANTY" means a Guaranty, substantially in the form of
EXHIBIT I hereto, duly executed and delivered by a Material Subsidiary of the
Borrower to and in favor of the Administrative Agent for the benefit of itself,
the Issuing Lenders, the Swing Line Lender, and the Lenders, as the same may
from time to time be amended, restated, supplemented or otherwise modified.
"FACILITY TERMINATION DATE" means September 18, 2002.
"FAIR VALUE" means the value of the relevant asset determined in an
arm's-length transaction conducted in good faith between an informed and willing
buyer and an informed and willing seller under no compulsion to buy or sell.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"FIRST CHICAGO" means The First National Bank of Chicago in its
individual capacity, and its successors.
"FIXED CHARGE COVERAGE RATIO" means the ratio of (a) EBITDAR to (b)
Consolidated Fixed Charges.
"FLOATING RATE" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day, changing when and as the Alternate Base Rate
changes.
"FLOATING RATE ADVANCE" means a Syndicated Advance denominated in
Dollars which bears interest at the Floating Rate.
"FLOATING RATE LOAN" means a Syndicated Loan denominated in Dollars
which bears interest at the Floating Rate.
"FUNDED DEBT" of any Person means, without duplication, all obligations
of such Person for money borrowed which in accordance with Agreement Accounting
Principles shall be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include (a) all Capitalized
Lease Obligations of such Person and (b) all Contingent Obligations of such
Person with respect to money borrowed, but shall exclude (i) notes, bills and
checks presented in the ordinary course of business by such Person to banks for
collection or deposit, (ii) with reference to the Borrower and its Subsidiaries,
all obligations of the Borrower and its Subsidiaries of the character referred
to in this definition to the extent owing to the Borrower or any Subsidiary,
(iii) bankers acceptances which, in accordance with Agreement Accounting
Principles, are classified as accounts
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payable and (iv) Contingent Obligations set forth on Schedule 6.14. Without in
any way limiting the foregoing, Funded Debt of the Borrower shall include all
Loans outstanding under this Agreement and the Notes.
"GAAP" means the generally accepted accounting principles as generally
applied by the Borrower as at the end of its fiscal year ending January 25,
1997.
"GOVERNMENTAL ACTS" has the meaning specified in SECTION 2.20.9.
"GOVERNMENTAL AUTHORITY" means any country or nation, any political
subdivision of such country or nation, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government of any country or nation or political subdivision thereof.
"GROSS NEGLIGENCE" means either recklessness or actions taken or
omitted with conscious indifference to or the complete disregard of
consequences. Gross Negligence does not mean the absence of ordinary care or
diligence, or an inadvertent act or inadvertent failure to act. If the term
"gross negligence" is used with respect to the Administrative Agent or any
Lender or any indemnitee in any of the other Loan Documents, it shall have the
meaning set forth herein.
"INDEBTEDNESS" of a Person means, without duplication, such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of Property or services (other than (i) accounts payable and (ii)
bankers acceptances classified in accordance with Agreement Accounting
Principles as accounts payable, in each case arising in the ordinary course of
such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which are evidenced by notes, acceptances (to the extent
not classified as accounts payable in accordance with Agreement Accounting
Principles), or other similar instruments, (e) Capitalized Lease Obligations,
(f) obligations of such Person to purchase securities or other property arising
out of or in connection with the sale of the same or substantially similar
securities or property, and (g) any other obligation in writing for borrowed
money or financial accommodation with respect to other items included in the
definition of Indebtedness above which in accordance with Agreement Accounting
Principles would be shown as a liability on the consolidated balance sheet of
such Person. but excluding, in any event, (i) amounts payable by such Person in
respect of covenants not to compete, and (ii) with reference to the Borrower and
its Subsidiaries, all obligations of the Borrower and its Subsidiaries of the
character referred to in this definition to the extent owing to the Borrower or
any Subsidiary of the Borrower.
"INDEMNIFIED MATTERS" has the meaning specified in SECTION 9.7(b).
"INDEMNITEES" has the meaning specified in SECTION 9.7(b).
"INDEXED RATE AUCTION" has the meaning specified in SECTION 2.10(b)(i).
"INTELLECTUAL PROPERTY" means (i) any and all intangible personal
property consisting of intellectual property, whether or not registered with any
governmental entity, including, without limitation, franchises, licenses,
patents, technology and know-how, copyrights, trademarks, trade secrets, service
marks, logos and trade names and (ii) any and all contract rights (including,
without
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<PAGE> 24
limitation, applications for governmental registrations, license agreements,
trust agreements and assignment agreements) creating, evidencing or conveying an
interest or right in or to any of the intellectual property described in the
preceding clause (i).
"INTEREST PERIOD" means a Eurodollar Interest Period.
"INVESTMENT" of a Person means any loan, advance (other than
commission, travel and other loans, credits and advances to officers and
employees made in the ordinary course of business), extension of credit (other
than accounts receivable arising in the ordinary course of business on terms
customary in the trade), deposit account or contribution of capital by such
Person to any other Person or any investment in, or purchase or other
acquisition of, the stock, partnership interests, ownership interests in any
limited liability company, notes, debentures or other securities of any other
Person made by such Person (other than anticipatory prepayments to vendors in
the ordinary course of business consistent with past practice).
"ISSUING LENDER" means First Chicago and any other Lender which, at the
Borrower's request, agrees, in each such Lender's sole discretion, to become an
Issuing Lender for the purpose of issuing Letters of Credit, and their
respective successors and assigns, in each case in such Lender's separate
capacity as an issuer of Letters of Credit pursuant to SECTION 2.20. The
designation of any Lender as an Issuing Lender after the date hereof shall be
subject to the prior written consent of the Administrative Agent which consent
shall not be unreasonably withheld.
"L/C DRAFT" means a draft drawn on an Issuing Lender pursuant to any of
the Letters of Credit.
"L/C INTEREST" has the meaning specified in SECTION 2.20.5.
"L/C OBLIGATIONS" means an amount equal to the sum (without
duplication) of (i) the aggregate of the amount then available for drawing under
each of the Letters of Credit, (ii) the face amounts of all outstanding L/C
Drafts corresponding to the Letters of Credit, which L/C Drafts have been
accepted by the Issuing Lenders and (iii) the aggregate outstanding amount of
Reimbursement Obligations at such time.
"LENDERS" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"LENDING INSTALLATION" means, with respect to a Lender, any office,
branch, subsidiary or affiliate of such Lender.
"LETTER OF CREDIT" means any standby or commercial letter of credit
issued pursuant to SECTION 2.20.
"LEVERAGE RATIO" means the ratio of:
(i) the sum of (a) Funded Debt of the Borrower and its
Subsidiaries on a consolidated basis, PLUS (b) an amount equal
to the product of four (4) multiplied by Consolidated Rentals
for such period to
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(ii) the sum of (a) Funded Debt of the Borrower and its
Subsidiaries on a consolidated basis, plus (b) an amount equal
to the product of four (4) multiplied by Consolidated Rentals
for such period plus (c) Consolidated Net Worth.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN" means a Syndicated Loan, a Bid Rate Loan or a Swing Line Loan.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Facility
Guaranties and the applications, reimbursement agreements and other instruments
and agreements related to the Letters of Credit and L/C Interests.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, financial condition, operations, performance or Property of the
Borrower and its Subsidiaries on a consolidated basis, (b) the ability of the
Borrower to perform its obligations under the Loan Documents, or (c) the
validity or enforceability of any of the Loan Documents or any material rights
or remedies of the Administrative Agent or the Lenders thereunder.
"MATERIAL INDEBTEDNESS" means any Indebtedness, or group of different
Indebtedness, in an aggregate principal amount of at least $10,000,000.
"MATERIAL SUBSIDIARY" means (a) Marshalls of MA, Inc., Marmaxx
Operating Corp., NBC Fourth Realty Corp., Marshall's of Nevada, Inc.; (b) any
domestic Subsidiary of the Borrower which owns, directly or indirectly, greater
than ten percent (10%) of the total consolidated assets of the Borrower and its
Subsidiaries; and (c) any other domestic Subsidiary in connection with which the
Borrower shall provide written notice to the Agent designating such entity to be
a Material Subsidiary and which shall become a party to the Facility Guaranty
pursuant to the terms of SECTION 6.20.
"MONEY MARKET RATE" is defined in SECTION 2.9(a).
"MONEY MARKET RATE LOAN" is means a Swing Line Loan which bears
interest at a Money Market Rate.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a Plan, if any, maintained pursuant to a
collective bargaining agreement or any other arrangement to which the Borrower
or any member of the Controlled Group is a party to which more than one
non-Affiliated employer is obligated to make contributions.
"1995 CREDIT AGREEMENT" has the meaning specified in SECTION 4.1(g).
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"NOTE" means a Syndicated Note, a Bid Rate Note or a Swing Line Note.
"NOTICE OF ASSIGNMENT" has the meaning specified in SECTION 12.3.2.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid
interest on the Notes, all L/C Obligations, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Borrower to
the Lenders or to any Lender, the Administrative Agent or any indemnified party
hereunder arising under the Loan Documents.
"PARTICIPANT" has the meaning specified in SECTION 12.2.1.
"PAYMENT OFFICE" means the principal office of the Administrative Agent
in Chicago, Illinois, located on the date hereof at One First National Plaza,
Chicago, Illinois 60670 or such other office of the Administrative Agent as the
Administrative Agent may from time to time designate by written notice to the
Borrower and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERMITTED ACQUISITION" means any Acquisition made by the Borrower or
any of its Subsidiaries provided that upon giving effect to each such
Acquisition (a) the Person so acquired by the Borrower shall have either been
merged into the Borrower or a Subsidiary (with the Borrower or the Subsidiary as
the surviving entity) or such Person shall have become a Subsidiary of the
Borrower; (b) no Default or Unmatured Default shall exist; (c) the Acquisition
is consummated pursuant to a negotiated acquisition agreement on a non-hostile
basis approved by a majority of the board of directors of all Persons parties
thereto; and (d) involves the purchase of a business line similar, related,
complementary or incidental to that of the Borrower and its Subsidiaries as of
the date of this Agreement.
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"PREPAYMENT NOTICE" has the meaning specified in SECTION 2.5.
"PRO RATA SHARE" means, with respect to any Lender, the percentage
obtained by dividing (A) such Lender's Commitment at such time (as adjusted from
time to time in accordance with the provisions of this Agreement) by (B) the sum
of the Aggregate Commitments at such time; PROVIDED, that if the Commitments are
terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means
the percentage obtained by dividing (x) the sum of each Lender's L/C
Obligations, Loans and Swing Line Loans by (y) the aggregate amount of all
Loans, Swing Line Loans and L/C Obligations.
"PROPERTY" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
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"PURCHASERS" has the meaning specified in SECTION 12.3.1.
"RATED DEBT" means the Borrower's senior unsecured non-credit-enhanced
long-term Indebtedness, which Indebtedness does not benefit from guaranties or
other credit enhancement provided by any of the Borrower's Subsidiaries.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 2.20.6.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event; provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of SECTION 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"REQUIRED LENDERS" means Lenders having, in the aggregate, at least 51%
of the Aggregate Commitment; provided, however, that in the event any of the
Lenders shall have failed to fund a portion of any Syndicated Advance requested
by the Borrower, any participation in any Letter of Credit or any refunding of
or participation in any Swing Line Loan which such Lenders are obligated to fund
under the terms of this Agreement and any such failure has not been cured, then
for so long as such failure continues, "Required Lenders" means Lenders
(excluding all such defaulting Lenders) having, in the aggregate, at least 51%
of the aggregate Commitments of such non-defaulting Lenders; provided, further,
however, that, if the Aggregate Commitment has been terminated pursuant to the
terms of this Agreement, "Required Lenders" means Lenders (without regard to
such Lenders' performance of their respective obligations hereunder) whose
aggregate outstanding principal balance of all Syndicated Loans and L/C
Obligations is equal to or greater than 51%; provided, further, however, if the
Aggregate Commitment has been terminated at a time when only Bid Rate Loans are
outstanding, "Required Lenders" means Lenders whose aggregate outstanding
principal balance of all Bid Rate Loans is equal to or greater than 51%.
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, Regulations G, T, U and X, ERISA,
the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification
Act, Americans with Disabilities Act of
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1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or permit or environmental, labor,
employment, occupational safety or health law, rule or regulation, including
Environmental, Health or Safety Requirements of Law.
"RESERVES" means, with respect to a Eurodollar Interest Period, the
maximum aggregate reserves (including all basic, supplemental, marginal and
other reserves) imposed under Regulation D on Eurocurrency liabilities.
"RISK-BASED CAPITAL GUIDELINES" has the meaning specified in SECTION
3.2.
"S&P" means S&P Ratings Group, a division of McGraw-Hill, Inc.
"SALE AND LEASEBACK TRANSACTION" means any sale or other transfer of
Property by any Person with intent to lease such Property as lessee pursuant to
a Capitalized Lease.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SINGLE EMPLOYER PLAN" means a Plan, if any, maintained by the Borrower
or any member of the Controlled Group for employees of the Borrower or any
member of the Controlled Group. The term "Single Employer Plan" does not include
any Multiemployer Plan.
"SPECIFIED REMITTANCE TIME" means (a) if the relevant Payment Office is
located in Chicago, 1:00 p.m. (Chicago time) and (b) if the relevant Payment
Office is located elsewhere, such time as the Administrative Agent shall specify
after consultation with the Lenders and the consent of the Borrower, which
consent shall not be unreasonably withheld.
"SUBSIDIARY" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"SUBSTANTIAL PORTION" means, with respect to the Property of any Person
and its Subsidiaries, Property which:
(a) when aggregated with all other Property in accordance with
SECTION 6.11 (i) represents more than 15% of the consolidated assets of
such Person and its Subsidiaries as would be shown in the consolidated
financial statements of such Person and its Subsidiaries as at the
beginning of the fiscal year in which such determination is made, or
(ii) is responsible for more than 15% of the consolidated net sales of
such Person and its Subsidiaries as reflected in the financial
statements referred to in clause (i) above or
(b) in any individual transaction or series of related
transactions (i) represents more than 10% of the consolidated assets of
such Person and its Subsidiaries as
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would be shown in the consolidated financial statements of such Person
and its Subsidiaries as at the beginning of the fiscal year in which
such determination is made, or (ii) is responsible for more than 10% of
the consolidated net sales of such Person and its Subsidiaries as
reflected in the financial statements referred to in clause (i) above.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Lender
to make Swing Line Loans up to a maximum principal amount of $25,000,000 at any
one time outstanding.
"SWING LINE LENDER" means First Chicago or any other Lender as a
successor Swing Line Lender.
"SWING LINE LOAN" means a loan made available to the Borrower by the
Swing Line Lender pursuant to SECTION 2.9.
"SWING LINE NOTE" means a Note in substantially the form of Exhibit A-3
hereto duly executed by the Borrower and payable to the order of the Swing Line
Lender in the amount of its Swing Line Commitment.
"SYNDICATED ADVANCE" means a borrowing consisting of simultaneous
Syndicated Loans of the same Type made to the Borrower by each of the Lenders
pursuant to SECTION 2.1, and, in the case of Eurodollar Advances, for the same
Interest Period.
"SYNDICATED ADVANCE BORROWING NOTICE" has the meaning specified in
SECTION 2.6.
"SYNDICATED LOAN" means a loan by a Lender to the Borrower as part of a
Syndicated Advance.
"SYNDICATED NOTE" means a promissory note of the Borrower payable to
the order of any Lender, in substantially the form of Exhibit A-1 hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender resulting
from the Syndicated Loans made by such Lender to the Borrower.
"TRANSFEREE" has the meaning specified in SECTION 12.4.
"TYPE" means, (a) with respect to any Syndicated Loan, its nature as a
Floating Rate Loan or a Eurodollar Loan and (b) with respect to any Syndicated
Advance, its nature as a Floating Rate Advance or a Eurodollar Advance.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
actuarial value of all vested nonforfeitable benefits under all Single Employer
Plans (based on the actuarial assumptions for each such plan) exceeds the Fair
Value of all such Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans.
"UNITED STATES" and "U.S." mean the United States of America.
"UNMATURED DEFAULT" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
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"WHOLLY-OWNED SUBSIDIARY" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which (other than directors qualifying
shares and shares required by applicable corporate law to be owned by foreign
nationals) shall at the time be owned or controlled, directly or indirectly, by
such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such
Person and one or more Wholly-Owned Subsidiaries of such Person, or (b) any
partnership, association, joint venture or similar business organization 100% of
the ownership interests having ordinary voting power of which (other than
directors qualifying shares and shares required by applicable corporate law to
be owned by foreign nationals) shall at the time be so owned or controlled.
ARTICLE II
THE CREDITS
2.1. THE SYNDICATED LOANS. From and including the date of this
Agreement and prior to the Facility Termination Date, each Lender severally
agrees, on the terms and conditions set forth in this Agreement (including,
without limitation, the terms and conditions of SECTION 2.11 and SECTION 8.1
relating to the reduction, suspension or termination of the Aggregate
Commitment), to make Syndicated Loans to the Borrower from time to time in an
aggregate amount not to exceed at any one time outstanding the amount of such
Lender's Commitment; PROVIDED, HOWEVER, that the Aggregate Commitment shall be
deemed used from time to time to the extent of (a) the aggregate amount of the
Bid Rate Loans then outstanding, and such deemed use of the Aggregate Commitment
shall be applied to the Lenders ratably according to their respective
Commitments (such deemed use of the aggregate amount of the Commitments being a
"BID RATE REDUCTION"), (b) the aggregate L/C Obligations then outstanding, and
such deemed use of the Aggregate Commitment shall be applied to the Lenders
ratably according to their respective Commitments and (c) the aggregate amount
of the Swing Line Loans then outstanding, and such deemed use of the Aggregate
Commitment shall be applied to the Lenders ratably according to their respective
Commitments. Subject to the terms of this Agreement (including, without
limitation, the terms and conditions of SECTION 2.11 and SECTION 8.1 relating to
the reduction, suspension or termination of the Aggregate Commitment), the
Borrower may borrow, repay and reborrow Syndicated Loans at any time prior to
the Facility Termination Date. Unless earlier terminated in accordance with the
terms and conditions of this Agreement, the Commitments of the Lenders to lend
hereunder shall expire on the Facility Termination Date. Notwithstanding
anything herein to the contrary, each of the Lenders shall be required to fund
its ratable share of any Advance made in connection with any L/C Drafts
notwithstanding that such Advance may be made on or after the date of any
reduction, suspension or termination of the Aggregate Commitment pursuant to
SECTION 2.11(b) or SECTION 8.1 of this Agreement.
2.2. REPAYMENT OF THE SYNDICATED LOANS. Any outstanding
Syndicated Loans shall be paid in full by the Borrower on the Facility
Termination Date; PROVIDED, HOWEVER, that (a) all Syndicated Loans made in
connection with any of the Letters of Credit shall be paid in full by the
Borrower on the later of the Facility Termination Date and the Business Day
immediately following the date the relevant Syndicated Loan is made, and (b)
nothing in this SECTION 2.2 shall be construed as limiting or modifying the
obligation of the Borrower to repay any or all of the outstanding Syndicated
Loans at any earlier time in accordance with the terms of this Agreement.
2.3. RATABLE LOANS; TYPES OF SYNDICATED ADVANCES. Each
Syndicated Advance hereunder shall consist of Syndicated Loans made from the
several Lenders ratably in proportion to the ratio that their respective
Commitments bear to the Aggregate Commitment. Any Syndicated
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Advance may be a Floating Rate Advance or a Eurodollar Advance, as the Borrower
shall select in accordance with SECTIONS 2.6 and 2.7.
2.4. MINIMUM AMOUNT OF EACH SYNDICATED ADVANCE. Each
Eurodollar Advance shall be in the minimum amount of $15,000,000 (and an
integral multiple of $5,000,000 if in excess thereof) and each Floating Rate
Advance shall be in the minimum amount of $10,000,000 (and an integral multiple
of $1,000,000 if in excess thereof); provided, however, that any Syndicated
Advance may be in the amount of the unused Aggregate Commitment.
2.5. OPTIONAL PREPAYMENTS OF SYNDICATED LOANS. Subject to
Section 3.4 and the requirements of Section 2.4, the Borrower may (a) following
notice given to the Administrative Agent by the Borrower, in the form attached
hereto as EXHIBIT G (a "Prepayment Notice") by not later than 1:00 p.m. (Chicago
time) on the date of the proposed prepayment, such notice specifying the
aggregate principal amount of and the proposed date of the prepayment, and if
such notice is given the Borrower shall, prepay the outstanding principal
amounts of the Floating Rate Loans comprising part of the same Syndicated
Advance in whole or ratably in part, together with accrued interest to the date
of such prepayment on the principal amount prepaid and (b) following a
Prepayment Notice given to the Administrative Agent by the Borrower by not later
than 1:00 p.m. (Chicago time) on, if the Advance to be prepaid is a Eurodollar
Advance, the third Business Day preceding the date of the proposed prepayment,
such notice specifying the Advance to be prepaid and the proposed date of the
prepayment, and, if such notice is given, such Borrower shall, prepay the
outstanding principal amounts of the Eurodollar Loans comprising a Eurodollar
Advance in whole (and not in part), together with accrued interest to the date
of such prepayment on the principal amount prepaid. In the case of a Floating
Rate Advance, each partial prepayment shall be in an aggregate principal amount
not less than $10,000,000 (and an integral multiple of $1,000,000 if in excess
thereof).
2.6. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR NEW
SYNDICATED ADVANCES. The Borrower shall select the Type of each Syndicated
Advance and, in the case of a Eurodollar Advance, the Interest Period applicable
to such Syndicated Advance from time to time. The Borrower shall give the
Administrative Agent irrevocable notice, in the form attached hereto as EXHIBIT
F-1 (a "Syndicated Advance Borrowing Notice"), not later than 11:00 a.m.
(Chicago time) (i) on the Borrowing Date for each Floating Rate Advance and (ii)
at least three Business Days before the Borrowing Date for each Eurodollar
Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of such
Advance,
(b) the aggregate amount of such Advance,
(c) the Type of such Advance, and
(d) in the case of each Eurodollar Advance, the Interest
Period applicable thereto.
Not later than the Specified Remittance Time on each Borrowing Date, each Lender
shall make available its Syndicated Loan or Syndicated Loans to the
Administrative Agent in immediately available funds at the relevant Payment
Office. To the extent that the Administrative Agent has received funds from the
Lenders as specified in the preceding sentence and the applicable conditions set
forth in Article IV have been fulfilled, the Administrative Agent will make such
funds available to the Borrower at the relevant Payment Office promptly
following the Specified Remittance Time,
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it being understood that if the relevant Payment Office is located in Chicago,
the Administrative Agent will make the applicable funds available to the
Borrower by depositing such funds to such account with First Chicago as the
Borrower shall designate.
2.7. CONVERSION AND CONTINUATION OF OUTSTANDING SYNDICATED
ADVANCES. Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are converted into Eurodollar Advances or
prepaid pursuant to SECTION 2.5. Each Eurodollar Advance shall continue as a
Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Advance shall be automatically converted
into a Floating Rate Advance unless the Borrower shall have given the
Administrative Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance either continue as a
Eurodollar Advance for the same or another Interest Period or be converted into
an Advance of another Type. Subject to the terms of SECTION 2.6, the Borrower
may elect from time to time to convert all or any part of a Syndicated Advance
of any Type into any other Type or Types of Syndicated Advances; provided that
any conversion of any Eurodollar Advance shall be made on, and only on, the last
day of the Interest Period applicable thereto. The Borrower shall give the
Administrative Agent irrevocable notice in the form of EXHIBIT H hereto (a
"CONVERSION/CONTINUATION NOTICE") of each conversion of an Advance or
continuation of a Eurodollar Advance not later than 11:00 a.m. (Chicago time)
(i) in the case of a conversion into a Floating Rate Advance on the date of such
conversion and (ii) in the case of a conversion into or continuation of a
Eurodollar Advance, at least three Business Days before the date of such
conversion or continuation, specifying:
(a) the requested date, which shall be a Business Day, of such
conversion or continuation;
(b) the aggregate amount and Type of the Syndicated Advance
which is to be converted or continued; and
(c) the amount and Type(s) of Syndicated Advance(s) into which
such Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Eurodollar Advance, the duration
of the Interest Period applicable thereto.
2.8. PAYMENT OF INTEREST ON SYNDICATED ADVANCES; CHANGES IN
INTEREST RATE. (a) Interest accrued on each Floating Rate Advance shall be
payable in arrears on the last Business Day of each fiscal quarter and on the
earliest of the Facility Termination Date, the date of the reduction to zero of
the Aggregate Commitment pursuant to SECTION 2.11 and the date of the
acceleration of the Obligations pursuant to SECTION 8.1. Interest accrued on
each Eurodollar Advance shall be payable in arrears on the last day of its
applicable Interest Period, on any date on which the Eurodollar Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued
on each Eurodollar Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval during such
Interest Period. Interest on Floating Rate Advances shall be calculated for
actual days elapsed on the basis of a 365/366 -day year. Interest on Eurodollar
Advances shall be calculated for actual days elapsed on the basis of a 360-day
year. Interest shall be payable for the day a Syndicated Advance is made but not
for the day of any payment on the amount paid if payment is received prior to
1:00 p.m. (local time) at the place of payment. If any payment of principal of
or interest on a Syndicated Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
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and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
(b) Each Floating Rate Advance shall bear interest on the
outstanding principal amount thereof, for each day from and including
the date such Advance is made or is converted from a Eurodollar Advance
into a Floating Rate Advance pursuant to SECTION 2.7(b) to but
excluding the date it becomes due or is converted into a Eurodollar
Advance pursuant to SECTION 2.7(b), at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on each
Syndicated Advance maintained as a Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest from and including the first day
of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the Eurodollar Rate determined as
applicable to such Eurodollar Advance. No Interest Period may end after
the Facility Termination Date.
2.9. SWING LINE LOANS. (a) Amount of Swing Line Loans. Upon
the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2,
from and including the date of this Agreement and prior to the Facility
Termination Date, the Swing Line Lender agrees, on the terms and conditions set
forth in this Agreement, to make Swing Line Loans to the Borrower from time to
time in an amount not to exceed the least of (i) $25,000,000, (ii) the amount by
which the Aggregate Commitment exceeds the sum of the outstanding principal
amount of Syndicated Advances, Bid Rate Advances and L/C Obligations, or (iii)
the available amount of the Swing Line Lender's Commitment. Each Swing Line Loan
shall be in a minimum amount of $1,000,000 and increments of $1,000,000 in
excess thereof and all interest payable on the Swing Line Loans shall be payable
to the Swing Line Lender for the account of such Swing Line Lender. In no event
shall the number of Swing Line Loans outstanding at any time be greater than
five. The Swing Line Lender agrees, upon the Borrower's request therefor,
promptly to provide information regarding the applicable interest rate at which
the Swing Line Lender will make Swing Line Loans to the Borrower on the Business
Day of such request or the immediately following Business Day if such request is
received after 1:00 p.m. (Chicago time) (the "Money Market Rate"), which Money
Market Rate, in any event, shall not exceed the Floating Rate then applicable to
Floating Rate Advances.
(b) Borrowing Notice. The Borrower shall deliver to the
Administrative Agent and the Swing Line Lender a Borrowing Notice
signed by it not later than 11:00 a.m. (Chicago time) on the Borrowing
Date of each Swing Line Loan specifying (i) the applicable Borrowing
Date (which shall be a Business Day) and (ii) the aggregate amount of
the requested Swing Line Loan. The Swing Line Loans shall at all times
be Money Market Rate Loans.
(c) Making of Swing Line Loans. Promptly after receipt of the
Borrowing Notice under Section 2.9(b), the Administrative Agent shall
notify each Lender of the requested Swing Line Loan. Promptly on the
applicable Borrowing Date, the Swing Line Lender shall make available
its Swing Line Loan in funds immediately available in Chicago to the
Administrative Agent at the address specified by the Administrative
Agent. The Administrative Agent will promptly make such funds available
to the Borrower.
(d) Repayment of Swing Line Loans. The Swing Line Loans shall
be evidenced by the Swing Line Note and each Swing Line Loan shall be
paid in full by the Borrower on or before the fifth Business Day after
the Borrowing Date for such Swing Line Loan. Outstanding Swing Line
Loans may be repaid from the proceeds of Syndicated Advances, Bid Rate
Advances or Swing Line
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Loans. Any repayment of a Swing Line Loan shall be accompanied by accrued
interest thereon and shall be in the minimum amount of $500,000 and in
increments of $100,000 in excess thereof or the full amount of such Swing Line
Loan. If the Borrower at any time fails to repay a Swing Line Loan on the
applicable date when due, the Borrower shall be deemed to have elected to borrow
a Floating Rate Advance under SECTION 2.1 as of such date equal in amount to the
unpaid amount of the Swing Line Loan and interest thereon (notwithstanding the
minimum amount of Syndicated Advances as provided in SECTION 2.4). The proceeds
of any such Advance shall be used to repay the Swing Line Loan and interest
thereon. Unless the Required Lenders shall have notified the Swing Line Lender
prior to its making any Swing Line Loan, that the applicable conditions
precedent set forth in Article IV have not then been satisfied, each Lender's
obligation to make Loans pursuant to SECTION 2.1 and this SECTION 2.9(d) to
repay Swing Line Loans shall be unconditional, continuing, irrevocable and
absolute and shall not be affected by any circumstances, including the
occurrence or continuance of a Default. In the event that any Lender fails to
make payment to the Administrative Agent of any amount due under this SECTION
2.9(d), the Administrative Agent shall be entitled to receive, retain and apply
against such obligation the principal and interest otherwise payable to such
Lender hereunder until the Administrative Agent receives such payment from such
Lender or such obligation is otherwise fully satisfied. In addition to the
foregoing, if for any reason any Lender fails to make payment to the
Administrative Agent of any amount due under this SECTION 2.9(d), such Lender
shall be deemed, at the option of the Administrative Agent, to have
unconditionally and irrevocably purchased from the Swing Line Lender, without
recourse or warranty, an undivided interest in and participation in the
applicable Swing Line Loan in the amount of the Loan such Lender was required to
make pursuant to this SECTION 2.9(d) and such interest and participation may be
recovered from such Lender together with interest thereon at the Federal Funds
Effective Rate for each day during the period commencing on the date of demand
by the Administrative Agent and ending on the date such obligation is fully
satisfied.
2.10. THE BID RATE ADVANCES. (a) Each Lender severally agrees
that, on the terms and conditions set forth in this Agreement, the Borrower may
request and receive Bid Rate Advances under this SECTION 2.10 from time to time
on any Business Day during the period from the date hereof until the date
occurring 30 days prior to the Facility Termination Date in the manner set forth
below; PROVIDED, HOWEVER, that, following the making of each Bid Rate Advance,
the aggregate amount of the Advances then outstanding plus the aggregate amount
of the Swing Line Loans then outstanding plus the aggregate amount of the L/C
Obligations then outstanding shall not exceed the Aggregate Commitment of the
Lenders (computed without regard to any Bid Rate Reduction) and the aggregate
amount of Bid Rate Advances then outstanding shall not exceed fifty percent
(50%) of the Aggregate Commitment of the Lenders (computed without regard to any
Bid Rate Reduction).
(b) The procedures for the solicitation and acceptance of Bid
Rate Loans are set forth below:
(i) The Borrower may request a Bid Rate Advance under this
SECTION 2.10(b) by giving the Administrative Agent irrevocable notice,
in the form attached hereto as EXHIBIT F-2 (a "BID RATE ADVANCE
BORROWING NOTICE"), specifying the date and aggregate amount of the
proposed Bid Rate Advance, the maturity date for repayment of each Bid
Rate Loan to be made as part of such Bid Rate Advance (which maturity
date may not be earlier than in the case of an Absolute Rate Auction,
the date occurring one day, and in the case of an Indexed Rate Auction,
the date occurring one month after the date of the related Bid Rate
Advance or later than, in either case, the
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earlier of the day occurring 180 days after the date of such Bid Rate
Advance and the Facility Termination Date and, in the case of an
Indexed Rate Auction, the earlier of the day occurring six months after
the date of such Bid Rate Advance and the Facility Termination Date),
and any other terms to be applicable to such Bid Rate Advance, not
later than 11:00 a.m. (Chicago time) (A) one Business Day prior to the
date of the proposed Bid Rate Advance, if the Borrower shall specify in
the Bid Rate Advance Borrowing Notice that the rates of interest to be
offered by the Lenders shall be absolute rates per annum (such type of
solicitation being an "Absolute Rate Auction"), and (B) five Business
Days prior to the date of the proposed Bid Rate Advance, if the
Borrower shall specify in the Bid Rate Advance Borrowing Notice that
the rates of interest to be offered by the Lenders shall be rates per
annum at a margin greater than or less than the Eurodollar Base Rate
(such type of solicitation being an "Indexed Rate Auction"). The
Administrative Agent shall, promptly following its receipt of a Bid
Rate Advance Borrowing Notice under this Section 2.10(b), notify each
Lender of such request by sending such Lender a copy of such Bid Rate
Advance Borrowing Notice.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Bid Rate Loans to the
Borrower as part of such proposed Bid Rate Advance at a rate or rates
of interest specified by such Lender in its sole discretion, by
notifying the Administrative Agent (which shall give prompt notice
thereof to the Borrower), before 10:00 a.m. (Chicago time) (or if such
Lender is the Administrative Agent, before 9:45 a.m. (Chicago time))
(A) on the date of such proposed Bid Rate Advance, in the case of an
Absolute Rate Auction, and (B) four Business Days before the date of
such proposed Bid Rate Advance, in the case of an Indexed Rate Auction
of the minimum amount and maximum amount of each Bid Rate Loan which
such Lender would be willing to make as part of such proposed Bid Rate
Advance (which amounts may, subject to the proviso to the first
sentence of Section 2.10(a), exceed such Lender's Commitment), the rate
or rates of interest therefor and such Lender's Lending Installation
with respect to such Bid Rate Loan.
(iii) The Borrower shall, in turn, before (A) 11:00 a.m.
(Chicago time) on the date of such proposed Bid Rate Advance, in the
case of an Absolute Rate Auction, and (B) 10:00 a.m. (Chicago time)
three Business Days before the date of such proposed Bid Rate Advance,
in the case of an Indexed Rate Auction for a Bid Rate Advance, either:
(x) cancel such Bid Rate Advance by giving the
Administrative Agent notice to that effect, or
(y) accept, subject to Section 2.10(d), one or more of
the offers made by any Lender or Lenders pursuant to
SECTION 2.10(b)(ii) above, in its sole discretion, by
giving notice to the Administrative Agent of the
amount of each Bid Rate Loan (which amount shall be
equal to or greater than the minimum amount, and
equal to or less than the maximum amount, notified to
the Borrower by the Administrative Agent on behalf of
such Lender for such Bid Rate Loan pursuant to
SECTION 2.10(b)(ii)) to be made by each Lender as
part of such Bid Rate Advance, and reject any
remaining offers made by Lenders
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pursuant to SECTION 2.10(b)(ii) by giving the
Administrative Agent notice to that effect.
(iv) If the Borrower notifies the Administrative Agent that
such Bid Rate Advance is canceled pursuant to SECTION 2.10(b)(iii)(x)
above, the Administrative Agent shall give prompt notice thereof to the
Lenders and such Bid Rate Advance shall not be made.
(v) If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to SECTION 2.10(b)(iii)(y) above, the
Administrative Agent shall in turn promptly notify (A) each Lender that
has made an offer as described in SECTION 2.10(b)(ii) of the date, and
aggregate amount of such Bid Rate Advance and whether or not any offer
or offers made by such Lender pursuant to SECTION 2.10(b)(ii) have been
accepted by the Borrower and (B) each Lender that is to make a Bid Rate
Loan as part of such Bid Rate Advance, of the amount of each Bid Rate
Loan to be made by such Lender as part of such Bid Rate Advance. Each
Lender that is to make a Bid Rate Loan as part of such Bid Rate Advance
shall, not later than the Specified Remittance Time on the date of such
Bid Rate Advance specified in the notice received from the
Administrative Agent pursuant to clause (A) of the preceding sentence,
make available for the account of its Lending Installation to the
Administrative Agent at the relevant Payment Office such Lender's
portion of such Bid Rate Advance, in same day funds. Upon fulfillment
of the applicable conditions set forth in ARTICLE IV and after receipt
by the Administrative Agent of such funds, the Administrative Agent
will make such funds available to the Borrower at the Administrative
Agent's address specified pursuant to ARTICLE XIII. Promptly after each
Bid Rate Advance the Administrative Agent will notify each Lender of
the amount of the Bid Rate Advance, the consequent Bid Rate Reduction
and the dates upon which such Bid Rate Reduction commenced and will
terminate.
(vi) Notwithstanding the other provisions of this SECTION
2.10(b), the Borrower may elect at its own discretion to assume the
responsibilities of the Administrative Agent in connection with the
solicitation and acceptance of Bid Rate Loans as described in this
section. In the event that the Borrower makes the election described in
this subsection, all notices to be given by the Borrower to the
Administrative Agent pursuant to this SECTION 2.10(b) shall be given by
the Borrower directly to the Administrative Agent and the Lenders, all
notices to be given by the Administrative Agent to the Lenders pursuant
to this SECTION 2.10(b) shall be given by the Borrower to the Lenders,
and all notices to be given by the Lenders to the Administrative Agent
pursuant to this SECTION 2.10(b) shall be given by the Lenders to the
Borrower and the Administrative Agent.
(c) Each Bid Rate Advance shall be in an aggregate amount not
less than $10,000,000 or an integral multiple of $1,000,000 in excess
thereof, and, following the making of each Bid Rate Advance, the
Borrower shall be in compliance with the limitation set forth in the
proviso to the first sentence of SECTION 2.10(a).
(d) Each acceptance by the Borrower pursuant to SECTION
2.10(b)(iii)(y) of the offers made in response to a Bid Rate Advance
Borrowing Notice shall be treated as an acceptance of such offers in
ascending order of the rates or margins, as applicable, at which the
same were made but if,
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as a result thereof, two or more offers at the same such rate or margin
would be partially accepted, then the amounts of the Bid Rate Loans in
respect of which such offers are accepted shall be treated as being the
amounts which bear the same proportion to one another as the respective
amounts of the Bid Rate Loans so offered bear to one another but, in
each case, rounded as the Administrative Agent (or the Borrower in the
event the Borrower runs the bid rate process under clause (b)(vi)
above) may consider necessary to ensure that the amount of each such
Bid Rate Loan is $5,000,000 or an integral multiple thereof.
(e) Within the limits and on the conditions set forth in this
Section 2.10, the Borrower may from time to time borrow under this
SECTION 2.10, repay pursuant to SECTION 2.10(f) below, and reborrow
under this SECTION 2.10.
(f) The Borrower shall repay to the Administrative Agent for
the account of each Lender which has made a Bid Rate Loan to it, on the
maturity date of such Bid Rate Loan (such maturity date being that
specified by the Borrower for repayment of such Bid Rate Loan in the
related Bid Rate Advance Borrowing Notice), or, if earlier, the
acceleration of the Obligations pursuant to SECTION 8.1, the then
unpaid principal amount of such Bid Rate Loan. The Borrower shall have
no right to prepay any principal amount of any Bid Rate Loan unless,
and then only on the terms, specified by the Borrower for such Bid Rate
Loan in the related Bid Rate Advance Borrowing Notice and subject to
SECTION 3.4.
(g) The Borrower shall pay interest on the unpaid principal
amount of each Bid Rate Loan made to it, from the date of such Bid Rate
Loan to the date the principal amount of such Bid Rate Loan is repaid
in full, at the rate of interest for such Bid Rate Loan specified by
the Lender making such Bid Rate Loan in the related notice submitted by
such Lender pursuant to SECTION 2.10(b)(ii), payable on the interest
payment date or dates specified by the Borrower for such Bid Rate Loan
in the related Bid Rate Advance Borrowing Notice and on any date on
which such Bid Rate Loan is prepaid, whether by acceleration or
otherwise, and at maturity. In the event the term of any Bid Rate Loan
shall be longer than three months, interest thereon shall be payable
not less frequently than once each three-month period during such term.
Interest on Bid Rate Advances shall be calculated for actual days
elapsed on the basis of a 360-day year.
2.11. FACILITY FEE; REDUCTIONS IN AGGREGATE COMMITMENT. (a)
The Borrower agrees to pay to the Administrative Agent for the account of each
Lender a facility fee at a rate per annum equal to the Applicable Facility Fee
Rate in effect from time to time on such Lender's Commitment (determined without
giving effect to any Bid Rate Reduction or any other usage of the Commitments)
from the date hereof to but excluding the earliest of the Facility Termination
Date, the date of the reduction to zero of the Aggregate Commitment pursuant to
SECTION 2.11 and the date of the termination of the Aggregate Commitment
pursuant to Section 8.1. Such facility fees shall be payable in arrears on the
last Business Day of each March, June, September and December, and on the
earliest of the Facility Termination Date, the date of the reduction to zero of
the Aggregate Commitment pursuant to SECTION 2.11 and the date of the
termination of the Aggregate Commitment pursuant to Section 8.1. Facility fees
shall be calculated for actual days elapsed on the basis of a 360-day year.
(b) The Borrower may permanently reduce the Aggregate
Commitment in whole or in part ratably among the Lenders in integral
multiples of $15,000,000, upon at least two Business Days' written
notice to the Administrative Agent, which notice shall specify the
amount of any such reduction; provided, however, that the amount of the
Aggregate Commitment may not be reduced
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below the sum of the aggregate principal amount of the outstanding Advances and
the aggregate outstanding L/C Obligations and Swing Line Loans.
2.12. RATES APPLICABLE AFTER DEFAULT. Notwithstanding anything
to the contrary contained in Section 2.8, during the continuance of a Default or
Unmatured Default no Syndicated Advance may be made as, converted into or
continued past the end of the applicable Interest Period as a Eurodollar
Advance. During the continuance of a Default upon notice given to the Borrower,
(a) each Advance shall bear interest until paid in full at a rate per annum
equal to the Floating Rate or Eurodollar Rate, as the case may be, plus 2% per
annum and (b) the letter of credit fees payable under SECTION 2.20.5 shall be
increased by two percent (2.0%) per annum.
2.13. METHOD OF PAYMENT. All payments of the Obligations
hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Administrative Agent at the Administrative
Agent's address specified pursuant to ARTICLE XIII, or at any other Lending
Installation of the Administrative Agent specified in writing by the
Administrative Agent to the Borrower, by 1:00 p.m. (local time) on the date when
due and shall be remitted by the Administrative Agent to the Lenders according
to their respective interests therein. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered promptly
by the Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at its address specified pursuant to ARTICLE XIII
or at any Lending Installation specified in a notice received by the
Administrative Agent from such Lender. The Administrative Agent is hereby
authorized, but is not obligated, to charge the accounts of the Borrower
maintained with First Chicago into which proceeds of Advances are remitted
pursuant to SECTION 2.6 for each payment of interest and fees as it becomes due
hereunder, for each payment of principal, in accordance with the applicable
Prepayment Notice or when otherwise due and payable in accordance with the terms
hereof, and for each payment of Reimbursement Obligations when due and payable
in accordance with the terms hereof.
2.14. NOTES; TELEPHONIC NOTICES. Each Lender is hereby
authorized to record the date and principal amount of each of its Syndicated
Loans and the date and amount of each repayment on the schedule attached to its
Syndicated Note; PROVIDED, HOWEVER, that the failure to so record shall not
affect the Borrower's obligations under such Syndicated Note. Each Lender making
a Bid Rate Loan is hereby authorized to record the principal amount, interest
rate, maturity date and other terms of such Bid Rate Loan, as specified in the
relevant Bid Rate Advance Borrowing Notice and the related notice submitted by
such Lender pursuant to SECTION 2.10(b)(ii), on the schedule attached to its Bid
Rate Note; PROVIDED, HOWEVER, that the failure to so record shall not affect the
Borrower's obligations under such Bid Rate Note. The Borrower hereby authorizes
the Lenders and the Administrative Agent to extend, convert or continue Advances
and effect selections of Types of Syndicated Advances based on telephonic
notices made by any person or persons the Administrative Agent in good faith
believes to be acting on behalf of the Borrower. The Borrower agrees to deliver
promptly to the Administrative Agent a written confirmation, if such
confirmation is requested by the Administrative Agent or any Lender, of each
telephonic notice signed by an Authorized Officer. If the written confirmation
differs in any material respect from the action taken by the Administrative
Agent and the Lenders, the records of the Administrative Agent of the relevant
telephonic notice shall govern absent manifest error.
