___________________________________________________________________________
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Form 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
____________________
Commission file number: 1-6024
WOLVERINE WORLD WIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1185150
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
9341 Courtland Drive, Rockford, Michigan 49351
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (616) 866-5500
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1 Par Value New York Stock Exchange/Pacific 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. _____
Number of shares outstanding of the registrant's Common Stock, $1 par value
(excluding shares of treasury stock) as of March 1, 1995: 10,788,618
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant based on the closing price on the New York
Stock Exchange on March 1, 1995: $277,264,120
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the registrant's annual
stockholders' meeting to be held April 19, 1995, are incorporated by
reference into Part III of this report.
___________________________________________________________________________
___________________________________________________________________________
PART I
Item 1. Business
General
Wolverine World Wide, Inc. (the "Company"), designs,
manufactures, distributes and markets various brands and styles of
footwear. The wide variety of footwear sold by the Company includes casual
shoes, slippers, moccasins, dress shoes, boots, uniform shoes and work
boots and shoes. The Company is also the largest domestic tanner of
pigskin. The Company, a Delaware corporation, is the successor of a 1969
reorganization of a Michigan corporation of the same name, originally
organized in 1906, which in turn was the successor of a business
established in Grand Rapids, Michigan, in 1883.
The Company is a leading provider of branded, comfort footwear
for the entire family, supplying, in conjunction with its licensees and
distributors, more than 26 million pairs annually to consumers in 80 countries.
Footwear has accounted for 90% or more of the consolidated revenues of the
Company for each of the last three years. For further financial information
regarding the Company, see the consolidated financial statements of the Company,
which are attached as Appendix A to this Form 10-K.
Footwear manufactured by the Company is sold under many
recognizable brand names. The Company's HUSH PUPPIES (registered
trademark) brand is a world leader in affordable, comfortable, casual and
functional footwear for men, women and children. The Company's WOLVERINE
(registered trademark) brand of work and sport boots is recognized as an
industry leader in work and sport boots. The Company's BATES (registered
trademark) brand is an industry leader in uniform footwear. The Tru-Stitch
Footwear Division is the foremost supplier of constructed slippers in the
United States. The Company also manufactures a line of rugged outdoor and
sport footwear under the WOLVERINE WILDERNESS (registered trademark) brand.
The Company has been granted the worldwide rights to manufacture and market
footwear under the CATERPILLAR (registered trademark) and CAT (registered
trademark) trademarks, and is also licensed to market footwear throughout
the United States, Japan and Canada under the COLEMAN (registered
trademark) trademark. Through these, and several other footwear brands,
the Company expects to continue to manufacture and source quality footwear
for its customers.
The Wolverine Leather Division is one of the premier tanners of
quality pigskin leather for the shoe, automotive and leather goods
industries. The pigskin leather tanned by the Company is used in a
significant portion of the footwear manufactured and sold by the Company,
and is also sold to other domestic and foreign manufacturers of shoes.
The Company's products are sold by Company salespersons and
agents and through Company-owned stores. Sales are made directly to
various retail sellers, including independent shoe stores, footwear chains
and department stores. Most customers also sell shoes bought from
competing manufacturers.
-1-
Retail footwear sales are seasonal with significant increases in
sales experienced during the Christmas, Easter and back-to-school periods.
Due to this seasonal nature of footwear sales, the Company experiences some
fluctuation in the levels of working capital. The Company provides working
capital for such fluctuation through internal financing and through a
revolving credit agreement that the Company has in place. The Company
expects the seasonal sales pattern to continue in future years.
Sales and Distribution
Company products are sold directly to more than 10,000 accounts,
operating more than 20,000 retail locations. Sales are also made to large
footwear chains, including those owned or operated by other companies in
the shoe industry, catalog houses, and to the retail operations referenced
below.
In addition to its wholesale activities, the Company operated 102
domestic retail shoe stores, leased shoe departments and Company-owned HUSH
PUPPIES (registered trademark) Specialty Stores as of March 25, 1995. A
fiscal 1990 decision to downsize the factory outlet business will result in
closing approximately 12 outlet retail locations during 1995. Fifteen
outlet retail locations were closed in fiscal 1994. As noted below, the
Company has also decided to exit the leased shoe department business in the
Lamonts Apparel chain.
Of the 102 retail locations, approximately 56 are factory outlet
stores located in strip centers or in free-standing buildings.
Approximately 21 of these stores operate under the LITTLE RED SHOE HOUSE
(service mark) format. These stores primarily handle closeouts and factory
rejects from the Company's own factories and those of other manufacturers.
The 35 remaining outlet stores are currently operating under the HUSH
PUPPIES (registered trademark) FACTORY DIRECT (service mark) name in major
manufacturer outlet malls. These stores carry a large selection of first
quality company branded footwear. The Company has and may continue to
selectively convert LITTLE RED SHOE HOUSE (service mark) locations to the
HUSH PUPPIES (registered trademark) FACTORY DIRECT (service mark) retail
and merchandising format.
In addition to the traditional retail shoe stores, the Company
currently operates 32 full price, full service family leased shoe
departments in the Lamonts Apparel chain in the Pacific Northwest and
Alaska, which feature the Company's wholesale brands. During 1994, the
Company announced its intent to discontinue its leased shoe department
business in the Lamonts Apparel chain. The current Lamonts Apparel leases
are scheduled to expire in October, 1995, and the business will be phased
out by year end.
The 102 retail locations also include 14 regional mall full
service, full price HUSH PUPPIES (registered trademark) Specialty Stores
which feature a broad selection of men's and women's HUSH PUPPIES
(registered trademark) brand footwear. The Company also licenses
independent retailers who operate HUSH PUPPIES (registered trademark)
Specialty Stores at another 63 locations.
-2-
The Company derives royalty income from licensing the HUSH
PUPPIES (registered trademark), WOLVERINE (registered trademark), WOLVERINE
WILDERNESS (registered trademark), COLEMAN (registered trademark), TOWN &
COUNTRY (trademark), and other trademarks to domestic and foreign licensees
for use on footwear and related products. The Company sells footwear
bearing the CATERPILLAR (registered trademark) trademark through domestic
and foreign distributors. In addition, the Company sells its own pigskin
leather to certain of its licensees. In fiscal 1994, the Company's foreign
licensees and distributors sold an estimated 12.4 million pairs of
footwear, an increase from approximately 8.3 million pairs sold in fiscal
1993.
The Company continues to develop a global network of licensees
and distributors to market its footwear brands. The licensees and
distributors purchase goods from the Company and third-party manufacturers
and these purchases are generally supported by letters of credit. Each
licensee and distributor is responsible for the marketing and distribution
of the Company's products, and generally purchases substantially all
marketing, advertising materials and products from the Company.
A broad distribution base insulates the Company from dependence
on any one customer. No customer of the Company accounted for more than
10% of the Company's consolidated revenues in fiscal 1994.
Raw Materials
The Company operates a pigskin tannery as a part of its Wolverine
Leather Division, from which the Company receives virtually all of its
pigskin requirements. The tannery is one of the most modern pigskin
tanneries in the world. The quality pigskin leather utilized in the
Company's products which incorporate this material is a significant element
of product cost, and is generally only available at comparable cost and
delivery terms from the Company's tannery. Therefore, the continued
operation of this tannery is important to the Company's competitive
position in the footwear industry. In addition the Company owns a minority
interest in Wan Hau Enterprise Co., Ltd. ("Wan Hau"), a principal tanner of
pigskin in Taiwan. The Company provides semi-finished pigskin leather to
Wan Hau for finishing in Taiwan.
The Company's principal required raw material is quality leather,
which it purchases primarily from a select group of domestic suppliers,
including the Company's tannery. The Company has traditionally purchased
the majority of the shearling used extensively in the manufacture of
constructed slippers and related products by its Tru-Stitch Footwear
Division from a single domestic source, which has been a reliable and
consistent supplier. The Company currently purchases the vast majority of
the raw pigskins used in a significant portion of its pigskin footwear from
a single domestic source, which has also been a reliable and consistent
supplier. The Company purchases all of its other raw materials, including
man-made materials and fabrics for uppers, and leather, rubber and plastics
for soles and heels, from a variety of sources, none of which is believed
by the Company to be a dominant supplier.
-3-
Trademarks, Licenses and Patents
The Company is the holder of many trademarks which identify its
products. The trademarks that are most widely used by the Company include
HUSH PUPPIES (registered trademark), WOLVERINE (registered trademark),
WILDERNESS (registered trademark), WOLVERINE WILDERNESS (registered
trademark), BATES (registered trademark), FLOATERS (trademark), DURASHOCKS
(registered trademark), BOUNCE & DESIGN (registered trademark), COMFORT
CURVE (registered trademark), TOWN & COUNTRY (trademark), TRU-STITCH
(registered trademark), WIMZEES (registered trademark), and SIOUX MOX
(registered trademark). The Company is also licensed to market footwear in
the United States, Japan and Canada under the COLEMAN (registered
trademark) trademark and throughout the world under the CATERPILLAR
(registered trademark) and CAT (registered trademark) trademarks.
Pigskin leather produced by the Company is sold under the trademarks
WOLVERINE (registered trademark), BREATHIN' BRUSHED PIGSKIN (registered
trademark), and SILKEE (registered trademark).
The Company believes that its products are identified by its
trademarks and thus its trademarks are a valuable asset. It is the policy
of the Company to vigorously defend its trademarks against infringement to
the greatest extent practicable under the laws of the United States and
other countries. The Company is also the holder of several patents,
copyrights and various other proprietary rights. The Company protects all
of its proprietary rights to the greatest extent practicable under
applicable law.
Order Backlog
The Company does not have a significant backlog of non-cancelable
orders. On March 1, 1995, the Company had a backlog of orders believed to
be firm of approximately $79 million compared with a backlog of
approximately $69 million on March 1, 1994. Historically, the Company has
not experienced significant cancellation of orders. While orders in
backlog are subject to cancellation by customers, the Company expects that
substantially all of these orders will be shipped in fiscal 1995.