2.15. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS
AND COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Administrative
Agent will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice,
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Conversion/Continuati on Notice, and Prepayment Notice received by it hereunder.
The Administrative Agent will notify each Lender of the interest rate applicable
to each Eurodollar Advance promptly upon determination of such interest rate and
will give each Lender prompt notice of each change in the Alternate Base Rate.
2.16. LENDING INSTALLATIONS. Each Lender may book its Loans at
any one or more Lending Installations selected by such Lender and may change any
such Lending Installation from time to time. All terms of this Agreement shall
apply to any such Lending Installation and the Notes shall be deemed held by
each Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Administrative Agent and the Borrower, designate
a Lending Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.17. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless
the Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the Administrative
Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case
of the Borrower, a payment of principal, interest or fees to the Administrative
Agent for the account of the Lenders, that it does not intend to make such
payment, the Administrative Agent may assume that such payment has been made.
The Administrative Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Administrative Agent, the recipient of such payment
shall, on demand by the Administrative Agent, repay to the Administrative Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Administrative Agent until the date the Administrative Agent recovers
such amount at a rate per annum equal to (a) in the case of repayment by a
Lender, the Federal Funds Effective Rate for such day or (b) in the case of
repayment by the Borrower, the interest rate applicable to the relevant Loan.
2.18. WITHHOLDING TAX EXEMPTION. At least five Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender is entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any United States federal income
taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Administrative Agent two additional
copies of such form (or any successor form or related form as may from time to
time be required under applicable law) on or before the date that such form
expires (currently, three successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, in each case certifying
that such Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the
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Administrative Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
2.19. TERMINATION. All unpaid Obligations shall be paid in
full by the Borrower on the Facility Termination Date; PROVIDED, HOWEVER, that
(a) all Syndicated Loans made in connection with any of the Letters of Credit
shall be paid in full by the Borrower on the later of the Facility Termination
Date and the Business Day immediately following the date the relevant Syndicated
Loan is made, and (b) nothing in this SECTION 2.19 shall be construed as
limiting or modifying the obligation of the Borrower to repay any or all of the
outstanding Obligations at any earlier time in accordance with the terms of this
Agreement.
2.20. LETTER OF CREDIT FACILITY.
2.20.1. OBLIGATION TO ISSUE. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants of the Borrower herein set forth, each Issuing Lender
hereby agrees to issue for the account of the Borrower through such Issuing
Lender's branches as it and the Borrower may jointly agree, one or more Letters
of Credit in accordance with this SECTION 2.20, from time to time during the
period, commencing on the date hereof and ending on the third Business Day prior
to the Facility Termination Date; PROVIDED, HOWEVER, no Issuing Lender shall
have any obligation to issue any Letter of Credit if, after taking into account
such issuance, the aggregate L/C Obligations outstanding under Letters of Credit
issued by it would exceed the amount specified on SCHEDULE 2.20 next to its
name. SCHEDULE 2.20 may be updated from time to time by the Administrative Agent
in connection with the addition of any Issuing Lender.
2.20.2. TYPES AND AMOUNTS. No Issuing Lender shall have any
obligation to and no Issuing Lender shall:
(i) issue any Letter of Credit if on the date of issuance,
before or after giving effect to the Letter of Credit requested
hereunder, (a) the amount of the Advances, the L/C Obligations and the
Swing Line Loans outstanding at such time would exceed the Aggregate
Commitment or (b) the aggregate outstanding amount of the L/C
Obligations would exceed $100,000,000; or
(ii) issue any Letter of Credit which has an expiration date
later than the date which is the earlier of one (1) year after the date
of issuance thereof or three (3) Business Days immediately preceding
the Facility Termination Date.
2.20.3. CONDITIONS. In addition to being subject to the
satisfaction of the conditions contained in SECTIONS 4.1 and 4.2, the obligation
of an Issuing Lender to issue any Letter of Credit is subject to the
satisfaction in full of the following conditions:
(i) the Borrower shall have delivered to the applicable
Issuing Lender at such times and in such manner as such Issuing Lender
may reasonably prescribe, a written request for issuance of such Letter
of Credit, duly executed applications for such Letter of Credit, and
such other documents, instructions and agreements as may be reasonably
required pursuant to the terms thereof, and the proposed Letter of
Credit shall be reasonably satisfactory to such Issuing Lender as to
form and content; and
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(ii) as of the date of issuance no order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport by its terms
to enjoin or restrain the applicable Issuing Lender from issuing such
Letter of Credit and no law, rule or regulation applicable to such
Issuing Lender and no request or directive (whether or not having the
force of law) from a Governmental Authority with jurisdiction over such
Issuing Lender shall prohibit or request that such Issuing Lender
refrain from the issuance of Letters of Credit generally or the
issuance of that Letter of Credit.
If any provision in a letter of credit application delivered in connection with
the foregoing is inconsistent with or more restrictive than a provision
contained in this Agreement, the provisions contained in this Agreement shall
control.
2.20.4. PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Section 2.20 and provided that
the applicable conditions set forth in SECTIONS 4.1 and 4.2 hereof have been
satisfied, the applicable Issuing Lender shall, on the requested date, issue a
Letter of Credit on behalf of the Borrower in accordance with such Issuing
Lender's usual and customary business practices and, in this connection, such
Issuing Lender may assume that the applicable conditions set forth in SECTION
4.2 hereof have been satisfied unless it shall have received notice to the
contrary from the Administrative Agent or a Lender or has knowledge that the
applicable conditions have not been met.
(b) The applicable Issuing Lender shall give the
Administrative Agent written or telex notice, or telephonic notice confirmed
promptly thereafter in writing, of the issuance of a Letter of Credit, provided,
however, that the failure to provide such notice shall not result in any
liability on the part of such Issuing Lender.
(c) No Issuing Lender shall extend or amend any Letter of
Credit unless the requirements of this Section 2.20 are met as though a new
Letter of Credit was being requested and issued.
2.20.5. LETTER OF CREDIT PARTICIPATION. Unless a Lender shall
have notified the Issuing Lender, prior to its issuance of a Letter of Credit,
that any applicable condition precedent set forth in SECTIONS 4.1 and 4.2 had
not then been satisfied immediately upon the issuance of each Letter of Credit
hereunder, each Lender shall be deemed to have automatically, irrevocably and
unconditionally purchased and received from the applicable Issuing Lender an
undivided interest and participation in and to such Letter of Credit, the
obligations of the Borrower in respect thereof, and the liability of such
Issuing Lender thereunder (collectively, an "L/C Interest") in an amount equal
to the amount available for drawing under such Letter of Credit multiplied by
such Lender's Pro Rata Share. Each Issuing Lender will notify each Lender
promptly upon presentation to it of an L/C Draft or upon any other draw under a
Letter of Credit. On or before the Business Day on which an Issuing Lender makes
payment of each such L/C Draft or, in the case of any other draw on a Letter of
Credit, on demand by the Administrative Agent, each Lender shall make payment to
the Administrative Agent, for the account of the applicable Issuing Lender, in
immediately available funds in an amount equal to such Lender's Pro Rata Share
of the amount of such payment or draw. The obligation of each Lender to
reimburse the Issuing Lenders under this SECTION 2.20.5 shall be unconditional,
continuing, irrevocable and absolute. In the event that any Lender fails to make
payment to the Administrative Agent of any amount due under this SECTION 2.20.5,
the Administrative Agent shall be entitled to receive, retain and apply against
such obligation the principal and interest otherwise payable to such Lender
hereunder until the Administrative Agent receives such payment from such Lender
or such
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obligation is otherwise fully satisfied; PROVIDED, HOWEVER, that nothing
contained in this sentence shall relieve such Lender of its obligation to
reimburse the applicable Issuing Lender for such amount in accordance with this
Section 2.20.5.
2.20.6. REIMBURSEMENT OBLIGATION. The Borrower agrees
unconditionally, irrevocably and absolutely to pay immediately to the
Administrative Agent, for the account of the Lenders, the amount of each advance
which may be drawn under or pursuant to a Letter of Credit or an L/C Draft
related thereto (such obligation of the Borrower to reimburse the Administrative
Agent for an advance made under a Letter of Credit or L/C Draft being
hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with respect to such
Letter of Credit or L/C Draft). If the Borrower at any time fails to repay a
Reimbursement Obligation pursuant to this SECTION 2.20.6, the Borrower shall be
deemed to have elected to borrow Floating Rate Loans from the Lenders, as of the
date of the advance giving rise to the Reimbursement Obligation, equal in amount
to the amount of the unpaid Reimbursement Obligation. Such Floating Rate Loans
shall be made as of the date of the payment giving rise to such Reimbursement
Obligation, automatically, without notice and without any requirement to satisfy
the conditions precedent otherwise applicable to an Advance of Floating Rate
Loans. Such Floating Rate Loans shall constitute a Floating Rate Advance, the
proceeds of which Advance shall be used to repay such Reimbursement Obligation.
If, for any reason, the Borrower fails to repay a Reimbursement Obligation on
the day such Reimbursement Obligation arises and, for any reason, the Lenders
are unable to make or have no obligation to make Floating Rate Loans, then such
Reimbursement Obligation shall bear interest from and after such day, until paid
in full, at the interest rate applicable to a Floating Rate Advance.
2.20.7. LETTER OF CREDIT FEES. The Borrower agrees to pay (a)
to the Administrative Agent for the ratable benefit of the Lenders, a letter of
credit fee equal to (i) for standby Letters of Credit, the Eurodollar Applicable
Margin in effect from time to time on the aggregate daily amount available for
drawing under the outstanding standby Letters of Credit and (ii) for commercial
Letters of Credit, fifty percent (50%) of the Eurodollar Applicable Margin in
effect from time to time on the aggregate daily amount available for drawing
under the outstanding commercial Letters of Credit, such fee to be paid in
arrears on the last Business Day of each calendar quarter and on the Facility
Termination Date and (b) to the Administrative Agent for the benefit of the
Issuing Lenders, a fronting fee of 0.125% and all customary fees and other
issuance, amendment, negotiation and presentment expenses and related charges in
connection with the issuance, amendment, presentation of L/C Drafts, and the
like customarily charged by the applicable Issuing Lender with respect to
standby letters of credit and commercial letters of credit, including, without
limitation, standard commissions with respect to commercial letters of credit,
payable at the time of invoice of such amounts.
2.20.8. ISSUING LENDER REPORTING REQUIREMENTS. In addition to
the notices required by Section 2.20.4, each Issuing Lender shall, no later than
the tenth Business Day following the last day of each month, provide to the
Administrative Agent, upon the Administrative Agent's request, schedules, in
form and substance reasonably satisfactory to the Administrative Agent, showing
the date of issue, account party, amount, expiration date and the reference
number of each Letter of Credit issued by it outstanding at any time during such
month and the aggregate amount payable by the Borrower during such month. In
addition, upon the request of the Administrative Agent, each Issuing Lender
shall furnish to the Administrative Agent copies of any Letter of Credit and any
application for or reimbursement agreement with respect to a Letter of Credit to
which such Issuing Lender is party and such other documentation as may
reasonably be requested by the Administrative
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<PAGE> 43
Agent. Upon the request of any Lender, the Administrative Agent will provide to
such Lender information concerning such Letters of Credit.
2.20.9. INDEMNIFICATION; EXONERATION. (a) In addition to
amounts payable as elsewhere provided in this Section 2.20, the Borrower hereby
agrees to protect, indemnify, pay and save harmless the Administrative Agent,
each Issuing Lender and each Lender from and against any and all liabilities and
costs which the Administrative Agent, such Issuing Lender or such Lender may
incur or be subject to as a consequence, direct or indirect, of (i) the issuance
of any Letter of Credit other than, in the case of the applicable Issuing
Lender, as a result of its Gross Negligence or willful misconduct, as determined
by the final judgment of a court of competent jurisdiction, or (ii) the failure
of the applicable Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto Governmental Authority (all such acts or omissions
herein called "Governmental Acts").
(b) As among the Borrower, the Lenders, the Administrative
Agent and the Issuing Lenders, the Borrower assumes all risks of the acts and
omissions of, or misuse of such Letter of Credit by, the beneficiary of any
Letters of Credit. In furtherance and not in limitation of the foregoing,
subject to the provisions of the Letter of Credit applications and Letter of
Credit reimbursement agreements executed by the Borrower at the time of request
for any Letter of Credit, neither the Administrative Agent, any Issuing Lender
nor any Lender shall be responsible (in the absence of Gross Negligence or
willful misconduct in connection therewith, as determined by the final judgment
of a court of competent jurisdiction): (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Letters of Credit that
appears on its face to comply in all material respects with the requirements of
the Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument that appears on its face to comply in
all material respects with the requirements of the Letter of Credit
transferring or assigning or purporting to transfer or assign a 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; (iii) for failure
of the beneficiary of a Letter of Credit to comply duly with conditions required
in order to draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, or other similar form of teletransmission or otherwise;
(v) for errors in interpretation of technical trade terms; (vi) for any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Letter of Credit of the proceeds of any
drawing under such Letter of Credit; and (viii) for any consequences arising
from causes beyond the control of the Administrative Agent, the Issuing Lenders
and the Lenders, including, without limitation, any Governmental Acts. None of
the above shall affect, impair, or prevent the vesting of any Issuing Lender's
rights or powers under this SECTION 2.20.9.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by any
Issuing Lender under or in connection with the Letters of Credit or any related
certificates shall not, in the absence of Gross Negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, put the applicable Issuing Lender, the Administrative Agent or any
Lender under any resulting liability to the Borrower or relieve the Borrower of
any of its obligations hereunder to any such Person.
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<PAGE> 44
(d) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.20 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
2.20.10. CASH COLLATERAL. Notwithstanding anything to the
contrary herein or in any application for a Letter of Credit, after the
occurrence and during the continuance of Default, the Borrower shall, upon the
Administrative Agent's demand, deliver to the Administrative Agent for the
benefit of the Lenders and the Issuing Lenders, cash, or other collateral of a
type satisfactory to the Required Lenders, having a value, as determined by such
Lenders, equal to the aggregate outstanding L/C Obligations. In addition, if the
available Aggregate Commitment is at any time less than the amount of contingent
L/C Obligations outstanding at any time, the Borrower shall deposit cash
collateral with the Administrative Agent in an amount equal to the amount by
which such L/C Obligations exceed such available Aggregate Commitment. Any such
collateral shall be held by the Administrative Agent in a separate
interest-bearing account appropriately designated as a cash collateral account
in relation to this Agreement and the Letters of Credit and retained by the
Administrative Agent for the benefit of the Lenders and the Issuing Lenders as
collateral security for the Borrower's obligations in respect of this Agreement
and each of the Letters of Credit and L/C Drafts. Such amounts shall be applied
to reimburse the Issuing Lenders for drawings or payments under or pursuant to
Letters of Credit or L/C Drafts, or if no such reimbursement is required, to
payment of such of the other Obligations as the Administrative Agent shall
determine. If no Default shall be continuing, amounts remaining in any cash
collateral account established pursuant to this SECTION 2.20.10 which are not to
be applied to reimburse an Issuing Lender for amounts actually paid or to be
paid by such Issuing Lender in respect of a Letter of Credit or L/C Draft, shall
be returned to the Borrower (after deduction of the Administrative Agent's
expenses incurred in connection with such cash collateral account).
2.21. PRICING. The Eurodollar Applicable Margin and the
Applicable Facility Fee Rate for any period shall be determined on the basis of
the publicly announced ratings ("CREDIT RATINGS") by Moody's and S&P on the
Borrower's Rated Debt during such period, in each case in accordance with the
table set forth below, to change when and as such Credit Ratings change. For
purposes of determining the Applicable Margin and the Applicable Facility Fee
Rate with respect to any period:
(i) Any change in the Credit Rating shall be deemed to become
effective on the date of public announcement thereof and shall
remain in effect until the date of public announcement that
such Credit Rating shall no longer be in effect. If any change
in Credit Rating occurs during an Interest Period, the new
Eurodollar Applicable Margin and Applicable Facility Fee Rate
shall become effective from the date of the public
announcement.
(ii) If, during any period, either Moody's or S&P shall not have a
publicly-announced Credit Rating with respect to the
Borrower's Rated Debt, the Credit Rating announced by the
other rating agency with respect thereto shall be used.
(iii) Except as provided below, in the event that the Credit Ratings
publicly announced by Moody's and S&P with respect to the
Borrower's Rated Debt appear in more than one column of the
table, the Eurodollar Applicable Margin and the Applicable
Facility Fee Rate will be based on the column which includes
the highest rating; PROVIDED,
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<PAGE> 45
HOWEVER, that if there exists a differential of two or more
levels between the Credit Rating publicly announced by Moody's
and the Credit Rating publicly announced by S & P, then the
Credit Rating which is one level below the higher announced
Credit Rating will determine the Eurodollar Applicable Margin
and the Applicable Facility Fee Rate.
(iv) If, during any period, neither Moody's nor S&P shall have
publicly announced a Credit Rating with respect to the
Borrower's Rated Debt, the Eurodollar Applicable Margin and
the Applicable Facility Fee Rate shall be the margins set
forth under the column entitled "No Other Pricing Level
Applies."
<TABLE>
<CAPTION>
Eurodollar Applicable
EURODOLLAR APPLICABLE MARGINS Applicable Facility
AND APPLICABLE FACILITY FEE RATES (Basis Points) Margin Fee
---------- ----------
<S> <C> <C>
CREDIT RATINGS
At Least A From S&P or A2 or Above From Moody's 13.5 6.5
At Least A- From S&P from or A3 From Moody's 15.0 7.5
At Least BBB+ From S&P or Baa1 From Moody's 17.0 9.0
At Least BBB from S&P or Baa2 From Moody's 19.0 11.0
At Least BBB- From S&P or Baa3 From Moody's 27.5 12.5
No Other Pricing Level Applies 35.0 20.0
</TABLE>
<PAGE> 46
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation thereof, or the compliance
by any Lender therewith,
(a) subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments due from
the Borrower (excluding federal taxation of the overall net income of
any Lender, franchise taxes and branch profit taxes), or changes the
basis of taxation of payments to any Lender or any applicable Lending
Installation in respect of its Loans, L/C Interests or other amounts
due it hereunder, or
(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
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than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(c) imposes any other condition, in each case, the result of
which is to increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining Loans or issuing or
participating in Letters of Credit or reduces any amount receivable by
any Lender or any applicable Lending Installation in connection with
Loans or Letters of Credit, or requires any Lender or any applicable
Lending Installation to make any payment calculated by reference to the
amount of Loans or Letters of Credit held, or interest received by it,
by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender reasonably determines is attributable to making,
funding and maintaining its Loans, its L/C Interests, the Letters of Credit and
its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender
determines that the amount of capital required or expected to be maintained by
such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased as a result of a Change (as defined below
in this SECTION 3.2), then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Lender reasonably determines is attributable to this Agreement, its Loans,
its L/C Interests, the Letters of Credit or its obligation to make Loans or
participate in Letters of Credit hereunder (after taking into account such
Lender's or such controlling corporation's policies as to capital adequacy).
"CHANGE" means (a) any change after the date of this Agreement in the Risk-Based
Capital Guidelines (as defined below in this SECTION 3.2) or (b) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "RISK-BASED CAPITAL GUIDELINES" means
(a) the risk-based capital guidelines in effect in the United States on the date
of this Agreement, including transition rules, and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement. Each
Lender agrees promptly to notify the Borrower and the Administrative Agent of
any circumstances that would cause the Borrower to pay additional amounts
pursuant to this SECTION 3.2, PROVIDED that, except as set forth in SECTION
3.5(b), the failure to give such notice shall not affect the Borrower's
obligation to pay such additional amounts hereunder.
3.3. AVAILABILITY OF TYPES OF SYNDICATED ADVANCES. If any
Lender reasonably determines that maintenance of its Eurodollar Loans at a
suitable Lending Installation would violate
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<PAGE> 48
any applicable law, rule, regulation, or directive, whether or not having the
force of law, or if the Required Lenders reasonably determine that (a) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (b) the interest rate applicable to a Type of Syndicated Advance
does not accurately reflect the cost of making or maintaining such Advance, then
the Administrative Agent shall suspend the availability of the affected Type of
Syndicated Advance.
3.4. FUNDING INDEMNIFICATION. If any payment of a Eurodollar
Advance or a Bid Rate Advance occurs on a date which is not the last day of the
applicable Interest Period in the case of a Eurodollar Advance, or the
applicable maturity date in the case of a Bid Rate Advance, whether because of
acceleration, prepayment, conversion or otherwise, or a Eurodollar Advance or a
Bid Rate Advance is not made (whether by borrowing, continuation or conversion)
on the date specified by the Borrower for any reason other than default by the
Lenders, or an optional prepayment, notice of which has been given in accordance
with SECTION 2.5, is not made on the date specified therefor in such notice, the
Borrower will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurodollar
Advance or Bid Rate Advance, as the case may be.
3.5. MITIGATION; LENDER STATEMENTS; SURVIVAL OF INDEMNITY. (a)
To the extent reasonably possible, each Lender shall designate an alternate
Lending Installation with respect to its Eurodollar Loans to reduce any
liability of the Borrower to such Lender under SECTIONS 3.1 and 3.2 or to avoid
the unavailability of a Type of Syndicated Advance under SECTION 3.3, so long as
such designation is not disadvantageous to such Lender in its reasonable
determination. If the obligation of the Lenders to make Eurodollar Advances has
been suspended pursuant to SECTION 3.3 as a consequence of a determination by
any Lender that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law or any Lender has demanded
compensation under Section 3.1 or 3.2, the Borrower may elect (i) subject to
SECTION 3.4, to prepay any outstanding Syndicated Advances to the extent
necessary to mitigate its liability under SECTION 3.1 or 3.2, or (ii) to require
the applicable Lender to assign its outstanding Syndicated Loans, L/C Interests
and Commitment hereunder to another financial institution designated by the
Borrower and reasonably acceptable to the Administrative Agent. The obligation
of a Lender to assign its rights and obligations hereunder as contemplated by
this SECTION 3.5(a) is subject to the requirements that (x) all amounts owing to
that Lender under the Loan Documents are paid in full upon the completion of
such assignment and (y) any assignment is effected in accordance with the terms
of Section 12.3 and on terms otherwise satisfactory to that Lender (it being
understood that the Borrower or the replacement Lender shall pay the processing
fee payable to the Administrative Agent pursuant to SECTION 12.3.2 in connection
with any such assignment).
(b) In determining the amounts payable under SECTIONS 3.1, 3.2
or 3.4, each Lender shall use its reasonable efforts to make its allocations and
computations, to the extent readily determinable, consistent with the
allocations and computations applied generally by such Lender to other customers
of similar size and credit quality and under similar circumstances. Each Lender
shall deliver a written statement of such Lender as to the amount due, if any,
under SECTION 3.1, 3.2 or 3.4. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender
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<PAGE> 49
determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan or Bid Rate Loan made
pursuant to an Indexed Rate Auction shall be calculated as though each Lender
funded such Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the interest
rate applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement shall
be payable not later than fifteen (15) days after receipt by the Borrower of the
written statement. The Borrower shall not be liable for any amounts under
SECTIONS 3.1, 3.2 or 3.4 accruing more than 120 days prior to the receipt of a
demand for payment therefor. The obligations of the Borrower under SECTIONS 3.1,
3.2 and 3.4 shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. EFFECTIVENESS; INITIAL ADVANCE. This Agreement shall
become effective and the Lenders shall be obligated to make the initial Advance
or Swing Line Loan or purchase participations in the Letters of Credit or Swing
Line Loans hereunder only after the Administrative Agent shall have received
from the Borrower, with sufficient copies (other than in the case of the Notes)
for each of the Lenders, each of the following items in form and substance
satisfactory to the Administrative Agent:
(a) copies of the certificates of incorporation of the
Borrower and each of the Material Subsidiaries, together with all
amendments thereto and a certificate of good standing, certified by the
appropriate governmental officer of its jurisdiction of incorporation
and by the Secretary, Assistant Secretary, or other appropriate officer
of the Borrower or the Material Subsidiary, as applicable;
(b) copies, certified by the Secretary, Assistant Secretary or
other appropriate officer of the Borrower and each of the Material
Subsidiaries of its by-laws (or any comparable constitutive laws, rules
or regulations) and of its board of directors' resolutions (and
resolutions of other bodies, if any are deemed necessary by counsel for
any Lender) authorizing the execution of the relevant Loan Documents;
(c) incumbency certificates, executed by the Secretary or
Assistant Secretary or other appropriate officer of the Borrower and
each of the Material Subsidiaries, which shall identify by name and
title and bear the signature of the officers of the Borrower and each
of the Material Subsidiaries authorized to sign the relevant Loan
Documents and to make borrowings hereunder, as applicable, upon which
certificate the Administrative Agent, the Issuing Lenders, the Swing
Line Lender and the Lenders shall be entitled to rely until informed of
any change in writing by the Borrower;
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<PAGE> 50
(d) a certificate, signed by the Chief Financial Officer,
stating that on the date hereof no Default or Unmatured Default has
occurred and is continuing;
(e) opinions of Ropes & Gray, counsel to the Borrower and the
Material Subsidiaries initially parties to the Guaranty, Jay Meltzer,
General Counsel to the Borrower and the Material Subsidiaries initially
parties to the Guaranty, and Nevada counsel to certain of such Material
Subsidiaries;
(f) the Syndicated Notes and the Bid Rate Notes payable to the
order of each of the Lenders and the Swing Line Note payable to the
order of the Swing Line Lender;
(g) written money transfer instructions, in substantially the
form of Exhibit E hereto, addressed to the Administrative Agent and
signed by an Authorized Officer, together with such other related money
transfer authorizations as the Administrative Agent may have reasonably
requested, which instructions shall, among other things, direct the
Administrative Agent to repay in full (i) the loans and advances
outstanding under that certain Credit Agreement dated as of November
17, 1995 between the Borrower and The First National Bank of Chicago,
as administrative agent, and the Co-Agents and Lenders parties thereto
(as amended, modified, restated or supplemented from time to time, the
"1995 Credit Agreement") as of the effective date of this Agreement,
together with all accrued and unpaid interest thereon and all breakage
fees and other amounts payable with respect thereto and (ii) all
commitment or other fees accrued and unpaid under the 1995 Credit
Agreement as of the effective date of this Agreement;
(h) evidence of termination of the 1995 Credit Agreement;
(i) a supplemental fee letter dated as of the date hereof;
(j) a Facility Guaranty executed by each of the Material
Subsidiaries; and
(k) such other documents as any Lender or its counsel may have
reasonably requested.
4.2. EACH ADVANCE AND LETTER OF CREDIT. No Lender shall be
required to make any Loan or purchase participations in any Letter of Credit or
Swing Line Loan, nor shall the Administrative Agent shall be required to issue
any Letter of Credit hereunder unless on the applicable Borrowing Date or date
for issuance of such Letter of Credit:
(a) there exists no Default or Unmatured Default;
(b) the representations and warranties contained in Article V
are true and correct as of such Borrowing Date or date for issuance of
such Letter of Credit except to the extent any such representation or
warranty is stated to relate solely to an earlier date, in which case
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<PAGE> 51
such representation or warranty shall be true and correct on and as of
such earlier date;
(c) after giving effect to such Loan and the other Loans being
made as a part of such Advance or the issuance of such Letter of
Credit, the aggregate outstanding principal amount of all Advances and
outstanding L/C Obligations and Swing Line Loans does not exceed the
Aggregate Commitment; and
(d) all legal matters incident to the making of such Advance
or the issuance of such Letter of Credit shall be reasonably
satisfactory to the Lenders and their counsel.
Each Borrowing Notice and each Conversion/Continuation Notice with respect to a
Loan or application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
SECTIONS 4.2(a), (b) and (c) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent, the Swing Line Lender, the
Issuing Lenders and the Lenders to enter into this Agreement and to make the
Loans and the other financial accommodations to the Borrower and to issue the
Letters of Credit described herein, the Borrower represents and warrants to the
Administrative Agent, the Swing Line Lender, the Issuing Lenders and each Lender
as follows as of the date of this Agreement, the date of the initial extension
of credit hereunder and thereafter on each date as required by SECTION 4.2 that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Borrower
and its Subsidiaries (other than Subsidiaries which in the aggregate
own, directly or indirectly, less than ten percent (10%) of the total
consolidated assets of the Borrower and its Subsidiaries) (i) is a
corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, (ii) is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it owns or leases
real property or in which the nature of its business requires it to be
so qualified, except those jurisdictions where the failure to be in
good standing or to so qualify is not reasonably likely to have a
Material Adverse Effect, and (iii) has all requisite corporate power
and authority to own, lease and operate its property and assets and to
conduct its business as presently conducted and as proposed to be
conducted.
5.2. AUTHORIZATION AND VALIDITY.
(a) Each of the Borrower and its Subsidiaries has the
requisite corporate power and authority to execute, deliver and perform
each of the Loan Documents which have been or are to be executed by it.
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(b) The execution, delivery, performance and filing, as the
case may be, of each of the Loan Documents executed or filed by the
Borrower or any of its Subsidiaries and to which the Borrower or any of
its Subsidiaries is a party, and the consummation of the transactions
contemplated thereby, have been duly approved by the respective boards
of directors and, if necessary, the shareholders of the Borrower and
its Subsidiaries, and such approvals have not been rescinded. No other
corporate action or proceedings on the part of the Borrower or its
Subsidiaries are necessary to consummate such transactions.
(c) Each of the Loan Documents to which the Borrower or any of
its Subsidiaries is a party has been duly executed, delivered or filed,
as the case may be, by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (except
as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditor's rights generally), is in
full force and effect and no material term or condition thereof has
been amended, modified or waived without the prior written consent of
the Required Lenders (or all of the Lenders if so required under
Section 8.2), and the Borrower and its Subsidiaries have performed and
complied with all the terms, provisions, agreements and conditions set
forth therein and required to be performed or complied with by such
parties and no unmatured default, default or breach of any covenant by
any such party exists thereunder. As of the date of the initial
extension of credit hereunder, to the best of the Borrower's and its
Subsidiaries' knowledge, all parties (other than the Borrower and its
Subsidiaries) have performed and complied with all the terms,
provisions, agreements and conditions set forth in the Loan Documents
and required to be performed or complied with by such parties and no
unmatured default, default or breach of any covenant by any such party
exists thereunder.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution
and delivery by the Borrower or any of its Subsidiaries of the Loan
Documents, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Borrower or any of its Subsidiaries or the
Borrower's or any Subsidiary's articles of incorporation or by-laws or
the provisions of any material indenture, instrument or material
agreement to which the Borrower or any of its Subsidiaries is a party
or is subject, or by which it, or its Property, is bound, or conflict
with or constitute a default thereunder, or result in the creation or
imposition of any Lien in, of or on the Property of the Borrower or a
Subsidiary pursuant to the terms of any such material indenture,
instrument or agreement. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration
with, or exemption by, any Governmental Authority is required to
authorize, or is required in connection with the execution, delivery
and performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents, except (i) such as have
been made or obtained as set forth on SCHEDULE 5.3 or (ii) such as set
forth on Schedule 5.3 hereto which have not been obtained or made and
which are immaterial.
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<PAGE> 53
5.4. FINANCIAL STATEMENTS. The January 25, 1997 audited
consolidated financial statements of the Borrower and its Subsidiaries
heretofore delivered to the Administrative Agent and the Lenders were
prepared in accordance with generally accepted accounting principles in
effect on the respective dates such statements were prepared and fairly
present in all material respects the consolidated financial condition
and operations of the Borrower and its Subsidiaries at such dates and
the consolidated results of their operations for the respective periods
then ended.
5.5. MATERIAL ADVERSE CHANGE. As of the date of this Agreement
and as of the initial extension of credit hereunder, since January 25,
1997 with respect to the Borrower and its Subsidiaries, there has been
no material adverse change in the business, financial condition,
operations, performance or Property of the Borrower and its
Subsidiaries on a consolidated basis.
5.6. TAXES. The Borrower and its Subsidiaries have filed all
United States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by the Borrower or any
of its Subsidiaries, except such taxes, if any, as are being contested
in good faith, as to which adequate reserves have been provided in
accordance with Agreement Accounting Principles and as to which no tax
lien has been filed. The United States income tax returns of the
Borrower and its Subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ended January 25, 1992. No tax liens
have been filed and, except as set forth on SCHEDULE 5.6 hereto, no
written claims are being made and no other claims are, to the knowledge
of the executive officers of the Borrower, asserted with respect to any
such taxes except for liens and claims which, in the aggregate, are not
reasonably expected to exceed $25,000,000. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect
of any taxes or other governmental charges have been established in
accordance with Agreement Accounting Principles and, to the knowledge
of the executive officers of the Borrower, are adequate.
5.7. LITIGATION AND CONTINGENT OBLIGATIONS. Except as set
forth on SCHEDULE 5.7 hereto, there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the
knowledge of any of their executive officers, threatened against or
affecting the Borrower or any of its Subsidiaries which, if adversely
determined, could reasonably be expected to result in a Material
Adverse Effect. Other than any liability incident to such litigation,
arbitration or proceedings, the Borrower and its Subsidiaries have no
material contingent obligations not provided for or disclosed in the
financial statements referred to in SECTION 5.4.
5.8. SUBSIDIARIES. SCHEDULE 5.8 hereto contains an accurate
list of all of the presently existing Subsidiaries of the Borrower,
setting forth their respective jurisdictions of incorporation and the
percentage of their respective capital stock owned by the Borrower or
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other Subsidiaries. All of the issued and outstanding shares of capital
stock of such Subsidiaries have been duly authorized and issued and are
fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer
Plans do not in the aggregate exceed $40,000,000. Neither the Borrower
nor any other member of the Controlled Group has failed to make any
required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or other
payment with respect to a Single Employer Plan, or has failed to make a
required contribution or payment to a Multiemployer Plan. Neither the
Borrower nor any other member of the Controlled Group has any potential
liability, whether direct or indirect, contingent or otherwise, under
SECTION 4069, 4204 or 4212(c) of ERISA. Each Plan complies in all
material respects with all applicable requirements of law and
regulations and has been administered in all material respects in
accordance with its terms. No Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other member of the
Controlled Group has withdrawn from any Plan or initiated steps to do
so, no steps have been taken to reorganize or terminate any Plan, no
event has occurred which imposes an obligation on the Borrower or any
member of the Controlled Group under SECTION 4041 of ERISA to provide
affected parties written notice of intent to terminate a Plan in a
distress termination described in SECTION 4041(c) of ERISA; no event or
condition has occurred which is reasonably likely to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, in any such case where such event
could reasonably be expected to have a Material Adverse Effect.
5.10. ACCURACY OF INFORMATION. No written information, exhibit
or report furnished by the Borrower or any of its Subsidiaries to the
Administrative Agent, the Swing Line Lender, any Issuing Lender or the
Lenders contained any material misstatement of fact or omitted to state
a material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances under which they
were made.
5.11. REGULATIONS G, T, U AND X. Margin stock (as defined in
Regulation U) constitutes less than 25% of those assets of the Borrower
and its Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder. Neither the Borrower nor any of
its Subsidiaries is engaged in the business of purchasing or carrying
margin stock.
5.12. MATERIAL AGREEMENTS. Neither the Borrower nor any
Subsidiary is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in (i) any
agreement to which it is a party, which default could reasonably be
expected to have a Material Adverse Effect or (ii) any agreement or
instrument evidencing or governing Material Indebtedness.
5.13. COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries
have complied with all applicable statutes, rules, regulations, orders
and restrictions of any Governmental
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Authority having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except where
the failure to so comply could not reasonably be expected to result in
a Material Adverse Effect. Except as set forth in SCHEDULE 5.13 hereto,
neither the Borrower nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any
Environmental, Health or Safety Requirements of Law or the subject of
any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any petroleum, toxic or
hazardous waste or substance into the environment, which non-compliance
or remedial action could reasonably be expected to have a Material
Adverse Effect.
5.14. OWNERSHIP OF PROPERTY. Except as set forth on SCHEDULE
5.14 hereto, on the date of this Agreement, the Borrower and its
Subsidiaries have good title, free of all Liens other than those
permitted by SECTION 6.15, to all of the Property and assets reflected
in the financial statements referred to in SECTION 5.4 as owned by it.
The Borrower and each of its Subsidiaries owns (or is licensed to use)
all Intellectual Property which is necessary or appropriate in any
material respect for the conduct of its respective business as
conducted on the date of this Agreement, without any material conflict
with the rights of any other Person. Neither the Borrower nor any
Subsidiary is aware of (i) any material existing or threatened
infringement or misappropriation of any of its Intellectual Property by
any third party or (ii) any material third party claim that any aspect
of the business of the Borrower or any Subsidiary (as conducted on the
date of this Agreement) infringes or will infringe upon, any
Intellectual Property or other property right of any other Person, in
each case that could reasonably be expected to have a Material Adverse
Effect.
5.15. LABOR MATTERS. There are no labor controversies pending
or, to the best of the Borrower's and its Subsidiaries' knowledge,
threatened against the Borrower or any Subsidiary, which, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect. The Borrower and each of its Subsidiaries are in substantial
compliance in all material respects with the Fair Labor Standards Act,
as amended.
5.16. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
5.17. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
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ARTICLE VI
COVENANTS
6. COVENANTS. During the term of this Agreement, unless the
Required Lenders shall otherwise consent in writing:
6.1. FINANCIAL REPORTING. The Borrower will maintain, for
itself and its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting
principles, and will furnish or cause to be furnished to the
Administrative Agent with sufficient copies for each of the Lenders:
(a) As soon as practicable but in any event within 105 days
after the close of each of its fiscal years, an audit report (which
audit report shall be unqualified or shall be otherwise reasonably
acceptable to the Required Lenders; PROVIDED that such report may set
forth qualifications to the extent such qualifications pertain solely
to changes in generally accepted accounting principles from the
Agreement Accounting Principles applied during earlier accounting
periods, the implementation of which changes (with the concurrence of
such accountants) is reflected in the financial statements accompanying
such report), certified by independent certified public accountants who
are reasonably acceptable to the Required Lenders, prepared in
accordance with Agreement Accounting Principles on a consolidated basis
for itself and its Subsidiaries, including balance sheets as of the end
of such period and the related statements of income, and consolidated
stockholder's equity and cash flows, accompanied by a certificate of
said accountants that, in the course of their examination necessary for
their certification of the foregoing, they have obtained no knowledge
of any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof.
(b) As soon as practicable but in any event within 60 days
after the close of each of the first three quarterly periods of each of
its fiscal years, for itself and its Subsidiaries on a consolidated
basis, balance sheets as of the end of such period and the related
statements of income, and consolidated stockholder's equity and cash
flows for the period from the beginning of such fiscal year to the end
of such quarter, all certified by its Chief Financial Officer,
Controller or Treasurer as to fairness of presentation and prepared,
with respect to such consolidated statements, in accordance with
Agreement Accounting Principles (subject to normal year end
adjustments).
(c) Together with the financial statements required hereunder,
a compliance certificate in substantially the form of EXHIBIT "C"
hereto signed by its Chief Financial Officer, Controller or Treasurer
showing the calculations necessary to determine compliance with
SECTIONS 6.16 and 6.17 and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating the
nature and status thereof and the Borrower's plans with respect
thereto.
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(d) As soon as possible and in any event within 10 days after
an executive officer of the Borrower knows that any Reportable Event or
any other event described in Section 5.9 has occurred with respect to
any Plan, a statement, signed by the Chief Financial Officer or
Treasurer of the Borrower, describing said Reportable Event or other
event and the action which the Borrower proposes to take with respect
thereto.
(e) As soon as possible and in any event within 10 days after
receipt by the Borrower or any Subsidiary, a copy of (a) any notice or
claim to the effect that the Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of the release by the Borrower,
any of its Subsidiaries, or any other Person of any petroleum, toxic or
hazardous waste or substance into the environment, and (b) any notice
alleging any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries, which,
in either case, could reasonably be expected to have a Material Adverse
Effect or subject the Borrower and its Subsidiaries to liability,
individually or in the aggregate, in excess of $10,000,000 (in each
case, determined after giving effect to claims which the Borrower has
demonstrated to the reasonable satisfaction of the Administrative Agent
are covered by applicable third-party insurance policies (other than
retro-premium insurance or other policies with similar self-insurance
attributes) of the Borrower or any of its Subsidiaries unless the
insurers of such claims have disclaimed coverage or reserved the right
to disclaim coverage).
(f) Promptly upon the furnishing thereof to the shareholders
of the Borrower, copies of all financial statements, reports and proxy
statements so furnished.
(g) Promptly upon the filing thereof, copies of all final
registration statements, proxy statements and annual, quarterly,
monthly or other reports which the Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission (provided the
Borrower shall not be obligated to provide copies of routine reports
which are required to be filed concerning the management of employee
benefit plans, including, without limitation, stock purchases or the
exercise of stock options made under any such employee benefit plan).
(h) Except to the extent that such items are redundant with
reports or information otherwise provided pursuant to this Section 6.1,
promptly upon the furnishing thereof to the holders thereof, copies of
all financial statements and reports furnished to the holders of (or
trustee or other representative for the holders of) any Indebtedness
for money borrowed of the Borrower or its Subsidiaries.
(i) Such other information (including non-financial
information) as any Lender through the Administrative Agent may from
time to time reasonably request.
6.2. USE OF PROCEEDS. The Borrower will, and will cause each
of its Subsidiaries to, use the proceeds of the Advances and the Swing
Line Loans to repay outstanding loans and advances made under the 1995
Credit Agreement, to repay Advances, Reimbursement
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Obligations and the Swing Line Loans or for general corporate or
working capital purposes. The Borrower will not, nor will it permit any
Subsidiary, to use proceeds of the Advances and the Swing Line Loans
other than as contemplated in this SECTION 6.2.
6.3. OTHER NOTICES. Promptly after the Borrower or relevant
subsidiary becomes aware of such occurrence, the Borrower will, and
will cause each of its Subsidiaries to, give notice in writing to the
Lenders of the occurrence of: (a) any Default or Unmatured Default; and
(b) any other development, financial or otherwise, which could
reasonably be expected to have a Material Adverse Effect; PROVIDED, no
separate notice of the occurrence of any such development under this
CLAUSE (b) needs to be given to the extent such item has been disclosed
in the Borrower's annual, quarterly or other reports (i.e., 10-K, 10-Q
or 8-K) filed with the Securities and Exchange Commission and delivered
pursuant to SECTION 6.1(g) or in a press release issued by the Borrower
or one of its Subsidiaries. Any such notice shall state the nature and
status of the occurrence and any and all actions taken with respect
thereto.
6.4. CONDUCT OF BUSINESS. The Borrower will, and will cause
each of its Subsidiaries to, carry on and conduct its business in
substantially the same manner and in substantially the same or
complementary fields of enterprise as it is presently conducted and to
do all things necessary to remain duly incorporated, validly existing
and in good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its
business in each jurisdiction in which its business is conducted except
for transactions permitted under SECTIONS 6.10, 6.11, 6.13, or 6.18 or
where the failure to maintain such authority could not reasonably be
expected to have a Material Adverse Effect.
6.5. TAXES. The Borrower will, and will cause each of its
Subsidiaries to, pay when due all material taxes, assessments and
governmental charges and levies upon it or its income, profits or
Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting Principles
and in connection with which no tax Lien has been filed.
6.6. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable
insurance companies insurance on all their Property in such amounts and
covering such risks as is consistent with sound business practice, and
the Borrower will furnish to the Administrative Agent upon request of
any Lender full information as to the insurance carried.