Competition
The Company's footwear lines are manufactured and marketed in a
highly competitive environment. The Company competes with numerous other
manufacturers (domestic and foreign) and importers, many of which are
larger and have greater resources than the Company. The Company's major
competitors for its brands of footwear are generally located in the United
States. The Company has at least six major competitors in connection with
the sale of its work shoes and boots, at least eight major competitors in
connection with the sale of its sport boots, and at least fifteen major
competitors in connection with the sale of its casual and dress shoes.
Virtually all domestic and foreign manufacturers of footwear compete, or
plan to compete, with the Company in the rugged casual and outdoor footwear
market. Many of these competitors are established in the footwear
industry, and have strong market identities.
-4-
Product performance and quality, including technological
improvements, product identity, competitive pricing, and the ability to
adapt to style changes are all important elements of competition in the
footwear markets served by the Company. The Company attempts to meet
competition and maintain its competitive position through promotion of
brand awareness, manufacturing efficiencies, its tannery operations, and
the style, comfort and value of its products. Future sales of the Company
will be affected by its continued ability to sell its products at
competitive prices and to meet shifts in customer preference.
Because of the lack of reliable published statistics, the Company
is unable to state with certainty its position in the shoe industry,
however, the Company believes it is one of the five largest domestic
manufacturers of footwear.
Foreign footwear manufacturers and importers also provide a
source of competition for the Company. In order to remain competitive with
these foreign entities, the Company continues to improve and expand its
manufacturing facilities in Michigan, the Caribbean Basin and Mexico. In
addition, the Company is continuing to pursue lower cost manufacturing
alternatives in the Far East and Latin America.
Manufacturing and Sourcing
Although a significant portion of the Company's product line is
purchased or sourced overseas, the majority of its products are produced in
the United States. The Company's footwear is manufactured in several
domestic facilities and certain related foreign facilities, including
facilities located in Michigan, Arkansas, New York, Mexico, Puerto Rico,
Costa Rica, the Dominican Republic and Canada. The Company includes, as an
integral part of its domestic manufacturing operations, five factories
located in the Caribbean Basin and Mexico that produce footwear uppers for
final assembly in the Company's domestic factories.
The Company sources certain footwear from a variety of foreign
manufacturing facilities in the Far East, Latin America and the Caribbean.
The Company also maintains a small office in Taiwan to facilitate the
sourcing and importation of footwear from the Far East.
The Company is subject to the normal risks of doing business
abroad due to its international operations, including the risks of
expropriation, acts of war, political disturbances and similar events, and
loss of most favored nations trading status. With respect to its
international sourcing activities, management believes that over a period
of time, it could arrange adequate alternative sources of supply for the
products currently obtained from its foreign suppliers. A sustained
disruption of such sources of supply could, particularly on a short-term
basis, have an adverse impact on the Company's operations.
Discontinued Operations
During 1994, the Company announced its intent to discontinue its
leased shoe department business in the Lamonts Apparel chain. The current
-5-
Lamonts Apparel leases are scheduled to expire in October 1995, and the
business will be phased out by year end. In connection with this phase
out, an estimated after-tax loss of $1,122,000 was recognized in 1994. The
loss represents the cost of inventory liquidation, write-off of leasehold
improvements and anticipated operating results during 1994 and the 1995
phase-out period. On January 6, 1995, Lamonts Apparel filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. Lamonts Apparel has
indicated that it will continue with the lease arrangement with the Company
through October 1995, the end of the contract term, or find another operator for
the leased shoe department business.
Research and Development
In addition to normal and recurring product development, design
and styling activities, the Company engages in research and development
related to new and improved materials for use in its footwear and other
products and in the development and adaptation of new production
techniques. The Company's continuing relationship with the Biomechanics
Evaluation Laboratory at Michigan State University, which is funded in part
by a grant from the Company, has led to specific biomechanical design
concepts which have been incorporated in the Company's footwear. The
Company also maintains a footwear design center in Italy to develop
contemporary styling for the Company and its international licensees.
While the Company continues to be a leading developer of footwear
innovations, research and development costs do not represent a material
portion of operating expenses.
Environmental Matters
Compliance with federal, state and local regulations with respect
to the environment has not had, nor is it expected to have, any material
effect on the capital expenditures, earnings or competitive position of the
Company. The Company uses and generates, and in the past has used and
generated, certain substances and wastes that are regulated or may be
deemed hazardous under certain federal, state and local regulations with
respect to the environment. The Company from time to time works with
federal, state and local agencies to resolve cleanup issues at various
waste sites or other environmental regulatory issues.
The Company is one of 13 companies named as potentially
responsible parties ("PRPs") by the MDNR at the Sunrise Landfill Site near
Wayland, Michigan. The MDNR has demanded that the PRPs pay approximately $5
million as reimbursement for past costs at the site and join in financing
further investigation and remedial efforts. The MDNR estimates that cleanup and
remediation of the site could cost in excess of $10 million. The Sunrise PRPs
have jointly agreed with the MDNR to pay $323,000 in costs incurred by the MDNR
prior to July 1991, and have undertaken a comprehensive remedial
investigation/feasibility study at the site in order to determine whether less
expensive remedial measures will adequately protect public health and safety.
Excavation and removal of buried waste has been deferred pending the outcome of
this investigation, which is scheduled for completion in mid-1995. Preliminary
results suggest that it may be possible to leave the waste in place,
thereby significantly reducing the cost of remediation. In the meantime,
-6-
however, the PRPs are financing interim response measures aimed at
controlling the level of liquids in the landfill and preventing any further
environmental degradation. The PRPs have also undertaken a comprehensive
investigation in an effort to identify other responsible parties to share
in the response activity costs. The Company's share of the cost of these
activities is currently estimated at $75,000 to $125,000, of which
approximately $65,000 was paid during 1994. The Company's ultimate
liability at this site will depend largely upon what remedial measures
prove feasible and whether additional PRPs can be identified. To date, no
additional PRPs have been brought into the proceedings. The Company
appears to have been a relatively small generator at this site, and is
seeking to be classified as a de minimis PRP.
Employees
As of December 31, 1994, the Company had approximately 5,205
domestic and foreign production, office and sales employees. Approximately
1,292 employees were covered by seven union contracts expiring at various
dates through 1998. The Company has experienced no work stoppages since
1990. The Company presently considers its employee relations to be good.
Item 2. Properties.
The principal executive, sales and administration offices of the
Company are located in Rockford, Michigan and consist of administration and
office buildings of approximately 123,300 square feet. The Company also
has additional administrative and sales offices in Arkansas, New York,
Italy, the United Kingdom, Canada and Taiwan totaling approximately 32,400
square feet, the majority of which is leased.
The Company owns and operates one pigskin tannery from which it
receives virtually all of its pigskin requirements. The tannery is located
in Rockford, Michigan and encompasses approximately 160,000 square feet.
The Company's footwear manufacturing operations are carried out
at 14 separate facilities, totaling approximately 583,500 square feet of
manufacturing space. These facilities are located primarily in smaller
towns in Arkansas, Michigan, and New York and in Mexico, Puerto Rico, the
Dominican Republic and Canada. Approximately 370,400 square feet of
manufacturing space is under lease at seven locations and the remaining
seven facilities are Company-owned. The Company's current aggregate
footwear manufacturing capacity is in excess of 12.0 million pairs of shoes
per year. The Company believes its footwear manufacturing facilities are
generally among the most modern in the industry.
The Company maintains twelve warehouses, located in four states
and Canada, containing approximately 804,100 square feet. The vast
majority of these warehouses are Company-owned, with approximately 63,500
square feet at three locations under lease.
In addition, the Company's retail operations are conducted
throughout the United States and as of March 25, 1995, consisted of
approximately 102 locations, including 32 leased shoe departments. As
-7-
noted in Item 1 above, the Company intends to discontinue its leased shoe
department business by year end. All retail locations, except three
factory outlet stores in Company-owned facilities, are subject to operating
leases.
The Company believes that all properties and facilities of the
Company are suitable, adequate and fit for their intended purposes.
Item 3. Legal Proceedings.
The Company is involved in litigation and various legal matters
arising in the normal course of business. The Company is also involved in
certain environmental compliance activities, including proceedings
involving cleanup issues associated with a waste disposal site, as more
fully described in Item 1 of this Annual Report on Form 10-K. Having
considered facts that have been ascertained and opinions of counsel
handling these matters, the Company does not believe the ultimate
resolution of such proceedings will have a material adverse effect on the
Company's financial condition.
Item 4. Submission of Matters to a Vote of Security-Holders.
No matter was submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security-holders, through the
solicitation of proxies or otherwise.
Supplemental Item. Executive Officers of the Registrant.
The following table lists the names and ages of the Executive
Officers of the Company as of the date of this Annual Report on Form 10-K,
and the positions presently held with the Company. The information
provided below the table lists the business experience of each such
Executive Officer during the past five years. All Executive Officers serve
at the pleasure of the Board of Directors of the Company, or if not
appointed by the Board of Directors, they serve at the pleasure of
management.
<TABLE>
<CAPTION>
Name Age Positions held with the Company
<S><C> <C> <C>
Geoffrey B. Bloom 53 President and Chief Executive Officer
Steven M. Duffy 42 Vice President
Stephen L. Gulis, Jr. 37 Vice President and Chief Financial Officer
Blake W. Krueger 41 General Counsel and Secretary
L. James Lovejoy 62 Vice President of Corporate
Communications
Thomas P. Mundt 45 Vice President of Strategic Planning and
Treasurer
Timothy J. O'Donovan 49 Executive Vice President
Robert J. Sedrowski 45 Vice President of Human Resources
</TABLE>
-8-
Geoffrey B. Bloom has served the Company as President and Chief
Executive Officer since April 1993. From 1987 to 1993 he served the
Company as President and Chief Operating Officer.
Steven M. Duffy has served the Company as a Vice President since
April 1993. From 1989 to April 1993 he served the Company in various
senior manufacturing positions.
Stephen L. Gulis, Jr., has served the Company as Vice President
and Chief Financial Officer since February 1994. From April 1993 to
February 1994 he served the Company as Vice President of Finance and
Corporate Controller, and from 1986 to 1993 he was the Vice President of
Administration and Control for the Hush Puppies Company.
Blake W. Krueger has served the Company as General Counsel and
Secretary since April 1993. He has been a partner of the law firm of
Warner Norcross & Judd LLP since 1985.