6.7. COMPLIANCE WITH LAWS. The Borrower will, and will cause
each of its Subsidiaries to, comply in all material respects with all
laws (including, without limitation, all environmental laws), rules,
regulations, orders, writs, judgments, injunctions, decrees or awards
to which it may be subject, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
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6.8. MAINTENANCE OF PROPERTIES. The Borrower will, and will
cause each of its Subsidiaries to, do all things necessary to maintain,
preserve, protect and keep its material Property in good repair,
working order and condition, ordinary wear and tear excepted, and make
all necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted
at all times. The Borrower will, and will cause each Subsidiary to, do
all things necessary to maintain, preserve and protect all of its
material Intellectual Property including, without limitation, perform
each of its respective obligations under any and all license agreements
and other contracts and agreements evidencing or relating to
Intellectual Property, using the same in interstate or foreign
commerce, properly marking such Intellectual Property and maintaining
all necessary and appropriate governmental registrations (both domestic
and foreign) except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
6.9. INSPECTION. The Borrower will, and will cause each of its
Subsidiaries to, permit the Administrative Agent and any or each
Lender, by its respective representatives and agents, to inspect any of
the Property, corporate books and financial records of the Borrower and
each of its Subsidiaries, to examine and make copies of the books of
accounts and other financial records of the Borrower and each of its
Subsidiaries, and to discuss the affairs, finances and accounts of the
Borrower and each of its Subsidiaries with, and to be advised as to the
same by, their respective officers at such reasonable times and
intervals as the Administrative Agent or such Lender may designate.
Prior to the occurrence of a Default or Unmatured Default, the Lenders
will use reasonable efforts to coordinate their inspection through the
Administrative Agent so as to minimize any disruption to the business
of the Borrower and its Subsidiaries.
6.10. MERGER. The Borrower will not, nor will it permit any of
its Subsidiaries to, merge, amalgamate or consolidate with or into any
other Person, except that a Wholly-Owned Subsidiary may merge with the
Borrower or a Wholly-Owned Subsidiary of the Borrower, subject to the
further conditions that (a) if the Borrower is a party to any such
permitted merger, the Borrower shall be the surviving corporation and
(b) if any Material Subsidiary is a party to any such permitted merger,
the surviving corporation shall either be or become a party to the
Facility Guaranty pursuant to the terms of Section 6.21. Nothing herein
shall prohibit a transaction otherwise in compliance with Section 6.11,
6.13, or 6.18.
6.11. Sale of Assets. Except as disclosed in Schedule 6.11,
the Borrower will not, nor will it permit any of its Subsidiaries to,
lease, sell or otherwise dispose of its Property, to any other Person
except for:
(a) Sales of inventory in the ordinary course of business
(which in the business of the Borrower and its Subsidiaries may include
sales of larger quantities of inventory other than to consumers
provided such sales are consistent with the Borrower's and its
Subsidiaries' past practices and which are not extraordinary
transactions under Agreement Accounting Principles);
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(b) The sale, discount, or transfer of delinquent accounts
receivable in the ordinary course of business for purposes of
collection only;
(c) Occasional sales, leases or other dispositions of
immaterial assets for cash consideration and for not less than fair
market value;
(d) Sales, leases or other dispositions of assets that are
obsolete or have negligible fair market value;
(e) Sales of equipment for cash consideration and for fair
market value (but if replacement equipment is necessary for the proper
operation of the business of the seller, the seller must promptly
replace the sold equipment);
(f) Leases, sales or other dispositions of its Property to the
Borrower or a Wholly-Owned Subsidiary of the Borrower;
(g) Other leases, sales or other dispositions of its Property
subject to the requirement that the net proceeds of each such lease,
sale or other disposition of Property are reinvested in the business of
the Borrower and the Subsidiaries as conducted in accordance with the
requirements of SECTION 6.4 or are used for other general corporate
purposes;
(h) Sales of assets in the ordinary course of business and
consistent with past practices for not less than fair market value,
including store closings.
Notwithstanding anything herein to the contrary, the aggregate amount of
Property of the Borrower and its Subsidiaries leased, sold or disposed of
pursuant to CLAUSES (g) and (h) (excluding any equipment which has been promptly
replaced) during the twelve-month period ending with the month in which any such
lease, sale or other disposition occurs shall not: (1) in any single transaction
or series of related transactions constitute a Substantial Portion of the
Property of the Borrower and its Subsidiaries under clause (b) of the definition
of Substantial Portion or (2) in the aggregate constitute a Substantial Portion
of the Property of the Borrower and its Subsidiaries under CLAUSE (a) of the
definition of Substantial Portion. Notwithstanding anything herein to the
contrary, after consummation of any transaction permitted under this SECTION
6.11, the Borrower shall own not less than eighty percent (80%) of the
outstanding capital stock of Material Subsidiaries the domestic assets of which
Material Subsidiaries together with the domestic assets of the Borrower
represent at least eighty-five percent (85%) of the total domestic consolidated
assets of the Borrower and its Subsidiaries immediately after the consummation
of such transaction.
6.12. AFFILIATES. Except in connection with transactions
otherwise permitted pursuant to the terms of this Article VI, the Borrower will
not, nor will it permit any of its Subsidiaries
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to, enter into any transaction (including, without limitation, the purchase or
sale of any Property or service) with, or make any payment or transfer to, any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than the Borrower or such Subsidiary would obtain in a comparable arm's-length
transaction; provided, however, that these provisions shall not be applicable
with respect to transactions among the Borrower and its Subsidiaries which are
in the ordinary course of business and consistent with past practice.
6.13. INVESTMENTS. The Borrower will not, nor will it permit
any of its Subsidiaries to, make or suffer to exist any Investments, or
commitments therefor, except:
(a) Investments by the Borrower or any of its Subsidiaries in
and to any domestic Subsidiary;
(b) Investments by the Borrower or any of its Subsidiaries in
and to any foreign Subsidiary in an aggregate amount at any time not to
exceed 20% of Consolidated Net Worth;
(c) Investments in existence as of the close of business on
the date hereof and which are described in Schedule 6.13 hereto;
(d) Subject to the proviso set forth below, investments made
in connection with Acquisitions permitted under Section 6.18;
(e) Investments consisting of cash and cash equivalents; and
(f) Other Investments in any other Persons in an aggregate
amount at any time not to exceed 10% of Consolidated Net Worth;
provided, however, not withstanding anything in this Section 6.13 or Section
6.18 to the contrary, the aggregate amount of Investments made in connection
with Acquisitions made pursuant to clause (b) of Section 6.18 and pursuant to
clause (f) above shall not exceed 10% of Consolidated Net Worth.
6.14. Contingent Obligations. The Borrower will not, nor will
it permit any of its Subsidiaries to, make or suffer to exist any Contingent
Obligation, except:
(a) by endorsement of instruments for deposit or collection in
the ordinary course of business;
<PAGE> 62
(b) Contingent Obligations of the Borrower and any of its
Subsidiaries existing as of the close of business on the date hereof
which are described on SCHEDULE 6.14;
(c) Contingent Obligations in respect of the obligations of
any domestic Subsidiary;
(d) Reimbursement Obligations in connection with Letters of
Credit;
(e) Reimbursement Obligations in connection with letters of
credit not issued by the Issuing Lenders (provided the issuance thereof
is not violative of any other provision of this ARTICLE VI);
(f) Contingent Obligations consisting of the Borrower's
guaranty of reimbursement obligations of any Subsidiary in connection
with letters of credit not issued by the Issuing Lenders (provided the
issuance thereof is not violative of any other provision of this
ARTICLE VI);
(g) Contingent Obligations of any Subsidiary to the extent
such Contingent Obligations constitute Indebtedness permitted under
this Article VI;
(h) Guaranties of the Loans hereunder;
(i) Contingent Obligations of the Borrower to the extent such
Contingent Obligations are included in the calculation of Funded Debt;
and
(j) Contingent Obligations in an additional aggregate amount
not to exceed $100,000,000 at any one time outstanding.
6.15. LIENS. (a) The Borrower will not, nor will it permit any
of its Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on
the Property of the Borrower or such Subsidiary, as applicable, except:
(i) Liens for taxes, assessments or governmental
charges or levies on its Property if the same shall not at the
time be delinquent or thereafter can be paid without penalty,
or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with
Agreement Accounting Principles shall have been set aside on
its books;
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens
arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which
are being contested in good faith by appropriate proceedings
and for which adequate reserves in
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accordance with Agreement Accounting Principles shall have
been set aside on its books;
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits, or
similar legislation;
(iv) utility easements, building restrictions and
such other encumbrances or charges against real property as
are of a nature generally existing with respect to properties
of a similar character and which do not in any material way
affect the same or interfere with the use thereof in the
business of the Borrower or any Subsidiary of the Borrower;
(v) Liens existing as of the close of business on the
date hereof and which are described in Schedule 5.14;
(vi) Liens created or incurred after the date hereof,
given to secure the Indebtedness incurred or assumed in
connection with the acquisition or construction of property or
assets useful and intended to be used in carrying on the
business of the Borrower or any Subsidiary of the Borrower,
including Liens existing on such property or assets at the
time of acquisition or construction thereof or at the time of
acquisition or construction by the Borrower or such
Subsidiary, as applicable, of an interest in any business
entity then owning such property or assets, whether or not
such existing Liens were given to secure the consideration for
the property or assets to which they attach, subject to the
requirement that the Lien shall attach solely to the assets
acquired or purchased;
(vii) secured or unsecured purchase money
Indebtedness (including Capitalized Leases) incurred in the
ordinary course of business to finance the acquisition of
fixed assets or equipment used in the business of such
Subsidiary if such Indebtedness does not exceed the lower of
the fair market value or the cost of the applicable fixed
assets or equipment on the date acquired;
(viii) Liens on real property with respect to
Indebtedness the proceeds of which are used (a) for the
construction or improvement of the real property securing such
Indebtedness or (b) to finance the cost of construction or
improvement of such real property provided such financing
occurs within one hundred eighty (180) days of receipt of the
certificate of occupancy with respect to such construction or
improvement (other than with respect to a refinancing under
clause (x) below);
(ix) other Liens (a) securing Indebtedness or other
obligations not exceeding $50,000,000 at any one time
outstanding or (b) on property having in the aggregate
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a fair market value at the time of incurrence of the Lien not
exceeding $50,000,000 at any one time outstanding, whichever
is greater;
(x) any extension, renewal or replacement of any Lien
permitted by the preceding clauses (vi), (vii), (viii) or (ix)
hereof in respect of the same property or assets theretofore
subject to such Lien in connection with the extension, renewal
or refunding of the Indebtedness secured thereby; provided
that (x) such Lien shall attach solely to the same property or
assets, and (y) such extension, renewal or refunding of such
Indebtedness shall be without increase in the principal
remaining unpaid as of the date of such extension, renewal or
refunding; and
(xi) Liens on the shares of capital stock of the
Borrower's foreign Subsidiaries securing Indebtedness in an
amount which shall not exceed twenty-five percent (25%) of the
assets of all foreign Subsidiaries.
6.16. MAXIMUM LEVERAGE RATIO. The Borrower shall not permit
its Leverage Ratio to be greater than the ratio set forth below at the
end of the fiscal quarter ending on or about the corresponding date set
forth below:
Fiscal Quarters Ending
On or About the
Dates Set Forth Below: Maximum Ratio
---------------------- -------------
On or prior to July 31, 1998 70%
After August 1, 1998
but prior to or including July 31, 1999 67%
Thereafter 65%
The Leverage Ratio shall be calculated, in each case, determined as of
the last day of each fiscal quarter based upon (A) for Funded Debt and
Consolidated Net Worth, Funded Debt and Consolidated Net Worth as of
the last day of each such fiscal quarter and (B) for Consolidated
Rentals, the actual amount for the four-quarter period ending on such
day.
6.17. MINIMUM FIXED CHARGE COVERAGE. The Borrower will, at all
times in which (a) the Rated Debt of the Borrower is rated less than
BBB- by S&P or is rated less than Baa3 by Moody's or (b) the Borrower's
Leverage Ratio is greater than 60%, maintain a Fixed Charge Coverage
Ratio for the most recently ended period of four consecutive fiscal
quarters of at least 1.5 to 1.
6.18. ACQUISITIONS. The Borrower will not, nor will it permit
any of its Subsidiaries to, make any Acquisition other than (a) a
Permitted Acquisition; and (b) other Acquisitions
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(i) made at a time when no Default or Unmatured
Default exists;
(ii) consummated pursuant to a negotiated
acquisition agreement on a non-hostile basis
approved by a majority of the board of
directors of all Persons parties thereto,
(iii) the aggregate consideration for which,
individually or when aggregated with the
aggregate consideration for other
Acquisitions made under this clause (b) does
not exceed 10% of Consolidated Net Worth,
and (iv) the aggregate consideration for all
such Acquisitions plus the aggregate amount
of Investments made pursuant to SECTION
6.13(f) does not exceed 10% of Consolidated
Net Worth.
6.19. RATE HEDGING OBLIGATIONS. The Borrower shall not and
shall not permit any of its Subsidiaries to enter into any interest
rate, commodity or foreign currency exchange, swap, collar, cap or
similar agreements other than interest rate, foreign currency or
commodity exchange, swap, collar, cap, leveraged derivative or similar
agreements entered into by the Borrower pursuant to which the Borrower
or such Subsidiary has hedged its actual interest rate, foreign
currency or commodity exposure.
6.20. MATERIAL SUBSIDIARIES. The Borrower will cause each
Person that becomes a Material Subsidiary of the Borrower after the
date of this Agreement (whether as the result of an Acquisition,
creation or otherwise and whether under clause (b) of the definition of
Material Subsidiary or as a result of a designation under clause (c) of
the definition of Material Subsidiary) to execute and deliver a
supplement to the Facility Guaranty in substantially the form set forth
in Exhibit I hereto to and in favor of the Administrative Agent for the
benefit of itself, the Issuing Lenders, the Swing Line Lender and the
Lenders, together with an opinion of counsel, corporate resolutions and
such other corporate documentation as the Administrative Agent may
reasonably request, all in form and substance satisfactory to the
Administrative Agent and in each case (a) within 30 days after becoming
a Material Subsidiary of the Borrower, for a Material Subsidiary under
clause (b) of the definition thereof and (b) at the time of
designation, for a Material Subsidiary under clause (c) of the
definition thereof. In addition, the Borrower will designate an
additional Subsidiary or Subsidiaries as "Material Subsidiaries" under
clause (c) of the definition of Material Subsidiary such that at the
end of each fiscal quarter ending on or prior to the Facility
Termination Date the Borrower and its Material Subsidiaries in the
aggregate shall own at least eighty-five percent (85%) of the total
consolidated domestic assets of the Borrower and its Subsidiaries.
6.21. SUBSIDIARY INDEBTEDNESS. The Borrower will not permit
any Subsidiary to create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness existing on the date hereof or
proposed to be incurred, each as described in Schedule 6.21
hereto;
(b) Indebtedness of any Subsidiary to third parties,
which Indebtedness for all such Subsidiaries does not exceed
20% of Consolidated Net Worth; and
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(c) Indebtedness of any Subsidiary to the Borrower or
to any other Subsidiary.
6.22. SUBORDINATION OF INTERCOMPANY INDEBTEDNESS. The Borrower
will not and will not permit any of its domestic Subsidiaries to
create, incur, assume or suffer to exist any intercompany Indebtedness
where the obligor on such Indebtedness is the Borrower or any
Subsidiary which is a party to the Guaranty, unless such indebtedness
is subordinated to the Obligations hereunder on the terms described in
SCHEDULE 6.22.
ARTICLE VII
DEFAULTS
7. DEFAULTS. The occurrence of any one or more of the
following events shall constitute a Default:
7.1. BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made or deemed made by or on behalf of the Borrower or any
of its Subsidiaries to the Lenders, the Swing Line Lender, the Issuing
Lenders or the Administrative Agent under or in connection with this
Agreement, any Loan, any Letter of Credit or any certificate or
information delivered in connection with this Agreement or any other
Loan Document shall be materially false on the date as of which made or
deemed made.
7.2. PAYMENT DEFAULT. Nonpayment of principal of any Loan,
Note or L/C Obligations when due, or nonpayment of interest upon any
Loan or Note or of any fee or other obligations under any of the Loan
Documents within five Business Days after the same becomes due.
7.3. BREACH OF CERTAIN COVENANTS. The breach by the Borrower
of (a) any of the terms or provisions of SECTIONS 6.2, and 6.4, CLAUSE
(a) of SECTION 6.3, any of SECTIONS 6.10 through 6.13, SECTION 6.15,
SECTIONS 6.18 through 6.19 or (b) any of the terms of SECTIONS 6.16 or
6.17 and such breach under this clause (b) continues for 10 days after
the first to occur of (i) the date an executive officer of the Borrower
first knows of or should have known of such breach or (ii) the date the
Borrower receives written notice from any Lender (acting through the
Administrative Agent) of such breach.
7.4. BREACH OF OTHER PROVISIONS. The breach by the Borrower
(other than a breach which constitutes a Default under SECTION 7.1, 7.2
or 7.3) of any of the terms or provisions of this Agreement, and such
breach continues for 30 days after the first to occur of (i) the date
an executive officer of the Borrower first knows of or should have
known of such breach or (ii) the date the Borrower receives written
notice from any Lender (acting through the Administrative Agent) of
such breach.
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7.5. DEFAULT ON MATERIAL INDEBTEDNESS. Failure of the Borrower
or any of its Subsidiaries to make a payment on Material Indebtedness
when due (after giving effect to any applicable grace period); or the
default by the Borrower or any of its Subsidiaries in the performance
of any term, provision or condition contained in any agreement or
agreements under which any Material Indebtedness was created or is
governed (and any applicable grace period(s) shall have expired), or
any other event shall occur or condition exist, the effect of which is
to cause, or to permit the holder or holders of such Material
Indebtedness to cause, such Material Indebtedness to become due prior
to its stated maturity; or any Indebtedness of the Borrower or any of
its Subsidiaries equal to or exceeding $10,000,000 in the aggregate
shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any of its Subsidiaries shall not
pay, or shall admit in writing its inability to pay, its debts
generally as they become due.
7.6. VOLUNTARY INSOLVENCY PROCEEDINGS. The Borrower or any of
its Subsidiaries shall (a) have an order for relief entered with
respect to it under the United States bankruptcy laws as now or
hereafter in effect or cause or allow any similar event to occur under
any bankruptcy or similar law or laws for the relief of debtors as now
or hereafter in effect in any other jurisdiction, (b) make an
assignment for the benefit of creditors, (c) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator, monitor or similar official for it or any
Substantial Portion of its Property, (d) institute any proceeding
seeking an order for relief under the United States bankruptcy laws as
now or hereafter in effect or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or any of
its property or its debts under any law relating to bankruptcy,
insolvency or reorganization or compromise of debt or relief of debtors
as now or hereafter in effect in any jurisdiction, or any organization,
arrangement or compromise of debt under the laws of its jurisdiction of
incorporation or fail to promptly file an answer or other pleading
denying the material allegations of any such proceeding filed against
it, (e) take any corporate action to authorize or effect any of the
foregoing actions set forth in this SECTION 7.6 or (f) fail to contest
in good faith, or consent to or acquiesce in, any appointment or
proceeding described in SECTION 7.7.
7.7. INVOLUNTARY INSOLVENCY PROCEEDINGS. Without the
application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, custodian, trustee, examiner, liquidator or
similar official shall be appointed (either privately or by a court)
for the Borrower or any of its Subsidiaries or any Substantial Portion
of its Property, or a proceeding described in SECTION 7.6(d) shall be
instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 60 consecutive days.
7.8. CONDEMNATION. Any court, government or governmental
agency shall condemn, seize or otherwise appropriate, or take custody
or control of (each a "Condemnation"), all or
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any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its
Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in
which any such Condemnation occurs, constitutes a Substantial Portion
of the consolidated Property of the Borrower and its Subsidiaries.
7.9. JUDGMENTS. The Borrower or any of its Subsidiaries shall
fail within 30 days to pay, bond or otherwise discharge any one or more
judgments or orders for the payment of money in excess of $10,000,000
in the aggregate (determined after giving effect to claims which the
Borrower has demonstrated to the reasonable satisfaction of the
Administrative Agent are covered by applicable third-party insurance
policies (other than retro-premium insurance or other policies with
similar self-insurance attributes) of the Borrower or any of its
Subsidiaries unless the insurers of such claims have disclaimed
coverage or reserved the right to disclaim coverage), which are
judgments are not stayed on appeal with adequate reserves set aside on
its books in accordance with Agreement Accounting Principles of the
Borrower or any of its Subsidiaries.
7.10. ERISA Matters. Any Reportable Event, the occurrence
which may reasonably be expected to give rise to Material Adverse
Effect, shall occur in connection with any Plan.
7.11. ENVIRONMENTAL MATTERS. The Borrower or any of its
Subsidiaries shall be the subject of any proceeding or investigation
pertaining to the release by the Borrower or any of its Subsidiaries or
any other Person of any petroleum, toxic or hazardous waste or
substance into the environment, or any violation of any Environmental,
Health or Safety Requirements of Law which, in either case, could
reasonably be expected to have a Material Adverse Effect or subject the
Borrower and its Subsidiaries to liability, individually or in the
aggregate, in excess of $20,000,000 (in each case, determined after
giving effect to claims which the Borrower has demonstrated to the
reasonable satisfaction of the Administrative Agent are covered by
applicable third-party insurance policies (other than retro-premium
insurance or other policies with similar self-insurance attributes) of
the Borrower or any of its Subsidiaries unless the insurers of such
claims have disclaimed coverage or reserved the right to disclaim
coverage).
7.12. CHANGE OF CONTROL. Any Change in Control shall occur.
7.13. CHANGE OF SUBSIDIARY OWNERSHIP; GUARANTY DEFAULTS. The
Borrower shall cease to own 80% of the outstanding capital stock of any
Material Subsidiary which has executed a Facility Guaranty except in
connection with a transaction expressly permitted under the terms of
SECTIONS 6.10, 6.11, 6.13 or 6.14; or any Facility Guaranty shall fail
to remain in full force or effect or any party thereto shall so assert;
or any action shall be taken to discontinue, revoke or to assert the
invalidity or unenforce ability of any Facility Guaranty; or any
Material Subsidiary shall fail to comply in any material respect with
any of the terms or provisions of any Facility Guaranty to which it is
a party; or any Material Subsidiary shall deny that it has
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any further liability under any Facility Guaranty to which it is a
party, or shall give notice to such effect.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or
7.7 occurs, the obligations of the Lenders to make Loans or purchase
participations in Letters of Credit or Swing Line Loans hereunder and the
obligation of the Issuing Lenders to issue Letters of Credit hereunder shall
automatically terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Administrative Agent
or any Lender, and without presentment, demand, protest or notice of any kind,
all of which the Borrower hereby expressly waives. If any other Default occurs
and is continuing (which Default has not been waived under the terms of Section
8.2) the Required Lenders may (a) terminate or suspend the obligations of the
Lenders to make Loans and purchase participations in Letters of Credit or Swing
Line Loans hereunder, whereupon the obligation of the Issuing Lenders to issue
Letters of Credit hereunder shall also terminate or be suspended, or (b) declare
the Obligations to be due and payable, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives, or (c) take the
action described in both the preceding clause (a) and the preceding clause (b).
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7) and before any judgment or decree for the payment of the
Obligations due shall have been obtained or entered, the Required Lenders (in
their sole discretion) shall so direct, the Administrative Agent shall, by
notice to the Borrower, rescind and annul such acceleration and/or termination.
8.2. AMENDMENTS. Subject to the provisions of this Article
VIII, the Required Lenders (or the Administrative Agent with the consent in
writing of the Required Lenders) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or waiving any Default or Unmatured Default hereunder;
provided, however, that no such supplemental agreement shall, without the
consent of each Lender affected thereby:
(a) extend the maturity of any Loan, Note or Reimbursement
Obligation or forgive all or any portion of the principal amount
thereof, any interest thereon or any fees or other amounts payable
hereunder, or reduce the rate or extend the time of payment of
interest, fees or other amounts payable hereunder;
(b) reduce the percentage specified in the definition of
Required Lenders;
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(c) increase the amount of the Commitment of any Lender
hereunder, or permit the Borrower to assign its rights or obligations
under this Agreement; or
(d) amend this SECTION 8.2.
No amendment of any provision of this Agreement relating in any way to the
Administrative Agent or any or all of the Letters of Credit shall be effective
without the written consent of the Administrative Agent and each Issuing Lender.
No amendment of any provision of this Agreement relating to Swing Line Loans
shall be effective without the written consent of the Swing Line Lender. The
Administrative Agent may waive payment of the fee required under SECTION 12.3.2
without obtaining the consent of any other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the
Lenders or any of them or the Administrative Agent to exercise any right under
the Loan Documents shall impair such right or be construed to be a waiver of any
Default or an acquiescence therein, and the making of a Loan notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Loan shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude any other or further exercise thereof or the exercise of any other
right, and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by (or with the consent of) the Lenders required pursuant to SECTION 8.2,
and then only to the extent specifically set forth in such writing. All remedies
contained in the Loan Documents or afforded by law shall be cumulative and all
shall be available to the Administrative Agent and the Lenders until the
Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery of
the Notes and the making of the Loans herein contemplated.
9.2. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
9.3. TAXES; STAMP DUTIES. Any taxes (excluding taxes
(including income taxes, franchise taxes and branch profit taxes) as are imposed
on or measured by such Lender's, Swing Line Lender's or Issuing Lender's, as the
case may be, income by the United States of America or any Governmental
Authority of the jurisdiction under the laws of which such Lender, Swing Line
Lender or Issuing Lender, as the case may be, is organized or maintains its
Lending Installation) or other similar assessments or charges made by any
Governmental Authority or revenue authority in respect of the Loan Documents
shall be paid by the Borrower, together with interest and penalties, if any, as
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provided in Section 3.1. The Borrower shall pay and forthwith on demand
indemnify each of the Administrative Agent and each Lender against any liability
it incurs in respect of any stamp, registration and similar tax which is or
becomes payable in connection with the entry into, performance or enforcement of
any Loan Document.
9.4. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Administrative Agent and the
Lenders and supersede all prior agreements and understandings among the
Borrower, the Administrative Agent and the Lenders relating to the subject
matter thereof.
9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The
respective obligations of the Lenders hereunder are several and not joint and no
Lender shall be the partner or agent of any other (except to the extent to which
the Administrative Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other
Lender from any of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties (and their directors, officers and employees with respect to Section 9.7
to this Agreement) and their respective successors and assigns.
9.7. EXPENSES; INDEMNIFICATION. (a) The Borrower shall
reimburse the Administrative Agent for any reasonable costs, internal charges
and out-of-pocket expenses (including reasonable attorneys' fees and time
charges of attorneys for the Administrative Agent; which attorneys may be
employees of the Administrative Agent or of one outside counsel, but not both)
paid or incurred by the Administrative Agent in connection with the preparation,
negotiation, execution, delivery, syndication, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Administrative Agent, the Issuing Lenders, the Swing Line Lender and the
Lenders for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges not more than three firms
of attorneys for the Administrative Agent and the Lenders, which attorneys may
be employees of such persons) paid or incurred by the Administrative Agent or
any Lender in connection with the collection and enforcement of the Loan
Documents.
(b) The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Administrative Agent, the Swing Line Lender and each and
all of the Issuing Lenders and Lenders and each of their respective Affiliates,
and each of such Person's respective officers, directors, employees, partners,
managers, shareholders, attorneys and agents (collectively, the "Indemnitees")
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of attorneys and paralegals for such Indemnitees in connection
with any investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall
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be designated a party thereto), imposed on, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any act, event or
transaction related or attendant thereto or to the making of
the Loans, and the issuance or modification of and
participation in Letters of Credit hereunder, the management
of such Loans or Letters of Credit, the use or intended use of
the proceeds of the Loans or Letters of Credit hereunder, or
any of the other transactions contemplated by the Loan
Documents; or
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic
damages, consequential damages, treble damages, intentional,
willful or wanton injury, damage or threat to the environment,
natural resources or public health or welfare, costs and
expenses (including, without limitation, attorney, expert and
consulting fees and costs of investigation, feasibility or
remedial action studies), fines, penalties and monetary
sanctions and interest, direct or indirect, known or unknown,
absolute or contingent, past, present or future relating to
violation of any Environmental, Health or Safety Requirements
of Law arising from or in connection with the past, present or
future operations of the Borrower, its Subsidiaries or any of
their respective predecessors in interest, or, the past,
present or future environmental, health or safety condition of
any respective Property of the Borrower or its Subsidiaries,
the presence of asbestos-containing materials at any
respective property of the Borrower or its Subsidiaries or the
release or threatened release of any petroleum, toxic or
hazardous waste or substance into the environment
(collectively, the "INDEMNIFIED MATTERS");
PROVIDED, HOWEVER, the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused solely by or resulting
solely from the willful misconduct or Gross Negligence of such Indemnitee as
determined by the final non-appealable judgment of a court of competent
jurisdiction. If the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
(c) The Borrower further agrees to assert no claim against any of the
Indemnitees on any theory of liability for consequential, special, indirect,
exemplary or punitive damages. No settlement shall be entered into by the
Borrower or any of its Subsidiaries with respect to any claim, litigation,
arbitration or other proceeding relating to or arising out of the transaction
evidenced by this Agreement or the other Loan Documents (whether or not the
Administrative Agent or any Lender or any other Indemnitee is a party thereto)
unless such settlement releases all Indemnitees
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from any and all liability with respect thereto. After submission of a written
request to an Indemnitee from the Borrower detailing the nature of any claim,
litigation, arbitration or other proceeding which relates to or arises out of
the transaction evidenced by this Agreement or the other Loan Documents, such
Indemnitee shall inform the Borrower as to whether it will require compliance
with the provisions of this clause (c) or whether it will waive such compliance,
any waiver of which shall be applicable only for such Indemnitee.
(d) The obligations of the Borrower under this Section shall survive
the termination of this Agreement.
9.8. NUMBERS OF DOCUMENTS. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Administrative Agent
with sufficient counterparts so that the Administrative Agent may furnish one to
each of the Lenders.
9.9. ACCOUNTING. Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles. If any changes in generally accepted accounting principles are
hereafter required or permitted and are adopted by the Borrower or any of its
Subsidiaries with the agreement of its independent certified public accountants
and such changes result in a change in the method of calculation of any of the
financial covenants, restrictions or standards herein or in the related
definitions or terms used therein ("Accounting Changes"), the parties hereto
agree, at the Borrower's request, to enter into negotiations, in good faith, in
order to amend such provisions in a credit neutral manner so as to reflect
equitably such Accounting Changes with the desired result that the criteria for
evaluating the Borrower's and its Subsidiaries' financial condition shall be the
same after such Accounting Changes as if such Accounting Changes had not been
made; provided, however, until such provisions are amended in a manner
reasonably satisfactory to the Administrative Agent and the Required Lenders, no
Accounting Change shall be given effect in such calculations and all financial
statements and reports required to be delivered hereunder shall be prepared in
accordance with Agreement Accounting Principles without taking into account such
Accounting Changes. In the event such amendment is entered into, all references
in this Agreement to Agreement Accounting Principles shall mean generally
accepted accounting principles in effect as of the date of such amendment.
9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.11. NONLIABILITY OF LENDERS. The relationship between the
Borrower, on the one hand, and the Lenders and the Administrative Agent, on the
other hand, shall be solely that of borrower and lender. Neither the
Administrative Agent nor any Lender shall have any fiduciary responsibilities to
the Borrower or any of its Subsidiaries. Neither the Administrative Agent nor
any
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Lender undertakes any responsibility to the Borrower or any of its Subsidiaries
to review or inform the Borrower or any of its Subsidiaries of any matter in
connection with any phase of the business or operations of the Borrower or any
of its Subsidiaries.
9.12. GOVERNING LAW. THE ADMINISTRATIVE AGENT ACCEPTS THIS
AGREEMENT, ON BEHALF OF ITSELF, THE ISSUING LENDERS, THE SWING LINE LENDER AND
THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY
DISPUTE BETWEEN THE BORROWER AND ANY OF THE ADMINISTRATIVE AGENT, ANY ISSUING
LENDER, THE SWING LINE LENDER OR ANY LENDER, OR ANY OTHER HOLDER OF THE
OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT
SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM, BUT THE BORROWER ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
CHICAGO, ILLINOIS. EXCEPT AS SET FORTH IN CLAUSE (B) BELOW, ANY JUDICIAL
PROCEEDING BY THE ADMINISTRATIVE AGENT, THE SWING LINE LENDER, ANY ISSUING
LENDER OR ANY LENDER ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS IF BROUGHT OTHER THAN IN ANY UNITED STATES FEDERAL
OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS, SHALL BE BROUGHT ONLY IN A
COURT IN BOSTON, MASSACHUSETTS OR NEW YORK, NEW YORK. ANY JUDICIAL PROCEEDING BY
THE BORROWER AGAINST THE ADMINISTRATIVE AGENT, THE SWING LINE LENDER, ANY
ISSUING LENDER OR ANY LENDER OR ANY AFFILIATE OF ANY SUCH PERSON INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT ONLY
IN A COURT IN CHICAGO, ILLINOIS, BOSTON, MASSACHUSETTS OR
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NEW YORK, NEW YORK, TO THE EXTENT THAT JURISDICTION CAN BE OBTAINED AGAINST SUCH
PERSONS IN ANY SUCH JURISDICTION, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
CHICAGO, ILLINOIS, BOSTON, MASSACHUSETTS OR NEW YORK, NEW YORK. EACH OF THE
PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT IN THE JURISDICTIONS IDENTIFIED IN
THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE PROVIDED, WITH RESPECT TO THE ADMINISTRATIVE AGENT OR
ANY LENDER, PERSONAL JURISDICTION WITH RESPECT TO SUCH PARTY MAY BE OBTAINED IN
SUCH JURISDICTION.
(B) OTHER JURISDICTIONS. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY
PERSON TO BRING ANY ACTION HEREUNDER IN A COURT IN ANY LOCATION TO ENABLE SUCH
PERSON TO OBTAIN PERSONAL JURISDICTION OVER ANY OTHER PERSON WITH RESPECT
HERETO. THE BORROWER AGREES THAT THE ADMINISTRATIVE AGENT, ANY ISSUING LENDER,
ANY SWING LINE LENDER, ANY LENDER OR ANY OTHER HOLDER OF THE OBLIGATIONS SHALL
HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY
LOCATION TO ENABLE SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT UNDER THIS CLAUSE (B) BY SUCH
PERSON TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON, ALL
OF WHICH PERMISSIVE COUNTERCLAIMS SHALL BE BROUGHT BY THE BORROWER IN THE
JURISDICTIONS IDENTIFIED IN CLAUSE (A) ABOVE. THE BORROWER WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED
A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS; INCONVENIENT FORUM. THE BORROWER WAIVES
PERSONAL SERVICE OF ANY PROCESS UPON IT AND AGREES THAT ANY SUCH PROCESS MAY BE
SERVED BY REGISTERED MAIL TO THE BORROWER AT ITS ADDRESS FOR NOTICES PURSUANT TO
SECTION 13.1. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF 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
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, ARISING OUT OF, CONNECTED
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WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(E) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 9.13 WITH ITS COUNSEL.
9.14. CONFIDENTIALITY. Each Lender agrees to hold any
confidential information which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to other Lenders and its and
their respective Affiliates, Transferees and prospective Transferees, (ii) in
confidence to legal counsel, accountants and other professional advisors to that
Lender or to Transferees or prospective Transferees pursuant to SECTION 12.4,
(iii) to regulatory officials, (iv) to any Person as requested (which request
such Lender reasonably believes could give rise to mandatory disclosure) or
pursuant to or as required by law, regulation or legal process, (v) to any
Person in connection with any legal proceeding to which that Lender is a party
with respect to any claim, litigation, arbitration or other proceeding relating
to or arising out of the transaction evidenced by this Agreement or the other
Loan Documents, (vi) to any Person in connection with any other legal proceeding
to which that Lender is a party provided such Lender uses reasonable efforts to
give the Borrower notice of any disclosure thereunder, provided any failure in
such regard shall not result in any liability on the part of such Lender, and
(vii) permitted by SECTION 12.4.
9.15. FACILITY GUARANTY RELEASES. Each of the Lenders, the
Swing Line Lender, the Issuing Lenders and the Administrative Agent agrees that
upon the consummation of any transaction involving a merger permitted under the
last sentence of Section 6.10 or the sale of all or substantially all of the
assets of a Material Subsidiary, which sale is permitted pursuant to the terms
of Section 6.11, the Administrative Agent, for itself and on behalf of the
Lenders, the Swing Line Lender and the Issuing Lenders, shall release and
terminate the Facility Guaranty with respect to the Material Subsidiary which is
the subject of such transaction.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. APPOINTMENT; NATURE OF RELATIONSHIP. The First National
Bank of Chicago is appointed by the Issuing Lenders, Swing Line Lender and
Lenders as the Administrative Agent hereunder and under each other Loan
Document, and each of the Issuing Lenders, the Swing Line Lender and the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual
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representative of such Person with the rights and duties expressly set forth
herein and in the other Loan Documents. The Administrative Agent agrees to act
as such contractual representative upon the express conditions contained in this
ARTICLE X. Notwithstanding the use of the defined term "Administrative Agent" or
"agent" in reference to The First National Bank of Chicago, it is expressly
understood and agreed that the Administrative Agent shall not have any fiduciary
responsibilities to any Issuing Lender, Swing Line Lender or Lender by reason of
this Agreement and that the Administrative Agent is merely acting as the
representative of the Issuing Lenders, Swing Line Lender and Lenders with only
those duties as are expressly set forth in this Agreement and the other Loan
Documents. In its capacity as such contractual representative, the
Administrative Agent (i) does not assume any fiduciary duties to any of the
Issuing Lenders, Swing Line Lender or Lenders, (ii) is a "representative" of the
Issuing Lenders, Swing Line Lender and Lenders within the meaning of SECTION
9-105 of the Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents. Each of the Issuing
Lenders, Swing Line Lender and Lenders agrees to assert no claim against the
Administrative Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Issuing Lender, Swing Line
Lender and Lender waives.
10.2. POWERS. The Administrative Agent shall have and may
exercise such powers under the Loan Documents as are specifically delegated to
the Administrative Agent by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Administrative Agent shall have no
implied duties or fiduciary duties to the Issuing Lenders, Swing Line Lender or
Lenders, or any obligation to the Issuing Lenders, Swing Line Lender or Lenders
to take any action hereunder or under any of the other Loan Documents except any
action specifically provided by the Loan Documents required to be taken by the
Administrative Agent.
10.3. GENERAL IMMUNITY. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable to the
Borrower or any Issuing Lender, Swing Line Lender or Lender for any action taken
or omitted to be taken by it or them hereunder or under any other Loan Document
or in connection herewith or therewith except to the extent such action or
inaction is found in a final judgment by a court of competent jurisdiction to
have arisen solely from the Gross Negligence or willful misconduct of such
Person.
10.4. NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS,
COLLATERAL, RECITALS, ETC. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any extension of
credit hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower, any Subsidiary or any other obligor under any Loan
Document; (iii) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered solely to the Administrative
Agent; (iv) the existence or possible existence of any Default or (v) the
validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith. The Administrative
Agent shall not be responsible to any Issuing Lender, Swing Line Lender or
Lender for any recitals, statements, representations or warranties herein or in
any of the
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other Loan Documents or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectibility or sufficiency of this Agreement or any
of the other Loan Documents or the transactions contemplated thereby, or for the
financial condition of the Borrower or any of its Subsidiaries. The
Administrative Agent will use its reasonable efforts to distribute to each of
the Lenders, in a timely fashion, a copy of all written reports, certificates
and information required to be supplied by the Borrower or any of its
Subsidiaries to the Administrative Agent pursuant to the terms of this Agreement
or any of the other Loan Documents; provided that any failure in such regard
shall not result in any liability on the part of the Administrative Agent and
PROVIDED FURTHER that the Administrative Agent shall have no duty to disclose to
the Lenders information that is not required to be furnished by the Borrower to
the Administrative Agent at such time, but is voluntarily furnished by the
Borrower to the Administrative Agent (either in its capacity as Administrative
Agent or in its individual capacity).
10.5. ACTION ON INSTRUCTIONS OF LENDERS. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders or all of the Lenders (as applicable
under SECTION 8.2), and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Issuing Lenders, Swing Line
Lender, Lenders and any other holders of the Notes or Obligations. The
Administrative Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction (which shall not include any requirement that it
be indemnified for its willful misconduct or Gross Negligence) by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
10.6. EMPLOYMENT OF AGENTS AND COUNSEL. The Administrative
Agent may execute any of its duties as the Administrative Agent hereunder and
under any other Loan Document by or through employees, agents and
attorney-in-fact and shall not be answerable to the Issuing Lenders, Swing Line
Lender or Lenders, except as to money or securities received by it or its
authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Administrative Agent
shall be entitled to advice of counsel concerning the contractual arrangement
between the Administrative Agent and the Issuing Lenders, Swing Line Lender and
Lenders and all matters pertaining to the Administrative Agent's duties
hereunder and under any other Loan Document.
10.7. RELIANCE ON DOCUMENTS; COUNSEL. The Administrative Agent
shall be entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and, in respect of legal matters, upon the opinion of counsel selected
by the Administrative Agent, which counsel may be employees of the
Administrative Agent and which counsel may have acted as counsel for the
Administrative Agent in connection with the negotiation and execution of this
Agreement and the other Loan Documents.
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10.8. THE ADMINISTRATIVE AGENT'S REIMBURSEMENT AND
INDEMNIFICATION. The Lenders agree to reimburse and indemnify the Administrative
Agent ratably in proportion to their respective Percentage (i) for any amounts
not reimbursed by the Borrower for which the Administrative Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (ii) for any other
expenses incurred by the Administrative Agent on behalf of the Issuing Lenders,
Swing Line Lender or Lenders, in connection with the preparation, execution,
delivery, administration and enforcement of the Loan Documents (including with
respect to any disagreement between or among any of the Administrative Agent,
Issuing Lenders, Swing Line Lender or Lenders) and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Administrative Agent in any way relating
to or arising out of the Loan Documents or any other document delivered in
connection therewith or the transactions contemplated thereby, or the
enforcement of any of the terms thereof or of any such other documents, provided
that no Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen solely from the Gross Negligence or willful
misconduct of the Administrative Agent.
10.9. RIGHTS AS A LENDER. With respect to its Commitment,
Loans made by it, Letters of Credit issued by it and Notes issued to it, First
Chicago (or any other Person succeeding it as the Administrative Agent) shall
have the same rights and powers hereunder and under any other Loan Document as
any Lender, Issuing Lender or Swing Line Lender, as applicable, and may exercise
the same as though it were not the Administrative Agent, and the terms "Lender,"
"Lenders," "Issuing Lender," "Issuing Lenders," "Swing Line Lender," and "Swing
Line Lenders" shall, unless the context otherwise indicates, include First
Chicago (or any other Person succeeding it as the Administrative Agent) in its
individual capacity. First Chicago (or any other Person succeeding it as the
Administrative Agent) may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which such Person is not prohibited
hereby from engaging with any other Person.
10.10. LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Issuing Lender, Swing Line Lender or Lender and based on the financial
statements prepared by the Borrower and its Subsidiaries and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Issuing Lender, Swing Line Lender or
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents.
10.11. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign at any time by giving written notice thereof to the Lenders and
the Borrower, and the Administrative Agent may be removed at any time with or
without cause by written notice received by the Administrative
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Agent from the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint, without the consent of the
Borrower and on behalf of the Swing Line Lender, Issuing Lenders and Lenders, a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may appoint,
without the consent of the Borrower and on behalf of the Issuing Lenders, Swing
Line Lender and Lenders, a successor Administrative Agent, which successor
Administrative Agent shall be a Lender unless no Lender shall so agree in which
event such successor Administrative Agent may be a Person of the Administrative
Agent's choosing. Notwithstanding anything herein to the contrary, so long as
no Default has occurred and is continuing, each such successor Administrative
Agent shall be subject to approval by the Borrower, which approval shall not be
unreasonably withheld. Such successor Administrative Agent shall be a
commercial bank having capital and retained earnings of at least $100,000,000.
Upon the acceptance of any appointment as the Administrative Agent hereunder by
a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Article X shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent hereunder and under the other Loan Documents.
10.12. ADMINISTRATIVE AGENT'S FEE. The Borrower agrees to pay
to the Administrative Agent, for its own account, the fees agreed to by the
Borrower and the Administrative Agent by separate letter agreement, or as
otherwise agreed from time to time.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. SETOFF. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Default or Unmatured Default occurs and is continuing,
any and all deposits (including all account balances, whether provisional or
final and whether or not collected or available) and any other Indebtedness at
any time held or owing by any Lender to or for the credit or account of the
Borrower may be offset and applied toward the payment of the Obligations owing
to such Lender, whether or not the Obligations, or any part hereof, shall then
be due.
11.2. RATABLE PAYMENTS. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Syndicated Loans (other than payments
received pursuant to SECTION 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Syndicated Loans held by the other Lenders so that
after such purchase each Lender will hold its ratable proportion of Syndicated
Loans. If any Lender,
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whether in connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Syndicated Loans. In
case any such payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made.
11.3. APPLICATION OF PAYMENTS. The Administrative Agent shall,
unless otherwise specified at the direction of the Required Lenders which
direction shall be consistent with the last sentence of this Section 11.3, apply
all payments and prepayments in respect of any Obligations in the following
order:
(a) first, to pay interest on and then principal of any
portion of the Loans which the Administrative Agent may have advanced
on behalf of any Lender for which the Administrative Agent has not then
been reimbursed by such Lender or Borrower;
(b) second, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Administrative Agent;
(c) third, to pay interest on and then principal outstanding
on the Swing Line Loans, applied ratably to all outstanding Swing Line
Loans;
(d) fourth, to the ratable payment of Obligations in respect
of any fees, expenses, reimbursements or indemnities then due to the
Lenders, Swing Line Lender and Issuing Lenders;
(e) fifth, to pay interest due in respect of Loans (other than
Swing Line Loans) and L/C Obligations;
(f) sixth, to the ratable payment or prepayment of principal
outstanding on Loans (other than Swing Line Loans) and Reimbursement
Obligations in such order as the Administrative Agent may determine in
its sole discretion;
(g) seventh, to provide required cash collateral, if any,
pursuant to Section 2.20.10; and
(h) eighth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable if no
Default has occurred and is continuing) by the Borrower or unless otherwise
mandated by the terms of this Agreement, all principal payments in respect of
Loans shall be applied first, to repay outstanding Money Market Rate Loans,
second to repay other outstanding Floating Rate Loans, and then to repay
outstanding Eurodollar Loans with those Eurodollar Loans which have earlier
expiring Interest Periods being repaid prior to those which have later expiring
Interest Periods. The order of priority set forth in this
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SECTION 11.3 and the related provisions of this Agreement are set forth solely
to determine the rights and priorities of the Administrative Agent, the Lenders,
the Swing Line Lender and the Issuing Lenders as among themselves. The order of
priority set forth in CLAUSES (d) through (h) of this SECTION 11.3 may at any
time and from time to time be changed by the Required Lenders without necessity
of notice to or consent of or approval by Borrower or any other Person. The
order of priority set forth in CLAUSES (a) and (b) of this SECTION 11.3 may be
changed only with the prior written consent of the Administrative Agent and the
order of priority set forth in CLAUSE (c) may be changed only with the prior
written consent of the Swing Line Lender.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Borrower,
the Administrative Agent and the Lenders and their respective successors and
assigns, except that (a) the Borrower shall not have the right to assign its
rights or obligations under the Loan Documents without the consent of all of the
Lenders and (b) any assignment by any Lender must be made in compliance with
SECTION 12.3. Notwithstanding clause (b) of the preceding sentence, any Lender
may at any time, without the consent of the Borrower or the Administrative
Agent, assign all or any portion of its rights under this Agreement and its
Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such assignment
shall release the transferor Lender from its obligations hereunder. The
Administrative Agent may treat the payee of any Note as the owner thereof for
all purposes hereof unless and until such payee complies with SECTION 12.3 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Administrative Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound by all
the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
12.2. PARTICIPATIONS.
12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other Eligible Participants
(a "PARTICIPANT") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any L/C Interest held by such
Lender, the Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a
Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, such Lender shall remain the
holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating
interests, and the Borrower and the
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Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under the Loan Documents. The participation agreement effecting the
sale of any participating interest shall contain a representation by
the Participant to the effect that none of the consideration used to
make the purchase of the participating interest in the Commitment,
Loans and L/C Interests under such participation agreement are "plan
assets" as defined under ERISA and that the rights and interests of the
Participant in and under the Loan Documents will not be "plan assets"
under ERISA.
12.2.2. VOTING RIGHTS. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan,
L/C Interest or Commitment in which such Participant has an interest
which would require the consent of such Participant under SECTION 8.2
if such Participant were a Lender.
12.2.3. BENEFIT OF SETOFF. The Borrower agrees that to the
extent permitted by law each Participant shall be deemed to have the
right of setoff provided in SECTION 11.1 in respect of its
participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing
directly to it as a Lender under the Loan Documents, provided that each
Lender shall retain the right of setoff provided in SECTION 11.1 with
respect to the amount of participating interests sold to each
Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in SECTION
11.1, agrees to share with each Lender, any amount received pursuant to
the exercise of its right of setoff, such amounts to be shared in
accordance with SECTION 11.2 as if each Participant were a Lender.
12.3. ASSIGNMENTS.
12.3.1. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more commercial banks ("Purchasers") all or any
part of its Commitment and outstanding Loans and L/C Interests,
together with its rights and obligations under the Loan Documents with
respect thereto; provided, however, that (a) the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of such assignment) may be in the
amount of such Lender's entire Commitment but otherwise shall not be
less than $15,000,000 or an integral multiple of $1,000,000 in excess
of that amount. Such assignment shall be substantially in the form of
Exhibit D hereto or in such other form as may be agreed to by the
parties thereto. The consent of the Borrower and the Administrative
Agent shall be required prior to an assignment becoming effective with
respect to a Purchaser which is not a Lender (neither of which consents
may be unreasonably withheld or delayed); provided, however, that if a
Default has occurred and is continuing, the consent of the Borrower
shall not be required.
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12.3.2. EFFECT; EFFECTIVE DATE. Upon (a) delivery to the
Administrative Agent of a notice of assignment, substantially in the
form attached to EXHIBIT D hereto (a "NOTICE OF ASSIGNMENT"), together
with any consents required by SECTION 12.3.1, and (b) payment of a
$3,500 fee to the Administrative Agent for processing such assignment,
such assignment shall become effective on the effective date specified
in such Notice of Assignment. The Notice of Assignment shall contain a
representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On and
after the effective date of such assignment, such Purchaser shall for
all purposes be a Lender party to this Agreement and any other Loan
Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as
if it were an original party hereto and thereto, and no further consent
or action by the Borrower, the Lenders or the Administrative Agent
shall be required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this SECTION 12.3.2, the transferor Lender, the
Administrative Agent, and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued
to such Purchaser, in each case in principal amounts reflecting its
Commitment, as adjusted pursuant to such assignment.
12.4. DISSEMINATION OF INFORMATION. The Borrower authorizes
each Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"TRANSFEREE") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries; provided that each Transferee and prospective Transferee agrees to
be bound by Section 9.14 of this Agreement.
12.5. TAX TREATMENT. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of SECTION 2.18.
ARTICLE XIII
NOTICES
13.1. GIVING NOTICE. Except as otherwise permitted by SECTION
2.14 with respect to telephonic notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly
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addressed with postage prepaid, shall be deemed given when received; any notice,
if transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes).
13.2. CHANGE OF ADDRESS. The Borrower, the Administrative
Agent and any Lender may each change the address for service of notice upon it
by a notice in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Subject to Section 4.1, this Agreement shall be effective when it has been
executed by the Borrower, the Administrative Agent and the Lenders and each
party has notified the Administrative Agent by telex or telephone that it has
taken such action.
[Remainder of this Page Intentionally Blank]
-69-
<PAGE> 86
IN WITNESS WHEREOF, the Borrower, the Lenders and the
Administrative Agent have executed this Agreement as of the date first above
written.
THE TJX COMPANIES, INC.
By: /s/ Steven Wishner
-------------------------------------------
Name: STEVEN WISHNER
Title: Vice President, Finance
Treasurer
Address:
770 Cochituate Road
Framingham, Massachusetts 01701
Attn: Don Campbell, Chief Financial Officer
Facsimile No. (508) 390-2199
<PAGE> 87
COMMITMENT:
$60,000,000.00 THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender, as Administrative Agent, as Swing
Line Lender and as an Issuing Lender
By: /s/ John D. Runger
-----------------------------------------
Name: John D. Runger
Title:
Address:
One First National Plaza
Chicago, Illinois 60670
Attention: John D. Runger
Facsimile No.: (312)
<PAGE> 88
COMMITMENT:
$55,000,000.00 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender, as Syndication Agent and as an
Issuing Lender
By: /s/ Jody Pritchard
----------------------------------------
Name: Jody Pritchard
Title: Assistant Vice President
Address:
231 South LaSalle Street
9th Floor
Chicago, Illinois 60697
Attention: Jody A. Pritchard
Facsimile: 312/987-7384
<PAGE> 89
COMMITMENT:
$55,000,000.00 THE BANK OF NEW YORK,
as a Lender, as Documentation Agent and as
an Issuing Lender
By: /s/ Howard Bascom, Jr.
-----------------------------------------
Name: Howard Bascom, Jr.
Title:
Address:
One Wall Street
8th Floor
New York, New York 10286
Attention: Howard Bascom, Jr.
Facsimile: 212/635-1483
<PAGE> 90
COMMITMENT:
$55,000,000.00 BANKBOSTON, N.A.,
as a Lender, as Managing Agent and as an
Issuing Lender
By: /s/ Linda H. Thomas
----------------------------------------
Name: LINDA H. THOMAS
Title: MANAGING DIRECTOR
Address:
100 Federal Street
Mail Stop 01-09-05
Boston, Massachusetts 02110
Attention: Linda Thomas
Facsimile: 617/434-0816
<PAGE> 91
COMMITMENT:
$34,000,000.00 CIBC, INC.,
as a Lender
By: /s/ CHRISTOPHER P. KLECZKOWSKI
----------------------------------------
Name: Christopher P. Kleczkowski
Title:
Address (Credit Issues):
425 Lexington Avenue
New York, NY 10017
Attention: Chris Kleczkowski
Facsimile: 212/856-3991
Address (Operations Issues):
2727 Paces Ferry Road, Suite 1200
2 Paces West
Atlanta, Georgia 30339
Attention: Vickie Summey
Facsimile: 770/319-4950
<PAGE> 92
COMMITMENT:
$34,000,000.00 DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH,
as a Lender
By: /s/ Susan M. O'Connor
-----------------------------------------
Name: Susan M. O'Connor
Title: Director
By: /s/ Joel D. Makowsky
-----------------------------------------
Name: Joel D. Makowsky
Title: Assistant Vice President
Address:
31 West 52nd Street
New York, New York 10019
Attention: Susan O' Connor
Facsimile: 212/469-7936
<PAGE> 93
COMMITMENT:
$34,000,000.00 MELLON BANK, N.A.,
as a Lender
By: /s/ Manuel Burgueno
-----------------------------------------
Name: Manuel Burgueno
Title:
Address:
One Mellon Bank Center
Room 4535
Pittsburgh, Pennsylvania 15258-0001
Attention: Manuel Burgueno
Facsimile: 412/236-1914
<PAGE> 94
COMMITMENT:
$34,000,000.00 FLEET NATIONAL BANK,
as a Lender
By: /s/ Richard Seufert
-----------------------------------------
Name: Richard Seufert
Title: Vice President
Address:
One Federal Street
Mail Code MA-0F-0320
Boston, Massachusetts 02110-2010
Attention: Richard Seufert
Facsimile: 617/346-0689
<PAGE> 95
COMMITMENT:
$34,000,000.00 PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Mark Williams
-----------------------------------------
Name: Mark Williams
Title:
Address:
345 Park Avenue
10th Floor
New York, New York 10154-1099
Attention: Mark Williams
Facsimile: 212/557-5461
<PAGE> 96
COMMITMENT:
$15,000,000.00 ABN AMRO BANK N.V.,
as a Lender
By: /s/ Carol A. Levine
-----------------------------------------
Name: Carol A. Levine
Title: Senior Vice President
By: /s/ James E. Davis
-----------------------------------------
Name: James E. Davis
Title: Group Vice President
Address:
One Post Office Square
39th Floor
Boston, Massachusetts 02109
Attention: 617/988-7910
<PAGE> 97
COMMITMENT:
$15,000,000.00 BARNETT BANK, N.A.,
as a Lender
By: /s/ Scott Hesketh
-----------------------------------------
Name: Scott Hesketh
Title:
Address:
50 North Laura Street
P.O. Box 4078
Jacksonville, Florida 32202
Attention: Scott Hesketh
Facsimile: 904/791-7063
<PAGE> 98
COMMITMENT:
$15,000,000.00 FIRST AMERICAN NATIONAL BANK,
as a Lender
By: /s/ Andrew S. Zimberg
-----------------------------------------
Name: Andrew S. Zimberg
Title: Vice President
Address:
4th and Union Streets
3rd Floor
Nashville, Tennessee 37237-0310
Attention: Andy Zimberg
Facsimile: 615/748-6072
<PAGE> 99
COMMITMENT:
$15,000,000.00 STANDARD CHARTERED BANK,
as a Lender
By: /s/ Kristina M. David
-----------------------------------------
Name: Kristina M. David
Title: Vice President
Address:
7 World Trade Center
27th Floor
New York, New York 10048
Attention: Leonardo Tee
Facsimile: 212/667-0225
<PAGE> 100
COMMITMENT:
$15,000,000.00 STATE STREET BANK AND TRUST COMPANY,
as a Lender
By: /s/ F. Andrew Beise
-----------------------------------------
Name: F. Andrew Beise
Title: Vice President
Address:
225 Franklin Street
Boston, Massachusetts 02110
Attention: F. Andrew Beise
Facsimile: 617/664-6527
<PAGE> 101
COMMITMENT:
$15,000,000.00 THE TOYO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH,
as a Lender
By: /s/ Takishi Mikumo
-----------------------------------------
Name: Takishi Mikumo
Title:
Address:
666 Fifth Avenue
33rd Floor
New York, New York 10103-3395
Attention: Nicholas A. Fiore
Facsimile: 212/307-3498
<PAGE> 102
COMMITMENT:
$15,000,000.00 UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Dana C. Fenwick
-----------------------------------------
Name: Dana C. Fenwick
Title: Vice President
Address:
350 California Street
6th Floor
San Francisco, California 94104
Attention: Terry Rocha
Facsimile: 415/705-5093
<PAGE> 1
EXHIBIT 10.2
AMENDMENT
Amendment dated as of April 8, 1998 to the Employment Agreement dated as
of January 26, 1997 between Bernard Cammarata ("Executive") and the TJX
Companies, Inc. ("Employer") (the "Agreement").
For valuable consideration, receipt of which is acknowledged by the
parties hereto, the parties agree that the final two sentences of Section
3(c)(iii) of the Agreement are hereby amended in their entirety to read as
follows:
"Upon any other termination of employment the Options shall remain
exercisable (to the extent they were exercisable immediately prior to
such termination, taking into account any applicable accelerated vesting
as described above) for a period equal to the lesser of (i) three months
(six months, in the case of any Option granted after April 8, 1998), or
(ii) the remainder of their original term, and then shall terminate.
However, if Executive is terminated for Cause all the Options shall
immediately terminate."
Section 3(e) of the Agreement pertaining to MIP is amended as follows:
"To the extent provided in Section 162(m) of the Code, the goals, scope
and conditions of any award shall be established annually by the
Committee. Subject to the foregoing, Executive shall be entitled to earn
up to 75% of his Base Salary if the target established by the Committee
is met and up to 150% of his Base Salary is such target is exceeded,
with the payment potential ranging from 0% to 150% of Executive's Base
Salary as established by the terms of the award."
In witness whereof the parties have duly executed this amendment as of
the date first above written.
/s/ Bernard Cammarata
------------------------------------
Bernard Cammarata
THE TJX COMPANIES, INC.
By: /s/ John Nelson
--------------------------------
Title:
<PAGE> 2
January 26, 1998
Mr. Bernard Cammarata
President and Chief Executive Officer
The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Re: Employment Agreement
--------------------
Dear Mr. Cammarata:
Reference is made to the Employment Agreement dated as of January 26,
1997 between you and The TJX Companies, Inc. (the "Employment Agreement"). This
letter sets forth certain clarifications and amendments to the terms of the
Employment Agreement.
1. Section 3(a) of the Employment Agreement (relating to the deferral of
certain portions of the Base Salary payable to you) is hereby amended, effective
as of the Effective Date of the Employment Agreement, by adding at the end
thereof the following sentence: "Notwithstanding the foregoing, the parties
acknowledge that for the fiscal year of the Company ending in 1998, $53,085.00
of that portion of Executive's Base Salary which is in excess of the Section
162(m) Current Salary Maximum has been deferred under the GDCP and only the
balance of Executive's Base Salary in excess of the Section 162(m) Current
Salary Maximum, commencing with amounts deferred as of May 23, 1997, shall be
credited to the Account described at Section 9 below and paid out in accordance
with Section 9(f) below."
2. Section 9(a)(iii) of the Employment Agreement (relating to the
crediting of your Deferred Stock award) is hereby amended, effective as of the
Effective Date of the Employment Agreement, by substituting the words "date of
execution of this Agreement" for the words "the date of this Agreement."
3. Section 9(e) of the Employment Agreement (relating to the
establishment of a so-called "rabbi trust") is hereby amended, effective as of
the Effective Date of the Employment Agreement, by deleting the third sentence
thereof (begins: "In the case of the credits...") and replacing it with the
following sentence: "In the case of the credits described in (a)(ii) and
(a)(iii) above, the Company shall contribute cash in an amount not less than par
value per share and shall instruct the trust to apply such cash to the purchase
from the Company of shares of Stock equal in number to the shares to be credited
under those clauses; and in the case of the credits described in (a)(i), (a)(iv)
and (a)(v) above, the Company shall contribute cash in an amount equal to the
amount to be credited (including any notional interest, if applicable, through
the date of the contribution)."
<PAGE> 3
-2-
4. The definition of "Section 162(m) Current Salary Maximum" in Exhibit
C of the Employment Agreement is hereby amended, effective as of the Effective
Date of the Employment Agreement, by adding the words "and deferrals by
Executive under any cafeteria plan as described at Section 125 of the Code."
If you agree with the foregoing, please so indicate by signing the
enclosed copy of this letter in the space indicated below and returning it to
Mark Jacobson, Vice President, Human Services Director.
THE TJX COMPANIES, INC.
By: /s/ John Nelson
-------------------------
Agreed:
/s/ Bernard Cammarata
- ---------------------
Bernard Cammarata
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 31, 1998
BETWEEN RICHARD LESSER AND THE TJX COMPANIES, INC.
<PAGE> 2
INDEX
PAGE
----
1. EFFECTIVE DATE; TERM OF AGREEMENT 1
2. SCOPE OF EMPLOYMENT 1
3. COMPENSATION AND BENEFITS 2
4. TERMINATION OF EMPLOYMENT; IN GENERAL 3
5. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT 3
6. VOLUNTARY TERMINATION; TERMINATION FOR CAUSE; VIOLATION OF
CERTAIN AGREEMENTS 6
7. BENEFITS UPON CHANGE OF CONTROL 6
8. AGREEMENT NOT TO SOLICIT OR COMPETE 6
9. ASSIGNMENT 7
10. NOTICES 7
11. WITHHOLDING 8
12. GOVERNING LAW 8
13. ARBITRATION 8
14. ENTIRE AGREEMENT 8
EXHIBITS
EXHIBIT A - Certain Definitions A-1
EXHIBIT B - Definition of "Change of Control" B-1
EXHIBIT C - Change of Control Benefits C-1
<PAGE> 3
EMPLOYMENT AGREEMENT
This Amended and Restated Agreement dated as of January 31, 1998 amends
and restates the Agreement dated as of February 1, 1995, as amended (the "Prior
Agreement"), between RICHARD LESSER ("Executive") and The TJX Companies, Inc., a
Delaware corporation, whose principal office is in Framingham, Massachusetts,
01701 ("the Company").
RECITALS
Executive has for a number of years been employed by the Company or a
subsidiary of the Company and has served in a number of capacities with the
Company and such subsidiary. The Company and Executive deem it desirable and
appropriate to enter into this Agreement.
AGREEMENT
The parties hereto, in consideration of the mutual agreements
hereinafter contained, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This amended and restated
agreement ("Agreement") shall become effective as of January 31, 1998 (the
"Effective Date"). The employment shall continue on the terms provided herein
until February 1, 2001 and thereafter until terminated by either Executive or
the Company, subject to earlier termination as provided herein (such period of
employment hereinafter called the "Employment Period").
2. SCOPE OF EMPLOYMENT.
(a) NATURE OF SERVICES. Executive shall diligently perform the
duties and assume the responsibilities of Executive Vice President and Chief
Operating officer of the Company and such additional Executive duties and
responsibilities as shall from time to time be assigned to him by the President
or the Board.
(b) EXTENT OF SERVICES. Except for illnesses and vacation periods,
Executive shall continue to devote his present level of activity to the
performance of his duties and responsibilities under this Agreement. However,
Executive may (a) make any passive investments where he is not obligated or
required to, and shall not in fact, devote any managerial efforts or (b) serve
as a director on the boards of other companies or participate in charitable or
community activities or in trade or professional organizations, except only that
the President or the Board shall have the right to limit such services as a
director or such participation whenever the President or the Board shall believe
that the time spent on such activities infringes upon the time required by
Executive for the performance of his duties under this Agreement or is otherwise
incompatible with those duties.
<PAGE> 4
3. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Executive shall be paid a base salary at a rate
not less than $900,000 per year, subject to annual review. Base Salary shall be
payable in such manner and at such times as the Company shall pay base salary to
other Executive employees.
(b) LRPIP. During the Employment Period, Executive will be
entitled to participate in annual grants awarded through Fiscal 2000 under the
Company's Long Range Performance Incentive Plan (LRPIP) at a level commensurate
with his position in the Company. The terms of such awards shall be established
by the Committee.
(c) MIP. During the Employment Period, Executive shall be eligible
to receive annual awards under the Company's Management Incentive Plan (MIP). To
the extent provided in Section 162(m) of the Code, the goals, scope and
conditions of any award shall be established annually by the Committee. Subject
to the foregoing, Executive shall be entitled to earn up to 60% of his Base
Salary if the target established by the Committee is met and up to 120% of his
Base Salary if such target is exceeded, with the payment potential ranging from
0% to 120% of Executive's Base Salary as established by the terms of the award.
(d) STOCK OPTIONS; RESTRICTED STOCK. The following terms govern
stock options granted to Executive under the 1986 Plan from February 1, 1995
through January 30,1998, except for Grant 86-52 referred to below (the
"Options"). If on or prior to February 1, 2001 Executive dies or becomes
Disabled or a Change of Control occurs while Executive is employed by the
Company, then all Executive's Options then outstanding shall be immediately
vested (exercisable). If Executive dies or becomes Disabled while employed by
the Company, all his Options shall remain exercisable for a period of three
years, but in no event beyond their original term. Upon the expiration of such
three-year term, the Options shall terminate. In the event Executive retires
under the terms of the 1986 Plan, all his Options shall remain exercisable (to
the extent they were exercisable immediately prior to such retirement) for a
period of three years or, if less, the remainder of the original option term,
and then shall terminate. Upon any other termination of employment, the Options
shall remain exercisable (to the extent they were exercisable immediately prior
to such termination, taking into account any applicable accelerated vesting as
described above) for a period equal to the lesser of (i) three months, or (ii)
the remainder of their original term, and then shall terminate. However, if
Executive is terminated for Cause all options shall immediately terminate.
Notwithstanding the foregoing provisions of this paragraph (d), the
terms of Executive option grant (post split) 86-52 granted June 3, 1997 shall
govern the terms of such grant. Executive has also received a grant (post split)
of 50,000 shares of restricted stock of the Company which is governed by the
terms of a June 3, 1997 grant.
<PAGE> 5
(e) SERP. Executive is fully vested in his accrued benefit under
the Company's Supplemental Executive Retirement Plan ("SERP"). As of July 7,
1994, Executive had 20 years of service credited under SERP. Upon attaining age
65, Executive shall be deemed to have retired under SERP and shall thereupon be
entitled to payment of SERP benefits in a form specified in his SERP payment
election. Executive agrees that so much of his SERP payment in any fiscal year
of the Company as, together with Base Salary, exceeds the Section 162(m) Current
Salary Maximum shall be credited to his account in the Company's General
Deferred Compensation Plan and paid out at the earliest time which will avoid
such excess. Executive shall not receive any service or other SERP credit for
his continued employment after age 65.
(f) QUALIFIED PLANS. Executive shall be entitled during the
Employment Period to participate in the Company's tax qualified retirement and
profit-sharing plans in accordance with the terms of those plans,
(g) POLICIES AND FRINGE BENEFITS. Executive shall be subject to
Company policies applicable to its Executives generally and Executive shall be
entitled to receive all such fringe benefits as the Company shall from time to
time make available to other Executives generally (subject to the terms of any
applicable fringe benefit plan).
4. TERMINATION OF EMPLOYMENT; IN GENERAL.
(a) The Company shall have the right to end Executive's employment
at any time and for any reason, with or without Cause.
(b) The Employment Period shall terminate when Executive becomes
Disabled. In addition, if by reason of Incapacity Executive is unable to perform
his duties for at least six months in any 12-month period, upon written notice
by the Company to Executive, the Employment Period will be terminated for
Incapacity.
(c) Whenever the Employment Period shall terminate, Executive
shall resign all offices or other positions he shall hold with the Company and
any affiliated corporations.
5. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT.
(a) TERMINATION FOR DEATH, DISABILITY OR INCAPACITY OR BY THE
COMPANY OTHER THAN FOR CAUSE ON OR PRIOR TO FEBRUARY 1, 2001. If the Employment
Period shall have terminated on or prior to February 1, 2001 by reason of death,
Disability or Incapacity of Executive or by termination by the Company for any
reason other than Cause, all compensation and benefits for Executive shall be as
follows:
(i) (A) In the case of termination by reason of death,
Disability or Incapacity, for a period of 12 months after such
termination, the Company will pay to Executive or his legal
representative continued Base Salary at the rate in effect
<PAGE> 6
at termination of employment, without reduction for compensation earned
from other employment or self-employment.
(B) In the case of termination by the Company for any
reason other than Cause, for the longer of 12 months after such
termination or until February 1, 2001, the Company will pay to
Executive continued Base Salary at the rate in effect at termination of
employment. Base Salary shall be paid for the first twelve months of
the period without reduction for compensation earned from other
employment or self-employment, and shall thereafter be reduced by such
compensation received from other employment or self-employment.
If termination occurs by reason of Incapacity or Disability, Executive
shall also be entitled to such compensation, if any, as is payable
pursuant to the Company's group and any individual long-term disability
plan or any successor Company disability plan. Any payments made to
Executive under any long-term disability plan of the Company with
respect to the salary continuation period in clause (i) above shall be
offset against such salary continuation payments and to the extent not
so offset, Executive shall promptly make reimbursement payments to the
Company of such disability payments.
(ii) Until the expiration of the applicable Base Salary
continuation period under clause (i) and subject to such minimum
coverage continuation requirements as may be required by law, the
Company will provide (except to the extent that Executive shall obtain
no less favorable coverage from another employer or from
self-employment) such medical and hospital insurance and long term
disability insurance, for Executive and his family, comparable to the
insurance provided for Company executives generally, as the Company
shall determine, and upon the same terms and conditions as the same
shall be provided for other Company executives generally; provided,
however, that in no event shall such benefits or the terms and
conditions thereof be less favorable to Executive than those afforded
to him as of the date of termination.
(iii) The Company will pay to Executive, without offset for
compensation earned from other employment or self-employment, the
following amounts under the Company's MIP applicable to Executive:
First, if not already paid, any amounts to which Executive is
entitled under MIP for the fiscal year of the Company ended
immediately prior to Executive's termination of employment.
These amounts will be paid at the same time as other awards
for such prior year are paid.
Second, an amount in the nature of severance equal to
Executive's MIP Target Award for the year of termination,
prorated for Executive's period of service during such year
prior to termination. This amount will be paid at the same
time as other MIP awards for the year of termination are paid.
<PAGE> 7
Third, in addition, but only in case of termination by reason
of death, Disability or Incapacity, an amount equal to
Executive's MIP Target Award for the year of termination,
without proration. This amount will be paid at the same time
as the amount payable under the preceding paragraph.
In addition, the Company will also pay to Executive or his
legal representative such amounts as Executive shall have
deferred (but not received) under the Company's General
Deferred Compensation Plan in accordance with the provisions
of that Plan.
(iv) Executive shall be entitled to the benefits described in
Sections 3(d) (Stock Options; Restricted Stock), 3(e) (SERP), and 3(f)
(Qualified Plans), in each case to the extent, if any, provided in the
provisions of the relevant plan or award agreement (including the
pertinent provisions of this Agreement). In addition, with respect to
each three-year performance cycle not completed prior to termination,
the Company will pay to Executive an amount in the nature of severance
equal to 1/36 of his LRPIP Target Award for each month in such cycle
prior to termination. Such amounts will be paid at the same time as
other LRPIP awards payable for the cycle first ending after termination
are paid. Executive will also be entitled to payment (at the same time
as other LRPIP awards for the applicable cycle are paid) of any unpaid
amounts owing with respect to cycles completed prior to termination.
Executive will also be entitled to such rights, if any, under any stock
option and other grants not specifically referred to in Section 3 of
this Agreement as shall be provided by the terms of such options and
other grants.
(b) RETIREMENT. Upon the termination of the Employment Period for
any reason on or after February 1, 2001, Executive shall be deemed to have
retired from employment and shall be entitled to the benefits provided under the
terms of his then outstanding options, restricted stock and any other applicable
Company awards and plans, including the benefits described in Sections 3(d)
(Stock Options; Restricted Stock, 3(e) (SERP) and 3(f) (Qualified Plans, in each
case to the extent, if any, provided in the provisions of the relevant plan or
award agreement, including this Agreement.
In addition, with respect to each three-year Performance Cycle not
completed prior to termination, the Company will pay to Executive an amount in
the nature of severance equal to 1/36 of his LRPIP Target Award for each month
in such cycle prior to termination. Such amounts will be paid at the same time
as other LRPIP awards payable for the cycle first ending after termination are
paid. Executive will also be entitled to payment (at the same time as other
LRPIP awards for the applicable cycle are paid) of any unpaid amounts owing with
respect to cycles completed prior to termination. In addition, the Company will
also pay to Executive or his legal representative such amounts as Executive
shall have deferred (but not received) under the Company's General Deferred
Compensation Plan in accordance with the provisions of that Plan.
<PAGE> 8
6. VOLUNTARY TERMINATION; TERMINATION FOR CAUSE; VIOLATION OF
CERTAIN AGREEMENTS.
If Executive should end his employment voluntarily or if the Company
should end Executive's employment for Cause, or, notwithstanding (a) or (b) of
Section 5 above, if Executive should violate the protected persons or
noncompetition provisions of Section 8, all compensation and benefits otherwise
payable pursuant to this Agreement shall cease, other than (x) such amounts as
Executive shall have deferred (but not received) under the Company's General
Deferred Compensation Plan in accordance with the provisions of that Plan and
(y) any benefits to which Executive may be entitled under Sections 3(d) (Stock
Options; Restricted Stock), 3(e) (SERP) and 3(f) (Qualified Plans). Executive
will also be entitled to such rights, if any, under stock options and other
grants not specifically referred to in Section 3 of this Agreement as shall be
provided by the terms of such other options and other grants. In addition, the
Company will pay to Executive such amounts as Executive shall have deferred (but
not received) under the Company's General Deferred Compensation Plan in
accordance with the provisions of that Plan. The Company does not waive any
rights it may have for damages or for injunctive relief.
7. BENEFITS UPON CHANGE OF CONTROL.
Notwithstanding any other provisions of this Agreement, in the event of
a Change of Control, the determination and payment of any benefits payable
thereafter with respect to Executive shall be governed exclusively by the
provisions of Exhibit C.
8. AGREEMENT NOT TO SOLICIT OR COMPETE.
(a) Upon the termination of employment at any time, then for a
period of two years after the termination of the Employment Period, Executive
shall not under any circumstances employ, solicit the employment of, or accept
unsolicited the services of, any "protected person" or recommend the employment
of any "protected person" to any other business organization. A "protected
person" shall be a person known by Executive to be employed by the Company or
its Subsidiaries or to have been employed by Company or its Subsidiaries within
six months prior to the commencement of conversations with such person with
respect to employment.
As to (i) each "protected person" to whom the foregoing applies, (ii)
each subcategory of "protected person" as defined above, (iii) each limitation
on (A) employment, (B) solicitation and (C) unsolicited acceptance of services,
of each "protected person" and (iv) each month of the period during which the
provisions of this subsection (a) apply to each of the foregoing, the provisions
set forth in this subsection (a) are deemed to be separate and independent
agreements and in the event of unenforceability of any such agreement, such
unenforceable agreement shall be deemed automatically deleted from the
provisions hereof and such deletion shall not affect the enforceability of any
other provision of this subsection (a) or any other term of this Agreement.
<PAGE> 9
(b) During the course of his employment, Executive will have
learned many trade secrets of the Company and will have access to confidential
information and business plans for the Company. Therefore, if Executive should
end his employment voluntarily at any time, including by reason of retirement or
disability, or if the Company should end Executive's employment at any time for
Cause, then for a period of two years thereafter, Executive will not engage,
either as a principal, employee, partner, consultant or investor (other than a
less-than-l% equity interest in an entity), in a business which is a competitor
of the Company. A business shall be deemed a competitor of the Company if it
shall then be so regarded by retailers generally or if it shall operate a
promotional off-price family apparel store (such as T.J. Maxx or Marshalls)
within ten miles of any "then existing T.J. Maxx or Marshalls store". The term
"then existing" in the previous sentence shall refer to any such store that is,
at the time of termination of the Employment Period, operated by the Company or
any wholly-owned subsidiary of the Company or under lease for operation as
aforesaid. Nothing herein shall restrict the right of Executive to engage in a
business that operates a conventional or full mark-up department store.
Executive agrees that if, at any time, pursuant to action of any court,
administrative or governmental body or other arbitral tribunal, the operation of
any part of this paragraph shall be determined to be unlawful or otherwise
unenforceable, then the coverage of this paragraph shall be deemed to be
restricted as to duration, geographical scope or otherwise, as the case may be,
to the extent, and only to the extent, necessary to make this paragraph lawful
and enforceable in the particular jurisdiction in which such determination is
made.
(c) If the Employment Period terminates, Executive agrees to (i)
notify the Company immediately upon his securing employment or becoming
self-employed during any period when Executive's compensation from the Company
shall be subject to reduction or his benefits provided by the Company shall be
subject to termination as provided in Section 5 and (ii) furnish to the Company
written evidence of his compensation earned from any such employment or
self-employment as the Company shall from time to time request. In addition,
upon termination of the Employment Period for any reason other than the death of
Executive, Executive shall immediately return all written trade secrets,
confidential information and business plans of the Company and shall execute a
certificate certifying that he has returned all such items in his possession or
under his control.
9. ASSIGNMENT. The rights and obligations of the Company shall
enure to the benefit of and shall be binding upon the successors and assigns of
the Company. The rights and obligations of Executive are not assignable except
only that payments payable to him after his death shall be made by devise or
descent.
10. NOTICES. All notices and other communications required
hereunder shall be in writing and shall be given by mailing the same by
certified or registered mail, return receipt requested, postage prepaid. If sent
to the Company the same shall be mailed to the Company at 770 Cochituate Road,
Framingham, Massachusetts, 01701, Attention: General Counsel, or such other
address as the Company may hereafter designate by notice
<PAGE> 10
to Executive; and if sent to Executive, the same shall be mailed to Executive at
358 Cartwright Road, Wellesley, MA 02181 or at such other address as Executive
may hereafter designate by notice to the Company.
11. WITHHOLDING. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to Executive shall be
subject to the withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation.
12. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by the laws of the Commonwealth of
Massachusetts.
13. ARBITRATION. In the event that there is any claim or dispute
arising out of or relating to this Agreement, or the breach thereof, and the
parties hereto shall not have resolved such claim or dispute within 60 days
after written notice from one party to the other setting forth the nature of
such claim or dispute, then such claim or dispute shall be settled exclusively
by binding arbitration in Boston, Massachusetts in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by an
arbitrator mutually agreed upon by the parties hereto or, in the absence of such
agreement, by an arbitrator selected according to such Rules, and judgment upon
the award rendered by the arbitrator shall be entered in any Court having
jurisdiction thereof upon the application of either party.
14. ENTIRE AGREEMENT. This Agreement, including Exhibits,
represents the entire agreement between the parties relating to the terms of
Executive's employment by the Company and supersedes all prior written or oral
agreements between them.
/s/ Richard Lesser
-----------------------------------
Richard Lesser
THE TJX COMPANIES, INC.
By: /s/ Bernard Cammarata
-------------------------------
Bernard Cammarata
President and
Chief Executive Officer
<PAGE> 11
EXHIBIT A
CERTAIN DEFINITIONS
In this Agreement, the following terms shall have the following meanings:
(a) "Base Salary" means, for any period, the amount described in
Section 3(a).
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Executive Compensation Committee
of the Board.
(d) "Cause" means dishonesty, conviction of a felony, gross
neglect of duties (other than as a result of Disability or death), or conflict
of interest which conflict shall continue for 30 days after the Company gives
written notice to Executive requesting the cessation of such conflict.
In respect of any termination during a Standstill Period, Executive
shall not be deemed to have been terminated for Cause until the later to occur
of (i) the 30th day after notice of termination is given and (ii) the delivery
to Executive of a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the Company's directors at a meeting called and held
for that purpose (after reasonable notice to Executive), and at which Executive
together with his counsel was given an opportunity to be heard, finding that
Executive was guilty of conduct described in the definition of "Cause" above,
and specifying the particulars thereof in detail; PROVIDED, however, that the
Company may suspend Executive and withhold payment of his Base Salary from the
date that notice of termination is given until the earliest to occur of (A)
termination of Executive for Cause effected in accordance with the foregoing
procedures (in which case Executive shall not be entitled to his Base Salary for
such period), (B) a determination by a majority of the Company's directors that
Executive was not guilty of the conduct described in the definition of "Cause"
above (in which case Executive shall be reinstated and paid any of his
previously unpaid Base Salary for such period), or (C) 90 days after notice of
termination is given (in which case Executive shall then be reinstated and paid
any of his previously unpaid Base Salary for such period). If Base Salary is
withheld and then paid pursuant to clauses (B) or (C) of the preceding sentence,
the amount thereof shall be accompanied by simple interest calculated on a daily
basis, at a rate per annum equal to the prime or base lending rate, as in effect
at the time, of the Company's principal commercial bank.
(e) "Change of Control" has the meaning given it in Exhibit B.
<PAGE> 12
(f) "Change of Control Termination" means the termination of
Executive's employment during a Standstill Period by (1) the Company other than
for Cause, or (2) by Executive for good reason, or (3) by reason of death,
Incapacity or Disability.
For purposes of this definition, termination for "good reason" shall
mean the voluntary termination by Executive of his employment (1) within 120
days after the occurrence without Executive's express written consent of any one
of the events described in clauses (I), (II), (III), (IV), (V) or (VI) below,
provided that Executive gives notice to the Company at least 30 days in advance
requesting that the situation described in those clauses be remedied, and the
situation remains unremedied upon expiration of such 30-day period; (2) within
120 days after the occurrence without Executive's express written consent of the
event described in clauses (VII) or (VIII) below, provided that Executive gives
notice to the Company at least 30 days in advance; or (3) upon the occurrence of
the events described in clause (IX) below, provided that Executive gives notice
to the Company at least 30 days in advance:
(I) the assignment to him of any duties inconsistent with his
positions, duties, responsibilities, reporting requirements,
and status with the Company immediately prior to the Change of
Control, or a substantive change in Executive's titles or
offices as in effect immediately prior to a Change of Control,
or any removal of Executive from or any failure to re-elect
him to such positions, except in connection with the
termination of Executive's employment by the Company for Cause
or by Executive other than for good reason, or any other
action by the Company which results in a diminishment in such
position, authority, duties or responsibilities, other than an
insubstantial and inadvertent action which is remedied by the
Company promptly after receipt of notice thereof given by
Executive; or
(II) if Executive's Base Salary for any fiscal year is less than
100 percent of the Base Salary paid to Executive in the
completed fiscal year immediately preceding the Change of
Control; or if Executive's total cash compensation
opportunities, including salary and incentives, for any fiscal
year are less than 100 percent of the total cash compensation
opportunities made available to Executive in the completed
fiscal year immediately preceding the Change of Control,
unless any such reduction represents an overall reduction in
the Base Salary paid or cash compensation opportunities made
available, as the case may be, to executives in the same
organizational level (it being the Company's burden to
establish this fact); or
(III) the failure of the Company to continue in effect any benefits
or perquisites, or any pension, life insurance, medical
insurance or disability plan in which Executive was
participating immediately prior to the Change of Control
unless the Company provides Executive with a plan or plans
that provide substantially similar benefits, or the taking of
any action by the Company
<PAGE> 13
that would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans
or deprive Executive of any material fringe benefit enjoyed by
Executive immediately prior to the Change of Control, unless
the elimination or reduction of any such benefit, perquisite
or plan affects all other executives in the same
organizational level (it being the Company's burden to
establish this fact); or
(IV) any purported termination of Executive's employment by the
Company for Cause during a Standstill Period which is not
effected in compliance with paragraph (d) above; or
(V) any relocation of Executive of more than 40 miles from the
place where Executive was located at the time of the Change of
Control; or
(VI) any other breach by the Company of any provision of this
Agreement; or
(VII) the Company sells or otherwise disposes of, in one transaction
or a series of related transactions, assets or earning power
aggregating more than 30 percent of the assets (taken at asset
value as stated on the books of the Company determined in
accordance with generally accepted accounting principles
consistently applied) or earning power of the Company (on an
individual basis) or the Company and its Subsidiaries (on a
consolidated basis) to any other Person or Persons (as those
terms are defined in Exhibit B); or
(VIII) if Executive is employed by a Subsidiary of the Company, such
Subsidiary either ceases to be a Subsidiary of the Company or
sells or otherwise disposes of, in one transaction or a series
of related transactions, assets or earning power aggregating
more than 30 percent of the assets (taken at asset value as
stated on the books of the Subsidiary determined in accordance
with generally accepted accounting principles consistently
applied) or earning power of such Subsidiary (on an individual
basis) or such Subsidiary and its subsidiaries (on a
consolidated basis) to any other Person or Persons (as those
terms are defined in Exhibit B); or
(IX) the voluntary termination by Executive of his employment (i)
at any time within one year after the Change of Control or
(ii) at any time during the second year after the Change of
Control unless the Company offers Executive an employment
contract having a minimum two-year duration which provides
Executive with substantially the same title, responsibilities,
annual and long-range compensation, benefits and perquisites
that he had immediately prior to the Standstill Period.
Notwithstanding the foregoing, the Board may expressly waive
the application of this clause (IX) if it waives the
applicability of substantially similar provisions with respect
to all persons with whom the Company has a written severance
agreement (or
<PAGE> 14
may condition its application on any additional requirements
or employee agreements which the Board shall in its discretion
deem appropriate in the circumstances). The determination of
whether to waive or impose conditions on the application of
this clause (IX) shall be within the complete discretion of
the Board, but shall be made prior to the occurrence of a
Change of Control.
(g) "Date of Termination" means the date on which Executive's
employment is terminated.
(h) "Disability" has the meaning given it in the Company's
long-term disability plan. Executive's employment shall be deemed to be
terminated for Disability on the date on which Executive is entitled to receive
long-term disability compensation pursuant to such long-term disability plan.
(i) "Incapacity" means a disability (other than Disability within
the meaning of (h) above) or other impairment of health that renders Executive
unable to perform his duties to the satisfaction of the Committee.
(j) "Standstill Period" means the period commencing on the date of
a Change of Control and continuing until the close of business on the last
business day of the 24th calendar month following such Change of Control.
(k) "Stock" means the common stock, $1.00 par value, of the
Company.
(l) "Subsidiary" means any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined voting power of
all classes of stock.