L. James Lovejoy has served the Company as Vice President of
Corporate Communications since 1991. From 1984 to 1991 he was the Director
of Corporate Communications for Gerber Products Company, a manufacturer of
baby food and related products.
Thomas P. Mundt has served the Company as Vice President of
Strategic Planning and Treasurer since December 1993. From 1988 to 1993 he
served in various financial and planning positions at Sears Roebuck & Co.
including Vice President Planning, Coldwell Banker's Real Estate Group and
Director of Corporate Planning for Sears Roebuck & Co.
Timothy J. O'Donovan has served the Company as Executive Vice
President since 1982.
Robert J. Sedrowski has served the Company as Vice President of
Human Resources since October 1993. From 1990 to 1993 he served as
Director of Human Resources for the Company.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Wolverine World Wide, Inc. common stock is traded on the New York
and Pacific Stock Exchanges. The following table shows the high and low
transaction prices by calendar quarter for 1994 and 1993. The 1993
transaction prices have been adjusted to reflect the three-for-two stock
split announced in March 1994. The number of holders of record of common
stock on March 1, 1995 was 2,033.
-9-
<TABLE>
<CAPTION>
1994 1993
High Low High Low
<S> <C> <C> <C> <C> <C>
January-March $24 5/8 $19 3/8 $13 1/8 $ 9 1/8
April-June 24 3/8 18 1/2 14 11 1/8
July-September 27 1/8 20 3/4 19 3/8 11
October-December 26 3/4 20 1/4 22 3/8 18 5/8
</TABLE>
Dividends Per Share Declared:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C> <C>
1st quarter $.04 $.0275
2nd quarter $.04 $.0275
3rd quarter $.04 $.0275
4th quarter $.04 $.0275
</TABLE>
Cash dividends declared per share for 1993 have been retroactively
adjusted to reflect the three-for-two stock split announced in March 1994.
Dividends of $.05 per share were declared for the first quarter of fiscal
1995.
Item 6. Selected Financial Data.
<TABLE>
Five Year Operating and Financial Summary (1)(2)
(Thousands of Dollars, Except Per Share Data)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales and other
operating income $378,473 $323,315 $282,863 $271,622 $284,274
Earnings (loss) from
continuing operations 18,050 11,754 4,699 4,563 (4,644)
Primary earnings (loss) from
continuing operations
per share of common stock(3)(4)$ 1.65 $ 1.12 $ 0.47 $ 0.46 $ (0.46)
Cash dividends(4)(5) 0.16 0.11 0.11 0.11 0.11
1994 1993 1992 1991 1990
Financial Position at Year End
Total assets $230,151 $205,633 $201,232 $201,488 $185,366
Long-term debt, less
current maturities 43,482 44,913 42,656 31,596 34,267
-10-
<FN>
Notes to Five Year Operating and Financial Summary
1. This summary should be read in conjunction with the consolidated financial statements of the
Company and the notes thereto, which are attached as Appendix A to this Form 10-K.
2. The results from operations exclude discontinued operations and are before the cumulative
effect of accounting changes. Balance sheet amounts for discontinued operations have been
separately identified within current assets. Refer to Note B to the consolidated financial
statements for a description of the Company's discontinued operations and Notes H and I for a
description of the cumulative effect of accounting changes.
3. Primary earnings (loss) from continuing operations per share are based on the weighted average
number of shares of common stock outstanding during the year and the assumed exercise of
dilutive stock options.
4. On March 10, 1994, the Company announced a three-for-two stock split on shares of common stock
outstanding as of March 21, 1994. All share and per share data have been retroactively
adjusted for the increased shares resulting from the stock split.
5. Cash dividends per share represent the rates paid by the Company on the shares outstanding at
dates of declaration and have been retroactively adjusted to reflect the three-for-two stock
split announced in March 1994.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Operations
Results of Operations - 1994 Compared to 1993
Net sales from continuing operations for 1994 of $378.5 million
compare with $323.3 million for 1993, a 17.1% increase. This increase was
primarily the result of record sales in the Wolverine Footwear Group and
the Tru-Stitch businesses. Additionally, strong sales increases occurred
in the Hush Puppies Company and the Wolverine Leather operations.
The Wolverine Footwear Group's record sales were fueled by a 31.9%
increase in the domestic and international work and sport boot divisions.
This increase was offset by a 6.1% decrease in the Bates Uniform division.
The work and sport boot gains continue to reflect superior product
characteristics and the continued trend toward utilizing these products for
everyday use. The reduced shipments in the Bates division reflect the
continued downsizing of the U.S. military and reduced demand in export
markets.
The Tru-Stitch Footwear Division reached record sales by recording a
23.9% increase over record 1993 levels. The increase resulted from further
increases in catalog accounts and a full year of operations of the B & B
Shoe Company, which was acquired in 1993.
-11-
The Hush Puppies Company recorded a 11.1% increase in volume for the
year with all operating groups reporting an increase. The brand
repositioning which began in 1993 continues to have a positive impact on
the domestic wholesale business and is also contributing to gains in the
international and retail operations. Despite the closing of thirty stores
during the year, the retail operations reported a 4.6% sales increase.
The Global Operations Group recorded a sales increase in its Leather
operation while its contract sales remained flat. The Leather operation
recorded a revenue increase of 23.2% which reflects the opportunities
created from increased pricing pressure on cowhide prices. This increase
was obtained despite the actions taken to reduce its product offerings and
to focus on high margin products.
Gross margins increased to 31.6% in 1994 compared to 29.8% in 1993.
Pricing pressures continue on both the wholesale and retail level and cost
increases on raw materials occurred throughout the Company during the year.
Despite these pressures, the Company was able to improve its margins by
increasing manufacturing efficiencies, providing improved sourcing to the
wholesale groups and capitalizing on increased production levels which
provides incremental absorption of overhead costs. These benefits are
expected to continue and should provide the Company with the ability to
maintain its value pricing position.
Selling and administrative expenses increased $13.8 million in 1994
and as a percentage of net sales rose to 23.9% in 1994. This increase was
a result of increased investment spending in our core brands as advertising
and marketing expenses of the Hush Puppies Company and Wolverine Footwear
Group increased 40.3% on a combined basis. Additionally, normal cost
increases occurred in conjunction with the growth of the Company and
employee profit-sharing costs increased as the overall profitability of the
corporation improved.
Interest expense of $4.0 million was down in 1994 from the $4.7
million reported in 1993. The reduction resulted from reduced average
borrowings during the year and a more favorable interest rate on our long-
term borrowings which resulted from the issuance of replacement senior
debt.
The 1994 effective tax rate on continuing operations of 29.0%
increased from 28.0% in 1993. The reduction from the federal statutory
rates of 35% was principally a result of non-taxable earnings of the
Company's Caribbean operations.
Earnings from continuing operations of $18.1 million ($1.65 per share)
for 1994 reflect a 53.6% increase over earnings of $11.8 million ($1.12 per
share) reported for 1993. In 1994, the Company recorded a loss from
discontinued operations of $1.5 million ($.13 per share), net of income
taxes, to reflect the costs associated with the exiting of its leased shoe
department business.
-12-
Primary earnings per share of $1.52 for 1994 compare to $1.10 per
share for 1993. Fully diluted earnings per share of $1.50 and $1.07 were
reported for 1994 and 1993 respectively.
Results of Operations - 1993 Compared to 1992
Net sales for fiscal 1993 were $323.3 million compared to $282.9
million for fiscal 1992. This 14.3% increase was driven by record sales in
the Wolverine Footwear Group and the Tru-Stitch Footwear Division. The Hush
Puppies Company also recorded a healthy sales increase during the year.
These increases were partially offset by a decrease in the Wolverine
Leather Division sales.
Domestically, the Wolverine Footwear Group posted a sales increase of
31.5% which was the second year in which the sales gain exceeded 30%. The
continued success of Wolverine DURASHOCKS (registered trademark) boots and
the introduction of WOLVERINE WILDERNESS (registered trademark) products to
the market place were the primary factors contributing to the sales gain.
Increased marketing efforts to promote the Wolverine Work Boot products
also contributed to the sales gains.
A 16.2% increase in sales was realized by the Bates Uniform Division
of the Wolverine Footwear Group. While the U.S. military continued to
downsize, the comfort characteristics of BATES (registered trademark)
footwear continues to gain acceptance and the durability of the product
made Bates number one in this category.
The Tru-Stitch Footwear Division reached record sales with a 20.7%
increase for the year. Their prominent position in the market through all
distribution channels and the addition of B & B Shoe Company which produces
generally lower priced products continues to allow the Tru-Stitch Division
to grow its business.
While the Hush Puppies Company did not reach record sales volumes, it
did post an increase of 5.3%. The repositioning and revitalization of the
brand which began in 1992 had a positive impact. Retail and consumer
acceptance for the product was apparent as the division's reorder business
for the year was strong.
The Wolverine Leather Division began resizing during the third
quarter of 1993. The primary focus was to retract the business into high
margin areas where the business can perform profitability. The volume was
reduced and this combined with other actions is expected to allow the
division to regain its profitability as it focuses on the higher value
added product in its offerings.
Gross margins as a percentage of net sales decreased to 29.8% from
30.0% in 1992. The emphasis of value priced product in the market place
continues to place pressures on wholesale and retail price points. The
Company maximized its pricing positions when superior products were
available, such as WOLVERINE (registered trademark) DURASHOCKS (registered
trademark) and TRU-STITCH (registered trademark) slippers, but was very
cautious in raising prices in a competitive market in order to increase
-13-
gross margin levels. A significant benefit, which improved the Company's
gross margin levels, was the manufacturing efficiencies realized in the
domestic facilities. This, combined with the Company's low cost import
operations, provided the Company with product which was priced
attractively.
Selling and administrative expenses for 1993 were 23.7% of net sales
compared to 25.6% of net sales in 1992. While the expenses were reduced as
a percentage of net sales, the expenses increased $4.1 million. The
increase was primarily a result of increased commissions due to higher
volume, the impact of intensified marketing and promotional campaigns, and
employee profit sharing programs. The overhead reduction plan which was
announced in the fourth quarter of 1992 was successful and the initial
target of $3.0 million of savings was exceeded by over $1.0 million.