<PAGE> 15
EXHIBIT B
"Change of Control" shall mean the occurrence of any one of the
following events:
(a) there occurs a change of control of the Company of a nature that
would be required to be reported in response to Item 1(a) of the Current Report
on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") or in any other filing under the Exchange Act;
PROVIDED, however, that no transaction shall be deemed to be a Change of Control
(i) if the person or each member of a group of persons acquiring control is
excluded from the definition of the term "Person" hereunder or (ii) unless the
Committee shall otherwise determine prior to such occurrence, if the Executive
or an Executive Related Party is the Person or a member of a group constituting
the Person acquiring control; or
(b) any Person other than the Company, any wholly-owned subsidiary of
the Company, or any employee benefit plan of the Company or such a subsidiary
becomes the owner of 20% or more of the Company's Common Stock and thereafter
individuals who were not directors of the Company prior to the date such Person
became a 20% owner are elected as directors pursuant to an arrangement or
understanding with, or upon the request of or nomination by, such Person and
constitute at least 1/4 of the Company's Board of Directors; PROVIDED, however,
that unless the Committee shall otherwise determine prior to the acquisition of
such 20% ownership, such acquisition of ownership shall not constitute a Change
of Control if Executive or an Executive Related Party is the Person or a member
of group constituting the Person acquiring such ownership; or
(c) there occurs any solicitation or series of solicitations of proxies
by or on behalf of any Person other than the Company's Board of Directors and
thereafter individuals who were not directors of the Company prior to the
commencement of such solicitation or series of solicitations are elected as
directors pursuant to an arrangement or understanding with, or upon the request
of or nomination by, such Person and constitute at least 1/4 of the Company's
Board of Directors; or
(d) the Company executes an agreement of acquisition, merger or
consolidation which contemplates that (i) after the effective date provided for
in such an agreement, all or substantially all of the business and/or assets of
the Company shall be owned, leased or otherwise controlled by another Person and
(ii) individuals who are directors of the Company when such agreement is
executed shall not constitute a majority of the board of directors of the
survivor or successor entity immediately after the effective date provided for
in such agreement; PROVIDED, HOWEVER, that unless otherwise determined by the
Committee, no transaction shall constitute a Change of Control if, immediately
after such transaction, Executive or any Executive Related Party shall own
equity securities of any surviving corporation ("Surviving Entity") having a
fair value as a percentage of the fair value of the equity securities of such
Surviving Entity greater than 125% of the fair value of the equity securities of
the Company owned by Executive and any Executive Related Party immediately prior
to such transaction, expressed as a percentage of the fair
<PAGE> 16
value of all equity securities of the Company immediately prior to such
transaction (for purposes of this paragraph ownership of equity securities shall
be determined in the same manner as ownership of Common Stock); and PROVIDED,
FURTHER, that for purposes of this paragraph (d), if such agreement requires as
a condition precedent approval by the Company's shareholders of the agreement or
transaction, a Change of Control shall not be deemed to have taken place unless
and until such approval is secured (but upon any such approval, a Change of
Control shall be deemed to have occurred on the date of execution of such
agreement).
In addition, for purposes of this Exhibit B the following terms have
the meanings set forth below:
"Common Stock" shall mean the then outstanding Common Stock of the
Company plus, for purposes of determining the stock ownership of any Person, the
number of unissued shares of Common Stock which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock shall
not include shares of Preferred Stock or convertible debt or options or warrants
to acquire shares of Common Stock (including any shares of Common Stock issued
or issuable upon the conversion or exercise thereof) to the extent that the
Board of Directors of the Company shall expressly so determine in any future
transaction or transactions.
A Person shall be deemed to be the "owner" of any Common Stock:
(i) of which such Person would be the "beneficial owner,"
as such term is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission (the "Commission") under the Exchange Act, as in
effect on March 1, 1989; or
(ii) of which such Person would be the "beneficial owner"
for purposes of Section 16 of the Exchange Act and the rules of the
Commission promulgated thereunder, as in effect on March 1, 1989; or
(iii) which such Person or any of its affiliates or
Associates (as such terms are defined in Rule 12b-2 promulgated by the
Commission under the Exchange Act, as in effect on March 1, 1989) has
the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise.
"Person" shall have the meaning used in Section 13(d) of the Exchange
Act, as in effect on March 1, 1989.
An "Executive Related Party" shall mean any affiliate or associate of
Executive other than the Company or a majority-owned subsidiary of the Company.
The terms
<PAGE> 17
"affiliate" and "associate" shall have the meanings ascribed thereto
in Rule 12b-2 under the Exchange Act (the term "registrant" in the definition of
"associate" meaning, in this case, the Company).
<PAGE> 18
EXHIBIT C
CHANGE OF CONTROL BENEFITS
1. BENEFITS UPON A CHANGE OF CONTROL TERMINATION.
(a) The Company shall pay the following to Executive in a lump sum
within 30 days following a Change of Control Termination:
(i) an amount equal to two times his Base Salary for one
year at the rate in effect immediately prior to the Date of Termination or the
Change of Control (or, if Executive's title was diminished within 180 days
before the commencement of the Standstill Period, the rate in effect immediately
prior to such change), whichever is highest, plus the accrued and unpaid portion
of his Base Salary through the Date of Termination. Any payments made to
Executive under any long term disability plan of the Company with respect to the
two years following termination of employment shall be offset against such two
times Base Salary payment. Executive shall promptly make reimbursement payments
to the Company to the extent any such disability payments are received after the
Base Salary payment.
(ii) in lieu of any other benefits under SERP, an amount
equal to the present value of the payments that Executive would have been
entitled to receive under SERP as a Category B participant, applying the
following rules and assumptions:
(A) a credit equal to the number of Years of Service
(as that term is defined in SERP) that Executive has been employed by
the Company or a predecessor at the Date of Termination shall be added
to his Years of Service in determining Executive's total Years of
Service; PROVIDED, HOWEVER, that the total Years of Service determined
hereunder shall not exceed the lesser of (x) 20 or (y) the Years of
Service that Executive would have had if he had retired at the age of
65;
(B) Executive's Average Compensation (as that term is
defined in SERP) shall be determined as of the Date of Termination;
(C) Executive's Primary Social Security Benefit (as that
term is defined in SERP) shall mean the annual primary insurance amount
to which Executive is entitled or would, upon application therefor,
become entitled at age 65 under the provisions of the Federal Social
Security Act as in effect on the Date of Termination assuming that
Executive received annual income at the rate of his Base Salary from
the Date of Termination until his 65th birth date which would be
treated as wages for purposes of the Social Security Act;
<PAGE> 19
(D) the monthly benefit under SERP determined using the
foregoing criteria shall be multiplied by 12 to determine an annual
benefit; and
(E) the present value of such annual benefit shall be
determined by multiplying the result in (D) by the appropriate
actuarial factor using the most recently published interest and
mortality rates published by the Pension Benefit Guaranty Corporation
which are effective for plan terminations occurring on the Date of
Termination, using Executive's age to the nearest year determined as of
that date. If, as of the Date of Termination, the Executive has
previously satisfied the eligibility requirements for Early Retirement
under The TJX Companies, Inc. Retirement Plan, then the appropriate
factor shall be that based on the most recently published "PBGC
Actuarial Value of $1.00 Per Year Deferred to Age 60 And Payable For
Life Thereafter -- Healthy Lives," except that if the Executive's age
to the nearest year is more than 60, then such higher age shall be
substituted for 60. If, as of the Date of Termination, the Executive
has not satisfied the eligibility requirements for Early Retirement
under The TJX Companies, Inc. Retirement Plan, then the appropriate
factor shall be based on the most recently published "PBGC Actuarial
Value of $1.00 Per Year Deferred to Age 65 And Payable For Life
Thereafter -Healthy Lives."
(b) Until the second anniversary of the Date of Termination, the
Company shall maintain in full force and effect for the continued benefit of
Executive and his family all life insurance, medical insurance and disability
plans and programs in which Executive was entitled to participate immediately
prior to the Change of Control (or, if Executive's title was diminished within
180 days before the commencement of the Standstill Period, all such plans and
programs in which Executive was entitled to participate immediately prior to
such change, to the extent that such benefits thereunder are greater), provided
that Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Executive is ineligible
to participate in such plans or programs, the Company shall arrange upon
comparable terms to provide Executive with benefits substantially similar to
those which he is entitled to receive under such plans and programs.
Notwithstanding the foregoing, the Company's obligations hereunder with respect
to life, medical or disability coverage or benefits shall be deemed satisfied to
the extent (but only to the extent) of any such coverage or benefits provided by
another employer.
(c) For a period of two years after the Date of Termination, the
Company shall make available to Executive the use of any automobile that was
made available to Executive prior to the Date of Termination, including ordinary
replacement thereof in accordance with the Company's automobile policy in effect
immediately prior to the Change of Control, or, if Executive's title was
diminished within 180 days before the commencement of a Standstill Period, the
Company shall make available to the Executive the use of an automobile of a type
that was made available to him immediately prior to such change (or, in lieu of
making such automobile available, the Company may at its option pay to Executive
the present value of its cost of providing such automobile).
<PAGE> 20
2. INCENTIVE BENEFITS UPON A CHANGE OF CONTROL. Within 30 days following a
Change of Control, whether or not Executive's employment has terminated or been
terminated, the Company shall pay to the Executive the following in a lump sum:
(i) an amount equal to the "Target Award" under the MIP or any
other annual incentive plan which is applicable to Executive for the fiscal year
in which the Change of Control occurs (or, if Executive's title was diminished
within 180 days before the commencement of the Standstill Period, the "Target
Bonus" applicable to Executive for the fiscal year in which such change occurred
as if he continued to hold such prior title, if such Target Bonus is higher). In
addition, the Company will pay to Executive an amount equal to such Target Award
prorated for the period of active employment during such fiscal year through the
Change of Control; and
(ii) for performance cycles not completed prior to the Change of
Control, an amount with respect to each such cycle equal to the maximum Award
under LRPIP specified for Executive for such cycle, unless Executive shall
already have received payment of such amounts. Executive shall also be entitled
to payment of unpaid amounts owing with respect to cycles completed prior to the
Change of Control.
3. Payments under Section 1 and Section 2 of this Exhibit shall be made
without regard to whether the deductibility of such payments (or any other
payments to or for the benefit of Executive) would be limited or precluded by
Internal Revenue Code Section 28OG and without regard to whether such payments
(or any other payments) would subject Executive to the federal excise tax levied
on certain "excess parachute payments" under Internal Revenue Code Section 4999;
PROVIDED, that if the total of all payments to or for the benefit of Executive,
after reduction for all federal taxes (including the tax described in Internal
Revenue Code Section 4999, if applicable) with respect to such payments
("Executive's total after-tax payments"), would be increased by the limitation
or elimination of any payment under Section 1 or Section 2, amounts payable
under Section 1 and Section 2 above shall be reduced to the extent, and only to
the extent, necessary to maximize Executive's total after-tax payments. The
determination as to whether and to what extent payments under Section 1 or
Section 2 above are required to be reduced in accordance with the preceding
sentence shall be made at the Company's expense by Coopers & Lybrand or by such
other certified public accounting firm as the Committee may designate prior to a
Change of Control. In the event of any underpayment or overpayment under Section
1 or Section 2 above, as determined by Coopers & Lybrand (or such other firm as
may have been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to Executive or
refunded to the Company, as the case may be, with interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code.
4. OTHER BENEFITS. In addition to the amounts described in Sections 1 and
2, Executive shall be entitled to his benefits, if any, under Sections 3(d)
(Stock Options;
<PAGE> 21
Restricted Stock) and 3(f) (Qualified Plans). Executive will also be entitled to
such rights under any stock options and other grants not specifically referred
to in Section 3 of this Agreement as shall be provided by the terms of such
other options and other grants.
5. NONCOMPETITION; NO MITIGATION OF DAMAGES; ETC.
(a) NONCOMPETITION. Upon a Change of Control, any agreement by
Executive not to engage in competition with the Company subsequent to the
termination of his employment, whether contained in an employment contract or
other agreement, shall no longer be effective.
(b) NO DUTY TO MITIGATE DAMAGES. Executive's benefits under this
Exhibit C shall be considered severance pay in consideration of his past service
and his continued service from the date of this Agreement, and his entitlement
thereto shall be neither (x) governed by any duty to mitigate his damages by
seeking further employment nor (y) (except as expressly provided in this Exhibit
C) offset by any compensation which he may receive from future employment.
(c) OTHER SEVERANCE PAYMENTS. Benefits hereunder shall be in lieu of
any benefits to which Executive would otherwise be entitled under any severance
pay plan of the Company or its Subsidiaries, and shall be reduced by any
severance payments from the Company or its Subsidiaries to which Executive is
entitled under applicable federal or state law (for example, under a so-called
"tin parachute" or plant closing law).
(d) LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer fees, printing
costs, etc. reasonably incurred by Executive in contesting or disputing that the
termination of his employment during a Standstill Period is for Cause or other
than for good reason (as defined in the definition of Change of Control
Termination) or obtaining any right or benefit to which Executive is entitled
under this Agreement following a Change of Control. Any amount payable under
this Agreement that is not paid when due shall accrue interest at the base rate
of interest as from time to time in effect at The First National Bank of Boston,
until paid in full.
(e) Notice of Termination. During a Standstill Period, Executive's
employment may be terminated by the Company only upon 30 days' written notice to
Executive.
<PAGE> 1
Exhibit 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 31, 1998
BETWEEN DONALD G. CAMPBELL AND THE TJX COMPANIES, INC.
<PAGE> 2
INDEX
Page
----
1. EFFECTIVE DATE; TERM OF AGREEMENT -1-
2. SCOPE OF EMPLOYMENT -1-
3. COMPENSATION AND BENEFITS -2-
4. TERMINATION OF EMPLOYMENT; IN GENERAL -3-
5. BENEFITS UPON NON-VOLUNTARY TERMINATION
OF EMPLOYMENT. -3-
6. VOLUNTARY TERMINATION; TERMINATION FOR CAUSE;
VIOLATION OF CERTAIN AGREEMENTS -8-
7. BENEFITS UPON CHANGE OF CONTROL -8-
8. AGREEMENT NOT TO SOLICIT OR COMPETE -8-
9. ASSIGNMENT -10-
10. NOTICES -10-
11. WITHHOLDING -10-
12. GOVERNING LAW -10-
13. ARBITRATION -10-
14. ENTIRE AGREEMENT 10
EXHIBIT A A-1
EXHIBIT B B-1
EXHIBIT C C-1
<PAGE> 3
EMPLOYMENT AGREEMENT
This Amended and Restated Agreement dated as of January 31, 1998 amends
and restates the Agreement dated as of February 1, 1995, as amended (the "Prior
Agreement"), between DONALD G. CAMPBELL ("Executive") and The TJX Companies,
Inc., a Delaware corporation, whose principal office is in Framingham,
Massachusetts, 01701 (the "Company").
RECITALS
Executive has for a number of years been employed by the Company, and
has served in a number of capacities with the Company. The Company and Executive
deem it desirable and appropriate to enter into this Agreement.
AGREEMENT
The parties hereto, in consideration of the mutual agreements
hereinafter contained, agree as follows:
I. EFFECTIVE DATE; TERM OF AGREEMENT. This amended and restated agreement
("Agreement") shall become effective as of January 31, 1998 (the "Effective
Date"). The employment shall continue on the terms provided herein until January
27, 2001 and thereafter until terminated by either Executive or the Company,
subject to earlier termination as provided herein (such period of employment
hereinafter called the "Employment Period").
II. SCOPE OF EMPLOYMENT.
A. NATURE OF SERVICES. Executive shall diligently perform the duties and
assume the responsibilities of Executive Vice President-Finance and Chief
Financial Officer of the Company and such additional Executive duties and
responsibilities as shall from time to time be assigned to him by the President
or the Board.
B. EXTENT OF SERVICES. Except for illnesses and vacation periods,
Executive shall devote substantially all his working time and attention and his
best efforts to the performance of his duties and responsibilities under this
Agreement. However, Executive may (a) make any passive investments where he is
not obligated or required to, and shall not in fact, devote-any managerial
efforts or (b) serve as a director on the boards of other companies or
participate in charitable or community activities or in trade or professional
organizations, except only that the President or the Board shall have the right
to limit such services as a director or such participation whenever the
President or the
<PAGE> 4
Board shall believe that the time spent on such activities infringes upon the
time required by Executive for the performance of his duties under this
Agreement or is otherwise incompatible with those duties.
III. COMPENSATION AND BENEFITS.
A. BASE SALARY. Executive shall be paid a base salary at a rate not less
than $560,000 per year (or any increased Base Salary), subject to annual review.
Base Salary shall be payable in such manner and at such times as the Company
shall pay base salary to other Executive employees.
B. LRPIP. During the Employment Period, Executive will be entitled to
participate in annual grants made under the Company's Long Range Performance
Incentive Plan (LRPIP) at a level commensurate with his position in the Company.
To the extent provided in Section 162(m) of the Code, the terms of such awards
shall be established by the Committee.
C. MIP. During the Employment Period, Executive shall be eligible to
receive annual awards under the Company's Management Incentive Plan (MIP). To
the extent provided in Section 162(m) of the Code, the goals, scope and
conditions of any award shall be established annually by the Committee. Subject
to the foregoing, Executive shall be entitled to earn up to 45% of his Base
Salary if the target established by the Committee is met and up to 90% of his
Base Salary if such target is exceeded, with the payment potential ranging from
0% to 90% of Executive's Base Salary as established by the terms of the award.
D. STOCK OPTIONS. The Committee has determined to grant annually to
Executive during the Employment Period nonstatutory stock options under the 1986
Plan, (the "Options"). Such awards and grants will be subject to the discretion
of the Committee. If on or prior to January 27, 2001 Executive dies or becomes
Disabled or a Change of Control occurs while Executive is employed by the
Company, then all Executive's Options then outstanding shall be immediately
vested (exercisable). If Executive dies or becomes Disabled while employed by
the Company, all his Options shall remain exercisable for a period of three
years, but in no event beyond their original term. Upon the expiration of such
three-year term, the options shall terminate. In the event Executive retires
under the terms of the 1986 Plan, all his Options shall remain exercisable (to
the extent they were exercisable immediately prior to such retirement) for a
period of three years or, if less, the remainder of the original option term,
and then shall terminate. Upon any other termination of employment, the Options
shall remain exercisable (to the extent they were exercisable immediately prior
to such termination, taking into account any applicable accelerated vesting as
described above) for a period equal to the lesser of (i) three months (six
months, in the case of Options granted after
<PAGE> 5
March 31, 1998), or (ii) the remainder of their original term, and then shall
terminate. However, if Executive is terminated for Cause all options shall
immediately terminate.
E. SERP. Except as provided in Exhibit C ("Change of Control Benefits"),
Executive will be entitled to the greater of Category B or C benefits determined
and made payable in accordance with the generally applicable provisions of the
Company's Supplemental Executive Retirement Plan ("SERP"), including vesting
requirements.
F. QUALIFIED PLANS. Executive shall be entitled during the Employment
Period to participate in the Company's tax qualified retirement and profit-
sharing plans in accordance with the terms of those plans.
G. POLICIES AND FRINGE BENEFITS. Executive shall be subject to Company
policies applicable to its Executives generally and Executive shall be entitled
to receive all such fringe benefits as the Company shall from time to time make
available to other Executives generally (subject to the terms of any applicable
fringe benefit plan).
IV. TERMINATION OF EMPLOYMENT; IN GENERAL.
A. The Company shall have the right to end Executive's employment at any
time and for any reason, with or without, Cause.
B. The Employment Period shall terminate when Executive becomes Disabled.
In addition, if by reason of Incapacity Executive is unable to perform his
duties for at least six months in any 12-month period, upon written notice by
the Company to Executive, the Employment Period will be terminated for
Incapacity.
C. Whenever the Employment Period shall terminate, Executive shall resign
all offices or other positions he shall hold with the Company and any affiliated
corporations.
V. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT.
A. TERMINATION FOR DEATH, DISABILITY OR INCAPACITY, TERMINATION BY THE
COMPANY OTHER THAN FOR CAUSE OR A TERMINATION DESCRIBED IN SECTION 5 (a) (i) (C)
ON OR PRIOR TO JANUARY 27, 2001. If the Employment Period shall have terminated
on or prior to January 27, 2001 by reason of death, Disability or Incapacity of
Executive, by termination by the Company for any reason other than Cause, or a
termination described in clause (i) (C) below, all compensation and benefits for
Executive shall be as follows:
<PAGE> 6
1. (A) In the case of termination by reason of death, Disability or
Incapacity, for a period of 12 months after such termination, the Company will
pay to Executive or his legal representative continued Base Salary at the rate
in effect at termination of employment, without reduction for compensation
earned from other employment or self-employment.
(B) In the case of termination by the Company for any reason other
than Cause, other than a termination described in paragraph (C) below, for the
longer of 12 months after such termination or until January 27, 2001, the
Company will pay to Executive continued Base Salary at the rate in effect at the
termination of employment. Base Salary shall be paid for the first twelve months
of the period without reduction for compensation earned from other employment or
self-employment, and shall thereafter be reduced by such compensation received
from other employment or self-employment.
(C) In the case of a termination described in this paragraph (C),
for the longer of 24 months after such termination or until January 27, 2001,
the Company will pay to Executive continued Base Salary at the rate in effect at
the termination of employment. Base Salary shall be paid for the first twelve
months of the period without reduction for compensation earned from other
employment or self-employment, and shall thereafter be reduced by such
compensation received from other employment or self-employment. Executive shall
be deemed to have suffered a termination of employment described in this
paragraph (C) only if, upon or following the appointment of a new Chief
Executive Officer of the Company, (1) Executive is terminated by the Company
other than for Cause, or (2) Executive terminates his employment with the
Company by reason of a change in reporting relationship to the Chief Executive
Officer or a change in duties resulting in Executive's ceasing to have the
responsibilities and authority of a Chief Financial officer.
If termination occurs by reason of Incapacity or Disability, Executive shall
also be entitled to such compensation, if any, as is payable pursuant to the
Company's group and any individual long-term disability plan or any successor
Company disability plan. Any payments made to Executive under any long-term
disability plan of the Company with respect to the salary continuation period in
clause (i) above shall be offset against such salary continuation payments and
to the extent not so offset, Executive shall promptly make reimbursement
payments to the Company of such disability payments.
2. Until the expiration of the applicable Base Salary continuation period
under clause (i) and subject to such minimum coverage- continuation requirements
as may be required by law, the Company will provide
<PAGE> 7
(except to the extent that Executive shall obtain no less favorable coverage
from another employer or from self-employment) such medical and hospital
insurance, long term disability insurance and group life insurance (excluding
life insurance for which a waiver for Executive is in effect) for Executive and
his family, comparable to the insurance provided for executives generally, as
the Company shall determine, and upon the same terms and conditions as the same
shall be provided for other Company executives generally; provided, however,
that in no event shall such benefits or the terms and conditions thereof be less
favorable to Executive than those afforded to him as of the date of termination.
3. The Company will pay to Executive, without offset for compensation
earned from other employment or self-employment, the following amounts under the
Company's MIP applicable to Executive:
First, if not already paid, any amounts to which Executive is entitled
under MIP for the fiscal year of the Company ended immediately prior to
Executive's termination of employment. These amounts will be paid at
the same time as other awards for such prior year are paid.
Second, an amount in the nature of severance equal to Executive's MIP
Target Award for the year of termination, prorated for Executive's
period of service during such year prior to termination. This amount
will be paid at the same time as other MIP awards for the year of
termination are paid.
Third, in addition, but only in case of termination by reason of death,
Disability or Incapacity, an amount equal to Executive's MIP Target
Award for the year of termination, without proration. This amount will
be paid at the same time as the amount payable under the preceding
paragraph.
In addition, the Company will also pay to Executive or his legal
representative such amounts as Executive shall have deferred (but not
received) under the Company's General Deferred Compensation Plan in
accordance with the provisions of that Plan.
4. Executive shall be entitled to the benefits described in Sections 3(d)
(Stock Options), 3(e) (SERP), and 3(f) (Qualified Plans), in each case to the
extent, if any, provided in the provisions of the relevant plan or award
agreement (including the pertinent provisions of this Agreement). In addition,
with respect to each three-year performance cycle not completed prior to
termination, the Company will pay to Executive an amount in the nature of
severance equal to 1/36 of his LRPIP Target Award for each month in such cycle
<PAGE> 8
prior to termination. Such amounts will be paid at the same time as
other LRPIP awards payable for the cycle first ending after termination
are paid. Executive will also be entitled to payment (at the same time
as other LRPIP awards for the applicable cycle are paid) of any unpaid
amounts owing with respect to cycles completed prior to termination.
Executive will also be entitled to such rights, if any, under any stock
option and other grants not specifically referred to in Section 3 of
this Agreement as shall be provided by the terms of such options and
other grants.
B. TERMINATION FOR DEATH, DISABILITY OR INCAPACITY, TERMINATION BY THE
COMPANY OTHER THAN FOR CAUSE OR A TERMINATION DESCRIBED IN SECTION 5(b)(i)(B)
AFTER JANUARY 27, 2001. If the Employment Period shall have terminated after
January 27, 2001 by reason of death, Disability or Incapacity of Executive, by
termination by the Company for any reason other than Cause, or a termination
described in clause (i)(B) below, all compensation and benefits for Executive
shall be as follows:
1. (A) In the case of termination by reason of death, Disability
or Incapacity or termination of Executive by the Company for any reason
other than Cause, other than a termination described in paragraph (B)
below, the Company will pay to Executive (or his legal representative
in the case of death, Disability or Incapacity) his then Base Salary
for a period of twelve months from the Date of Termination, which Base
Salary shall be reduced after six months for compensation earned from
other employment or self-employment.
(i) (B) In the case of a termination after January 27,
2001 described in this paragraph (B), the Company will pay to Executive
his then Base Salary for the period commencing with the Date of
Termination and ending a) twenty-four months after the Date of
Termination, if termination occurs less than six months after a new
Chief Executive Officer is appointed, or b) eighteen months after the
Date of Termination, if termination occurs six to twelve months after a
new Chief Executive Officer is appointed, or c) twelve months after the
Date of Termination, if termination occurs more than twelve months
after a new Chief Executive Officer is appointed. Base Salary payments
under this paragraph (B) shall be reduced after six months for
compensation earned from other employment or self- employment.
Executive shall be deemed to have suffered a termination of employment
described in this paragraph (B) only if, upon or following the
appointment of a new Chief Executive Officer of the Company, (1)
Executive is terminated by the Company other than for Cause, or (2)
Executive terminates his employment with the Company by reason of a
change in reporting relationship to the Chief Executive Officer or a
change in his duties resulting in Executive's ceasing to have the
responsibilities and authority of a Chief Financial Officer.
<PAGE> 9
If termination occurs by reason of Incapacity or Disability, Executive
shall also be entitled to such compensation, if any, as is payable
pursuant to the Company's group and any individual long-term disability
plan or any successor Company disability plan. Any payments made to
Executive under any long-term disability plan of the Company with
respect to the salary continuation period in clause (i) above shall be
offset against such salary continuation payments and to the extent not
so offset, Executive shall promptly make reimbursement payments to the
Company of such disability payments.
2. The Company will pay to Executive, without offset for
compensation earned from other employment or self-employment. the
following amounts under the Company's MIP applicable to Executive:
First, if not already paid, any amount to which Executive is
entitled under MIP for the fiscal year of the Company ended
immediately prior to Executive's termination of employment.
These amounts will be paid at the same time as other awards
for such prior year are paid.
Second, an amount in the nature of severance equal to
Executive's MIP Target Award for the year of termination,
prorated for Executive's period of service during such year
prior to termination. This amount will be paid at the same
time as other MIP awards for the year of termination are paid.
Third, in addition, but only in the case of termination by
reason of death, Disability or Incapacity, an amount equal to
Executive's MIP Target Award for the year of termination,
without proration. This amount will be paid at the same time
as the amount payable under the preceding paragraph.
In addition, the company will also pay to Executive or his
legal representative such amounts as Executive shall have
deferred (but not received) under the Company's General
Deferred Compensation Plan in accordance with the provisions
of that Plan.
3. Until the expiration of the applicable Base Salary
continuation period under Clause (i) above and subject to such minimum
coverage-continuation requirements as may be required by law, the
Company will provide (except to the extent that Executive shall obtain
no less favorable coverage from another employer or from
self-employment) such medical and hospital insurance, long-term
disability insurance and group life insurance (excluding life insurance
for which a waiver for Executive is in effect) for Executive and his
family, comparable to the insurance provided for executives
<PAGE> 10
generally, as the Company shall determine, and upon the same terms and
conditions as the same shall be provided for other Company executives
generally; provided, however, that in no event shall such benefits or
the terms and conditions thereof be less favorable to Executive than
those afforded to him as of the date of termination.
4. Executive shall be entitled to the benefits described in
Sections 3(d) (Stock Options), 3(e) (SERP), and 3(f) (Qualified Plans),
in each case to the extent, if any, provided in the provisions of the
relevant plan or award agreement (including the pertinent provisions of
this Agreement). In addition, with respect to each three-year
Performance Cycle not completed prior to termination, the Company will
pay to Executive an amount in the nature of severance equal to 1/36 of
his LRPIP Target Award for each month in such cycle prior to
termination. Such amounts will be paid at the same time as other LRPIP
awards payable for the cycle first ending after termination are paid.
Executive will also be entitled to payment (at the same time as other
LRPIP awards for the applicable cycle are paid) of any unpaid amounts
owing with respect to cycles completed prior to termination. Executive
will also be entitled to such rights, if any, under any stock option
and other grants not specifically referred to in Section 3 of this
Agreement as shall be provided by the terms of such options and other
grants.
C. EMPLOYMENT PERIOD NOT EXTENDED. If the Company determines not to extend
the Employment Period beyond its original term (January 27, 2001) or any
extension thereof, or offers to extend the Employment Period on terms less
favorable to Executive than those set forth herein, and Executive declines, it
shall be deemed a termination of the Employment Period by the Company pursuant
to (b) above. If Executive should choose not to continue his employment beyond
January 27, 2001 or any extension of the Employment Period, other than in
response to an offer by the Company to extend the Employment Period on terms
less favorable to Executive than those set forth herein, it shall be deemed a
voluntary termination by Executive and the provisions of Section 6 shall apply.
VI. VOLUNTARY TERMINATION; TERMINATION FOR CAUSE; VIOLATION OF CERTAIN
AGREEMENTS.
If Executive should end his employment voluntarily (other than in the
case of a termination described at Section 5 (a) (i) (C) or Section 5(b) (i)
(B)) or if the Company should end Executive's employment for Cause, or,
notwithstanding (a) or (b) of Section 5 above, if Executive should violate the
protected persons or noncompetition provisions of Section 8, all compensation
and benefits otherwise payable pursuant to this Agreement
<PAGE> 11
shall cease, other than (x) such amounts as Executive shall have deferred (but
not received) under the Company's General Deferred Compensation Plan in
accordance with the provisions of that Plan and (y) any benefits to which
Executive may be entitled under Sections 3(d) (Stock Options), 3(e) (SERP) and
3(f) (Qualified Plans). Executive will also be entitled to such rights, if any,
under stock options and other grants not specifically referred to in Section 3
of this Agreement as shall be provided by the terms of such other options and
other grants. In addition, the Company will pay to Executive such amounts as
Executive shall have deferred (but not received) under the Company's General
Deferred Compensation Plan in accordance with the provisions of that Plan. The
Company does not waive any rights it may have for damages or for injunctive
relief.
VII. BENEFITS UPON CHANGE OF CONTROL.
Notwithstanding any other provision of this Agreement, in the event of
a Change of Control, the determination and payment of any benefits payable
thereafter with respect to Executive shall be governed exclusively by the
provisions of Exhibit C.
VIII. AGREEMENT NOT TO SOLICIT OR COMPETE.
A. Upon the termination of employment at any time, then for a period of
two years after the termination of the Employment Period, Executive shall not
under any circumstances employ, solicit the employment of, or accept unsolicited
the services of, any "protected person" or recommend the employment of any
"protected person" to any other business organization. A "protected person"
shall be a person known by Executive to be employed by the Company or its
Subsidiaries or to have been employed by Company or its Subsidiaries within six
months prior to the commencement of conversations with such person with respect
to employment.
As to (i) each "protected person" to whom the foregoing applies, (ii)
each subcategory of "protected person" as defined above, (iii) each limitation
on (A) employment, (B) solicitation and (C) unsolicited acceptance of services,
of each "protected person" and (iv) each month of the period during which the
provisions of this subsection (a) apply to each of the foregoing, the provisions
set forth in this subsection (a) are deemed to be separate and independent
agreements and in the event of unenforceability of any such agreement, such
unenforceable agreement shall be deemed automatically deleted from the
provisions hereof and such deletion shall not affect the enforceability of any
other provision of this subsection (a) or any other term of this Agreement.
B. During the course of his employment, Executive will have learned many
trade secrets of the company and will have access to confidential information
and business plans for the Company. Therefore, if Executive should end his
employment
<PAGE> 12
voluntarily at any time, including by reason of retirement or disability, or if
the Company should end Executive's employment at any time for Cause, then for a
period of two years thereafter, Executive will not engage, either as a
principal, employee, partner, consultant or investor (other than a less-than-1%
equity interest in an entity), in a business which is a competitor of the
Company. A business shall be deemed a competitor of the Company if it shall then
be so regarded by retailers generally or if it shall operate a promotional
off-price family apparel store (such as T.J. Maxx or Marshalls) within ten miles
of any "then existing T.J. Maxx or Marshalls store". The term "then existing" in
the previous sentence Company or under lease for operation as aforesaid. Nothing
herein shall restrict the right of Executive to engage in a business that
operates a conventional or full mark-up department store. Executive agrees that
if, at any time, pursuant to action of any court, administrative or governmental
body or other arbitral tribunal, the operation of any part of this paragraph
shall be determined to be unlawful or otherwise unenforceable, then the coverage
of this paragraph shall be deemed to be restricted as to duration, geographical
scope or otherwise, as the case may be, to the extent, and only to the extent,
necessary to make this paragraph lawful and enforceable in the particular
jurisdiction in which such determination is made.
C. If the Employment Period terminates, Executive agrees to (i) notify the
Company immediately upon his securing employment or becoming self-employed
during any period when Executive's compensation from the Company shall be
subject to reduction or his benefits provided by the Company shall be subject to
termination as provided in Section 5 and (ii) furnish to the Company written
evidence of his compensation earned from any such employment or self-employment
as the Company shall from time to time request. In addition, upon termination of
the Employment Period for any reason other than the death of Executive,
Executive shall immediately return all written trade secrets, confidential
information and business plans of the Company and shall execute a certificate
certifying that he has returned all such items in his possession or under his
control.
IX. ASSIGNMENT. The rights and obligations of the Company shall enure to
the benefit of and shall be binding upon the successors and assigns of the
Company. The rights and obligations of Executive are not assignable except only
that payments payable to him after his death shall be made by devise or descent.
X. NOTICES. All notices and other communications required hereunder shall
be in writing and shall be given by mailing the same by certified or registered
mail, return receipt requested, postage prepaid. If sent to the Company the same
shall be mailed to the Company at 770 Cochituate Road, Framingham,
<PAGE> 13
Massachusetts, 01701, Attention: General Counsel, or such other address as the
Company may hereafter designate by notice to Executive; and if sent to
Executive, the same shall be mailed to Executive at P.O. Box 451, Brimfield,
Massachusetts, 01010 or at such other address as Executive may hereafter
designate by notice to the Company.
XI. WITHHOLDING. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
XII. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the Commonwealth of
Massachusetts.
XIII. ARBITRATION. In the event that there is any claim or dispute arising
out of or relating to this Agreement, or the breach thereof, and the parties
hereto shall not have resolved such claim or dispute within 60 days after
written notice from one party to the other setting forth the nature of such
claim or dispute, then such claim or dispute shall be settled exclusively by
binding arbitration in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by an arbitrator
mutually agreed upon by the parties hereto or, in the absence of such agreement,
by an arbitrator selected according to such Rules, and judgment upon the award
rendered by the arbitrator shall be entered in any Court having jurisdiction
thereof upon the application of either party.
<PAGE> 14
XIV. ENTIRE AGREEMENT. This Agreement, including Exhibits, represents the
entire agreement between the parties relating to the terms of Executive's
employment by the Company and supersedes all prior written or oral agreements
between them.
/s/ Donald G. Campbell
----------------------------------------
Donald G. Campbell
THE TJX COMPANIES, INC.
/s/ Bernard Cammarata
----------------------------------------
By Bernard Cammarata
President and Chief Executive Officer
<PAGE> 15
EXHIBIT A
CERTAIN DEFINITIONS
In this Agreement, the following terms shall have the following meanings:
(a) "Base Salary" means, for any period, the amount described in
Section 3(a).
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Executive Compensation Committee of the
Board.
(d) "Cause" means dishonesty, conviction of a felony, gross
neglect of duties (other than as a result of Disability or death), or conflict
of interest which conflict shall continue for 30 days after the Company gives
written notice to Executive requesting the cessation of such conflict.
In respect of any termination during a Standstill Period, Executive
shall not be deemed to have been terminated for Cause until the later to occur
of (i) the 30th day after notice of termination is given and (ii) the delivery
to Executive of a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the Company's directors at a meeting called and held
for that purpose (after reasonable notice to Executive), and at which Executive
together with his counsel was given an opportunity to be heard, finding that
Executive was guilty of conduct described in the definition of "Cause" above,
and specifying the particulars thereof in detail; PROVIDED, HOWEVER, that the
Company may suspend Executive and withhold payment of his Base Salary from the
date that notice of termination is given until the earliest to occur of (A)
termination of Executive for Cause effected in accordance with the foregoing
procedures (in which case Executive shall not be entitled to his Base Salary for
such period), (B) a determination by a majority of the Company's directors that
Executive was not guilty of the conduct described in the definition of "Cause"
above (in which case Executive shall be reinstated and paid any of his
previously unpaid Base Salary for such period), or (C) 90 days after notice of
termination is given (in which case Executive shall then be reinstated and paid
any of his previously unpaid Base salary for such period). If Base Salary is
withheld and then paid pursuant to clauses (B) or (C) of the preceding sentence,
the amount thereof shall be accompanied by simple interest calculated on a daily
basis, at a rate per annum equal to the prime or base lending rate, as in effect
at the time, of the Company's principal commercial bank.
(e) "Change of Control" has the meaning given it in Exhibit B.
<PAGE> 16
(f) "Change of Control Termination" means the termination of
Executive's employment during a Standstill Period by (1) the Company other than
for Cause, or (2) by Executive for good reason, or (3) by reason of death,
Incapacity or Disability.
For purposes of this definition, termination for "good reason" shall
mean the voluntary termination by Executive of his employment (1) within 120
days after the occurrence without Executive's express written consent of any one
of the events described in clauses (I), (II), (III), (IV), (V) or (VI) below,
provided that Executive gives notice to the Company at least 30 days in advance
requesting that the situation described in those clauses be remedied, and the
situation remains unremedied upon expiration of such 30- day period; (2) within
120 days after the occurrence without Executive's express written consent of the
event described in clauses (VII) or (VIII) below, provided that Executive gives
notice to the Company at least 30 days in advance; or (3) upon the occurrence of
the events described in clause (IX) below, provided that Executive gives notice
to the Company at least 30 days in advance:
(I) the assignment to him of any duties inconsistent with his
positions duties, responsibilities, reporting requirements, and status with the
company immediately prior to the Change of Control, or a substantive change in
Executive's titles or offices as in effect immediately prior to a Change of
Control, or any removal of Executive from or any failure to re-elect him to such
positions, except in connection with the termination of Executive's employment
by the Company for Cause or by Executive other than for good reason, or any
other action by the Company which results in a diminishment in such position,
authority, duties or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Company promptly after receipt of
notice thereof given by Executive; or
(II) if Executive's Base Salary for any fiscal year is less than
100 percent of the Base Salary paid to Executive in the
completed fiscal year immediately preceding the Change of
Control; or if Executive's total cash compensation
opportunities, including salary and incentives, for any fiscal
year are less than 100 percent of the total cash compensation
opportunities made available to Executive in the completed
fiscal year immediately preceding the Change of Control,
unless any such reduction represents an overall reduction in
the Base Salary paid or cash compensation opportunities made
available, as the case may be, to Executives in the same
organizational level (it being the Company's burden to
establish this fact); or
(III) the failure of the Company to continue in effect any benefits
or perquisites, or any pension, life insurance, medical
insurance or disability plan in which Executive was
participating immediately prior to the
<PAGE> 17
Change of Control unless the Company provides Executive with a
plan or plans that provide substantially similar benefits, or
the taking of any action by the Company that would adversely
affect Executive's participation in or materially reduce
Executive's benefits under any of such plans or deprive
Executive of any material fringe benefit enjoyed by Executive
immediately prior to the Change of Control, unless the
elimination or reduction of any such benefit, perquisite or
plan affects all other Executives in the same organizational
level (it being the Company's burden to establish this fact);
or
(IV) any purported termination of Executive's employment by the
Company for Cause during a Standstill Period which is not
effected in compliance with paragraph (d) above; or
(V) any relocation of Executive of more than 40 miles from the
place where Executive was located at the time of the Change of
Control; or
(VI) any other breach by the Company of any provision of this
Agreement; or
(VII) the Company sells or otherwise disposes of, in one transaction
or a series of related transactions, assets or earning power
aggregating more than 30 percent of the assets (taken at asset
value as stated on the books of the Company determined in
accordance with generally accepted accounting principles
consistently applied) or earning power of the Company (on an
individual basis) or the Company and its Subsidiaries (on a
consolidated basis) to any other Person or Persons (as those
terms are defined in Exhibit B); or
(VIII) if Executive is employed by a subsidiary of the Company, such
Subsidiary either ceases to be a Subsidiary of the Company or
sells or otherwise disposes of, in one transaction or a series
of related transactions, assets or earning power aggregating
more than 30 percent of the assets (taken at asset value as
stated on the books of the Subsidiary determined in accordance
with generally accepted accounting principles consistently
applied) or earning power of such subsidiary (on an individual
basis) or such Subsidiary and its subsidiaries (on a
consolidated basis) to any other Person or Persons (as those
terms are defined in Exhibit B); or
(IX) the voluntary termination by Executive of his employment (i)
at any time within one year after the Change of Control or
(ii) at any time during the second year after the Change of
Control unless the Company offers Executive an employment
contract having a minimum two-year duration
<PAGE> 18
which provides Executive with substantially the same title,
responsibilities, annual and long-range compensation, benefits
and perquisites that he had. immediately prior to the
Standstill Period. Notwithstanding the foregoing, the Board
may expressly waive the application of this clause (IX) if it
waives the applicability of substantially similar provisions
with respect to all persons with whom the Company has a
written severance agreement (or may condition its application
on any additional requirements or employee agreements which
the Board shall in its discretion deem appropriate in the
circumstances). The determination of whether to waive or
impose conditions on the application of this clause (IX) shall
be within the complete discretion of the Board, but shall be
made prior to the occurrence of a Change of Control.
(g) "Date of Termination" means the date on which Executive's
employment is terminated.
(h) "Disability" has the meaning given it in the Company's
long-term disability plan. Executive's employment shall be deemed to be
terminated for Disability on the date on which Executive is entitled to receive
long-term disability compensation pursuant to such long-term disability plan.
(i) "Incapacity" means a disability (other than Disability within
the meaning of (h) above) or other impairment of health that renders Executive
unable to perform his duties to the satisfaction of the Committee.
(j) "Standstill Period" means the period commencing on the date of
a Change of Control and continuing until the close of business on the last
business day of the 24th calendar month following such Change of Control.
(k) "Stock" means the common stock, $1.00 par value, of the
Company.
(l) "Subsidiary" means any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined voting power of
all classes of stock.
<PAGE> 19
EXHIBIT B
DEFINITION OF "CHANGE OF CONTROL"
"Change of Control" shall mean the occurrence of any one of the
following events:
(a) there occurs a change of control of the Company of a nature
that would be required to be reported in response to Item 1(a) of the Current
Report on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") or in any other filing under the Exchange Act;
PROVIDED, HOWEVER, that no transaction shall be deemed to be a Change of Control
(i) if the person or each member of a group of persons acquiring control is
excluded from the definition of the term "Person" hereunder or (ii) unless the
Committee shall otherwise determine prior to such occurrence, if the Executive
or an Executive Related Party is the Person or a member of a group constituting
the Person acquiring control; or
(b) any Person other than the Company, any wholly-owned subsidiary
of the Company, or any employee benefit plan of the Company or such a subsidiary
becomes the owner of 20% or more of the Company's Common Stock and thereafter
individuals who were not directors of the Company prior to the date such Person
became a 20% owner are elected as directors pursuant to an arrangement or
understanding with, or upon the request of or nomination by, such Person and
constitute at least 1/4 of the Company's Board of Directors; PROVIDED, HOWEVER,
that unless the Committee shall otherwise determine prior to the acquisition of
such 20% ownership, such acquisition of ownership shall not constitute a Change
of Control if Executive or an Executive Related Party is the Person or a member
of group constituting the Person acquiring such ownership; or
(c) there occurs any solicitation or series of solicitations of
proxies by or on behalf of any Person other than the Company's Board of
Directors and thereafter individuals who were not directors of the Company prior
to the commencement of such solicitation or series of solicitations are elected
as directors pursuant to an arrangement or understanding with, or upon the
request of or nomination by, such Person and constitute at least 1/4 of the
Company's Board of Directors; or
(d) the Company executes an agreement of acquisition, merger or
consolidation which contemplates that (i) after the effective date provided for
in such an agreement, all or substantially all of the business and/or assets of
the Company shall be owned, leased or otherwise controlled by another Person and
(ii) individuals who are directors of the Company when such agreement is
executed shall not constitute a majority of the board of directors of the
survivor or successor entity immediately after the effective date provided for
in such agreement; PROVIDED, HOWEVER, that unless otherwise
<PAGE> 20
determined by the Committee, no transaction shall constitute a Change of Control
if, immediately after such transaction, Executive or any Executive Related Party
shall own equity securities of any surviving corporation ("Surviving Entity")
having a fair value as a percentage of the fair value of the equity securities
of such Surviving Entity greater than 125% of the fair value of the equity
securities of the Company owned by Executive and any Executive Related Party
immediately prior to such transaction, expressed as a percentage of the fair
value of all equity securities of the Company immediately prior to such
transaction (for purposes of this paragraph ownership of equity securities shall
be determined in the same manner as ownership of Common Stock); and PROVIDED,
FURTHER, that for purposes of this paragraph (d), if such agreement requires as
a condition precedent approval by the Company's shareholders of the agreement or
transaction, a Change of Control shall not be deemed to have taken place unless
and until such approval is secured (but upon any such approval, a Change of
Control shall be deemed to have occurred on the date of execution of such
agreement).
In addition, for purposes of this Exhibit B the following terms have
the meanings set forth below:
"Common Stock" shall mean the then outstanding Common Stock of the
Company plus, for purposes of determining the stock ownership of any Person, the
number of unissued shares of Common Stock which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock shall
not include shares of Preferred Stock or convertible debt or options or warrants
to acquire shares of Common Stock (including any shares of Common Stock issued
or issuable upon the conversion or exercise thereof) to the extent that the
Board of Directors of the Company shall expressly so determine in any future
transaction or transactions.
A Person shall be deemed to be the "owner" of any Common Stock:
(i) of which such Person would be the "beneficial owner," as such
term is defined in Rule 13d-3 promulgated by the Securities and Exchange
Commission (the "Commission") under the Exchange Act, as in effect on March 1,
1989; or
(ii) of which such Person would be the "beneficial owner" for
purposes of Section 16 of the Exchange Act and the rules of the Commission
promulgated thereunder, as in effect on March 1, 1989; or
(iii) which such Person or any of its affiliates or Associates (as
such terms are defined in Rule 12b-2 promulgated by the Commission under the
Exchange Act, as in effect on March 1, 1989) has the right to acquire (whether
such right is exercisable
<PAGE> 21
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise.
"Person" shall have the meaning used in Section 13 (d) of the Exchange
Act, as in effect on March 1, 1989.
An "Executive Related Party" shall mean any affiliate or associate of
Executive other than the Company or a majority-owned subsidiary of the Company.
The terms "affiliate" and "associate" shall have the meanings ascribed thereto
in Rule 12b-2 under the Exchange Act (the term "registrant" in the definition of
"associate" meaning, in this case, the Company).
<PAGE> 22
EXHIBIT C
CHANGE OF CONTROL BENEFITS
1. BENEFITS UPON A CHANGE OF CONTROL TERMINATION.
(a) The Company shall pay the following to Executive in a lump sum
within 30 days following a Change of Control Termination:
(i) an amount equal to two times his Base Salary for one year at
the rate in effect immediately prior to the Date of Termination or the Change of
Control (or, if Executive's title was diminished within 180 days before the
commencement of the Standstill Period, the rate in effect immediately prior to
such change), whichever is highest, plus the accrued and unpaid portion of his
Base Salary through the Date of Termination. Any payments made to Executive
under any long term disability plan of the Company with respect to the two years
following termination of employment shall be offset against such two times Base
Salary payment. Executive shall promptly make reimbursement payments to the
Company to the extent any such disability payments are received after the Base
Salary payment.
(ii) in lieu of any other benefits under SERP, an amount equal to
the present value of the payments that Executive would have been entitled to
receive under SERP as a Category B or C participant, whichever is greater,
applying the following rules and assumptions:
(A) a credit equal to the number of Years of Service (as
that term is defined in SERP) that Executive has been employed
by the Company or a predecessor at the Date of Termination
shall be added to his Years of Service in determining
Executive's total Years of Service; PROVIDED, HOWEVER, that
the total Years of Service determined hereunder shall not
exceed the lesser of (x) 20 or (y) the Years of Service that
Executive would have had if he had retired at the age of 65;
(B) Executive's Average Compensation (as that term is
defined in SERP) shall be determined as of the Date of
Termination;
(C) Executive's Primary Social Security Benefit (as that
term is defined in SERP) shall mean the annual primary
insurance amount to which Executive is entitled or would, upon
application therefor, become entitled at age 65 under the
provisions of the Federal Social Security Act as in effect on
the Date of Termination assuming that Executive received
annual income at the rate of his Base Salary from the Date of
Termination until
<PAGE> 23
his 65th birth date which would be treated as wages for
purposes of the Social Security Act;
(D) the monthly benefit under SERP determined using the
foregoing criteria shall be multiplied by 12 to determine an
annual benefit; and
(E) the present value of such annual benefit shall be
determined by multiplying the result in (D) by the appropriate
actuarial factor using the most recently published interest
and mortality rates published by the Pension Benefit Guaranty
Corporation and which are effective for plan terminations
occurring on the Date of Termination, using Executive's age to
the nearest year determined as of that date. If, as of the
Date of Termination, the Executive has previously satisfied
the eligibility requirements for Early Retirement under The
TJX companies, Inc. Retirement Plan, then the appropriate
factor shall be that based on the most recently published
"PBGC Actuarial Value of $1.00 Per Year Deferred to Age 60 And
Payable For Life Thereafter -- Healthy Lives," except that if
the Executives age to the nearest year is more than 60, then
such higher age shall be substituted for 60. If, as of the
Date of Termination, the Executive has not satisfied the
eligibility requirements for Early Retirement under The TJX
companies, Inc. Retirement Plan, then the appropriate factor
shall be based on the most recently published "PBGC Actuarial
Value of $1.00 Per Year Deferred to Age 65 And Payable For
Life Thereafter - Healthy Lives."
(b) Until the second anniversary of the Date of Termination, the
Company shall maintain in full force and effect for the continued benefit of
Executive and his family all life insurance, medical insurance and disability
plans and programs in which Executive was entitled to participate immediately
prior to the Change of Control (or, if Executive's title was diminished within
180 days before the commencement of the Standstill Period, all such plans and
programs in which Executive was entitled to participate immediately prior to
such change, to the extent that such benefits thereunder are greater), provided
that Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Executive is ineligible
to participate in such plans or programs, the Company shall arrange upon
comparable terms to provide Executive with benefits substantially similar to
those which he is entitled to receive under such plans and programs.
Notwithstanding the foregoing, the Company's obligations hereunder with respect
to life, medical or disability coverage or benefits shall be deemed satisfied to
the extent (but only to the extent) of any such coverage or benefits provided by
another employer.
<PAGE> 24
(c) For a period of two years after the Date of Termination, the
company shall make available to Executive the use of any automobile that was
made available to Executive prior to the Date of Termination, including ordinary
replacement thereof in accordance with the Company's automobile policy in effect
immediately prior to the Change of Control, or, if Executive's title was
diminished within 180 days before the commencement of a Standstill Period, the
Company shall make available to the Executive the use of an automobile of a type
that was made available to him immediately prior to such change (or, in lieu of
making such automobile available, the company may at its option pay to Executive
the present value of its cost of providing such automobile).
2. INCENTIVE BENEFITS UPON A CHANGE OF CONTROL. Within 30 days following a
Change of Control, whether or not Executive's employment has terminated or been
terminated, the Company shall pay to the Executive the following in a lump sum:
(i) an amount equal to the "Target Award" under MIP or any other
annual incentive plan which is applicable to Executive for the fiscal year in
which the Change of Control occurs (or, if Executive's title was diminished
within 180 days before the commencement of the standstill Period, the "Target
Bonus" applicable to Executive for the fiscal year in which such change occurred
as if he continued to hold such prior title, if such Target Bonus is higher). In
addition, the Company will pay to Executive an amount equal to such Target Award
prorated for the period of active employment during such fiscal year through the
Change of Control; and
(ii) for performance cycles not completed prior to the Change of
Control, an amount with respect to each such cycle equal to the maximum Award
under LRPIP specified for Executive for such cycle, unless Executive shall
already have received payment of such amounts. Executive shall also be entitled
to payment of unpaid amounts owing with respect to cycles completed prior to the
Change of Control.
3. Payments under Section 1 and Section 2 of this Exhibit shall be made
without regard to whether the deductibility of such payments (or any other
payments to or for the benefit of Executive) would be limited or precluded by
Internal Revenue Code Section 28OG and without regard to whether such payments
(or any other payments) would subject Executive to the federal excise tax levied
on certain "excess parachute payments" under Internal Revenue Code Section 4999;
PROVIDED, that if the total of all payments to or for the benefit of Executive,
after reduction for all federal taxes (including the tax described in Internal
Revenue Code Section 4999, if applicable) with respect to such payments
("Executive's total after-tax payments"), would be increased by the limitation
or elimination of any payment under Section 1 or Section 2, amounts payable
under Section 1 and Section 2 above shall be reduced to the extent, and only to
the extent, necessary to maximize Executive's total after-tax payments. The
determination as to whether and to what extent payments under Section 1 or
Section 2 above are required to be reduced in
<PAGE> 25
accordance with the preceding sentence shall be made at the Company's expense by
Coopers & Lybrand or by such other certified public accounting firm as the
Committee may designate prior to a Change of Control. In the event of any
underpayment or overpayment under Section 1 or Section 2 above, as determined by
Coopers & Lybrand (or such other firm as may have been designated in accordance
with the preceding sentence), the amount of such underpayment or overpayment
shall forthwith be paid to Executive or refunded to the Company, as the case may
be, with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code.
4. OTHER BENEFITS. In addition to the amounts described in Sections 1 and
2, Executive shall be entitled to his benefits, if any, under Sections 3(d)
(Stock Options) and 3(f) (Qualified Plans). Executive will also be entitled to
such rights under any stock options and other grants not specifically referred
to in Section 3 of this Agreement as shall be provided by the terms of such
other options and other grants.
5. NONCOMPETITION; NO MITIGATION OF DAMAGES; ETC.
(a) NONCOMPETITION. Upon a Change of Control, any
agreement by Executive not to engage in competition with the Company
subsequent to the termination of his employment, whether contained in
an employment contract or other agreement, shall no longer be
effective.
(b) NO DUTY TO MITIGATE DAMAGES. Executive's benefits
under this Exhibit C shall be considered severance pay in consideration
of his past service and his continued service from the date of this
Agreement, and his entitlement thereto shall be neither (x) governed by
any duty to mitigate his damages by seeking further employment nor (y)
(except as expressly provided in this Exhibit C) offset by any
compensation which he may receive from future employment.
(c) OTHER SEVERANCE PAYMENTS. Benefits hereunder shall be
in lieu of any benefits to which Executive would otherwise be entitled
under any severance pay plan of the Company or its Subsidiaries, and
shall be reduced by any severance payments from the Company or its
Subsidiaries to which Executive is entitled under applicable federal or
state law (for example, under a so-called "tin parachute" or plant
closing law).
(d) LEGAL FEES AND EXPENSES. The Company shall pay all
legal fees and expenses, including but not limited to counsel fees,
stenographer fees, printing costs, etc. reasonably incurred by
Executive in contesting or disputing that the termination of his
employment during a Standstill Period is for Cause or other than for
good reason (as defined in the definition of Change of Control
Termination) or obtaining any right or benefit to which Executive is
entitled under
<PAGE> 26
this Agreement following a Change of Control. Any amount payable under
this Agreement that is not paid when due shall accrue interest at the
base rate of interest as from time to time in effect at The First
National Bank of Boston, until paid in full.
(e) Notice of Termination. During a Standstill Period,
Executive's employment may be terminated by the Company only upon 30
days' written notice to Executive.
<PAGE> 1
EXHIBIT 10.11
As Amended on April 8, 1998
---------------------------
THE TJX COMPANIES, INC.
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of this 1993 Stock Option Plan for Non-Employee Directors (the
"Plan") is to advance the interests of The TJX Companies, Inc. (the "Company")
by increasing the proprietary interest in the Company of non-employee members of
the Company's Board of Directors by providing a portion of their compensation in
options to acquire shares ("Shares") of the Company's common stock ("Common
Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. The Committee shall have authority, not inconsistent with the express
provisions of the Plan, (a) to administer the issuance of options granted in
accordance with the formula set forth in this Plan to such directors as are
eligible to receive options; (b) to prescribe the form or forms of instruments
evidencing options and any other instruments required under the Plan and to
change such forms from time to time; (c) to adopt, amend and rescind rules and
regulations for the administration of the Plan; and (d) to interpret the Plan
and to decide any questions and settle all controversies and disputes that may
arise in connection with the Plan. Such determinations of the Committee shall be
conclusive and shall bind all parties. Transactions under this plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
Section 16 of the Securities Exchange Act of 1934 ("Rule 16b-3"). To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date approved by the shareholders of
the Company. No option shall be granted under the Plan after the day of the
annual meeting of stockholders held in 2002, but options previously granted may
extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. The maximum number of Shares that may be delivered
upon the exercise of options granted under the Plan shall be 100,000. If any
option
-1-
<PAGE> 2
granted under the Plan terminates without having been exercised in full, the
number of Shares as to which such option was not exercised shall be available
for future grants within the foregoing limit.
(b) Shares to be Delivered. Shares delivered under the Plan after April 7,
1998 shall be previously issued Shares acquired by the Company and held in
treasury. No fractional Shares shall be delivered under the Plan.
(c) Changes in Stock; Restructuring, etc. In the event of a stock dividend,
stock split or combination of shares, the number and kind of shares of stock or
securities of the Company subject to options then outstanding or subsequently
granted under the Plan, the maximum number of shares or securities that may be
delivered under the Plan, the exercise price, and other relevant provisions
shall be appropriately adjusted by the Committee. In the event of any other
recapitalization, reorganization, extraordinary dividend or distribution or
restructuring transaction affecting the Common Stock, the number of shares
issuable under this Plan shall be subject to such adjustment as the Committee
may deem appropriate, and the number of shares issuable pursuant to any option
theretofore granted (whether or not then exercisable) and/or the option price
per share of such option shall be subject to such adjustment as the Committee
may deem appropriate with a view toward preserving the value of such option.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan ("Non-Employee
Directors") shall be those directors who are not present or former employees of
the Company or of any subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options (Reflects 2 for 1 stock split effective June, 1997).
In addition to options granted prior to the amendment of the Plan on
April 8, 1998, on June 8, 1993 and on the date of each subsequent annual
meeting, each Non-Employee Director who has served since at least the previous
annual meeting and is continuing in office and each newly elected Non-Employee
Director shall be awarded an option covering 2,000 Shares. For purposes of this
paragraph, each Non-Employee Director elected to office by the Board since the
then last annual meeting shall be treated as a newly elected Non-Employee
Director.
(b) Exercise Price. The exercise price of each option shall be 100% of the
fair market value per Share at the time the option is granted. In no event,
however, shall the option price be less, in the case of an original issue of
authorized stock, than par value per share. For purposes of this paragraph, the
fair market value of a Share on any date shall be the last sale price of a share
of Common Stock on such day as reflected in the New York Stock Exchange
Composite Transactions Index or, if there was no such reported price on such
day, the latest day prior thereto on which there was such a reported price.
<PAGE> 3
(c) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the option was granted.
(d) Exercise of Options.
(1) Each option shall become exercisable to the full extent of all
Shares covered thereby one year after the date of the grant.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by
(i) any documentation required by the Committee and (ii) payment in
full for the number of Shares for which the option is exercised.
(3) If tax withholding is required under applicable federal, state or
local tax laws, the Committee may withhold from the number of Shares
otherwise issuable to the individual upon exercise a number of Shares
with a fair market value equal to any federal, state or local
withholding tax requirements due upon the exercise of the option.
(4) If an option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has
been transferred by the director's will or the applicable laws of
descent and distribution, the Company shall be under no obligation to
deliver Shares pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons exercising the
option.
(e) Payment for and Delivery of Shares. Shares purchased under the Plan
shall be paid for as follows: (i) by certified or bank check or other instrument
or means acceptable to the Committee (in accordance with guidelines established
for this purpose), (ii) through the delivery of shares of Company common stock
(which, in the case of shares acquired from the Company, have been outstanding
for at least six months) having a fair market value on the last business day
preceding the date of exercise equal to the purchase price, (iii) by delivery of
an unconditional and irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price or (iv) by any
combination of the permissible forms of payment.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any Shares (1) until, in the
opinion of the Company's counsel, all applicable federal, state and foreign laws
and regulations have been complied with, and (2) if the Company's common stock
outstanding is at the time listed on any stock exchange, until the Shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (3) until all
<PAGE> 4
other legal matters in connection with the issuance and delivery of such Shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Shares bear an appropriate legend restricting transfer.
(f) Nontransferability of Options. No option may be transferred other than
by will or by the laws of descent and distribution, and during a director's
lifetime an option may be exercised only by him or her.
(g) Death, Retirement and Disability of a Director. Upon the death,
retirement from the Board after attaining age 65 with at least 10 years of
service as a director or disability (as determined by the Committee) of any
director granted options under this Plan, all options not then exercisable shall
terminate. All options held by the director that are exercisable immediately
prior to such event may be exercised by such director or by his or her executor
or administrator, or by the person or persons to whom the option is transferred
by will or the applicable laws of descent and distribution, at any time within
three years after such event. After completion of that three-year period, such
options shall terminate to the extent not previously exercised. Notwithstanding
the foregoing, options held by a director who dies in the third year following
such retirement or disability shall remain exercisable for one year following
death. In no event shall any option referred to in this paragraph 6(g) be
exercisable beyond its stated term, if earlier.
(h) Other Termination of Status of Director. If a director's service with
the Company terminates for any reason other than death, retirement or disability
as specified in paragraph 6(g), all options held by the director that are not
then exercisable shall terminate. Options that are exercisable on the date of
termination shall continue to be exercisable for a period of three months (or
six months in the case of options granted after April 8, 1998), but not beyond
their stated term if earlier. After completion of such three-month or six month
period, such options shall terminate to the extent not previously exercised,
expired or terminated.
(i) Mergers, etc. In the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition of
substantially all the Company's outstanding Stock by a single person or entity
or by a group of persons and/or entities acting in concert, or in the event of a
sale of all or substantially all assets or a dissolution or liquidation of the
Company, all options hereunder will terminate; provided, that 20 days prior to
the effective date of any such merger, consolidation, sale, dissolution, or
liquidation, all options outstanding hereunder that are not otherwise
exercisable shall become immediately exercisable.
7. EFFECT, TERMINATION AND AMENDMENT
The Committee may at any time terminate the Plan as to any further grants
of options. The Board may at any time or times amend the Plan for any purpose
which may
<PAGE> 5
at the time be permitted by law; provided, that except to the extent
expressly required or permitted by the Plan, no such amendment will, without the
approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Rule 16b-3.
<PAGE> 1
EXHIBIT 10.12
THE TJX COMPANIES, INC.
DEFERRED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. INTRODUCTION. Reference is made to The TJX Companies, Inc.
Retirement Plan for Directors (formerly the Zayre Corp. Retirement Plan for
Directors) (the "Directors Retirement Plan"), under which non-employee members
of the board of directors of The TJX Companies, Inc. (the "Company") earned
benefits payable in accordance with the terms of the Directors Retirement Plan.
The Deferred Stock Plan for Non-Employee Directors set forth herein (as the same
may be amended, the "Plan") has been adopted (i) to replace benefits under the
Directors Retirement Plan with a commitment on the part of the Company to
deliver to eligible directors or their beneficiaries, upon the director's
retirement or earlier termination, common stock of the Company ("Stock") in an
amount and subject to the terms set forth below, and (ii) to provide for
continuing awards of deferred Stock to eligible directors on the terms set forth
below. A maximum of 50,000 shares of Stock (appropriately adjusted by the
Administrator for mergers, consolidations, stock splits, stock dividends and
similar changes in capitalization affecting the Stock that occur after January
1, 1998) are authorized for delivery under the Plan.
2. ELIGIBILITY. Participants in the Plan (each, a "Participant") shall
consist of the individuals listed on Exhibit A hereto and each other individual
who from time to time after January 1, 1998 serves as a member of the Board of
Directors of the Company. No individual who is or at any time has been an
employee of the Company or of any company while such company is a direct or
indirect subsidiary of the Company shall be eligible to participate in the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Executive
Compensation Committee of the Board of Directors of the Company, or its delegate
(the "Administrator"). The Administrator shall have full discretion, consistent
with the terms of the Plan, to interpret the Plan and make all determinations
hereunder.
4. CONVERSION OF EXISTING BENEFITS. Each Participant listed on Exhibit
A, each of whom has accrued a benefit under the Directors Retirement Plan, shall
have an initial credit under the Plan equal to the number of shares set forth
opposite such Participant's name on Exhibit A. Units representing such shares
shall be credited to the Participant's Account in accordance with paragraph 5
below.
5. ACCOUNT. For each Participant, there shall be maintained on the
books of the Company a memorandum account (the "Account") reflecting the
Participant's right to receive shares of Stock in the future. In the case of a
Participant listed on Exhibit A, the Account shall have an opening balance as of
January 1, 1998 equal to the number of
-1-
<PAGE> 2
shares specified in Exhibit A. Thereafter, there shall be credited to the
Account of each Participant who is elected a director at (or if previously
elected, continues as a director after) each annual meeting of the stockholders
of the Company a number of units equal to $10,000 divided by the closing price
of a share of Stock on the date of such annual meeting. The number of share
units credited to a Participant's Account shall be appropriately adjusted by the
Administrator for mergers, consolidations, stock splits, stock dividends and
similar changes in capitalization affecting the Stock that occur after the date
such share units are credited to the Account. In the case of any cash dividend
for which the ex-dividend date occurs after the date share units are credited to
an Account, there shall be added to the Account a number of share units equal to
the dividend that would have been paid on the shares represented by the units
credited to the Account (before application of this sentence) had those shares
been outstanding, divided by the closing price of one share of Stock on the date
the dividend is paid. The share units reflected on the books of the Company as
credited to a Participant's Account shall be "phantom" or notional shares only
and shall not entitle the Participant to any voting rights or to any dividend or
distribution rights except as expressly set forth herein. Nothing herein shall
obligate the Company to issue or set aside shares of Stock, in trust or
otherwise, to meet its contractual obligations under the Plan prior to
distribution of a Participant's benefit.
6. DELIVERY OF STOCK. As soon as practicable following the earlier of a
Change of Control (as defined in the Company's 1986 Stock Incentive Plan as from
time to time amended and in effect) or a termination for any reason (including
death) of a Participant's service as a director of the Company, in each case
occurring after January 1, 1998, the Company shall deliver to the Participant
(or in the event of the Participant's death, to his or her designated
beneficiary) a number of shares of Stock equal to the number of whole share
units credited to the Participant's Account, plus cash equal to the fair market
value of any fractional share units credited to the Account. The Company may
withhold such required taxes (if any), as the Administrator determines as a
precondition to the delivery of any shares or the payment of any cash hereunder.
Shares of Stock delivered under the Plan shall consist of treasury shares.
7. DESIGNATION OF BENEFICIARY. A Participant may at any time designate
a beneficiary or beneficiaries to receive any shares or cash remaining to be
paid hereunder at the time of the Participant's death. Any such designation or
change in designation shall be effective only if made in writing, in form
acceptable to the Administrator, and received by the Administrator prior to the
Participant's death. In the absence of an effective beneficiary designation
hereunder, any amounts payable hereunder upon the Participant's death shall be
paid to his or her estate.
8. NO ASSIGNMENT; NATURE OF RIGHTS. Rights under the Plan are not
transferable or subject to assignment or alienation of any kind. The obligations
of the Company under the Plan are unfunded contractual obligations only, and the
rights, if any, of a Participant or beneficiary to any benefits or distributions
hereunder shall be no greater than those of an unsecured general creditor of the
Company.
<PAGE> 3
9. BINDING ON SUCCESSORS. The obligations of the Company under the Plan
shall be binding on any successor to the Company or to its business, by merger
or otherwise.
10. AMENDMENT AND TERMINATION. The Company by vote of its Board of
Directors may at any time terminate the Plan or at any time and from time to
time amend the Plan; provided, that no such action of termination or amendment
shall (except to the extent consistent with an adjustment to Accounts described
in paragraph 5) reduce the number of share units credited to a Participant's
Account immediately prior to the effective date of such termination or
amendment. Upon termination of the Plan, the Administrator shall promptly
distribute (in whole shares of Stock and cash in lieu of fractional shares) to
each Participant the balance in his or her Account. In all events the Plan will
terminate when the last Account is distributed.
11. GOVERNING LAW. The Plan shall be construed and administered in
accordance with the laws of the State of Delaware.
<PAGE> 4
EXHIBIT A
NAME OF DIRECTOR NUMBER OF SHARES
- ------------------------------------------------------------------
Phyllis B. Davis 3,574.34
Dennis F. Hightower 508.60
John M. Nelson 1,537.34
John F. O'Brien 459.84
Willow B. Shire 625.63
Fletcher H. Wiley 2,065.13
<PAGE> 1
EXHIBIT 11
THE TJX COMPANIES, INC.
DETAILED COMPUTATIONS OF NET INCOME PER COMMON SHARE
BASIC AND DILUTED
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------
January 31, January 25, January 27, January 28, January 29,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
The computation of net income available
and adjusted shares outstanding follows:
Net income $304,815,000 $363,123,000 $ 26,261,000 $ 82,619,000 $124,379,000
Less provision for dividends
on preferred stock in each year 11,668,000 13,741,000 9,407,000 7,156,000 7,156,000
------------ ------------ ------------ ------------ ------------
A) Net income used for basic computation 293,147,000 349,382,000 16,854,000 75,463,000 117,223,000
------------ ------------ ------------ ------------ ------------
Add (where dilutive):
Provision for preferred dividends 11,668,000 13,741,000 93,000 - -
------------ ------------ ------------ ------------ ------------
B) Net income used for diluted computation $304,815,000 $363,123,000 $ 16,947,000 $ 75,463,000 $117,223,000
============ ============ ============ ============ ============
C) Weighted average number of common shares
outstanding, used for basic calculation 160,737,023 150,463,452 144,830,352 146,270,668 146,706,270
Add (where dilutive):
Assumed conversion of:
Convertible preferred stock 12,016,086 23,165,792 532,314 - -
Stock options 2,052,983 1,695,806 28,284 648,232 1,554,686
------------ ------------ ------------ ------------ ------------
D) Adjusted shares outstanding, used for
fully diluted computation 174,806,092 175,325,050 145,390,950 146,918,900 148,260,956
============ ============ ============ ============ ============
Earnings per share:
Basic (A divided by C) $1.82 $2.32 $0.12 $0.52 $0.80
Diluted (B divided by D) $1.74 $2.07 $0.12 $0.51 $0.79
</TABLE>
Note: Share amounts above are presented as if the 2 for 1 stock split had been
effective for each period.
<PAGE> 1
PORTIONS OF THE TJX COMPANIES, INC.
1997 Annual Report
<PAGE> 2
<TABLE>
<CAPTION>
STORE LOCATIONS SHAREHOLDER INFORMATION
<S> <C>
T.J. Maxx Marshalls Transfer Agent and Registrar
- ----------------------------------------------------- Common and Series E Preferred Stock
Alabama 9 2 Boston EquiServe
Arizona 8 4 P.O. Box 8200
Arkansas 4 - Boston, Massachusetts 02266-8200
California 45 65 1-800-426-5523
Colorado 8 3
Connecticut 24 19 Trustees
Delaware 3 2 Public Debentures
District of Columbia 1 - 6 5\8% Promissory Notes
Florida 40 41 7% Promissory Notes
Georgia 21 19 The First National Bank of Chicago
Idaho 1 - Chicago, Illinois
Illinois 31 32
Indiana 8 4 Auditors
Iowa 4 1 Coopers & Lybrand L.L.P.
Kansas 4 2
Kentucky 7 1 Independent Counsel
Louisiana 4 5 Ropes & Gray
Maine 5 1
Maryland 7 13 Form 10-K
Massachusetts 40 38
Michigan 27 6 Information concerning the Company's operations
Minnesota 12 9 and financial position is provided in this report
Mississippi 2 - and in the Form 10-K filed with the Securities and
Missouri 6 7 Exchange Commission. A copy of the 10-K may be
Montana 1 - obtained without charge by writing or calling:
Nebraska 2 1 The TJX Companies, Inc.
Nevada 3 3 Investor Relations
New Hampshire 9 6 770 Cochituate Road
New Jersey 16 27 Framingham, Massachusetts 01701
New Mexico 1 - (508) 390-2323
New York 39 35
North Carolina 18 10 Investor Relations
North Dakota 3 - Analysts and investors seeking financial data about
Ohio 33 7 the Company are asked to contact:
Oklahoma 3 1 Sherry Lang, Investor and Public Relations Director
Oregon 5 3 (508) 390-2323
Pennsylvania 29 16 Financial information is also available on our web site
Puerto Rico - 12 at www.tjx.com
Rhode Island 5 3
South Carolina 10 4 Annual Meeting
South Dakota 1 - The 1998 annual meeting will be held at 11:00 a.m. on
Tennessee 13 7 Tuesday, June 2, 1998 at BankBoston, Lobby Auditorium,
Texas 23 29 1st Floor, 100 Federal Street, Boston, Massachusetts
Utah 4 -
Vermont 2 - Executive Offices
Virginia 21 18 Framingham, Massachusetts 01701
Washington 7 4
West Virginia 1 - For the Store Nearest You, Call:
Wisconsin 10 1 T.J. Maxx: 1-800-2-TJMAXX
- -----------------------------------------------------
Total Stores 580 461 Marshalls: 1-800-MARSHALLS
=====================================================
Winners: 1-800-646-WINN (in Canada)
Winners Apparel Ltd. operates 76 stores in Canada.
HomeGoods operates 23 stores in the United States. HomeGoods: 1-800-614-HOME
T.K. Maxx operates 30 stores in the United Kingdom,
and 1 store in the Republic of Ireland. T.K. Maxx: (01923) 475797 (in the U.K.)
</TABLE>
<PAGE> 3
The TJX Companies, Inc.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
January 31, January 25, January 27,
Dollars in Thousands Except Per Share Amounts 1998 1997 1996
==========================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Net sales $7,389,069 $6,689,410 $3,975,115
- --------------------------------------------------------------------------------------------------------------------------
Cost of sales, including buying and occupancy costs 5,676,541 5,198,783 3,143,257
Selling, general and administrative expenses 1,185,755 1,087,137 669,876
Store closing costs - - 35,000
Interest expense, net 4,502 37,350 38,186
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes and extraordinary item 522,271 366,140 88,796
Provision for income taxes 215,679 152,314 37,207
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before extraordinary item 306,592 213,826 51,589
Discontinued operations:
Income from discontinued operations,
net of income taxes - 29,361 9,710
Gain (loss) on disposal of discontinued
operations, net of income taxes - 125,556 (31,700)
- --------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 306,592 368,743 29,599
Extraordinary (charge), net of income taxes (1,777) (5,620) (3,338)
- --------------------------------------------------------------------------------------------------------------------------
Net income 304,815 363,123 26,261
Preferred stock dividends 11,668 13,741 9,407
- --------------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $ 293,147 $ 349,382 $ 16,854
==========================================================================================================================
Basic earnings per share:
Income from continuing operations
before extraordinary item $1.83 $1.33 $ .29
Net income $1.82 $2.32 $ .12
Weighted average common shares - basic 160,737,023 150,463,452 144,830,352
Diluted earnings per share:
Income from continuing operations
before extraordinary item $1.75 $1.22 $ .29
Net income $1.74 $2.07 $ .12
Weighted average common shares - diluted 174,806,092 175,325,050 145,390,950
Cash dividends per share $ .20 $ .14 $.245
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 4
The TJX Companies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
=====================================================================================================================
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 404,369 $ 474,732
Accounts receivable 60,735 57,275
Merchandise inventories 1,190,170 1,059,505
Prepaid expenses 27,357 16,379
Net current assets of discontinued operations - 54,451
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 1,682,631 1,662,342
- ---------------------------------------------------------------------------------------------------------------------
Property at cost:
Land and buildings 108,729 103,067
Leasehold costs and improvements 480,964 428,836
Furniture, fixtures and equipment 611,470 527,710
- ---------------------------------------------------------------------------------------------------------------------
1,201,163 1,059,613
Less: accumulated depreciation and amortization 515,027 419,129
- ---------------------------------------------------------------------------------------------------------------------
686,136 640,484
Other assets 36,645 42,259
Goodwill and tradename, net of amortization 204,220 216,127
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $2,609,632 $2,561,212
=====================================================================================================================
Liabilities
Current liabilities:
Current installments of long-term debt $ 23,360 $ 27,140
Accounts payable 582,791 533,945
Accrued expenses and other current liabilities 611,506 621,211
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,217,657 1,182,296
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt, exclusive of current installments 221,024 244,410
Deferred income taxes 6,859 7,320
Shareholders' Equity
Preferred stock at face value, authorized 5,000,000 shares, par value $1,
issued and outstanding cumulative convertible stock of:
727,300 and 1,500,000 shares of 7% Series E 72,730 150,000
Common stock, authorized 300,000,000 shares, par value $1,
issued and outstanding 159,901,247 and 79,576,438 shares 159,901 79,576
Additional paid-in capital 202,053 429,017
Retained earnings 729,408 468,593
- ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,164,092 1,127,186
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,609,632 $2,561,212
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 5
The TJX Companies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
January 31, January 25, January 27,
In Thousands 1998 1997 1996
===========================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 304,815 $ 363,123 $ 26,261
Adjustments to reconcile net income to net cash
provided by operating activities:
(Income) from discontinued operations,
net of income taxes - (29,361) (9,710)
(Gain) loss on disposal of discontinued operations - (125,556) 31,700
Extraordinary charge 1,777 5,620 3,338
Depreciation and amortization 124,891 126,830 79,232
(Gain) on sale of other assets (5,992) - -
Property disposals and asset write-downs 18,778 25,399 3,489
Other, net 2,064 (732) (382)
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
(Increase) in accounts receivable (3,460) (2,131) (233)
(Increase) decrease in merchandise inventories (130,665) 198,983 211,168
(Increase) decrease in prepaid expenses (10,978) 27 6,872
Increase (decrease) in accounts payable 48,846 95,677 (147,013)
Increase in accrued expenses
and other current liabilities 39,184 11,928 63,975
(Decrease) in deferred income taxes (3,793) (5,344) (14,143)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 385,467 664,463 254,554
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Property additions (192,382) (119,153) (105,864)
Proceeds from sale of other assets 15,697 - -
Acquisition of Marshalls, net of cash acquired - (49,327) (378,733)
Proceeds from (adjustments to) sale
of discontinued operations (33,190) 222,800 3,000
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (209,875) 54,320 (481,597)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on short-term debt - - (20,000)
Proceeds from borrowings of long-term debt - - 574,861
Principal payments on long-term debt (27,179) (46,506) (31,271)
Prepayment of long-term debt - (455,560) -
Payment of debt issue expenses - - (14,776)
Proceeds from sale and issuance of common stock, net 15,471 34,395 1,040
Stock repurchased (245,198) - -
Cash dividends paid (43,500) (35,019) (44,886)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (300,406) (502,690) 464,968
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) continuing operations (124,814) 216,093 237,925
Net cash provided by (used in) discontinued operations 54,451 49,413 (70,268)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (70,363) 265,506 167,657
Cash and cash equivalents at beginning of year 474,732 209,226 41,569
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 404,369 $ 474,732 $ 209,226
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 6
The TJX Companies, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Preferred Common Additional
Stock, Stock, Par Paid-in Retained
In Thousands Face Value Value $1 Capital Earnings Total
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, January 28, 1995 $107,500 $ 72,401 $ 267,937 $159,114 $ 606,952
Net income - - - 26,261 26,261
Cash dividends:
Preferred stock - - - (9,407) (9,407)
Common stock - - - (35,479) (35,479)
Issuance of cumulative
convertible preferred stock:
Series D 25,000 - - - 25,000
Series E 150,000 - - - 150,000
Issuance of common stock under
stock incentive plans and
related tax benefits - 85 754 - 839
Other - - 468 - 468
- -------------------------------------------------------------------------------------------------------------------------
Balance, January 27, 1996 282,500 72,486 269,159 140,489 764,634
Net income - - - 363,123 363,123
Cash dividends:
Preferred stock - - - (13,741) (13,741)
Common stock - - - (21,278) (21,278)
Conversion of cumulative preferred
stock into common stock:
Series A (25,000) 1,190 23,810 - -
Series C (82,500) 3,178 79,322 - -
Series D (25,000) 1,350 23,650 - -
Issuance of common stock under
stock incentive plans and
related tax benefits - 1,372 32,786 - 34,158
Other - - 290 - 290
- -------------------------------------------------------------------------------------------------------------------------
Balance, January 25, 1997 150,000 79,576 429,017 468,593 1,127,186
Net income - - - 304,815 304,815
Cash dividends:
Preferred stock - - - (11,668) (11,668)
Common stock - - - (31,832) (31,832)
Conversion of cumulative Series E
preferred stock into common stock (77,020) 8,315 68,705 - -
Stock repurchase:
Preferred (250) - - (500) (750)
Common - (8,528) (235,920) - (244,448)
Stock split, two-for-one - 79,823 (79,823) - -
Issuance of common stock under
stock incentive plans and
related tax benefits - 715 15,719 - 16,434
Other - - 4,355 - 4,355
- -------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1998 $ 72,730 $159,901 $ 202,053 $729,408 $1,164,092
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 7
The TJX Companies, Inc.
Selected Information by Major Business Segment
The following selected information by major business segment reflects the
results of Marshalls in the off-price family apparel segment for the periods
following its acquisition on November 17, 1995.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
January 31, January 25, January 27,
In Thousands 1998 1997 1996
========================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Net sales:
Off-price family apparel stores $7,290,959 $6,602,391 $3,896,710
Off-price home fashion stores 98,110 87,019 78,405
- ------------------------------------------------------------------------------------------------------------------------
$7,389,069 $6,689,410 $3,975,115
========================================================================================================================
Operating income (loss):
Off-price family apparel stores (1) $ 596,908 $ 463,419 $ 187,974
Off-price home fashion stores (2) (8,615) (14,018) (13,375)
- ------------------------------------------------------------------------------------------------------------------------
588,293 449,401 174,599
General corporate expense (3) 58,906 43,297 45,003
Goodwill amortization 2,614 2,614 2,614
Interest expense, net 4,502 37,350 38,186
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes and extraordinary item $ 522,271 $ 366,140 $ 88,796
========================================================================================================================
Identifiable assets:
Off-price family apparel stores $2,033,945 $1,801,779 $2,116,127
Off-price home fashion stores 39,074 36,493 46,861
Corporate, primarily cash and goodwill (4) 536,613 668,489 382,137
- ------------------------------------------------------------------------------------------------------------------------
$2,609,632 $2,506,761 $2,545,125
========================================================================================================================
Capital expenditures:
Off-price family apparel stores $ 190,720 $ 104,955 $ 87,037
Off-price home fashion stores 1,662 731 7,932
Corporate (4) - 13,467 10,895
- ------------------------------------------------------------------------------------------------------------------------
$ 192,382 $ 119,153 $ 105,864
========================================================================================================================
Depreciation and amortization:
Off-price family apparel stores $ 115,967 $ 113,479 $ 69,596
Off-price home fashion stores 3,186 2,104 1,777
Corporate, including goodwill (4) 5,738 11,247 7,859
- ------------------------------------------------------------------------------------------------------------------------
$ 124,891 $ 126,830 $ 79,232
========================================================================================================================
</TABLE>
(1) The period ended January 27, 1996 includes a charge of $35 million relating
to the closing of certain T.J. Maxx stores.
(2) The periods ended January 31, 1998, January 25, 1997 and January 27, 1996
include a charge of $1.5 million, $3.1 million and $3.8 million,
respectively, for certain store closings and other restructuring costs
relating to HomeGoods.
(3) General corporate expense for the fiscal year ended January 31, 1998,
includes a pre-tax charge of $15.2 million for costs associated with a
deferred compensation arrangement with the Company's Chief Executive
Officer and a pre-tax gain of $6 million for the sale of Brylane, Inc.
common stock. General corporate expense for the fiscal years ended January
25, 1997 and January 27, 1996 include the net operating results of T.K.
Maxx. Fiscal year 1998 includes T.K. Maxx results in off-price family
apparel stores.
(4) Periods prior to January 31, 1998 include assets and activity of T.K. Maxx.
Fiscal year 1998 includes T.K. Maxx in off-price family apparel stores.
20
<PAGE> 8
The TJX Companies, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Accounting Policies
Fiscal Year: The Company's fiscal year ends on the last Saturday in January. The
fiscal year ended January 31, 1998 (fiscal 1998) included 53 weeks. The fiscal
years ended January 25, 1997 and January 27, 1996 each included 52 weeks.
Basis of Presentation: The consolidated financial statements of The TJX
Companies, Inc. include the financial statements of all the Company's
wholly-owned subsidiaries, including its foreign subsidiaries. The financial
statements for the applicable periods present the Company's former Chadwick's
and Hit or Miss divisions as discontinued operations. The notes pertain to
continuing operations except where otherwise noted.
The preparation of the financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent liabilities, at the date of the financial statements as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents: The Company generally considers highly liquid investments with
an initial maturity of three months or less to be cash equivalents. The
Company's investments are primarily high grade commercial paper, institutional
money market funds and time deposits with major banks. The fair value of cash
equivalents approximates carrying value.
Merchandise Inventories: Inventories are stated at the lower of cost or market.
The Company uses the retail method for valuing inventories on the first-in
first-out basis.
Depreciation and Amortization: For financial reporting purposes, the Company
provides for depreciation and amortization of property principally by the use of
the straight-line method over the estimated useful lives of the assets.
Buildings are depreciated over 33 years, leasehold costs and improvements are
generally amortized over the lease term or their estimated useful life,
whichever is shorter, and furniture, fixtures and equipment are depreciated over
3 to 10 years. Maintenance and repairs are charged to expense as incurred. Upon
retirement or sale, the cost of disposed assets and the related depreciation are
eliminated and any gain or loss is included in net income. Debt discount and
related issue expenses are amortized over the lives of the related debt issues.
Pre-opening costs are charged to operations within the fiscal year that a new
store or facility opens.
Goodwill and Tradename: Goodwill is primarily the excess of the purchase price
incurred over the carrying value of the minority interest in the Company's
former 83%-owned subsidiary. The minority interest was acquired pursuant to the
Company's fiscal 1990 restructuring. In addition, goodwill includes the excess
of cost over the estimated fair market value of the net assets of Winners
Apparel Ltd., acquired by the Company effective May 31, 1990. Goodwill totaled
$82.0 million, net of amortization, as of January 31, 1998 and is being
amortized over 40 years. Annual amortization of goodwill was $2.6 million in
fiscal years 1998, 1997 and 1996. Cumulative amortization as of January 31, 1998
and January 25, 1997 was $22.5 million and $19.9 million, respectively.