Interest expense of $4.7 million for 1993 reflects a $1.4 million
increase over 1992. However, 1992 interest expense did not include
interest expense of $2.6 million associated with discontinued operations.
Overall, interest expense was reduced by $1.1 million as a result of the
reduction in debt levels.
Other expenses in 1992 included a charge of $2.7 million associated
with the reduction in corporate staff and the write-down of certain
intangible assets.
The 1993 effective tax rate on continuing operations of 28.0% compared
to 28.8% in 1992. The reduction from the statutory federal rate of 35% was
principally a result of non-taxable earnings of our Puerto Rican
subsidiaries and foreign affiliates.
Earnings from continuing operations of $11.8 million for 1993 reflect
a 151% increase over 1992 earnings of $4.7 million.
The Company incurred costs associated with the operating losses of the
Brooks Athletic Footwear Division and Lamonts leased shoe department
business in 1993 and 1992. The losses associated with the disposal of
these operations totaled $0.3 million in 1993 and $14.9 million in 1992.
Additionally, the corporation elected to adopt SFAS No. 109 ("Accounting
for Income Taxes") and SFAS No. 106 ("Employers Accounting for Post-
retirement Benefits Other Than Pensions") which resulted in a net charge to
earnings of $0.8 million in 1992.
Net earnings of $11.5 million ($1.10 per share) for 1993 compares to a
loss of $10.9 million ($1.10 per share) for 1992. The change reflected the
significant progress made in the core business units of the Company and the
improvements resulting from the divestiture of the Brooks athletic
business.
Liquidity and Capital Resources
Net cash provided by operating activities before working capital items
was $24.0 million in 1994 compared to $19.2 million in 1993. Of these
amounts, $11.6 million in 1994 and $13.6 million in 1993 were used to fund
-14-
increases in working capital. The most significant changes in working
capital were increases in accounts receivables and inventories which were
the result of higher sales volumes and anticipated demand for product.
Cash of $0.7 million in 1994 and $12.7 million in 1993 was provided from
the discontinuance of the Lamonts and Brooks businesses.
Additions to property, plant and equipment of $9.9 million in 1994
were higher than the $6.6 million reported in 1993. The majority of these
expenditures were related to purchases of manufacturing equipment that were
necessary to continue to upgrade our manufacturing facilities.
Short-term debt was reduced by $0.5 million in 1994 and $14.4 million
in 1993. The significant reduction in 1993 was principally a reduction of
debt related to the discontinued operations of Brooks.
Long-term debt of $43.5 million at the end of 1994 remained relatively
flat compared to $44.9 million at the end of 1993. The Company issued a
$30.0 million 7.8% senior note and used the proceeds to extinguish previous
10.4% senior debt and reduced revolving credit obligations. Also, during
1994, holders of subordinated debt converted the underlying notes into
250,000 shares of the Company's common stock.
The Company paid dividends of $1.7 million, or $0.16 per share, which
reflects a 50% increase over 1993 dividends per share. Additionally,
shares issued under stock incentive plans provided cash of $2.5 million in
1994 compared to $2.2 million during 1993.
The Company has authorized a 25% increase in the dividend rate to
$0.05 per share for the first quarter of 1995.
The Company maintained its strong financial position as the current
ratio remained stable at 3.9 to 1. Additionally, the Company maintains
short-term borrowing and commercial letter-of-credit facilities of
$54.4 million of which $21.4 million was used at the end of 1994.
The combination of cash flows from operations and available credit
facilities will be sufficient to meet future capital needs.
Inflation
Inflation has not had a significant impact on the Company over the
past three years nor is it expected to have a significant impact in the
foreseeable future. The Company continuously attempts to minimize the
effect of inflation through cost reductions and improved productivity.
Item 8. Financial Statements and Supplementary Data.
The response to this Item is set forth in Appendix A of this
Annual Report on Form 10-K and is here incorporated by reference.
-15-
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding directors of the Company contained
under the captions "Board of Directors" and "Section 16(a) Reporting
Delinquencies" in the definitive Proxy Statement of the Company dated March
27, 1995, is incorporated herein by reference. The information regarding
Executive Officers is provided in the Supplemental Item following Item 4 of
Part I above.
Item 11. Executive Compensation.
The information contained under the captions "Compensation of
Directors," "Executive Compensation," "Employment Agreements, Termination
of Employment and Change in Control Arrangements" and "Compensation
Committee Interlocks and Insider Participation" in the definitive Proxy
Statement of the Company dated March 27, 1995, is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the captions "Ownership of Common
Stock" and "Securities Ownership of Management" contained in the definitive
Proxy Statement of the Company dated March 27, 1995, is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions.
The information regarding certain employee loans following the
caption "Executive Compensation," under the subheading "Stock Options," and
the information contained under the captions "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" contained in the definitive Proxy
Statement of the Company dated March 27, 1995, is incorporated herein
by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-
K.
-16-
Item 14(a)(1). List of Financial Statements. Attached as Appendix
A.
The following consolidated financial statements of Wolverine
World Wide, Inc. and subsidiaries are filed as a part of this report:
- Consolidated Balance Sheets as of December 31, 1994 and
January 1, 1994.
- Consolidated Statements of Stockholders' Equity for the
Fiscal Years Ended December 31, 1994, January 1, 1994 and
January 2, 1993.
- Consolidated Statements of Operations for the Fiscal Years
Ended December 31, 1994, January 1, 1994 and January 2,
1993.
- Consolidated Statements of Cash Flows for Fiscal Years Ended
December 31, 1994, January 1, 1994 and January 2, 1993.
- Notes to Consolidated Financial Statements as of
December 31, 1994.
- Report of Independent Auditors.
Item 14(a)(2). Financial Statement Schedules. Attached as Appendix
B.
The following consolidated financial statement schedule of
Wolverine World Wide, Inc. and subsidiaries is filed as a part of this
report:
- Schedule II--Valuation and qualifying accounts of continuing
operations.
All other schedules (I, III, IV, and V) for which provision is
made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
Item 14(a)(3). List of Exhibits.
Exhibit
Number
3(a) Certificate of Incorporation, as amended. Previously filed
as Exhibit 4(a) to the Company's Quarterly Report on
Form 10-Q for the period ended June 18, 1994. Here
incorporated by reference.
3(b) Amended and Restated Bylaws. Previously filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994. Here incorporated by
reference.
-17-
Exhibit
Number
4(a) The Certificate of Incorporation, as amended. See
Exhibit 3(a) above.
4(b) Rights Agreement dated as of May 7, 1987, as amended and
restated as of October 24, 1990. Previously filed with
Amendment No. 1 to the Company's Form 8-A filed November 13,
1990. Here incorporated by reference. This agreement has
been amended by the Second Amendment to Rights Agreement
included as Exhibit 4(f) below.
4(c) Amended and Restated Credit Agreement dated as of
October 13, 1994 with NBD Bank, N.A. as Agent.
4(d) Note Agreement dated as of August 1, 1994 relating to 7.81%
Senior Notes. Previously filed as Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 10, 1994. Here incorporated by reference.
4(e) The Registrant has several classes of long-term debt
instruments outstanding in addition to that described in
Exhibit 4(d) above. The amount of none of these classes of
debt outstanding on March 1, 1995 exceeds 10% of the
Registrant's total consolidated assets. The Registrant
agrees to furnish copies of any agreement defining the
rights of holders of any such long-term indebtedness to the
Securities and Exchange Commission upon request.
4(f) Second Amendment to Rights Agreement made as of October 28,
1994 (amending the Rights Agreement included as Exhibit 4(b)
above).
10(a) Stock Option Plan of 1979 and amendment.* Previously filed
as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1988. Here
incorporated by reference.
10(b) 1993 Stock Incentive Plan.* Previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(c) 1988 Stock Option Plan.* Previously filed as an exhibit to
the Company's registration statement on Form S-8, filed July
21, 1988, Registration No. 33-23196. Here incorporated by
reference.
10(d) Amended and Restated Directors Stock Option Plan.*
Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
-18-
Exhibit
Number
10(e) Amended and Restated Agreement executed on May 26, 1994 and
dated as of July 24, 1992, between the Company and Thomas D.
Gleason.* Previously filed as Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the period ended
June 18, 1994. Here incorporated by reference.
10(f) Employment Agreement dated April 27, 1993, between the
Registrant and Geoffrey B. Bloom.* Previously filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(g) Executive Short-Term Incentive Plan for 1994.* Previously
filed as Exhibit 10(g) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(h) Management Short-Term Incentive Plan for 1994.* Previously
filed as Exhibit 10(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(i) Stock Option Loan Program.* Previously filed as
Exhibit 10(h) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991. Here
incorporated by reference.
10(j) Deferred Compensation Agreements with Disability Benefits.*
The form of agreement was previously filed as Exhibit 10(i)
to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993. Here incorporated by reference.
An updated participant schedule is attached as
Exhibit 10(j).
10(k) Deferred Compensation Agreements without Disability
Benefits.* The form of agreement was previously filed as
Exhibit 10(j) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993. Here
incorporated by reference. An updated participant schedule
is attached as Exhibit 10(k).
10(l) Executive Long-Term Incentive (Three Year) Plans for the
years 1991 to 1993 and 1992 to 1994.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991. Here
incorporated by reference.
10(m) Executive Long-Term Incentive (Three Year) Plan for the
three year period 1993-1995.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
-19-
Exhibit
Number
for the fiscal year ended January 2, 1993. Here
incorporated by reference.
10(n) Executive Long-Term Incentive (Three Year) Plan for the
three year period 1994-1996.* Previously filed as
Exhibit 10(n) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(o) Termination of Employment and Change of Control Agreements.*
The form of agreement was previously filed as Exhibit 10(m)
to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993. Here incorporated by reference.
An updated participant schedule is attached as
Exhibit 10(o).
10(p) Indemnification Agreements.* The form of agreement was
previously filed as Exhibit 10(n) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2,
1993. Here incorporated by reference. An updated
participant schedule is attached as Exhibit 10(p).
10(q) Supplemental Retirement Benefits.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988. Here
incorporated by reference.