Tradename is the value assigned to the name "Marshalls" as a result of the
Company's acquisition of the Marshalls chain on November 17, 1995. The final
allocation of the purchase price of Marshalls, pursuant to the purchase
accounting method, resulted in $130.0 million being allocated to the tradename.
The value of the tradename was determined by the discounted present value of
assumed after-tax royalty payments, offset by a reduction for its pro-rata share
of the total negative goodwill acquired (see Note A). The tradename is deemed to
have an indefinite life and accordingly is being amortized over 40 years.
Amortization expense was $3.4 million and $3.7 million for fiscal years 1998 and
1997, respectively. Cumulative amortization as of January 31, 1998 and January
25, 1997 was $7.8 million and $4.4 million, respectively.
Impairment of Long-Lived Assets: During fiscal 1997, the Company adopted the
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Company periodically reviews the value of its property and intangible assets
in relation to the current and expected operating results of the related
business segments in order to assess whether there has been a permanent
impairment of their carrying values.
21
<PAGE> 9
As a result of the acquisition of Marshalls, and the development of a plan
for the realignment of the distribution center facilities at T.J. Maxx and
Marshalls, certain distribution center assets have been written down to their
net estimated realizable value in anticipation of their sale or disposal. The
plan is expected to be implemented over the next several years. The amounts
impacting Marshalls have been reflected in the final allocation of purchase
price (see Note A) and those related to T.J. Maxx have been reflected as a $12.2
million impairment charge which has been recorded in selling, general and
administrative expenses for fiscal 1997.
Advertising Costs: The Company expenses advertising costs during the fiscal year
incurred.
Earnings Per Share: Beginning with the fourth quarter of fiscal 1998, the
Company began to report earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings per Share." SFAS No. 128
requires the presentation of "basic" and "diluted" earnings per share. Basic
earnings per share is based on a simple weighted average of common stock
outstanding. Diluted earnings per share includes the dilutive effect of
convertible securities and other common stock equivalents. See Note F for a
computation of basic and diluted earnings per share. All earnings per share
amounts discussed refer to diluted earnings per share unless otherwise
indicated.
Foreign Currency Translation: The Company's foreign assets and liabilities are
translated at the year-end exchange rate and income statement items are
translated at the average exchange rates prevailing during the year. A large
portion of the Company's net investment in foreign operations is hedged with
foreign currency swap agreements and forward contracts. The translation
adjustment associated with the foreign operations and the related hedging
instruments are included in shareholders' equity as a component of additional
paid-in capital. Cumulative foreign currency translation adjustments included in
shareholders' equity amounted to losses of $1.7 million as of January 31, 1998
and $1.0 million as of January 25, 1997.
New Accounting Standards: During 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This statement specifies the computation,
presentation and disclosures for components of comprehensive income. The
Company will implement the standard in its fiscal year ending January 30, 1999.
The adoption of this standard will not have a material impact on the
consolidated financial statements.
During 1997, the Financial Accounting Standards Board (FASB) also issued
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosure about
Segments of an Enterprise and Related Information." This statement changes the
manner in which public companies report information about their operating
segments. SFAS No. 131, which is based on the management approach to segment
reporting, establishes requirements to report selected segment information
quarterly and to report entity-wide disclosures about products and services,
major customers, and the geographic locations in which the entity holds assets
and reports revenue. The Company is currently evaluating the effects of this
change on its reporting of segment information. The Company will adopt SFAS No.
131 in its fiscal year ending January 30, 1999.
Other: Certain amounts in prior years' financial statements have been
reclassified for comparative purposes.
The Company is in the process of converting all necessary systems to be
year 2000 compliant. The Company expects to spend an aggregate of approximately
$10 million on conversion costs, primarily in fiscal 1998 and 1999.
A. Dispositions and Acquisitions
Sale of Chadwick's of Boston: During the fourth quarter of fiscal 1997, the
Company sold its Chadwick's of Boston catalog division to Brylane, L.P. Proceeds
of approximately $300 million included cash, a 10 year $20 million Convertible
Subordinated Note at 6% interest (the "Brylane note") and Chadwick's consumer
credit card receivables. During the second quarter of fiscal 1998, the Company
paid Brylane $28.8 million as an estimated adjustment to the cash proceeds based
on the closing balance sheet of Chadwick's as of December 7, 1996 as prepared by
the Company. During the quarter ended October 1997, the Company paid Brylane
$4.4 million upon agreement of the final closing balance sheet of Chadwick's as
of December 7, 1996. The results of Chadwick's for all periods prior to December
7, 1996 have been reclassified to discontinued operations. The cash provided by
discontinued operations for fiscal 1998 represents the collection of the
remaining balance of the Chadwick's consumer credit card receivables outstanding
as of January 25, 1997. During the quarter ended October 1997, the Company
converted a portion of the Brylane note into 352,908 shares of Brylane, Inc.
common stock which it sold for $15.7 million. This sale resulted in an
22
<PAGE> 10
after-tax gain of $3.6 million, or $.02 per share. Subsequent to the end of the
year, the Company converted an additional portion of the Brylane note into
258,836 shares of Brylane, Inc. common stock. The Company donated 181,818 of
these shares to the Company's charitable foundation and sold the remaining
77,018 shares during the first quarter of fiscal 1999. The net after-tax impact
of these transactions on the Company's first quarter results is immaterial.
Pursuant to the acquisition, the Company agreed to purchase certain amounts of
excess inventory from Chadwick's through fiscal 2000.
The Chadwick's of Boston catalog division had net sales of $464.8 million
and recorded income from operations of $29.4 million, net of income taxes of
$20.9 million, for the fiscal year ended January 25, 1997, which represents the
results through December 7, 1996, the effective date of the transaction. The
results of Chadwick's for all periods prior to December 7, 1996 have been
reclassified to discontinued operations. The sale of the division resulted in a
gain on disposal of $125.6 million, net of income taxes of $15.2 million, or
$.72 per share. This gain allowed the Company to utilize its $139 million
capital loss carryforward (see Note G). Interest expense was allocated to
discontinued operations based on their respective proportion of assets to total
assets.
Net sales for Chadwick's were $472.4 million and income from operations was
$12.0 million, net of income taxes of $8.1 million, for fiscal 1996.
Sale of Hit or Miss: Effective September 30, 1995, the Company sold its Hit or
Miss division to members of Hit or Miss management and outside investors. The
Company received $3 million in cash and a 7 year $10 million note with interest
at 10%. During fiscal year ended 1998, the Company forgave a portion of this
note and was released from certain obligations and guarantees which reduced the
note to $5.5 million.
The Hit or Miss division had net sales of $165.4 million and recorded an
operating loss of $2.3 million, net of income tax benefits of $1.4 million, for
the fiscal year ended January 27, 1996, which represents results through July
29, 1995, the measurement date of the transaction. Hit or Miss' operating
results for all prior periods have been reclassified to discontinued operations.
The sale of the division resulted in a loss on disposal of $31.7 million (net of
income tax benefits of $19.8 million) and includes the operating results from
July 30, 1995 through the closing date, as well as the cost to the Company of
closing 69 Hit or Miss stores. Interest expense was allocated to discontinued
operations based on their respective proportion of assets to total assets.
Acquisition of Marshalls: On November 17, 1995, the Company acquired the
Marshalls family apparel chain from Melville Corporation. The Company paid
$424.3 million in cash and $175 million in junior convertible preferred stock.
The total purchase price of Marshalls, including acquisition costs, was $606
million.
The acquisition has been accounted for using the purchase method of
accounting and accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon their fair values at the date
of acquisition. The purchase accounting method allows a one year period to
finalize the fair values of the net assets acquired. No further adjustments to
fair market values are made after that point. The final allocation of purchase
price resulted in the fair value of the net assets acquired exceeding the
purchase price, creating negative goodwill of $86.4 million. The negative
goodwill was allocated to the long-term assets acquired. During fiscal 1998, the
store closing and restructuring reserve established in the final allocation of
the purchase price was reduced by an additional $15.8 million as the Company
closed fewer stores than initially planned. The $15.8 million reserve reduction
was offset by a reduction of $10.0 million to property, plant and equipment and
a reduction of $5.8 million to tradename. The final allocation of purchase price
as adjusted for the reserve adjustment in fiscal 1998 is summarized below:
In Thousands
- -------------------------------------------------------------------------------
Current assets $ 718,627
Property, plant and equipment 227,071
Tradename 130,046
Current liabilities (469,744)
- -------------------------------------------------------------------------------
Total purchase price $ 606,000
===============================================================================
The operating results of Marshalls have been included in the consolidated
results of the Company from the date of acquisition on November 17, 1995. The
following unaudited pro forma consolidated financial results for the fiscal year
ended January 1996, are presented as if the acquisition had taken place at the
beginning of the period:
23
<PAGE> 11
<TABLE>
<CAPTION>
Dollars in Thousands Except Per Share Amounts Fiscal Year Ended January 27, 1996
===================================================================================================================
<S> <C>
Net sales $ 6,085,509
Income from continuing operations $ 20,838
Average shares outstanding for diluted earnings per share calculations 147,557,961
Income from continuing operations per share, diluted $ .02
</TABLE>
The foregoing unaudited pro forma consolidated financial results give effect
to, among other pro forma adjustments, the following:
(i) Interest expense and amortization of the related debt expenses on
debt incurred to finance the acquisition.
(ii) Depreciation and amortization adjustments related to fair market
value of assets acquired.
(iii) Amortization of tradename over 40 years.
(iv) Adjustments to income tax expense related to the above.
(v) Impact of preferred stock issued on earnings per share
calculations.
The foregoing unaudited pro forma consolidated financial information is provided
for illustrative purposes only and does not purport to be indicative of results
that actually would have been achieved had the acquisition taken place on the
first day of the period presented or of future results.
B. Long-Term Debt and Credit Lines
At January 31, 1998 and January 25, 1997, long-term debt, exclusive of current
installments, consisted of the following:
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
===================================================================================================================
<S> <C> <C>
Real estate mortgages, interest at 10.48% maturing November 1, 1998 $ - $ 22,391
- -------------------------------------------------------------------------------------------------------------------
Equipment notes, interest at 11% to 11.25% maturing
December 12, 2000 to December 30, 2001 1,127 2,135
- -------------------------------------------------------------------------------------------------------------------
General corporate debt:
Medium term notes, interest at 5.87% to 7.97%, $15 million maturing on
October 21, 2003 and $5 million on September 20, 2004 20,000 20,000
65\8% unsecured notes, maturing June 15, 2000 100,000 100,000
7% unsecured notes, maturing June 15, 2005 (effective interest rate of 7.02%
after reduction of the unamortized debt discount of $103,000 and $116,000
in fiscal 1998 and 1997, respectively) 99,897 99,884
- -------------------------------------------------------------------------------------------------------------------
Total general corporate debt 219,897 219,884
- -------------------------------------------------------------------------------------------------------------------
Long-term debt, exclusive of current installments $221,024 $244,410
===================================================================================================================
</TABLE>
The aggregate maturities of long-term debt, exclusive of current installments,
at January 31, 1998 are as follows:
<TABLE>
<CAPTION>
General
Corporate
In Thousands Equipment Notes Debt Total
===================================================================================================================
<S> <C> <C> <C>
Fiscal Year
2000 $ 697 $ - $ 697
2001 430 100,000 100,430
2002 - - -
2003 - - -
Later years - 119,897 119,897
- -------------------------------------------------------------------------------------------------------------------
Aggregate maturities of long-term debt, exclusive of current installments $1,127 $219,897 $221,024
===================================================================================================================
</TABLE>
Real estate mortgages are collateralized by land and buildings. While the parent
company is not directly obligated with respect to the real estate mortgages, it
or a wholly-owned subsidiary has either guaranteed the debt or has guaranteed a
lease, if applicable, which has been assigned as collateral for such debt.
On September 16, 1996, pursuant to a call for redemption, the Company
prepaid $88.8 million of its 9 1/2% sinking fund debentures. The Company
recorded an after-tax extraordinary charge of $2.9 million, or $.02 per common
share, related to the early retirement of this debt. The Company paid the
outstanding balance of $8.5 million during fiscal 1998 utilizing an optional
sinking fund payment under the indenture.
In June 1995, the Company filed a shelf registration statement with
the Securities and Exchange Commission which provided for the issuance of up
to $250 million of long-term debt. This shelf registration
24
<PAGE> 12
statement was replaced by a new shelf registration statement filed in fiscal
1997 which currently provides for the issuance of up to $600 million of debt,
common stock or preferred stock. In June 1995, the Company issued $200 million
of long-term notes under the original registration statement; $100 million of
6 5/8 notes due June 15, 2000 and $100 million of 7% notes due June 15, 2005.
The proceeds were used in part to repay short-term borrowings and for general
corporate purposes, including the repayment of scheduled maturities of other
outstanding long-term debt and for new store and other capital expenditures.
On November 17, 1995, the Company entered into an unsecured $875 million
bank credit agreement under which the Company borrowed $375 million on a term
loan basis to fund the cash portion of the Marshalls purchase price. During the
fourth quarter of the fiscal year ended January 25, 1997, the Company prepaid
the outstanding balance of the $375 million term loan and recorded an after-tax
extraordinary charge of $2.7 million, or $.02 per share, for the early
retirement of this debt. The agreement also allowed the Company to borrow up to
an additional $500 million on a revolving loan basis to fund the working capital
needs of the Company. In September 1997, the Company replaced this $500 million
revolving credit agreement with a new five year $500 million revolving credit
facility. The Company recorded an extraordinary charge of $1.8 million
associated with the write-off of deferred financing costs of the former
agreement. The new agreement provides for reduced commitment fees on the unused
portion of the line, as well as lower borrowing costs and has certain financial
covenants which include a minimum net worth requirement, and certain leverage
and fixed charge covenants.
As of January 31, 1998, all $500 million of the revolving credit facility
was available for use. Interest is payable on borrowings at rates equal to or
less than prime. The revolving credit facility capability is used as backup to
the Company's commercial paper program. The Company had no short-term borrowings
under this facility or its commercial paper program during fiscal 1998.
Excluding the Company's foreign subsidiaries, the weighted average interest rate
on the Company's short-term borrowings under the former agreement was 5.81% and
6.25% in fiscal 1997 and 1996, respectively. The Company does not have any
compensating balance requirements under these arrangements. The Company also has
C$30 million of committed lines for its Canadian operation, all of which were
available as of January 31, 1998.
In connection with the $875 million bank credit agreement, during fiscal
1996 the Company prepaid its $45 million real estate mortgage on the Chadwick's
fulfillment center and incurred an extraordinary after-tax charge of $3.3
million in fiscal 1996 on the early retirement of this debt.
C. Financial Instruments
The Company periodically enters into forward foreign exchange contracts to hedge
firm U.S. dollar merchandise purchase commitments made by its Canadian
subsidiary. As of January 31, 1998, the Company had $20.2 million of such
contracts outstanding. The contracts cover commitments for the first quarter of
fiscal 1999 and any gain or loss on the contract will ultimately be reflected in
the cost of the merchandise. Deferred gains and losses on the contracts as of
January 31, 1998 were immaterial.
The Company also has entered into several foreign currency swap and forward
contracts in both Canadian dollars and British pounds sterling. Both the swap
and forward agreements are accounted for as a hedge against the Company's
investment in foreign subsidiaries; thus, foreign exchange gains and losses on
the agreements are recognized in shareholders' equity thereby offsetting
translation adjustments associated with the Company's investment in foreign
operations. The gains or losses on this hedging activity as of January 31, 1998
are immaterial.
The Canadian swap and forward agreements will require the Company to pay
C$41.7 million in exchange for $31.2 million in U.S. currency between October
2003 and September 2004. The British pounds sterling swap and forward agreements
will require the Company to pay (P)59.9 million between October 1999 and
September 2002 in exchange for $94.1 million in U.S. currency.
The agreements contain rights of offset which minimize the Company's
exposure to credit loss in the event of nonperformance by one of the
counterparties. The interest rates payable on the foreign currency swap
agreements are slightly higher than the interest rates receivable on the
currency exchanged, resulting in deferred interest costs which are being
amortized to interest expense over the term of the related agreements. The
premium cost or discount associated with the forward contracts is being amorti
zed over the term of the related agreements and is included with the gain or
loss of the hedging instrument. The unamortized balance of the net deferred
costs was $4.3 million and $4.1 million as of January 31, 1998 and January 25,
1997, respectively.
The counterparties to the exchange contracts and swap agreements are major
international financial institutions. The Company periodically monitors its
position and the credit ratings of the counterparties and does not anticipate
losses resulting from the nonperformance of these institutions.
25
<PAGE> 13
The fair value of the Company's long-term debt, including current
installments, is estimated using discounted cash flow analysis based upon the
Company's current incremental borrowing rates for similar types of borrowing
arrangements. The fair value of long-term debt, including current installments,
at January 31, 1998 is estimated to be $253 million compared to a carrying value
of $244.4 million. These estimates do not necessarily reflect certain provisions
or restrictions in the various debt agreements which might affect the Company's
ability to settle these obligations.
D. Commitments
The Company is committed under long-term leases related to its continuing
operations for the rental of real estate, and fixtures and equipment. T.J. Maxx
leases are generally for a ten year initial term with options to extend for one
or more five year periods. Marshalls leases, acquired in fiscal 1996, have
remaining terms ranging up to twenty-five years. In addition, the Company is
generally required to pay insurance, real estate taxes and other operating
expenses including, in some cases, rentals based on a percentage of sales.
Following is a schedule of future minimum lease payments for continuing
operations as of January 31, 1998:
<TABLE>
<CAPTION>
Operating
In Thousands Leases
==============================================================================
<S> <C>
Fiscal Year
1999 $ 302,177
2000 288,603
2001 260,753
2002 233,513
2003 210,983
Later years 1,006,059
- ------------------------------------------------------------------------------
Total future minimum lease payments $2,302,088
==============================================================================
</TABLE>
The rental expense under operating leases for continuing operations amounted to
$301.9 million, $293.5 million and $162.5 million for fiscal years 1998, 1997
and 1996, respectively. The present value of the Company's operating lease
obligations approximates $1,547.2 million as of January 31, 1998, including
$180.0 million payable in fiscal 1999.
The Company had outstanding letters of credit in the amount of $55.9
million as of January 31, 1998. Letters of credit are issued by the Company
primarily for the purchase of inventory.
E. Stock Compensation Plans
IN THE FOLLOWING NOTE, ALL REFERENCES TO HISTORICAL AWARDS, OUTSTANDING AWARDS
AND AVAILABILITY OF SHARES FOR FUTURE GRANTS UNDER THE COMPANY'S STOCK INCENTIVE
PLAN AND RELATED PRICES PER SHARE HAVE BEEN RESTATED, FOR COMPARABILITY
PURPOSES, FOR THE TWO-FOR-ONE STOCK SPLIT DISTRIBUTED IN JUNE 1997.
The Company has a Stock Incentive Plan under which options and other stock
awards may be granted to certain officers and key employees. The Stock Incentive
Plan, as amended, provides for the issuance of up to 21 million shares with 8.7
million shares available for future grants as of January 31, 1998. The Company
also has a Directors Stock Option Plan under which stock options are granted to
directors who are not otherwise employed by the Company. This plan provides for
the issuance of up to 100,000 shares. There are 61,000 shares available for
future grants under this plan as of January 31, 1998.
Under its stock option plans, the Company has granted options for the
purchase of common stock, generally within ten years from the grant date at
option prices of 100% of market price on the grant date. Most options
outstanding are exercisable at various percentages starting one year after the
grant, while certain options are exercisable in their entirety three years after
the grant date. Options granted to directors become fully exercisable one year
after the date of grant.
A summary of the status of the Company's stock options and related Weighted
Average Exercise Prices ("WAEP"), adjusted for the two-for-one stock split, for
fiscal years ended January 1998, 1997 and 1996 is presented below (shares in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended January
---------------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- --------------------
Shares WAEP Shares WAEP Shares WAEP
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 4,096 $12.20 5,624 $ 9.18 5,389 $ 9.97
Granted 2,169 25.93 1,426 17.44 1,193 6.44
Exercised (878) 10.61 (2,724) 8.89 (164) 7.04
Canceled (134) 14.61 (230) 9.90 (794) 10.63
- ---------------------------------------------------------------------------------------------------------------------
Outstanding, end of year 5,253 $18.07 4,096 $12.20 5,624 $ 9.18
- ---------------------------------------------------------------------------------------------------------------------
Options exercisable, end of year 1,966 1,706 3,496
=====================================================================================================================
</TABLE>
26
<PAGE> 14
The Company realizes an income tax benefit from the exercise or early
disposition of certain stock options. This benefit results in a decrease in
current income taxes payable and an increase in additional paid-in capital. Such
benefits amounted to $6.1 million and $10.2 million for the fiscal years ended
January 31, 1998 and January 25, 1997, respectively. Amounts for fiscal 1996
were immaterial.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation," and continues to apply the provisions of APB Opinion No. 25
"Accounting for Stock Issued to Employees" in accounting for compensation
expense under its stock option plans. The Company grants options at fair market
value on the date of the grant; accordingly, no compensation expense has been
recognized for the stock options issued during fiscal years 1998, 1997 or 1996.
Had compensation expense been determined in accordance with SFAS No. 123, the
Company's income from continuing operations, net income and related earnings per
share amounts for the fiscal years ended January 31, 1998 and January 25, 1997
would have been reduced to the unaudited pro forma amounts indicated below:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------
As Reported Unaudited Pro Forma
------------------------------ ------------------------------
January 31, January 25, January 31, January 25,
----------- ----------- ----------- -----------
Dollars in Thousands Except Per Share Amounts 1998 1997 1998 1997
========================================================================================================================
(53 weeks) (53 weeks)
<S> <C> <C> <C> <C>
Income from continuing operations $306,592 $213,826 $301,129 $211,893
Diluted earnings per share $ 1.75 $ 1.22 $ 1.72 $ 1.21
Net income $304,815 $363,123 $299,352 $361,190
Diluted earnings per share $ 1.74 $ 2.07 $ 1.71 $ 2.06
</TABLE>
For purposes of applying the provisions of SFAS No. 123 for the pro forma
calculations, the fair value of each option grant issued during fiscal 1998 and
1997 is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions: dividend yield 1% and expected volatility
of 38% in both fiscal 1998 and 1997, a risk-free interest rate of 5.8% in fiscal
1998 and 6.67% in fiscal 1997 and expected holding periods of 6 years in both
fiscal periods. The weighted average fair value of options granted during fiscal
1998 and 1997 was $11.05 and $7.75 per share, respectively.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated.
The following table summarizes information about stock options outstanding
as of January 31, 1998 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- --------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Remaining Exercise Exercise
Prices Shares Contract Life Price Shares Price
======================================================================================================================
<S> <C> <C> <C> <C>
$ 5.1250 - $ 7.6875 727 7.2 Years $ 6.36 398 $ 6.31
$ 7.6876 - $12.1875 772 5.8 Years 10.87 772 10.87
$12.1876 - $17.4375 1,591 7.7 Years 16.25 729 14.85
$17.4376 - $21.5000 700 9.2 Years 21.38 67 21.38
$21.5001 - $28.9375 1,463 9.5 Years 28.09 - -
- ----------------------------------------------- -----
Total 5,253 8.0 Years $18.07 1,966 $11.78
=============================================== =====
</TABLE>
During fiscal 1998, a special deferred compensation award was granted to the
Company's Chief Executive Officer initially denominated in 450,000 shares of the
Company's stock with a fair value of $21.375 per share at the date of grant. The
shares vested at the time of the grant and the Company recorded a deferred
compensation charge of $9.6 million at the time of the grant. The executive may
elect to have such grant converted into other investments. The Company does not
anticipate that the shares will be issued and therefore does not consider them
for diluted earnings per share calculations and adjusts the compensation charge
for changes in the market value of the stock. The Company recorded an additional
expense of $5.6 million in fiscal 1998 due to the increase in market value of
the shares from date of grant.
The Company has also issued restricted stock and performance based stock
awards under the Stock Incentive Plan. Restricted stock awards are issued at par
value, or at no cost, and have restrictions which generally lapse over three to
five years from date of grant. As of January 31, 1998, the performance based
stock awards have either vested or been forfeited. The market value in excess of
cost is charged to income ratably over the period during which these awards
vest, such pre-tax charges amounted to $2.7 million in fiscal 1998, $2.5 million
in fiscal 1997 and $0.4 million in fiscal 1996. The market value of the awards
is determined at date of grant for restricted stock awards, and at the date
shares are earned for performance based awards.
27
<PAGE> 15
There has been a combined total of 511,917 shares, 35,000 shares and 20,000
shares for deferred, restricted and performance based awards issued for the
fiscal years ended January 1998, 1997 and 1996, respectively. There were 150,000
and 7,000 shares forfeited for the fiscal years ended January 1998 and January
1996, respectively (no shares were forfeited for the fiscal year ended January
1997). The weighted average market value per share of these stock awards at
grant date was $21.79, $12.00 and $6.44 for fiscal 1998, 1997 and 1996,
respectively.
During fiscal 1998, the Company formed a deferred stock compensation plan
for its outside directors which replaced the Company's retirement plan for
directors. Deferred shares were issued equal to the current obligation under the
retirement plan as of December 31, 1997. Additional share awards valued at
$10,000 will be issued annually to each eligible director. Currently there are
8,771 deferred shares outstanding, actual shares will be issued at retirement.
The Company has 50,000 shares held in treasury from which the Company will issue
such shares.
F. Capital Stock and Earnings Per Share
Capital Stock: The Company distributed a two-for-one stock split, effected in
the form of a 100% stock dividend, on June 26, 1997 to shareholders of record on
June 11, 1997, which resulted in the issuance of 79.8 million shares of common
stock and a corresponding decrease of $79.8 million in additional paid-in
capital. All historical earnings per share amounts have been restated to reflect
the two-for-one stock split. Reference to common stock activity before the
distribution of the split has not been restated unless otherwise noted. All
activity after the distribution date reflects the two-for-one stock split.
In April 1992, the Company issued 250,000 shares of Series A cumulative
convertible preferred stock in a private offering. As of June 1996, pursuant to
a call for redemption, the Series A preferred stock was converted into 1,190,475
shares of common stock.
In August 1992, the Company issued 1,650,000 shares of Series C cumulative
convertible preferred stock in a public offering. As of September 1996, pursuant
to a call for redemption, the Series C preferred stock was converted into
3,177,844 shares of common stock.
On November 17, 1995, the Company issued its Series D and Series E
convertible preferred stock as part of the purchase price for Marshalls. The
250,000 shares of Series D preferred stock, with a face value of $25 million,
carried an annual dividend rate of $1.81 per share and was automatically
converted into 1,349,527 shares of common stock on November 17, 1996.
The shares of Series E preferred stock, with 1,500,000 shares initially
issued at a face value of $150 million, carry an annual dividend rate of $7.00
per share and is mandatorily converted into common shares on November 17, 1998
unless converted earlier. Through January 31, 1998, shareholders converted
770,200 shares of Series E preferred stock into 8.3 million shares of common
stock and 2,500 shares were repurchased by the Company. The Company paid $3.8
million to induce conversion of the preferred shares. The common shares issuable
on conversion of the outstanding Series E preferred stock will vary depending on
the market price of common stock at the time of conversion and ranges from a
minimum of 7.9 million shares to a maximum of 9.4 million shares of common
stock. Based on the market price of the common stock as of January 31, 1998, the
minimum number of shares would be issued. The 727,300 shares of the Company's
outstanding Series E preferred stock at January 31, 1998 has an aggregate
liquidation preference of $72.7 million. There is an aggregate of 9,422,513
common shares reserved for the conversion of Series E preferred stock, the
maximum number of shares that may be issued. The Series E preferred stock is
senior to the common stock of the Company with respect to payment of dividends
and upon liquidation. There are no voting rights for preferred stock unless
dividends are in arrears for a specified number of periods.
Dividends on the outstanding Series E preferred stock are paid quarterly on
the first business day of each calendar quarter, the Company accrues dividends
evenly throughout the year. In addition, the inducement fees paid on the
conversion of the Series E preferred stock during fiscal 1998 have been
classified as preferred dividends. The Company recorded aggregate dividends on
its preferred stock of $11.7 million in fiscal 1998, $13.7 million in fiscal
1997 and $9.4 million in fiscal 1996. The preferred dividends reduce net income
in computing net income available to common shareholders.
During fiscal 1997, the Company replaced the June 1995 shelf registration
statement with another shelf registration statement which currently provides for
the issuance of up to $600 million of debt, common stock or preferred stock.
28
<PAGE> 16
On June 25, 1997, the Company authorized the repurchase of up to $250
million of the Company's common shares and common equivalent shares. During
fiscal 1998, the Company repurchased 8.5 million shares of its stock, totaling
$245.2 million, representing approximately 5% of the Company's outstanding
common shares. In February 1998, the Company completed this buy back program
with a total of 8.7 million shares having been repurchased. At the same time,
the Company announced its intent to repurchase an additional $250 million of the
Company's common stock.
Earnings Per Share: The Company calculates earnings per share in accordance with
SFAS No. 128 which requires the presentation of basic and diluted earnings per
share. The following schedule presents the calculation of basic and diluted
earnings per share for income from continuing operations:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
January 31, January 25, January 27,
1998 1997 1996
=============================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Basic earnings per share:
Income from continuing operations
before extraordinary item $306,592 $213,826 $51,589
Less: preferred stock dividends 11,668 13,741 9,407
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations available
to common shareholders $294,924 $200,085 $42,182
=============================================================================================================================
Weighted average common stock outstanding
for basic earnings per share 160,737,023 150,463,452 144,830,352
Basic earnings per share $1.83 $1.33 $.29
Diluted earnings per share:
Income from continuing operations
available to common shareholders $294,924 $200,085 $42,182
Add back: preferred stock dividends 11,668 13,741 93
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations for
diluted earnings per share calculation $306,592 $213,826 $42,275
=============================================================================================================================
Weighted average common stock outstanding
for basic earnings per share 160,737,023 150,463,452 144,830,352
Assumed conversion of:
Convertible preferred stock 12,016,086 23,165,792 532,314
Stock options 2,052,983 1,695,806 28,284
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares for
diluted earnings per share calculation 174,806,092 175,325,050 145,390,950
=============================================================================================================================
Diluted earnings per share $1.75 $1.22 $.29
</TABLE>
G. Income Taxes
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
January 31, January 25, January 27,
In thousands 1998 1997 1996
=============================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Current:
Federal $172,026 $116,848 $52,306
State 39,200 27,160 12,604
Foreign 8,117 8,079 2,843
Deferred:
Federal (3,432) 33 (25,593)
State (326) 462 (5,361)
Foreign 94 (268) 408
- -----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $215,679 $152,314 $37,207
=============================================================================================================================
</TABLE>
29
<PAGE> 17
The Company had a net deferred tax liability as follows:
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
=================================================================================================================
<S> <C> <C>
Deferred tax assets:
Capital loss carryforward $ - $ 4,500
Foreign net operating loss carryforward 34,554 34,500
Reserve for discontinued operations 6,723 9,397
Reserve for closed stores and restructuring costs 23,571 38,421
Insurance costs not currently deductible for tax purposes 15,049 24,342
Pension, postretirement and employee benefits 34,173 23,267
Leases 9,350 6,478
Other 18,789 17,981
Valuation allowance (34,603) (39,084)
- -----------------------------------------------------------------------------------------------------------------
Total deferred tax assets $107,606 $119,802
- -----------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment $ 14,736 $ 20,096
Safe harbor leases 37,945 44,603
Tradename 48,659 52,302
Other 13,125 10,121
- -----------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities $114,465 $127,122
- -----------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 6,859 $ 7,320
=================================================================================================================
</TABLE>
The Company had a capital loss carryforward of $139 million as of January 27,
1996 which was fully utilized to offset the capital gain recognized on the sale
of Chadwick's.
The Company does not provide for U.S. deferred income taxes on the
undistributed earnings of its foreign subsidiaries as the earnings are
considered to be permanently reinvested. The undistributed earnings of its
foreign subsidiaries as of January 31, 1998 were immaterial.
The Company has a United Kingdom net operating loss carryforward of
approximately $50 million for tax and financial reporting purposes. The United
Kingdom net operating loss does not expire under current United Kingdom tax law.
The Company also has a Puerto Rico net operating loss carryforward of
approximately $49 million at January 31, 1998, for tax and financial reporting
purposes, which was acquired in the Marshalls acquisition and expires in fiscal
1999 through fiscal 2003. Future utilization of these operating loss
carryforwards is dependent upon future earnings of the Company's foreign
subsidiaries.
The Company's worldwide effective tax rate was 41% for the fiscal year
ended January 31, 1998, and 42% for fiscal years ended January 25, 1997 and
January 27, 1996. The difference between the U.S. federal statutory income tax
rate and the Company's worldwide effective income tax rate is summarized as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
January 31, January 25, January 27,
1998 1997 1996
=============================================================================================================
<S> <C> <C> <C>
U.S. federal statutory income tax rate 35% 35% 35%
Effective state income tax rate 5 5 5
Impact of foreign operations - 1 3
All other 1 1 (1)
- -------------------------------------------------------------------------------------------------------------
Worldwide effective income tax rate 41% 42% 42%
=============================================================================================================
</TABLE>
H. Pension Plans and Other Retirement Benefits
The Company has a non-contributory defined benefit retirement plan covering the
majority of full-time U.S. employees. Effective in fiscal 1998, Marshalls
associates are included in the plan with credit for service prior to the
acquisition. Employees who have attained twenty-one years of age and have
completed one year of service are covered under the plan. Benefits are based on
compensation earned in each year of service. The Company also has an unfunded
supplemental retirement plan which covers certain key employees of the Company
and provides additional retirement benefits based on average compensation.
30
<PAGE> 18
Net periodic pension cost (including discontinued operations) of the
Company's defined benefit and supplemental retirement plans includes the
following components:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
January 31, January 25, January 27,
1998 1997 1996
=================================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Service cost $ 8,372 $ 4,699 $ 3,920
Interest cost on projected benefit obligation 8,398 7,266 6,915
Actual return on assets (22,278) (16,981) (15,215)
Net amortization and deferrals 15,459 10,879 9,384
- ---------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 9,951 $ 5,863 $ 5,004
==================================================================================================================================
</TABLE>
Net pension cost includes $0.4 million and $0.5 million allocated to
discontinued operations in fiscal years 1997 and 1996, respectively. The
increase in pension cost for fiscal 1998 is primarily due to the inclusion of
Marshalls associates.
The following table sets forth the funded status of the Company's pension,
defined benefit and supplemental retirement plans (including discontinued
operations) and the amounts recognized in the Company's statements of financial
position:
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
=================================================================================================================================
Accumulated benefit obligation, including vested benefits
of $111,116 and $89,533 in fiscal 1998 and 1997, respectively $ 115,250 $ 93,383
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $ 127,148 $ 100,465
Plan assets at fair market value 110,234 89,704
- ---------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 16,914 10,761
Unrecognized net gain from past experience, different
from that assumed and effects of changes in assumptions 5,243 5,929
Prior service cost not yet recognized in net periodic pension cost (861) (950)
Unrecognized prior service cost (596) (670)
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued pension cost included in accrued expenses $ 20,700 $ 15,070
=================================================================================================================================
</TABLE>
The projected benefit obligation in excess of plan assets as of January 31,
1998, is due to the Company's unfunded supplemental retirement plan.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.0% and 7.5% for fiscal
years 1998 and 1997, respectively. The rate of increase on future compensation
levels was 4.0% in each of the fiscal years 1998 and 1997, and the expected
long-term rate of return on assets was 9.0% in each of the fiscal years 1998 and
1997. The Company's funding policy is to contribute annually an amount allowable
for federal income tax purposes. Pension plan assets consist primarily of fixed
income and equity securities.
The Company's postretirement benefit plan is unfunded and provides limited
postretirement medical and life insurance benefits to associates who participate
in the Company's retirement plan and who retire at age fifty-five or older with
ten or more years of service.
Net periodic postretirement benefit cost of the Company's plan includes the
following components:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
January 31, January 25, January 27,
1998 1997 1996
=================================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Service cost $1,366 $ 671 $ 757
Interest cost on accumulated benefit obligation 1,649 1,081 1,046
Net amortization 749 55 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $3,764 $1,807 $1,803
=================================================================================================================================
</TABLE>
Net periodic postretirement benefit costs include $0.1 million in fiscal year
1997 and $0.3 million in fiscal year 1996 allocated to discontinued operations.
The increase in cost for fiscal 1998 is primarily due to the inclusion of
Marshalls associates.
The components of the accumulated postretirement benefit obligation
(including discontinued operations) and the amount recognized in the Company's
statements of financial position are as follows:
31
<PAGE> 19
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
=================================================================================================================================
<S> <C> <C>
Accumulated postretirement obligation:
Retired associates $ 8,882 $ 7,147
Fully eligible active associates 4,459 4,653
Other active associates 7,832 3,501
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement obligation 21,173 15,301
Unrecognized net (loss) due to change in assumptions (4,341) (1,375)
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefits included in accrued expenses $16,832 $13,926
=================================================================================================================================
</TABLE>
Assumptions used in determining the actuarial present value of the accumulated
postretirement obligation include a discount rate of 7.0% and 7.5% in fiscal
years 1998 and 1997, respectively. Due to the nature of the plan, which limits
the annual benefit to $3,000, the medical inflation assumption, initially set at
4.5% in fiscal 1998 and 5% in fiscal 1997, is gradually reduced to zero. An
increase of 1% in the medical inflation assumption would increase the
postretirement benefit obligation as of January 31, 1998 by approximately $1.7
million. Effective January 1, 1997, Marshalls associates were eligible for the
Company's postretirement medical plan.
The Company also sponsors an employee savings plan under Section 401(k) of
the Internal Revenue Code for all eligible U.S. employees, including Marshalls
associates effective January 1, 1997. Employees may contribute up to 15% of
eligible pay. The Company matches employee contributions up to 5% of eligible
pay at rates ranging from 25% to 50% based upon Company performance. The Company
contributed for all 401(k) plans $5.7 million in fiscal 1998, $6.4 million in
fiscal 1997 and $2.2 million in fiscal 1996. Prior to January 1, 1997, Marshalls
associates participated in a separate Section 401(k) savings plan consistent
with the plan Marshalls associates participated in prior to acquisition.
I. Accrued Expenses and Other Current Liabilities
The major components of accrued expenses and other current liabilities are as
follows:
<TABLE>
<CAPTION>
January 31, January 25,
In Thousands 1998 1997
=================================================================================================================================
<S> <C> <C>
Employee compensation and benefits $142,945 $113,855
Reserve for discontinued operations 17,843 23,650
Store closing and restructuring reserve, continuing operations 57,966 95,867
Insurance 58,070 67,403
Rent, utilities, advertising and other 334,682 320,436
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses and other current liabilities $611,506 $621,211
=================================================================================================================================
</TABLE>
The Company's reserve for discontinued operations relates to obligations the
Company retained or incurred in connection with the sale of its former Zayre,
Hit or Miss and Chadwick's operations. During fiscal 1997, the reserve decreased
by $1.6 million. The Company added $10.7 million to the reserve, relating to
anticipated costs associated with the sale of Chadwick's, which was offset by
reductions to the reserve of $12.3 million, primarily relating to lease
obligations. During fiscal 1998, the reduction to the reserve of $5.8 million is
primarily for settlement costs associated with Chadwick's and for lease related
costs associated with the former Zayre and Hit or Miss properties. The combined
remaining reserve balance of $17.8 million as of January 31, 1998 is expected to
be used for lease related obligations, primarily for former Zayre stores, which
is expected to be paid out over the next ten to fifteen years, as leases are
settled or terminated.
The reserve for store closings and restructurings is primarily for costs
associated with the disposition and settlement of leases for the T.J. Maxx and
Marshalls closings anticipated as a result of the Marshalls acquisition. The
initial reserves established in fiscal 1996 were estimated at $244.1 million for
a Marshalls store closing and restructuring plan and $35 million for the closing
of certain T.J. Maxx stores.
The Marshalls reserve included $44.1 million for inventory markdowns. The
primary reduction to the reserve in fiscal 1996 was for inventory markdowns.
During fiscal 1997 and 1998, the Marshalls reserve was reduced by $85.9 million
and $15.8 million, respectively, to reflect a reduction in the number of store
closings and a lower cost to settle and dispose of lease obligations. These
reserve reductions resulted in adjustments to the allocation of the Marshalls
purchase price as discussed in Note A to the consolidated financial statements.
The adjusted reserve balance included $70.8 million for lease related
obligations for planned store and other facility closings, $9.6 million for
property write-offs, $44.1 million for inventory
32
<PAGE> 20
markdowns and $17.9 million for severance, professional fees and all other costs
associated with the restructuring plan. The only non-cash charge portion of the
reserve was for property write-offs.
The Company also established a reserve for the closing of certain T.J. Maxx
stores. The Company recorded an initial charge to income from continuing
operations of $35 million in fiscal 1996 and a credit to income from continuing
operations of $8 million in fiscal 1997 to reflect a lower than anticipated cost
of the T.J. Maxx closings. The adjusted reserve balance includes $15.6 million
for lease related obligations of the closed stores, non-cash charges of $9.8
million for property write-offs and $2.3 million for severance, professional
fees and all other costs associated with the closings.
The following is a summary of the activity in the store closing and
restructuring reserve for the last two fiscal years:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
January 31, January 25,
In Thousands 1998 1997
===================================================================================================================================
<S> <C> <C>
Balance, beginning of the year $ 95,867 $ 251,566
Reserve adjustments:
Adjust Marshalls restructuring reserve (15,843) (85,900)
Adjust T.J. Maxx store closing reserve 700 (8,000)
Charges against the reserve:
Lease related obligations (13,593) (21,277)
Inventory markdowns - (15,886)
Severance and all other cash charges (1,876) (13,901)
Net activity relating to HomeGoods closings (1,887) 329
Non-cash property write-offs (5,402) (11,064)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 57,966 $ 95,867
===================================================================================================================================
</TABLE>
All the Marshalls and T.J. Maxx properties for which reserves were provided have
been closed. The remaining reserve balance as of January 31, 1998 of $58 million
is almost entirely for the estimated cost of future obligations of the closed
store and other facility leases. It includes estimates and assumptions as to how
the leases will be disposed of and could change; however, the Company believes
it has adequate reserves to deal with these obligations. The use of the reserve
will reduce operating cash flows in varying amounts over the next ten to fifteen
years as the related leases expire or are settled.
J. Supplemental Cash Flows Information
The Company classifies the cash flows associated with the operating results of
its discontinued operations through the date of sale, as "net cash provided by
(used in) discontinued operations." The following is a reconciliation of the
"income from discontinued operations, net of income taxes" to the "net cash
provided by (used in) discontinued operations."
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
January 31, January 25, January 27,
1998 1997 1996
===================================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Income from discontinued operations, net of income taxes $ - $ 29,361 $ 9,710
- -----------------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in net assets of discontinued
operations during the period:
Net assets of discontinued operations -
beginning of period 54,451 128,586 93,397
Less:
Net assets of discontinued operations - sold during period - 54,083 44,789
Net assets of discontinued operations - end of period - 54,451 128,586
- -----------------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in net assets of discontinued operations 54,451 20,052 (79,978)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) discontinued operations $ 54,451 $ 49,413 $(70,268)
===================================================================================================================================
</TABLE>
The Company is also responsible for certain leases related to, and other
obligations arising from, the sale of these operations, for which reserves have
been provided in its reserve for discontinued operations, and is included in
accrued expenses. The cash flow impact of these obligations is reflected as a
component of cash provided by operating activities in the statements of cash
flows.