10(r) Benefit Trust Agreement dated May 19, 1987, and Amendments
Numbers 1, 2 and 3 thereto.* Previously filed as
Exhibit 10(p) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993. Here
incorporated by reference.
10(s) Supplemental Director's Fee Arrangement dated April 27,
1993, between the Company and Phillip D. Matthews.*
Previously filed as Exhibit 10(s) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
10(t) Letter Agreement dated May 2, 1994, between the Company and
George A. Andrews.*
10(u) 1984 Executive Incentive Stock Purchase Plan and amendment.*
Previously filed as Exhibit 10(h) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2,
1988. Here incorporated by reference.
10(v) Asset Purchase Agreement dated January 29, 1993, concerning
the sale of the Brooks Business. Previously filed as
Exhibit No. 2 to the Company's Current Report on Form 8-K
filed February 1, 1993. Here incorporated by reference.
-20-
Exhibit
Number
10(w) Agreements relating to the sale of the assets of the three
European Subsidiaries associated with the Brooks Business.
Previously filed as Exhibits 2(a), 2(b) and 2(c) to the
Company's Current Report on Form 8-K filed July 8, 1993.
Here incorporated by reference.
10(x) Deferred Compensation Agreement dated as of April 21, 1994,
between the Company and Charles F. Morgo.* Previously filed
as Exhibit 10(x) to the Company's Quarterly Report on
Form 10-Q for the period ended June 18, 1994. Here
incorporated by reference.
10(y) Employment Agreement dated April 21, 1994, between the
Company and Charles F. Morgo.* Previously filed as
Exhibit 10(y) to the Company's Quarterly Report on Form 10-Q
for the period ended June 18, 1994. Here incorporated by
reference.
10(z) Restricted Stock Agreement dated April 21, 1994, between the
Company and Charles F. Morgo.* Previously filed as
Exhibit 10(z) to the Company's Quarterly Report on Form 10-Q
for the period ended June 18, 1994. Here incorporated by
reference.
10(aa) 1994 Directors' Stock Option Plan.* Previously filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-
Q for the period ended June 18, 1994. Here incorporated by
reference.
11 Computation of Per Share Earnings.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney
27 Financial Data Schedule
*Management contract or compensatory plan or arrangement.
The Company will furnish a copy of any exhibit listed above to any
stockholder without charge upon written request to Mr. Blake W. Krueger,
General Counsel and Secretary, 9341 Courtland Drive, Rockford, Michigan
49351.
Item 14(b). Reports on Form 8-K.
No reports on Form 8-K were filed in the fourth quarter of
the fiscal year ended December 31, 1994.
-21-
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.
WOLVERINE WORLD WIDE, INC.
Dated: March 29, 1995 By:/s/Geoffrey B. Bloom
Geoffrey B. Bloom
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
*/s/Phillip D. Matthews Chairman of the Board of March 29, 1995
Phillip D. Matthews Directors
/s/Geoffrey B. Bloom President, Chief Executive March 29, 1995
Geoffrey B. Bloom Officer and Director
*/s/Thomas D. Gleason Vice Chairman of the Board of March 29, 1995
Thomas D. Gleason Directors
*/s/Timothy J. O'Donovan Executive Vice President and March 29, 1995
Timothy J. O'Donovan Director
*/s/Stephen L. Gulis, Jr. Vice President and Chief March 29, 1995
Stephen L. Gulis, Jr. Financial Officer (Principal
Financial and Accounting
Officer)
*/s/Daniel T. Carroll Director March 29, 1995
Daniel T. Carroll
-22-
*/s/Alberto L. Grimoldi Director March 29, 1995
Alberto L. Grimoldi
*/s/David T. Kollat Director March 29, 1995
David T. Kollat
*/s/David P. Mehney Director March 29, 1995
David P. Mehney
*/s/Stuart J. Northrop Director March 29, 1995
Stuart J. Northrop
*/s/Joseph A. Parini Director March 29, 1995
Joseph A. Parini
*/s/Joan Parker Director March 29, 1995
Joan Parker
*/s/Elizabeth A. Sanders Director March 29, 1995
Elizabeth A. Sanders
*by/s/Geoffrey B. Bloom
Geoffrey B. Bloom
Attorney-in-Fact
-23-
APPENDIX A
Wolverine World Wide, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of Fiscal Year End
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,949 $ 3,730
Accounts receivable, less allowances
(1994--$3,959; 1993--$3,411) 70,669 62,322
Inventories:
Finished products 48,637 36,118
Raw materials and work-in-process 30,388 31,387
79,025 67,505
Refundable income taxes 1,629 1,594
Deferred income taxes 8,843 8,716
Net current assets of discontinued operations 991 2,940
Other current assets 4,430 2,622
Total current assets 168,536 149,429
Property, plant and equipment:
Land 1,292 1,269
Buildings and improvements 30,638 28,241
Machinery and equipment 65,098 61,098
97,028 90,608
Less accumulated depreciation 61,680 58,985
35,348 31,623
Other assets 26,267 24,581
Total assets $230,151 $205,633
</TABLE>
Wolverine World Wide, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
As of Fiscal Year End
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 1,432 $ 1,948
Accounts payable 18,257 12,575
Salaries, wages and other compensation 8,474 8,998
Other accrued expenses 14,553 9,970
Current maturities of long-term debt 304 4,732
Total current liabilities 43,020 38,223
Long-term debt, less current maturities 43,482 44,913
Other liabilities:
Unfunded retirement and other employee benefits 9,265 8,214
Deferred income taxes 1,860 1,533
11,125 9,747
Stockholders' equity:
Common stock, $1 par value:
Authorized 25,000,000 shares;
Issued, including treasury shares:
1994--11,314,673 shares; 1993--11,042,129 shares; 11,315 7,622
Additional paid-in capital 25,004 26,469
Retained earnings 101,873 86,986
Accumulated translation adjustments 332 398
Cost of shares in treasury (deduct):
1994--533,992 shares; 1993--781,778 shares; (6,000) (8,725)
Total stockholders' equity 132,524 112,750
Total liabilities and stockholders' equity $230,151 $205,633
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
Wolverine World Wide, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Fiscal Year
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Common Stock
Balance at beginning of the year $ 7,622 $ 7,467 $ 7,341
Common stock issued from exercise of stock options:
(1994--222,967 shares; 1993--232,625 shares;
1992--189,123 shares) 179 155 126
Three-for-two stock split 3,514
Balance at end of the year 11,315 7,622 7,467
Additional Paid In Capital
Balance at beginning of the year 26,469 24,438 23,333
Excess of proceeds from exercise of stock options,
including income tax benefits, over par value
of shares issued 2,351 2,031 1,105
Excess of cost of treasury shares over face value
of subordinated notes converted (302)
Three-for-two stock split (3,514)
Balance at end of the year 25,004 26,469 24,438
Retained Earnings
Balance at beginning of the year 86,986 76,580 88,584
Net earnings (loss) 16,598 11,492 (10,941)
Cash dividends (1994--$0.16 per share;
1993--$0.11 per share; 1992--$0.11 per share) (1,711) (1,086) (1,063)
Balance at end of the year 101,873 86,986 76,580
Accumulated Translation Adjustments
Balance at beginning of the year 398 351 (166)
Equity adjustments from foreign currency translation (66) 47 517
Balance at end of the year 332 398 351
Cost of Shares in Treasury
Balance at beginning of the year (8,725) (8,708) (8,707)
Issuance of 250,000 shares of common stock from
treasury upon conversion of subordinated notes 2,802
Common stock purchased for treasury (1994--2,214
shares; 1993--526 shares; 1992--50 shares) (77) (17) (1)
Balance at end of the year (6,000) (8,725) (8,708)
Total stockholders' equity at end of the year $132,524 $112,750 $100,128
<FN>
( ) Denotes deduction.
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
Wolverine World Wide, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Fiscal Year
1994 1993 1992
(Thousands of Dollars,)
Except Per Share Data)
<S> <C> <C> <C>
Net sales and other operating income $378,473 $323,315 $282,863
Costs and expenses:
Cost of products sold 258,818 227,026 198,129
Selling and administrative expenses 90,297 76,543 72,447
Interest expense 3,981 4,745 3,305
Interest income (644) (859) (420)
Other expenses (income) - net 598 (469) 2,804
353,050 306,986 276,265
Earnings from continuing operations before
income taxes 25,423 16,329 6,598
Income taxes 7,373 4,575 1,899
Earnings from continuing operations 18,050 11,754 4,699
Loss from discontinued operations, net of income taxes:
Operating losses (330) (262) (5,555)
Loss on disposals (1,122) (9,335)
(1,452) (262) (14,890)
Cumulative effect of accounting changes:
Income taxes 800
Retirement benefits, net of income taxes (1,550)
(750)
Net earnings (loss) $ 16,598 $ 11,492 $(10,941)
Primary earnings (loss) per share:
Continuing operations $ 1.65 $ 1.12 $ .47
Discontinued operations (.13) (.02) (1.50)
Cumulative effect of accounting changes (.07)
Net earnings (loss) $ 1.52 $ 1.10 $ (1.10)
Fully diluted net earnings per share $ 1.50 $ 1.07
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
Wolverine World Wide, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Fiscal Year
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Activities
Net earnings (loss) $ 16,598 $ 11,492 $(10,941)
Adjustments necessary to reconcile net earnings (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 5,664 5,182 5,176
Deferred income taxes 200 3,299 1,911
Pension income (731) (503) (576)
Loss from discontinued operations 1,452 262 14,890
Cumulative effect of accounting changes 750
Other 855 (575) (204)
Changes in operating assets and liabilities:
Accounts receivable (8,347) (10,998) 2,609
Inventories (11,520) (6,312) (2,711)
Other operating assets (404) 2,347 (1,815)
Accounts payable 5,682 (1,813) 217
Other operating liabilities 2,944 3,139 (10,431)
Net cash provided by (used in) operating activities 12,393 5,520 (1,125)
Investing Activities
Additions to property, plant and equipment (9,858) (6,605) (4,061)
Cash from (used in) discontinued operations 747 12,664 (11,773)
Other (930) 1,899 2,261
Net cash provided by (used in) investing activities (10,041) 7,958 (13,573)
Financing Activities
Proceeds from short-term borrowings 4,000 775 6,077
Payments of short-term debt (4,516) (15,204)
Proceeds from long-term borrowings 75,886 57,000 45,000
Payments of long-term debt (79,245) (55,777) (36,312)
Cash dividends paid (1,711) (1,086) (1,063)
Purchase of common stock for treasury (77) (17) (1)
Shares issued under stock incentive plans 2,530 2,186 1,231
Net cash provided by (used in) financing activities (3,133) (12,123) 14,932
Increase (decrease) in cash and cash equivalents (781) 1,355 234
Cash and cash equivalents at beginning of year 3,730 2,375 2,141
Cash and cash equivalents at end of year $ 2,949 $ 3,730 $ 2,375
Other cash flow information
Interest paid $ 4,361 $ 5,661 $ 6,723
Income taxes paid 4,219 957 2,495
<FN>
( ) Denotes reduction in cash and cash equivalents.
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994, January 1, 1994 and January 2, 1993
Note A--Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Wolverine
World Wide, Inc. and its majority owned subsidiaries (the Company). Upon
consolidation, all intercompany accounts, transactions and profits have
been eliminated. The investment in a 35%-owned foreign affiliate is carried
on the equity basis.
Fiscal Year
The Company's fiscal year is the 52- or 53-week period that ends on the
Saturday nearest the end of December. Fiscal years presented herein include
the 52-week periods ended December 31, 1994 and January 1, 1994, and the
53-week period ended January 2, 1993.
Revenue Recognition
Revenue is recognized on the sale of products when the related goods have
been shipped and legal title has passed to the customer.
Cash Equivalents
All short-term investments with a maturity of three months or less when
purchased are considered cash equivalents for purposes of the consolidated
statements of cash flows.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for substantially all manufacturing
inventories (see Note C). Inventories of the Company's retail operations
are valued using the retail method.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost and include
expenditures for new facilities, major renewals and betterments. Normal
repairs and maintenance are expensed as incurred.
-6-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A--Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment (continued)
Depreciation of plant and equipment is computed using the straight-line
method over the estimated useful lives of the respective assets.
Income Taxes
The provision for income taxes is based on the earnings or loss reported in
the consolidated financial statements. A deferred income tax asset or
liability is determined by applying currently enacted tax laws and rates to
the cumulative temporary differences between the carrying value of assets
and liabilities for financial reporting and income tax purposes. Deferred
income tax expense or credit is measured by the change in the deferred
income tax asset or liability during the year.
Earnings Per Share
Primary earnings (loss) per share are computed based on the weighted
average shares of common stock outstanding during each period and, for 1994
and 1993, the assumed exercise of dilutive stock options. Stock options are
not included in the computation of primary earnings per share in 1992 since
they were not materially dilutive. Fully diluted earnings per share for
1994 and 1993 also include the effect of converting subordinated notes into
common stock. Fully diluted earnings per share and the weighted average
shares of common stock outstanding are not presented for 1992 since the
effect of exercising stock options and converting subordinated notes was
antidilutive.
Weighted average shares outstanding for purposes of calculating earnings
(loss) per share are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Primary 10,905,371 10,477,824 9,941,154
Fully diluted 11,076,557 10,839,279
</TABLE>
-7-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A--Summary of Significant Accounting Policies (continued)
Financial Instruments
The Company's financial instruments, as defined by Statement of Financial
Accounting Standards (SFAS) No. 107, consist of cash and cash equivalents,
notes receivable and long-term debt. The Company's estimate of the fair
value of these financial instruments approximates their carrying amounts at
December 31, 1994. The fair value of these financial instruments was
determined using discounted cash flow analysis and current interest rates
for similar instruments.
Reclassifications
Certain amounts reported in 1993 and 1992 have been reclassified to conform
with the presentation used in 1994.
Note B--Discontinued Operations
During the fourth quarter of 1994, the Company adopted a formal plan to
withdraw from its Lamonts leased shoe department business, which involves
management of shoe departments in department stores. The shoe department
leases expire in October 1995 and the Company expects to complete its exit
of this business by the end of 1995.
In connection with this exit plan, an estimated after-tax loss of
$1,122,000 was recognized in 1994. The loss represents the cost of
inventory liquidation, write-off of leasehold improvements and anticipated
operating results during the phase-out period.
At the end of the third quarter of 1992, the Company announced its intent
to dispose of its Brooks athletic footwear and sports apparel businesses.
The Brooks businesses consisted of sales and distribution operations in the
United States, France, Germany and the United Kingdom, sourcing activities
primarily in the Far East, and worldwide licensing of rights to the brand
name.
The Company recognized a loss of $9,335,000 after income taxes in 1992 to
provide for estimated losses on the disposal of the Brooks businesses,
including anticipated operating results to the expected dates of sale.
-8-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note B--Discontinued Operations (continued)
During 1993, the Company sold the Brooks businesses in separate
transactions in exchange for cash and notes totaling approximately
$24,000,000. Notes receivable of $7,170,000 were outstanding at December
31, 1994 and are collateralized by substantially all of the assets sold.
The noncurrent portion of the notes receivable, representing amounts due of
$4,325,000 in 1996 and $360,000 in 1997, is included in other assets.
Summarized operating results of the Lamonts and Brooks businesses are shown
as discontinued operations in the accompanying consolidated statements of
operations and are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Net Sales $9,061 $9,828 $50,092
Losses before income taxes $ 500 $ 397 $ 6,831
Income tax credit (170) (135) (1,276)
Losses from operations $ 330 $ 262 $ 5,555
</TABLE>
The operating results above include allocations of overhead and interest
expense. Overhead expense of $370,000 in 1993 and $556,000 in 1992 was
allocated based on a determination of costs not expected to be incurred by
continuing operations. Interest expense of $302,000 in 1994, $325,000 in
1993 and $2,600,000 in 1992 was allocated based on debt incurred to finance
the discontinued operations.
Note C--Inventories
Inventories of $60,198,000 at December 31, 1994 and $47,887,000 at
January 1, 1994 have been valued using the LIFO method. If the first-in,
first-out (FIFO) method had been used, the amounts would have been
$19,667,000 and $19,636,000 higher than reported at December 31, 1994 and
January 1, 1994, respectively.
-9-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note D--Notes Payable to Banks
Notes payable to banks consist of unsecured short-term borrowings of the
Company's Canadian subsidiary. The notes bear interest at the Canadian
prime rate (8% at December 31, 1994) plus 2%.
The Company also has short-term borrowing and commercial letter-of-credit
facilities that allow for borrowings of up to $54,400,000. Outstanding
letters of credit amounted to approximately $21,400,000 and $13,400,000 at
December 31, 1994 and January 1, 1994, respectively.
The weighted average interest rate associated with short-term borrowings
outstanding was 10% at December 31, 1994 and 7.5% at January 1, 1994.
Note E--Long-Term Debt
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
1994 1993
(Thousands of Dollars)
<S> <C> <C>
7.8% senior notes to insurance companies $30,000
10.4% senior notes to insurance companies $21,429
Revolving credit obligations 13,000 25,000
Subordinated convertible notes 2,500
Other 786 716
43,786 49,645
Less current maturities 304 4,732
$43,482 $44,913
</TABLE>
The 7.8% senior notes to insurance companies were issued on August 15, 1994
and the previous 10.4% senior notes were extinguished. The new note
agreement requires equal annual principal payments of $4,285,000 on
August 15, 1998 through 2004. The prepayment penalty associated with the
early extinguishment of debt was not significant.
-10-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note E--Long-Term Debt (continued)
The revolving credit agreement, which expires on October 13, 1998, provides
for borrowings of up to $50,000,000, with interest payable at variable
rates based on both LIBOR and the prime rate (8.5% at December 31, 1994).
As of December 31, 1994, the available unused credit under the agreement
was $37,000,000. Maximum borrowings under the agreement were $40,000,000 in
1994 and $46,000,000 in 1993.
The revolving credit and insurance company loan agreements contain
restrictive covenants which, among other things, require the Company to
maintain certain financial ratios and minimum levels of working capital and
tangible net worth. The agreements also impose restrictions on securing
additional debt and on sale and merger transactions. At December 31, 1994,
retained earnings of $21,311,000 are unrestricted under these covenants.
During 1994, the holders of the subordinated debt converted the notes into
250,000 shares of the Company's common stock, as allowed by the agreement.
Principal maturities of long-term debt during the four years subsequent to
1995 are as follows: 1996--$112,000; 1997--$113,000; 1998--$17,350,000;
1999--$4,350,000.
Note F--Leases
The Company leases machinery, transportation equipment and certain
warehouse and retail store space under operating lease agreements that
expire at various dates through 2002. At December 31, 1994, minimum rental
payments due under all noncancelable leases are as follows (thousands of
dollars):
<TABLE>
<CAPTION>
<S> <C> <C>
1995 $ 3,609
1996 2,742
1997 2,227
1998 1,628
1999 644
Thereafter 724
Total minimum lease payments $11,574
</TABLE>
-11-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note F--Leases (continued)
Rental expense under all operating leases is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Minimum rentals $5,039 $5,210 $5,441
Contingent rentals 1,106 1,138 1,098
$6,145 $6,348 $6,539
</TABLE>
Contingent rentals are based on retail store sales volume or equipment
usage.
Note G--Capital Stock
On March 10, 1994, the Company announced a three-for-two stock split on
shares of common stock outstanding as of March 21, 1994. All share and per
share data included in the consolidated financial statements have been
retroactively adjusted for the increased shares resulting from the stock
split.
The Company's authorized capital includes 2,000,000 shares of preferred
stock with a par value of $1 per share. No preferred stock has been issued;
however, the Company has designated 880,000 shares of preferred stock as
Series A junior participating preferred stock for possible future issuance
under the Company's stock rights plan, described below. Upon issuance, each
share of Series A junior participating preferred stock will have 100 votes
and a preferential quarterly dividend equal to the greater of $6 per share
or 100 times the dividend declared on the Company's common stock.
The Company's stock rights plan is designed to protect stockholder
interests in the event the Company is confronted with coercive or unfair
takeover tactics. Under its terms, each stockholder received one right for
each share of common stock owned. The rights trade separately from common
stock and become exercisable only upon the occurrence of certain triggering
events. Each right, when exercisable, will entitle the holder to purchase
one one-hundredth of a share of Series A junior participating preferred
stock for $40.