33
<PAGE> 21
The Company's cash payments for interest expense and income taxes,
including discontinued operations, and its non-cash investing and financing
activities are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
January 31, January 25, January 27,
In Thousands 1998 1997 1996
==============================================================================================================================
(53 weeks)
<S> <C> <C> <C>
Cash paid for:
Interest $ 26,359 $ 44,288 $ 41,924
Income taxes 199,025 159,245 17,275
Non-cash investing and financing activities:
Conversion of cumulative convertible preferred
stock into common stock
Series A $ - $ 25,000 $ -
Series C - 82,500 -
Series D - 25,000 -
Series E 77,020 - -
Distribution of two-for-one stock split 79,823 - -
Note receivable from sale of Chadwick's of Boston - 20,000 -
Issuance of preferred stock for acquisition of Marshalls - - 175,000
Note receivable from sale of Hit or Miss - - 10,000
</TABLE>
K. Discontinued Operations and Related Contingent Liabilities
In October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). In April 1990, Ames filed for
protection under Chapter 11 of the Federal Bankruptcy Code and in December 1992,
Ames emerged from bankruptcy under a plan of reorganization.
The Company remains contingently liable for the leases of most of the
former Zayre stores still operated by Ames. In addition, the Company is
contingently liable on a number of leases of the Hit or Miss division, the
Company's former off-price women's specialty stores, sold on September 30, 1995.
The Company believes that the Company's contingent liability on these leases
will not have a material effect on the Company's financial condition.
The Company is also contingently liable on certain leases of its former
warehouse club operations (BJ's Wholesale Club and HomeBase), which was spun off
by the Company in fiscal 1990 as Waban Inc. During fiscal 1998, Waban Inc. was
renamed HomeBase, Inc. and spun-off from its BJ's Wholesale Club division (BJ's
Wholesale Club, Inc.). HomeBase, Inc., and BJ's Wholesale Club, Inc. are
primarily liable on their respective leases and have indemnified the Company for
any amounts the Company may have to pay with respect to such leases. In addition
HomeBase, Inc., BJ's Wholesale Club, Inc. and the Company have entered into
agreements under which BJ's Wholesale Club, Inc. has substantial indemnification
responsibility with respect to such HomeBase, Inc. leases. The Company is also
contingently liable on certain leases of BJ's Wholesale Club, Inc. for which
both BJ's Wholesale Club, Inc. and HomeBase, Inc. remain liable. The Company
believes that its contingent liability on the HomeBase, Inc. and BJ's Wholesale
Club, Inc. leases will not have a material effect on the Company's financial
condition.
L. Segment Information
For data on business segments for fiscal 1998, 1997 and 1996, see page 20.
34
<PAGE> 22
The TJX Companies, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COOPERS
&LYBRAND
a professional services firm
To the Board of Directors of The TJX Companies, Inc.:
We have audited the accompanying consolidated balance sheets of The TJX
Companies, Inc. and subsidiaries as of January 31, 1998 and January 25, 1997 and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three fiscal years in the period ended January 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The TJX
Companies, Inc. and subsidiaries as of January 31, 1998 and January 25, 1997 and
the consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended January 31, 1998 in conformity with
generally accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
March 3, 1998
Report of Management
The financial statements and related financial information in this annual report
have been prepared by management which is responsible for their integrity,
objectivity and consistency. The financial statements were prepared in
accordance with generally accepted accounting principles and necessarily include
amounts which are based upon judgments and estimates made by management.
The Company maintains a system of internal controls designed to provide, at
appropriate cost, reasonable assurance that assets are safeguarded, transactions
are executed in accordance with management's authorization and the accounting
records may be relied upon for the preparation of financial statements. The
system of controls includes the careful selection and training of associates,
and the communication and application of formal policies and procedures that are
consistent with high standards of accounting and administrative practices. The
accounting and control systems are continually reviewed, evaluated and where
appropriate, modified to accommodate changing business conditions and the
recommendations of the Company's internal auditors and the independent public
accountants.
An Audit Committee, comprised of members of the Board of Directors who are
neither officers nor employees of the Company, meets periodically with
management, internal auditors and the independent public accountants to review
matters relating to the Company's financial reporting, the adequacy of internal
accounting controls and the scope and results of audit work. The Committee is
responsible for reporting the results of its activities and for recommending the
selection of independent auditors to the full Board of Directors. The internal
auditors and the independent public accountants have free access to the
Committee and the Board of Directors.
The financial statements have been examined by Coopers & Lybrand L.L.P.,
whose report appears separately. Their report expresses an opinion as to the
fair presentation of the consolidated financial statements and is based on an
independent examination performed in accordance with generally accepted auditing
standards.
/s/ Bernard Cammarata /s/ Donald G. Campbell
Bernard Cammarata Donald G. Campbell
President and Chief Executive Officer Executive Vice President - Finance
and Chief Financial Officer
March 3, 1998
35
<PAGE> 23
The TJX Companies, Inc.
SELECTED FINANCIAL DATA (CONTINUING OPERATIONS)
The following selected financial data includes the results of Marshalls for the
periods following its acquisition on November 17, 1995. All prior year data has
been restated to reflect Chadwick's and Hit or Miss as discontinued operations.
<TABLE>
<CAPTION>
Fiscal Year Ended January
---------------------------------------------------------------------------------
Dollars in Thousands Except Per Share Amounts 1998 1997 1996 1995 1994
==================================================================================================================================
(53 weeks)
<S> <C> <C> <C> <C> <C>
Income statement and
per share data:
Net sales $7,389,069 $6,689,410 $3,975,115 $3,055,573 $2,832,070
Income from continuing
operations before
extraordinary item and
cumulative effect of
accounting changes 306,592 213,826 51,589 (1) 84,480 111,266
Weighted average shares
for diluted earnings per
share computations 174,806,092 175,325,050 145,390,950 146,918,900 148,260,956
Diluted earnings per share
from continuing operations
before extraordinary item $ 1.75 $ 1.22 $ .29 (1) $ .53 $ .70
Dividends per share .20 .14 .245 .28 .25
Balance sheet data:
Working capital $ 464,974 $ 425,595 $ 332,864 $ 240,646 $ 237,358
Total assets 2,609,632 2,506,761 2,545,825 1,373,964 1,171,412
Capital expenditures 192,382 119,153 105,864 109,436 102,279
Long-term debt 221,024 244,410 690,713 194,478 205,408
Shareholders' equity 1,164,092 1,127,186 764,634 606,952 590,900
Stores in operation at year-end:
T.J. Maxx 580 578 587 551 512
Marshalls 461 454 496 - -
Winners 76 65 52 37 27
HomeGoods 23 21 22 15 10
T.K. Maxx 31 18 9 5 -
</TABLE>
(1) Includes an after-tax charge of $21.0 million, or $.14 per share, for the
estimated cost of closing certain T.J. Maxx stores in connection with the
acquisition of Marshalls.
Price Range of Common Stock
The following per share data reflects the two-for-one stock split distributed in
June 1997.
The common stock of the Company is listed on the New York Stock Exchange
(Symbol: TJX). The quarterly high and low trading stock prices for fiscal 1998
and fiscal 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997
---------------------- ----------------------
Quarter High Low High Low
===============================================================================================================
<S> <C> <C> <C> <C>
First $24 1/16 $19 1/8 $15 3/8 $ 9 1/4
Second 29 15/16 22 1/2 18 5/16 13 3/16
Third 32 7/8 26 1/4 21 11/16 14 5/8
Fourth 38 9/16 26 24 1/8 19 5/16
</TABLE>
The approximate number of common shareholders at January 31, 1998 was 43,800.
The Company declared four quarterly dividends of $.05 per share for
fiscal 1998 and $.035 per share for fiscal 1997.
36
<PAGE> 24
The TJX Companies, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
During fiscal 1998, the Company declared a two-for-one stock split effected in
the form of a 100% stock dividend, and, beginning with the fourth quarter of
fiscal 1998, began to report earnings per share pursuant to Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings per Share." SFAS No. 128
requires the presentation of "basic" and "diluted" earnings per share. All
earnings per share amounts have been restated to reflect the two-for-one stock
split and the impact of SFAS No. 128. All earnings per share amounts discussed
refer to diluted earnings per share unless otherwise indicated.
Effective December 7, 1996, the Company sold its Chadwick's of Boston
mail order operation. The gain on this transaction was accounted for as
discontinued operations in the Company's fourth quarter reporting period ending
January 25, 1997. The operating results for Chadwick's for all periods prior to
the sale have been presented as discontinued operations for comparative
purposes. Discontinued operations for the fiscal year ended January 27, 1996 and
prior periods also includes the results of the Hit or Miss division prior to its
sale, which was sold by the Company effective September 30, 1995, along with the
loss incurred on the sale.
On November 17, 1995, the Company acquired the Marshalls off-price
family apparel chain from Melville Corporation. Under the purchase method of
accounting, the assets and liabilities and results of operations associated with
the acquired business have been included in the Company's financial position and
results of operations since the date acquired. Accordingly, the results of
operations for fiscal 1998 and 1997 are not directly comparable to the financial
position and the results of the operations of the Company for fiscal 1996. The
following discussion should be read in conjunction with the consolidated
financial statements and notes thereto contained elsewhere in this report.
Results of Operations
Continuing Operations: Income from continuing operations before extraordinary
item ("income from continuing operations") was $306.6 million in fiscal 1998
versus $213.8 million and $51.6 million in fiscal 1997 and 1996, respectively.
Income from continuing operations per share was $1.75 in fiscal 1998, versus
$1.22 in fiscal 1997, and $.29 in fiscal 1996. The results for fiscal 1996
include a $35 million pre-tax ($21.0 million after-tax) charge for closing
certain T.J. Maxx stores in connection with the acquisition of Marshalls.
Excluding the $35 million pre-tax charge, income from continuing operations for
fiscal 1996 would have been $72.6 million, or $.44 per share.
Net sales for fiscal 1998 increased 10.5% to $7.39 billion from $6.69
billion in 1997. Net sales for fiscal 1997 increased 68.3% from $3.98 billion in
fiscal 1996. These consolidated sales results include Marshalls for periods
subsequent to its acquisition on November 17, 1995. Fiscal 1998 included 53
weeks while fiscal 1997 and 1996 each included 52 weeks. Consolidated same store
sales, on a 52-week basis, increased 6% in fiscal 1998 and increased 7% in
fiscal 1997. Percentage increases in same store sales, on a divisional basis,
are as follows:
Fiscal Year Ended
------------------------
January 31, January 25,
1998 1997
===============================================================================
T.J. Maxx +5% +5%
Marshalls +7% +10%
Winners +14% +13%
HomeGoods +13% +2%
T.K. Maxx +15% +30%
Consolidated sales results for fiscal 1998 and 1997 primarily reflect the many
benefits associated with the Marshalls acquisition, along with some improvement
in apparel sales industry-wide. Following the acquisition of Marshalls, the
Company replaced Marshalls frequent promotional activity with an everyday low
price strategy and also implemented a more timely markdown policy. These changes
conformed the Marshalls operation to that of the T.J. Maxx stores and were
significant factors in the Marshalls same store sales performance for fiscal
1997. In addition, the enhanced buying power of the combined entities has
allowed the Company to offer better values to consumers at both chains in fiscal
1998 and 1997 as compared to fiscal 1996.
Cost of sales, including buying and occupancy costs, as a percentage of
net sales was 76.8%, 77.7% and 79.1% in fiscal 1998, 1997 and 1996,
respectively. The improvement in this ratio in fiscal 1998 and 1997, as compared
to fiscal 1996, is largely due to improved inventory management and the benefits
associated
37
<PAGE> 25
with the acquisition of Marshalls, as well as a reduction in occupancy and
depreciation costs as a percentage of net sales due to the strong sales
performance. Fiscal 1998 depreciation costs were also reduced as a result of the
revised purchase price allocation for the acquisition of Marshalls. See Note A
to the Consolidated Financial Statements.
Selling, general and administrative expenses as a percentage of net
sales were 16.0% in fiscal 1998, 16.3% in fiscal 1997 and 16.9% in fiscal 1996.
The improvement in this ratio in both fiscal 1998 and 1997 reflects the stronger
sales performance as well as expense savings provided by the consolidation of
the Marshalls and T.J. Maxx operations. During fiscal 1998, selling, general and
administrative expenses included a pre-tax gain of $6 million from the sale of
Brylane common stock and included a charge of $15.2 million for costs associated
with a deferred compensation arrangement with the Company's Chief Executive
Officer.
The Company recorded an estimated pre-tax charge of $35 million in
fiscal 1996 for the closing of certain T.J. Maxx stores in connection with the
acquisition of Marshalls, which consists primarily of estimated costs associated
with subletting stores or otherwise disposing of store leases and non-cash costs
associated with asset write-offs of the closed stores. During fiscal 1997, the
reserve requirement was reduced by $8 million as the actual cost of closing
stores was less than anticipated. This savings, however, was more than offset by
a $12.2 million impairment charge on certain T.J. Maxx distribution center
assets relating to a restructuring and realignment plan of the T.J. Maxx and
Marshalls distribution facilities. The net impact of these items is reflected in
selling, general and administrative expenses.
Interest expense, net of interest income, was $4.5 million, $37.4
million and $38.2 million in fiscal 1998, 1997 and 1996, respectively. The
Company has maintained a strong cash position throughout fiscal 1998 and 1997 as
a result of cash generated from operations and funds obtained from the sale of
Chadwick's. During fiscal 1997, this allowed the Company to prepay approximately
$450 million of long-term debt including the outstanding balance of the loan
incurred to acquire Marshalls. The impact of this positive cash flow position
throughout fiscal 1998 resulted in virtually no short-term borrowings during
fiscal 1998 despite the Company's purchase of $245.2 million of its common
stock. Interest income for fiscal 1998 was $21.6 million versus $14.7 million
and $2.8 million in fiscal 1997 and 1996, respectively.
The Company's effective income tax rate was 41% in fiscal 1998 and 42%
in both fiscal 1997 and 1996. The reduction in the fiscal 1998 effective income
tax rate is primarily due to the impact of foreign operations. The difference in
the U.S. federal statutory tax rate and the Company's worldwide effective income
tax rate in each fiscal year is primarily attributable to the effective state
income tax rate.
Discontinued Operations and Net Income: Net income for fiscal 1997 includes a
gain on the sale of the Chadwick's discontinued operation, net of income taxes,
of $125.6 million. Net income for fiscal 1996 includes a loss on the disposal of
the Hit or Miss discontinued operation, net of income taxes, of $31.7 million.
The operating results of both of these divisions prior to their respective sale
measurement dates have been reclassified as net income from discontinued
operations, net of income taxes, which amounted to income of $29.4 million in
fiscal 1997 and $9.7 million in fiscal 1996. In addition, in each of the fiscal
years 1998, 1997 and 1996, the Company retired certain long-term debt
instruments prior to scheduled maturities, resulting in extraordinary losses,
net of income taxes, of $1.8 million, $5.6 million and $3.3 million,
respectively.
Net income, after reflecting the above items, was $304.8 million, or
$1.74 per share, in fiscal 1998, $363.1 million, or $2.07 per share, in fiscal
1997 and $26.3 million, or $.12 per share, in fiscal 1996.
Capital Sources and Liquidity
Operating Activities: Net cash provided by operating activities was $385.5
million, $664.5 million and $254.6 million in fiscal 1998, 1997 and 1996,
respectively. The decrease in cash provided by operating activities in fiscal
1998 is primarily the result of an increase in merchandise inventories versus a
decrease in fiscal 1997. The increase in cash provided by operating activities
in fiscal 1997 versus that of fiscal 1996 reflects the increased earnings
attributable to the Marshalls acquisition, as well as the Company's movement to
a leaner inventory position as compared to fiscal 1996 year-end levels.
Inventories as a percentage of net sales were 16.1% in fiscal 1998, 15.8% in
fiscal 1997 and 31.6% in fiscal 1996. The fiscal 1996 percentage is not
comparable since Marshalls' net sales are included only from November 18, 1995.
Using unaudited pro forma net sales for fiscal 1996 (see Note A to the
consolidated financial statements), which assumes Marshalls was acquired at the
beginning of the fiscal year, inventories as a percentage of net sales in fiscal
1996 would be 20.7%. The strong sales volume, coupled with tight inventory
control, resulted in faster inventory turns, all of which were favorable to cash
flows and the inventory ratios for fiscal 1998 and
38
<PAGE> 26
1997. Working capital was $465.0 million in fiscal 1998, $425.6 million in
fiscal 1997 and $332.9 million in fiscal 1996. The increase in both years
reflects the acquisition of Marshalls and the benefits of strong operating cash
flows.
The cash flows from operating activities for fiscal 1998 and 1997 have
been reduced by $23.2 million and $63.0 million, respectively for cash
expenditures associated with the Company's store closing and restructuring
reserves, which relate primarily to the Marshalls acquisition, and for
obligations relating to the Company's discontinued operations.
The initial reserve established in the acquisition of Marshalls for the
fiscal year ended January 26, 1996 was estimated at $244.1 million and was
accounted for in the allocation of purchase price under the purchase accounting
method. The initial reserve included $44.1 million for inventory markdowns and
$200 million for a store closing and restructuring program. The plan included
the closing of 170 Marshalls stores during fiscal 1997 and fiscal 1998. The
Company reduced the total reserve by $85.9 million in fiscal 1997 and by an
additional $15.8 million in fiscal 1998, primarily due to fewer store closings
and a reduction in the estimated cost of settling the related lease obligations.
These reserve reductions were accounted for as adjustments to the purchase price
allocation of Marshalls and resulted in a corresponding reduction in the value
assigned to the long-term assets acquired. The adjusted final reserve balance
includes $70.8 million for lease related obligations for 70 store and other
facility closings, $9.6 million for property write-offs, $44.1 million for
inventory markdowns and $17.9 million for severance, professional fees and all
other costs associated with the restructuring plan. Property write-offs were the
only non-cash charge to t he reserve.
In connection with the Marshalls acquisition, the Company also
established a reserve for the closing of certain T.J. Maxx stores. The Company
recorded an initial pre-tax charge to income from continuing operations of $35
million in fiscal 1996 and a pre-tax credit to income from continuing operations
of $8 million in fiscal 1997 to reflect a lower than anticipated cost of the
T.J. Maxx closings. An additional charge to continuing operations of $700,000
was recorded in fiscal 1998. The adjusted reserve balance includes $15.6 million
for lease related obligations of 32 store closings, non-cash charges of $9.8
million for property write-offs and $2.3 million for severance, professional
fees and all other costs associated with the closings.
As of January 31, 1998, all of the Marshalls and T.J. Maxx properties
reserved for have been closed. The reserve also includes some activity relating
to several HomeGoods store closings, the impact of which is immaterial. Actual
spending and charges against the reserve are summarized below:
Fiscal Year Ended
---------------------------------
January January January
1998 1997 1996
==============================================================================
Cash charges:
Lease related obligations $13,593 $21,277 $ 307
Inventory markdowns - 15,886 28,209
Severance and other costs 3,763 13,572 650
- ------------------------------------------------------------------------------
Subtotal cash charges 17,356 50,735 29,166
Non-cash charges:
Property write-offs 5,402 11,064 -
- ------------------------------------------------------------------------------
Total reserve spending $22,758 $61,799 $29,166
==============================================================================
The remaining reserve balance as of January 31, 1998 of $58 million is virtually
all for the estimated cost of future lease obligations of the closed stores and
other facilities. It includes estimates and assumptions as to how the leases
will be disposed of, which could change, but the Company believes it has
adequate reserves to deal with these obligations. The spending of the reserve
will reduce operating cash flows in varying amounts over the next ten to fifteen
years as the leases expire or are settled. The remaining reserve balance will
not have a material impact on future cash flows or the Company's financial
condition.
The Company also has a reserve for future obligations relating to its
discontinued operations. Reductions to the reserve in fiscal 1998 of $5.8
million are primarily for settlement costs associated with Chadwick's and for
lease related costs associated with the former Zayre stores and Hit or Miss
properties. During fiscal 1997, the Company added $10.7 million to the reserve
relating to anticipated costs associated with the sale of Chadwick's. Reductions
to the reserve in fiscal 1997 of $12.3 million primarily relate to lease
obligations. The remaining reserve balance of $17.8 million as of January 31,
1998 is for lease related obligations, primarily for the former Zayre stores,
which is expected to reduce operating cash flows in varying amounts over the
39
<PAGE> 27
next ten to fifteen years, as leases are settled or terminated. The remaining
reserve balance will not have a material impact on future cash flows or the
Company's financial condition. The Company is also contingently liable on
certain leases of its discontinued operations. See Note K to the consolidated
financial statements for further information.
The Company has developed plans to address issues related to the impact
on its computer systems of the year 2000. Financial and operational systems have
been assessed and plans have been developed to address systems modification
requirements. The Company expects to spend the aggregate of approximately $10
million on conversion costs, primarily in fiscal years 1998 and 1999. There can
be no guarantee that a failure to resolve a year 2000 issue by the Company or a
third party whose systems may interface with the Company, would not have a
material effect on the Company.
Investing Activities: The Company's cash flows for investing activities include
capital expenditures for the last two years as set forth in the table below:
Fiscal Year Ended
----------------------
January January
In Millions 1998 1997
================================================================================
New stores $ 53.1 $ 36.7
Store renovations and improvements 103.3 56.1
Office and distribution centers 36.0 26.4
- --------------------------------------------------------------------------------
Capital expenditures $192.4 $119.2
================================================================================
The Company expects that capital expenditures will approximate $230 million for
fiscal 1999. This includes $61 million for new stores, $108 million for store
renovations and improvements and $61 million for the Company's office and
distribution centers.
Investing activities for fiscal 1998 include proceeds of $15.7 million
for the sale of 352,908 shares of Brylane Inc., common stock obtained by
converting approximately half of the Brylane note received as partial
consideration for the sale of Chadwick's. Fiscal 1998 also includes a payment by
the Company of $33.2 million as a final settlement of the sale proceeds from the
sale of Chadwick's as described below.
Fiscal 1997 investing activities include the estimated cash sale
proceeds from the sale of the Chadwick's division to Brylane, Inc., which
totaled $222.8 million. The purchase price was subject to a final adjustment
based on the net assets of Chadwick's as of the sale date resulting in a payment
to Brylane of $33.2 million during fiscal 1998. As part of the sale of
Chadwick's, the Company retained the consumer credit card receivables of the
division as of the closing date, which totaled approximately $125 million, with
$54.5 million still outstanding as of January 25, 1997. The balance of the
receivables was collected in the first quarter of fiscal 1998 and is classified
as cash provided by discontinued operations. The Company also received a $20
million convertible note due in ten years with annual interest currently at 6%.
The outstanding balance of the note as of January 31, 1998 is $10.3 million, as
a portion was converted into common stock during fiscal 1998. Investing
activities for fiscal 1997 also include a purchase price adjustment for the
acquisition of Marshalls of $49.3 million. Marshalls was acquired by the Company
in November 1995 for a total cost of $606 million. See Note A to the
consolidated financial statements for more information regarding the Marshalls
acquisition.
Financing Activities: The strong cash flows from operations as well as proceeds
generated from the sale of the Chadwick's division provided adequate capital
which exceeded the Company's needs in fiscal 1998 and fiscal 1997, and no
additional borrowings were required. Financing activities for fiscal 1998
include principal payments on long-term debt of $27.2 million, including $8.5
million to fully retire the Company's 9 1/2% sinking fund debentures. As a
result of its strong cash position, the Company prepaid certain long-term debt
in addition to regularly scheduled maturities during fiscal 1997. On September
16, 1996, pursuant to a call for redemption, the Company prepaid $88.8 million
of its 9 1/2% sinking fund debentures. In addition, during the fourth quarter
of fiscal 1997, the Company retired the entire outstanding balance of the $375
million term loan incurred to acquire Marshalls (see discussion below). The
Company recorded after-tax extraordinary charges totaling $5.6 million, or $.03
per share, due to the early retirement of these obligations. During fiscal
1997, the Company paid a total of $455.6 million for the prepayment of certain
long-term debt and a total of $46.5 million for regularly scheduled maturities
of long-term debt.
During fiscal 1996, the Company's cash flows from financing activities
includes the proceeds of $574.9 million from additional long-term borrowings. In
June 1995, the Company issued $200 million of long-term notes under a shelf
registration statement. The proceeds were used, in part, to repay short-term
40
<PAGE> 28
borrowings and for general corporate purposes. The Company currently has a
shelf registration statement which provides for the issuance of up to $600
million of debt or equity. In connection with the purchase of Marshalls, the
Company entered into an $875 million bank credit agreement under which the
Company borrowed $375 million on a long-term basis to fund the cash portion of
the Marshalls purchase price. The agreement also included a $500 million
revolving loan capability which was terminated prior to its maturity, resulting
in an after-tax extraordinary charge of $1.8 million, or $.01 per share, in
fiscal 1998. The Company entered into a new revolving credit agreement in
September 1997 as discussed below.
In June 1997, the Company announced a $250 million stock buyback
program. During fiscal 1998, the Company repurchased 8.5 million shares of
common stock for a cost of $245.2 million. The program was completed in February
1998 at which time the Company announced a second $250 million stock
repurchase program.
The Company declared quarterly dividends on its common stock of $.05 per
share in fiscal 1998 and $.035 per share in fiscal 1997. Annual dividends on
common stock totaled $31.8 million in fiscal 1998 and $21.3 million in fiscal
1997. The Company also paid dividends on all of its outstanding preferred stock,
which totaled $11.7 million in fiscal 1998, $13.7 million in fiscal 1997 and
$9.4 million in fiscal 1996. During fiscal 1998, 770,200 shares of the Series E
preferred stock were converted into 8.3 million shares of common stock and 2,500
shares were repurchased. Inducement fees of $3.8 million were paid on the Series
E conversions, which are classified as preferred dividends for fiscal 1998. The
727,300 outstanding shares of the Series E preferred stock as of January 31,
1998 will automatically convert into common stock on November 17, 1998. During
fiscal 1997, both the Series A cumulative convertible preferred stock and the
Series C cumulative convertible preferred stock were converted into an aggregate
of 4.4 million shares of common stock pursuant to separate calls for redemption.
Preferred dividends were paid through the respective conversion dates. The
Series D preferred stock automatically converted on November 17, 1996 into 1.3
million shares of common stock. Financing activities for fiscal 1998 and 1997
also includes proceeds of $15.5 million and $34.4 million, respectively, from
the exercise of employee stock options. The proceeds include $6.1 million and
$10.2 million for related tax benefits in fiscal 1998 and fiscal 1997,
respectively.
The Company has traditionally funded its seasonal merchandise
requirements through short-term bank borrowings and the issuance of short-term
commercial paper. The Company has the ability to borrow up to $500 million under
a revolving credit facility it entered into in September 1997. This agreement
replaced the agreement entered into at the time of the Marshalls acquisition and
contains certain financial covenants which include a minimum net worth
requirement and certain leverage and fixed charge coverage ratios. The Company
recorded an extraordinary charge of $1.8 million, or $.01 per share, on the
write-off of deferred financing costs associated with the former agreement. As
of January 31, 1998, the entire $500 million was available for use. The
Company's strong cash position throughout fiscal 1998 and 1997 required minimal
short-term borrowings. There were no U.S. short-term borrowings outstanding
during fiscal 1998. The maximum amount of U.S. short-term borrowings outstanding
during fiscal 1997 and 1996 was $3 million and $200 million, respectively. The
Company also has C$30 million of committed lines for its Canadian operations,
all of which were available for use as of January 31, 1998. The maximum amount
outstanding under its Canadian credit line during fiscal 1998 and 1997 was
C$12.1 million and C$6 million, respectively. Management believes that its
current credit facilities and availability under its shelf registration
statement are more than adequate to meet its needs. See Notes B and F to the
consolidated financial statements for further information regarding the
Company's long-term debt, capital stock transactions and available financing
sources.
The Company is exposed to foreign currency exchange rate risk on its
investment in its Canadian (Winners) and European (T.K. Maxx) operations. As
more fully described in Note C to the consolidated financial statements, the
Company hedges a large portion of its net investment and certain merchandise
commitments in these operations with derivative financial instruments. The
Company utilizes currency forwards and swaps, designed to offset the gains or
losses in the underlying exposures, most of which are recorded directly in
shareholders' equity. The contracts are executed with creditworthy banks and are
denominated in currencies of major industrial countries. The Company does not
enter into derivatives for speculative trading purposes.
The Company has performed a sensitivity analysis assuming a hypothetical
10% adverse movement in foreign exchange rates applied to the hedging contracts
and the underlying exposures described above. As of January 31, 1998, the
analysis indicated that such market movements would not have a material effect
on the Company's consolidated financial position, results of operations or cash
flows.
41
<PAGE> 29
The TJX Companies, Inc.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Earnings per share amounts in the following table are presented in accordance
with SFAS No. 128 and reflect the effect of the two-for-one stock split
distributed in June 1997.
<TABLE>
<CAPTION>
First Second Third Fourth
In Thousands Except Per Share Amounts Quarter Quarter Quarter Quarter
===============================================================================================================
<S> <C> <C> <C> <C>
Fiscal year ended January 31, 1998
(53 weeks)
Net sales $1,560,150 $1,698,372 $1,887,698 $2,242,849
Gross earnings * 357,531 375,111 473,362 506,524
Income from continuing operations
before extraordinary item 48,461 52,578 106,942 98,611
Diluted earnings per share .27 .30 .62 .58
Net income 48,461 52,578 105,165 98,611
Diluted earnings per share .27 .30 .61 .58
Fiscal year ended January 25, 1997
Net sales $1,472,247 $1,548,259 $1,722,429 $1,946,475
Gross earnings * 304,888 326,069 417,158 442,512
Income from continuing operations
before extraordinary item 23,024 33,690 81,590 75,522
Diluted earnings per share .13 .19 .46 .43
Net income 30,086 36,054 87,510 209,473
Diluted earnings per share .17 .21 .50 1.19
</TABLE>
* Gross earnings equal net sales less cost of sales, including buying and
occupancy costs.
Net income for the third quarter of fiscal 1998 includes an after-tax
extraordinary charge of $1.8 million for the write-off of deferred financing
costs associated with the early termination of a revolving credit facility.
Net income for the fourth quarter of fiscal 1997 includes an after-tax
gain on the sale of Chadwick's of $125.6 million, or $.72 per share. The
operating results for Chadwick's for fiscal 1997 have been reflected as
discontinued operations. Net income for fiscal 1997 includes after-tax
extraordinary charges of $2.9 million and $2.7 million for the third and fourth
quarters, respectively, for the early retirement of debt.
FORWARD-LOOKING INFORMATION
Certain statements contained in this Annual Report are forward-looking and
involve a number of risks and uncertainties. Among the factors that could cause
actual results to differ materially are the following: general economic
conditions and consumer demand and consumer preferences and weather patterns in
the U.S., Canada and Europe, particularly the United Kingdom; competitive
factors, including continuing pressure from pricing and promotional activities
of major competitors; impact of excess retail capacity and the availability of
desirable store locations on suitable terms; the availability, selection and
purchasing of attractive merchandise on favorable terms; import risks, including
potential disruptions and duties, tariffs and quotas on imported merchandise,
including economic and political problems in countries from which merchandise is
imported; currency and exchange rate factors in the Company's foreign
operations; risks in the development of new businesses and application of the
Company's off-price strategies in foreign countries; acquisition and divestment
activities; and other factors that may be described in the Company's filings
with the Securities and Exchange Commission. The Company does not undertake to
publicly update or revise its forward-looking statements even if experience or
future changes make it clear that any projected results expressed or implied
therein will not be realized.
42
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
State or Jurisdiction Name Under Which
of Incorporation Does Business
or Organization (if Different)
-------------------- ----------------
<S> <C> <C>
Operating Subsidiaries
- ----------------------
Newton Buying Corp. Delaware
NBC Distributors Inc. Massachusetts
NBC Merchants, Inc. Indiana
NBC Charlotte Merchants, Inc. North Carolina
NBC Nevada Merchants, Inc. Nevada
Marmaxx Operating Corp. Delaware T.J. Maxx/ Marshalls
Marshalls of MA, Inc. Massachusetts
New York Department Stores de Puerto Rico Puerto Rico Marshalls
Marshalls of Richfield, MN., Inc. Minnesota
Marshalls of Novato, CA., Inc. California
Marshalls of Northridge-Devonshire, CA., Inc. California
Marshalls of Glen Burnie, MD., Inc. Maryland
Marshalls of Beacon, VA., Inc. Virginia
Marshalls of Laredo, TX., Inc. Texas
Marshalls of Calumet City, IL., Inc. Illinois
Marshalls of Chicago-Clark, IL., Inc. Illinois
Marshalls of Streamwood, IL., Inc. Illinois
Marshalls of Chicago-Brickyard, IL., Inc. Illinois
Marshalls of Matteson, IL., Inc. Illinois
Marshalls of Nevada, Inc. Nevada
Winners Apparel Ltd. Ontario, Canada
Winners Merchants Ltd. Ontario, Canada
Winners Investments Limited Ontario, Canada
Strathmex Corp. Delaware
HomeGoods, Inc. Delaware
H.G. Merchants, Inc. Massachusetts
NBC Apparel, Inc. Delaware
TKM Holding Corp. Delaware
NBC Apparel United Kingdom T.K. Maxx
NBC Apparel Group United Kingdom
T.K. Maxx United Kingdom T.K. Maxx
NBC Apparel Management Limited United Kingdom T.K. Maxx
TJX Netherlands B.V. Netherlands TK Max
</TABLE>
<PAGE> 2
EXHIBIT 21
SUBSIDIARIES
CONTINUED
State or Jurisdiction Name Under Which
of Incorporation Does Business
or Organization (if Different)
-------------------- ----------------
Operating Subsidiaries
- ----------------------
Concord Buying Group Massachusetts
NBC Operating Corp. Massachusetts
T.J. Maxx of CA, LLC Delaware
T.J. Maxx of IL, LLC Delaware
Marshalls of CA, LLC Delaware
Marshalls of IL, LLC Delaware
NYDS, LLC Delaware
Leasing Subsidiaries
- --------------------
Cochituate Realty, Inc. Massachusetts
NBC First Realty Corp. Indiana
NBC Second Realty Corp. Massachusetts
NBC Fourth Realty Corp. Nevada
NBC Fifth Realty Corp. Illinois
NBC Sixth Realty Corp. North Carolina
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of The TJX Companies, Inc. on Form S-3 (File Nos. 333-5501 and 33-60059) and on
Forms S-8 (File Nos. 333-23613, 33-49747, 33-12220 and 333-35073) of our report
dated March 3, 1998 on our audits of the consolidated financial statements of
The TJX Companies, Inc. as of January 31, 1998 and January 25, 1997 and for the
years ended January 31, 1998, January 25, 1997 and January 27, 1996 which report
is incorporated by reference in this Annual Report on Form 10-K.
Boston, Massachusetts
April 29, 1998 Coopers & Lybrand L.L.P.
22
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bernard Cammarata and Donald G. Campbell and each
of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign the form 10-K to be filed by
The TJX Companies, Inc. for the fiscal year ended January 31, 1998 and any or
all amendments thereto and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Bernard Cammarata /s/ Donald G. Campbell
- ----------------------------------- ------------------------------------
Bernard Cammarata, President, Donald G. Campbell, Executive
Principal Executive Officer and Vice President - Finance
Director Principal Financial and
Accounting Officer
/s/ Phyllis B. Davis /s/ John F. O'Brien
- ----------------------------------- ------------------------------------
Phyllis B. Davis, Director John F. O'Brien, Director
/s/ Dennis F. Hightower /s/ Robert F. Shapiro
- ----------------------------------- ------------------------------------
Dennis F. Hightower, Director Robert F. Shapiro, Director
/s/ Richard Lesser /s/ Willow B. Shire
- ----------------------------------- ------------------------------------
Richard Lesser, Director Willow B. Shire, Director
/s/ Arthur F. Loewy /s/ Fletcher H. Wiley
- ----------------------------------- ------------------------------------
Arthur F. Loewy, Director Fletcher H. Wiley, Director
/s/ John M. Nelson
- -----------------------------------
John M. Nelson, Director
Dated: April 8, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> JAN-31-1998
<CASH> 404,369,000
<SECURITIES> 0
<RECEIVABLES> 60,735,000
<ALLOWANCES> 0
<INVENTORY> 1,190,170,000
<CURRENT-ASSETS> 1,682,631,000
<PP&E> 1,201,163,000
<DEPRECIATION> 515,027,000
<TOTAL-ASSETS> 2,609,632,000
<CURRENT-LIABILITIES> 1,217,657,000
<BONDS> 221,024,000
72,730,000
0
<COMMON> 159,901,000
<OTHER-SE> 931,461,000
<TOTAL-LIABILITY-AND-EQUITY> 2,609,632,000
<SALES> 7,389,069,000
<TOTAL-REVENUES> 7,389,069,000
<CGS> 5,676,541,000
<TOTAL-COSTS> 5,676,541,000
<OTHER-EXPENSES> 1,185,755,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,502,000
<INCOME-PRETAX> 522,271,000
<INCOME-TAX> 251,679,000
<INCOME-CONTINUING> 306,592,000
<DISCONTINUED> 0
<EXTRAORDINARY> (1,777,000)
<CHANGES> 0
<NET-INCOME> 304,815,000
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-END> JAN-27-1996
<CASH> 209,226,000
<SECURITIES> 0
<RECEIVABLES> 55,144,000
<ALLOWANCES> 0
<INVENTORY> 1,258,488,000
<CURRENT-ASSETS> 1,615,551,000
<PP&E> 1,073,792,000
<DEPRECIATION> 340,599,000
<TOTAL-ASSETS> 2,674,411,000
<CURRENT-LIABILITIES> 1,206,400,000
<BONDS> 690,713,000
72,486,000
175,000,000
<COMMON> 107,500,000
<OTHER-SE> 409,648,000
<TOTAL-LIABILITY-AND-EQUITY> 2,674,411,000
<SALES> 3,975,115,000
<TOTAL-REVENUES> 3,975,115,000
<CGS> 3,143,257,000
<TOTAL-COSTS> 3,143,257,000
<OTHER-EXPENSES> 704,876,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,186,000
<INCOME-PRETAX> 88,796,000
<INCOME-TAX> 37,207,000
<INCOME-CONTINUING> 51,589,000
<DISCONTINUED> (21,990,000)
<EXTRAORDINARY> (3,338,000)
<CHANGES> 0
<NET-INCOME> 26,261,000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-25-1997 JAN-25-1997
<PERIOD-END> APR-27-1996 JUL-27-1996
<CASH> 191,413,000 245,342,000
<SECURITIES> 0 0
<RECEIVABLES> 75,394,000 77,049,000
<ALLOWANCES> 0 0
<INVENTORY> 1,300,256,000 1,328,039,000
<CURRENT-ASSETS> 1,663,640,000 1,751,655,000
<PP&E> 1,087,009,000 1,115,230,000
<DEPRECIATION> 366,090,000 393,403,000
<TOTAL-ASSETS> 2,706,068,000 2,791,842,000
<CURRENT-LIABILITIES> 1,223,780,000 1,291,791,000
<BONDS> 679,676,000 662,871,000
175,000,000 175,000,000
107,500,000 82,500,000
<COMMON> 72,554,000 74,132,000
<OTHER-SE> 430,487,000 484,070,000
<TOTAL-LIABILITY-AND-EQUITY> 2,706,068,000 2,791,842,000
<SALES> 1,472,247,000 3,020,506,000
<TOTAL-REVENUES> 1,472,247,000 3,020,506,000
<CGS> 1,167,359,000 2,389,549,000
<TOTAL-COSTS> 1,167,359,000 2,389,549,000
<OTHER-EXPENSES> 251,151,000 509,065,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 14,362,000 25,330,000
<INCOME-PRETAX> 39,375,000 96,562,000
<INCOME-TAX> 16,351,000 39,848,000
<INCOME-CONTINUING> 23,024,000 56,714,000
<DISCONTINUED> 7,062,000 9,426,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 30,086,000 66,140,000
<EPS-PRIMARY> 0.18 0.39
<EPS-DILUTED> 0.17 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> JAN-25-1997 JAN-25-1997
<PERIOD-END> OCT-26-1996 JAN-25-1997
<CASH> 236,035,000 474,732,000
<SECURITIES> 0 0
<RECEIVABLES> 90,695,000 57,275,000
<ALLOWANCES> 0 0
<INVENTORY> 1,335,099,000 1,059,505,000
<CURRENT-ASSETS> 1,796,892,000 1,662,342,000
<PP&E> 1,144,816,000 1,059,613,000
<DEPRECIATION> 420,506,000 419,129,000
<TOTAL-ASSETS> 2,837,596,000 2,561,212,000
<CURRENT-LIABILITIES> 1,364,688,000 1,182,296,000
<BONDS> 540,362,000 244,410,000
175,000,000 150,000,000
0 0
<COMMON> 77,725,000 79,576,000
<OTHER-SE> 653,936,000 897,610,000
<TOTAL-LIABILITY-AND-EQUITY> 2,837,596,000 2,561,212,000
<SALES> 4,742,935,000 6,689,410,000
<TOTAL-REVENUES> 4,742,935,000 6,689,410,000
<CGS> 3,694,820,000 5,198,783,000
<TOTAL-COSTS> 3,694,820,000 5,198,783,000
<OTHER-EXPENSES> 775,983,000 1,087,137,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 35,674,000 37,350,000
<INCOME-PRETAX> 236,458,000 366,140,000
<INCOME-TAX> 98,154,000 152,314,000
<INCOME-CONTINUING> 138,304,000 213,826,000
<DISCONTINUED> 18,231,000 154,917,000
<EXTRAORDINARY> (2,885,000) (5,620,000)
<CHANGES> 0 0
<NET-INCOME> 153,650,000 363,123,000
<EPS-PRIMARY> 0.96 2.32
<EPS-DILUTED> 0.87 2.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1998
<PERIOD-END> APR-26-1997 JUL-26-1997
<CASH> 397,127,000 138,232,000
<SECURITIES> 0 0
<RECEIVABLES> 91,528,000 75,691,000
<ALLOWANCES> 0 0
<INVENTORY> 1,384,397,000 1,421,529,000
<CURRENT-ASSETS> 1,889,538,000 1,652,660,000
<PP&E> 1,088,662,000 1,131,993,000
<DEPRECIATION> 445,415,000 471,070,000
<TOTAL-ASSETS> 2,788,531,000 2,573,992,000
<CURRENT-LIABILITIES> 1,367,588,000 1,149,297,000
<BONDS> 244,263,000 243,262,000
150,000,000 120,410,000
0 0
<COMMON> 79,720,000 161,218,000
<OTHER-SE> 938,275,000 887,264,000
<TOTAL-LIABILITY-AND-EQUITY> 2,788,531,000 2,573,992,000
<SALES> 1,560,150,000 3,258,522,000
<TOTAL-REVENUES> 1,560,150,000 3,258,522,000
<CGS> 1,202,619,000 2,525,880,000
<TOTAL-COSTS> 1,202,619,000 2,525,880,000
<OTHER-EXPENSES> 273,738,000 557,526,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 855,000 2,400,000
<INCOME-PRETAX> 82,938,000 172,716,000
<INCOME-TAX> 34,477,000 71,677,000
<INCOME-CONTINUING> 48,461,000 101,039,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 48,461,000 101,039,000
<EPS-PRIMARY> 0.29 0.59
<EPS-DILUTED> 0.27 0.57
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-25-1997
<CASH> 143,602,000
<SECURITIES> 0
<RECEIVABLES> 110,117,000
<ALLOWANCES> 0
<INVENTORY> 1,459,607,000
<CURRENT-ASSETS> 1,730,185,000
<PP&E> 1,187,649,000
<DEPRECIATION> 494,847,000
<TOTAL-ASSETS> 2,668,758,000
<CURRENT-LIABILITIES> 1,282,492,000
<BONDS> 243,177,000
72,770,000
0
<COMMON> 161,752,000
<OTHER-SE> 894,532,000
<TOTAL-LIABILITY-AND-EQUITY> 2,668,758,000
<SALES> 5,146,220,000
<TOTAL-REVENUES> 5,146,220,000
<CGS> 3,940,216,000
<TOTAL-COSTS> 3,940,216,000
<OTHER-EXPENSES> 844,731,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,054,000
<INCOME-PRETAX> 355,219,000
<INCOME-TAX> 147,238,000
<INCOME-CONTINUING> 207,981,000
<DISCONTINUED> 0
<EXTRAORDINARY> (1,777,000)
<CHANGES> 0
<NET-INCOME> 206,204,000
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.17
</TABLE>