-12-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note G--Capital Stock (continued)
In the event the Company is a party to a merger or other business
combination, regardless of whether the Company is the surviving
corporation, rights holders other than the party to the merger will be
entitled to receive common stock of the surviving corporation worth twice
the exercise price of the rights. The plan also provides for protection
against self-dealing transactions by a 15% stockholder or the activities of
an adverse person. The Company may redeem the rights for $0.01 each at any
time prior to fifteen days after a triggering event. Unless redeemed
earlier, all rights expire on May 8, 1997.
The Company has stock incentive plans under which options to purchase
shares of common stock may be granted to officers, other key employees and
nonemployee directors. Options are exercisable in equal annual installments
of 25% over three years beginning on the date the options are granted. All
unexercised options are available for future grants upon their
cancellation.
A summary of the transactions under the plans follows:
<TABLE>
<CAPTION>
Shares Under
Options Option Price
<S> <C> <C> <C> <C>
Outstanding at December 28, 1991 790,503 $ 5.83 to $ 8.87
Granted in 1992 174,225 6.67 to 7.75
Exercised (162,442) 5.83 to 7.75
Canceled (93,862) 5.83 to 7.75
Outstanding at January 2, 1993 708,424 5.83 to 8.87
Granted in 1993 146,850 11.54 to 20.59
Exercised (202,235) 5.83 to 12.00
Canceled (1,238) 5.83 to 6.67
Outstanding at January 1, 1994 651,711 5.83 to 8.87
Granted in 1994 196,625 20.13 to 26.88
Exercised (179,792) 5.83 to 13.25
Canceled (4,536) 7.75 to 23.96
Outstanding at December 31, 1994 664,008 $ 5.83 to $26.88
Exercisable at December 31, 1994 429,888 $ 5.83 to $26.88
Available for future grants:
At December 31, 1994 351,710
At January 1, 1994 466,974
</TABLE>
-13-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note G--Capital Stock (continued)
Certain of the stock incentive plans allow the Company to make stock awards
to officers and other key employees at nominal exercise prices as
consideration for future services. Common stock acquired under the plans is
subject to certain restrictions, including prohibition against any sale,
transfer or other disposition by the officer or employee, and a requirement
to forfeit the award upon termination of employment. These restrictions
lapse over a three- to five-year period from the date of the award. Shares
aggregating 43,175 in 1994, 30,300 in 1993 and 29,550 in 1992 were awarded
under the plans. There were no cancellations of stock awards in 1994 or
1993, and 2,913 shares were canceled in 1992. Additional shares awarded
will reduce the number of shares identified as available for future grants
in the above table.
Note H--Retirement Plans
The Company has noncontributory defined benefit pension plans covering a
majority of domestic employees. The Company's principal defined benefit
pension plan provides benefits based on the employee s years of service and
final average earnings (as defined), while the other plans provide benefits
at a fixed rate per year of service. The Company intends to annually
contribute any amounts deemed necessary to maintain the plans on a sound
actuarial basis.
The Company also has individual deferred compensation agreements with
certain key employees that entitle them to receive payments from the
Company for a period of fifteen to eighteen years following retirement.
Under the terms of the individual contracts, the employees are eligible for
reduced benefits upon early retirement.
In addition, the Company sponsors a noncontributory defined benefit plan
that provides postretirement life insurance benefits to full-time employees
who have worked ten or more consecutive years and attained age 60 while
employed by the Company.
The Company does not provide postretirement medical benefits.
The Company has a defined contribution money accumulation plan covering
substantially all employees that provides for Company contributions based
on earnings. In 1994, the Company combined this plan with its principal
defined benefit pension plan for funding purposes. Contributions to the
money accumulation plan were $935,000 in 1994, $760,000 in 1993 and $69,000
in 1992.
-14-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note H--Retirement Plans (continued)
The following summarizes the status of the Company's pension assets and
related obligations for its defined benefit pension plans:
<TABLE>
<CAPTION>
September 30
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Pension assets at fair value $73,793 $72,865
Actuarial present value of accumulated plan benefits:
Vested 37,082 36,223
Nonvested 2,044 1,969
39,126 38,192
Effect of estimated future increases in compensation 8,887 6,793
Projected benefit obligation for service rendered to date 48,013 44,985
Excess pension assets $25,780 $27,880
Components of excess pension assets:
Prepaid pension costs recognized in other assets $ 5,610 $ 4,879
Unrecognized amounts, net of amortization:
Transition assets 4,701 5,634
Prior service costs (2,375) (2,348)
Experience gains 17,844 19,715
$25,780 $27,880
</TABLE>
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 8.5% and 5%, respectively, in 1994 and 7.5% and 4%,
respectively, in 1993. The effect of the assumption changes on the
projected benefit obligation was not significant.
Plan assets were invested in listed equity securities (58%), fixed income
funds (20%) and short-term and other investments (22%). Equity securities
include 300,300 shares of the Company's common stock, with a fair value of
$7,733,000 at September 30, 1994.
-15-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note H--Retirement Plans (continued)
The following is a summary of net pension income recognized by the Company:
<TABLE>
<CAPTION>
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Service cost pertaining to benefits earned during
the year $(2,410) $ (1,398) $(1,258)
Interest cost on projected benefit obligation (3,292) (3,247) (3,052)
Actual net investment income 3,317 20,354 5,638
Net amortization and deferrals 3,116 (15,206) (752)
Net pension income $ 731 $ 503 $ 576
</TABLE>
The expected long-term return on plan assets was 9% in 1994, 1993 and 1992.
The Company adopted the provisions of SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, in 1992. SFAS No. 106
requires the estimated cost of life insurance benefits and deferred
compensation agreements to be recognized over the period of employment to
the date when employees are fully eligible to receive future benefits. The
cumulative effect of adopting SFAS No. 106 was to decrease net earnings by
$1,550,000 ($0.16 per share) in 1992.
The Company's accumulated postretirement life insurance benefit obligation
is as follows:
<TABLE>
<CAPTION>
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Retirees $ 675 $ 731
Active plan participants 189 202
Accumulated postretirement benefit obligation 864 933
Unrecognized experience losses (44) (151)
Obligation recognized in other liabilities $ 820 $ 782
</TABLE>
The discount rate used in determining the accumulated postretirement life
insurance benefit obligation was 8.5% in 1994 and 7.5% in 1993. The
Company's expense for postretirement life insurance benefits was $88,000 in
1994, $70,000 in 1993 and $50,000 in 1992.
-16-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note I--Income Taxes
Effective as of the beginning of 1992, the Company adopted SFAS No. 109,
Accounting for Income Taxes. The new standard requires that an asset and
liability approach be applied to accounting for income taxes and provides
revised criteria for the recognition of deferred income tax assets. The
cumulative prior year effect of adopting SFAS No. 109 was recorded in 1992
and decreased the net loss by $800,000 ($0.08 per share).
The provisions for income taxes pertaining to continuing operations consist
of the following:
<TABLE>
<CAPTION>
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Currently payable (refundable):
Federal $ 3,828 $ (175) $(1,388)
State and foreign 2,750 1,451 1,376
Deferred 795 3,299 1,911
$ 7,373 $4,575 $ 1,899
</TABLE>
A reconciliation of the Company's total income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% (34% for
1992) to earnings from continuing operations before income taxes is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
(Thousands of Dollars)
<S> <C> <C> <C>
Income taxes at statutory rate $ 8,898 $ 5,715 $ 2,243
State income and foreign taxes, net of federal income
tax reduction 757 340 65
Nontaxable earnings of Puerto Rican subsidiary and
foreign affiliates (1,712) (1,202) (292)
Reduction of deferred income tax asset valuation
allowance (1,000)
Other 430 (278) (117)
$ 7,373 $ 4,575 $ 1,899
</TABLE>
-17-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note I--Income Taxes (continued)
Deferred income taxes reflect the net income tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes. Significant components of the
Company's deferred income tax assets and liabilities as of the end of 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Deferred income tax assets:
Accounts receivable and inventory valuation allowances $ 4,398 $ 3,861
Deferred compensation accruals 2,425 2,841
Provision for losses on disposal of discontinued operations 1,004 454
Credit carryforwards 1,038
Other 4,530 5,765
12,357 13,959
Valuation allowance (deduct) (1,000)
Total deferred income tax assets 12,357 12,959
Deferred income tax liabilities:
Excess tax depreciation 2,349 2,773
Prepaid pension costs 1,915 1,766
Unremitted earnings of Puerto Rican subsidiary 973 705
Other 137 532
Total deferred income tax liabilities 5,374 5,776
Net deferred income tax assets $ 6,983 $ 7,183
</TABLE>
The valuation allowance for deferred income tax assets was reduced in 1994
because of management s evaluation that such assets will be realized as a
result of the Company's ability to generate future taxable income.
The Company has provided for substantially all taxes that would be payable
if accumulated earnings of its Puerto Rican subsidiary were distributed.
Similar taxes on the unremitted earnings of the Company's foreign
affiliates have not been provided because such earnings are considered
permanently invested. The additional taxes that would be payable if
unremitted earnings of its foreign affiliates were distributed are not
significant.
-18-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note J--Litigation
The Company is involved in various environmental claims and other legal
actions arising in the normal course of business. After taking into
consideration legal counsel's evaluation of such actions, management is of
the opinion that their outcome will not have a significant effect on the
Company's consolidated financial position or results of operations.
Note K--Industry Information
The Company is principally engaged in the manufacture and sale of footwear,
including casual shoes, slippers, moccasins, dress shoes, boots, uniform
shoes and work shoes. The Company is also the largest domestic tanner of
pigskin, which is used in a significant portion of shoes manufactured and
sold by the Company and is sold to other domestic and foreign manufacturers
of shoes and other products. Royalty income is derived from licensing
the Company's trademarks to domestic and foreign licensees. As part of its
footwear business, the Company operates a number of domestic retail shoe
stores that sell Company-manufactured products as well as footwear
manufactured by unaffiliated companies. Foreign operations consist of a
75%-owned Canadian subsidiary and factories located in the Dominican
Republic and Mexico that produce shoe uppers for domestic operations.
Export sales, foreign operations and related assets are not significant.
The Company markets its products primarily to customers in the retail
sector. Although the Company closely monitors the credit worthiness of its
customers and adjusts its credit policies and limits as needed, a
substantial portion of its debtors' ability to discharge amounts owed is
dependent upon the retail economic environment. The Company does not
believe that it is dependent upon any single customer, since none account
for more than 10% of consolidated net sales.
Note L--Quarterly Results of Operations (unaudited)
The Company reports its quarterly results of operations on the basis of
12-week periods for each of the first three quarters and a 16-week period
for the fourth quarter.
-19-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note L--Quarterly Results of Operations (unaudited) (continued)
The following tabulation presents the Company's unaudited quarterly results
of operations for 1994 and 1993. Certain reclassifications have been made
to the amounts originally reported in the Company's quarterly reports on
Form 10-Q to segregate the results of discontinued operations.
<TABLE>
<CAPTION>
1994
First Second Third Fourth
Quarter Quarter Quarter Quarter
(Thousands of Dollars, Except Per Share Data)
<S> <C> <C> <C> <C>
Net sales and other operating
income $66,766 $79,319 $91,910 $140,478
Gross margin 21,107 24,421 26,905 47,222
Earnings from continuing operations 1,391 2,463 3,757 10,439
Loss from discontinued operations (100) (79) (70) (1,203)
Net earnings $ 1,291 $ 2,384 $ 3,687 $ 9,236
Net earnings (loss) per share:
Primary:
Continuing operations $ .13 $ .23 $ .34 $ .95
Discontinued operations (.01) (.01) (.11)
$ .12 $ .22 $ .34 $ .84
Fully diluted $ .12 $ .22 $ .33 $ .83
</TABLE>
-20-
Wolverine World Wide, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note L--Quarterly Results of Operations (unaudited) (continued)
<TABLE>
<CAPTION>
1993
First Second Third Fourth
Quarter Quarter Quarter Quarter
(Thousands of Dollars, Except Per Share Data)
<S> <C> <C> <C> <C>
Net sales and other operating
income $ 64,099 $ 63,585 $ 78,820 $116,811
Gross margin 18,528 19,076 21,516 37,169
Earnings from continuing operations 825 1,119 2,092 7,718
Loss from discontinued operations (125) (35) (44) (58)
Net earnings $ 700 $ 1,084 $ 2,048 $ 7,660
Net earnings (loss) per share:
Primary:
Continuing operations $ .08 $ .11 $ .20 $ .73
Discontinued operations (.01) (.01)
$ .07 $ .11 $ .20 $ .72
Fully diluted $ .07 $ .11 $ .19 $ .70
</TABLE>
Adjustments recorded in the fourth quarter of 1994 and 1993 relating
principally to inventories increased earnings from continuing operations by
$615,000 ($0.06 per share) in 1994 and $1,910,000 ($0.18 per share) in
1993.
-21-
Report of Independent Auditors
Board of Directors
Wolverine World Wide, Inc.
We have audited the accompanying consolidated balance sheets of Wolverine
World Wide, Inc. and subsidiaries as of December 31, 1994 and January 1,
1994, and the related consolidated statements of stockholders' equity,
operations and cash flows for each of the three fiscal years in the period
ended December 31, 1994. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Wolverine World Wide, Inc. and subsidiaries at December 31,
1994 and January 1, 1994, and the consolidated results of their operations
and their cash flows for each of the three fiscal years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
February 16, 1995
APPENDIX B
Schedule II -- Valuation and Qualifying Accounts of Continuing Operations
Wolverine World Wide, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
(1) (2)
Charged Charged
Balance at to Costs to Other Balance
Beginning of and Accounts- Deductions- at End of
Description Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
Fiscal year ended
December 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts $3,141,000 $1,722,000 $1,353,000(A) $3,510,000
Allowance for cash discounts 270,000 1,236,000 1,057,000(B) 449,000
$3,411,000 $2,958,000 $2,410,000 $3,959,000
Fiscal year ended
January 1, 1994
Deducted from asset accounts:
Allowance for doubtful accounts $2,454,000 $2,208,000 $1,521,000(A) $3,141,000
Allowance for cash discounts 262,000 1,770,000 1,762,000(B) 270,000
$2,716,000 $3,978,000 $3,283,000 $3,411,000
Fiscal year ended
January 2, 1993
Deducted from asset accounts:
Allowance for doubtful accounts $2,454,000 $1,615,000 $1,615,000(A) $2,454,000
Allowance for cash discounts 396,000 1,636,000 1,770,000(B) 262,000
$2,850,000 $3,251,000 $3,385,000 $2,716,000
<FN>
(A) Accounts charged off, net of recoveries.
(B) Discounts given to customers.
</TABLE>
Commission File No. 1-6024
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 10-K
For the Fiscal Year
December 31, 1994
Wolverine World Wide, Inc.
9341 Courtland Drive
Rockford, Michigan 49351
EXHIBIT INDEX
Exhibit
Number
3(a) Articles of Incorporation, as amended. Incorporated by
reference from Exhibit 3(a) of the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 1988.
3(b) Amended and Restated Bylaws. Previously filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994. Here incorporated by
reference.
4(a) The Certificate of Incorporation, as amended. See
Exhibit 3(a) above.
4(b) Rights Agreement dated as of May 7, 1987, as amended and
restated as of October 24, 1990. Previously filed with
Amendment No. 1 to the Company's Form 8-A filed November 13,
1990. Here incorporated by reference. This agreement has
been amended by the Second Amendment to Rights Agreement
included as Exhibit 4(f) below.
4(c) Amended and Restated Credit Agreement dated as of
October 13, 1994 with NBD Bank, N.A. as Agent.
4(d) Note Agreement dated as of August 1, 1994 relating to 7.81%
Senior Notes. Previously filed as Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 10, 1994. Here incorporated by reference.
4(e) The Registrant has several classes of long-term debt
instruments outstanding in addition to that described in
Exhibit 4(d) above. The amount of none of these classes of
debt outstanding on March 1, 1995 exceeds 10% of the
Registrant's total consolidated assets. The Registrant
agrees to furnish copies of any agreement defining the
rights of holders of any such long-term indebtedness to the
Securities and Exchange Commission upon request.
4(f) Second Amendment to Rights Agreement made as of October 28,
1994 (amending the Rights Agreement included as Exhibit 4(b)
above).
10(a) Stock Option Plan of 1979 and amendment.* Previously filed
as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1988. Here
incorporated by reference.
10(b) 1993 Stock Incentive Plan.* Previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
Exhibit
Number
10(c) 1988 Stock Option Plan.* Previously filed as an exhibit to
the Company's registration statement on Form S-8, filed July
21, 1988, Registration No. 33-23196. Here incorporated by
reference.
10(d) Amended and Restated Directors Stock Option Plan.*
Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
10(e) Amended and Restated Agreement executed on May 26, 1994 and
dated as of July 24, 1992, between the Company and Thomas D.
Gleason.* Previously filed as Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the period ended
June 18, 1994. Here incorporated by reference.
10(f) Employment Agreement dated April 27, 1993, between the
Registrant and Geoffrey B. Bloom.* Previously filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(g) Executive Short-Term Incentive Plan for 1994.* Previously
filed as Exhibit 10(g) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(h) Management Short-Term Incentive Plan for 1994.* Previously
filed as Exhibit 10(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(i) Stock Option Loan Program.* Previously filed as
Exhibit 10(h) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991. Here
incorporated by reference.
10(j) Deferred Compensation Agreements with Disability Benefits.*
The form of agreement was previously filed as Exhibit 10(i)
to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993. Here incorporated by reference.
An updated participant schedule is attached as
Exhibit 10(j).
10(k) Deferred Compensation Agreements without Disability
Benefits.* The form of agreement was previously filed as
Exhibit (j) to the Company's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993. Here incorporated by
reference. An updated participant schedule is attached as
Exhibit 10(k).
-2-
Exhibit
Number
10(l) Executive Long-Term Incentive (Three Year) Plans for the
years 1991 to 1993 and 1992 to 1994.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991. Here
incorporated by reference.
10(m) Executive Long-Term Incentive (Three Year) Plan for the
three year period 1993-1995.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993. Here
incorporated by reference.
10(n) Executive Long-Term Incentive (Three Year) Plan for the
three year period 1994-1996.* Previously filed as
Exhibit 10(n) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(o) Termination of Employment and Change of Control Agreements.*
The form of agreement was previously filed as Exhibit 10(m)
to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993. Here incorporated by reference.
An updated participant schedule is attached as
Exhibit 10(o).
10(p) Indemnification Agreements.* The form of agreement was
previously filed as Exhibit 10(n) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2,
1993. Here incorporated by reference. An updated
participant schedule is attached as Exhibit 10(p).
10(q) Supplemental Retirement Benefits.* Previously filed as
Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988. Here
incorporated by reference.
10(r) Benefit Trust Agreement dated May 19, 1987, and Amendments
Numbers 1, 2 and 3 thereto.* Previously filed as
Exhibit 10(p) to the Company's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993. Here
incorporated by reference.
10(s) Supplemental Director's Fee Arrangement dated April 27,
1993, between the Company and Phillip D. Matthews.*
Previously filed as Exhibit 10(s) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
10(t) Letter Agreement dated May 2, 1994, between the Company and
George A. Andrews*
-3-
Exhibit
Number
10(u) 1984 Executive Incentive Stock Purchase Plan and amendment.*
Previously filed as Exhibit (h) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2,
1988. Here incorporated by reference.
10(v) Asset Purchase Agreement dated January 29, 1993, concerning
the sale of the Brooks Business. Previously filed as
Exhibit No. 2 to the Company's Current Report on Form 8-K
filed February 1, 1993. Here incorporated by reference.
10(w) Agreements relating to the sale of the assets of the three
European Subsidiaries associated with the Brooks Business.
Previously filed as Exhibits 2(a), 2(b) and 2(c) to the
Company's Current Report on Form 8-K filed July 8, 1993.
Here incorporated by reference.
10(x) Deferred Compensation Agreement dated as of April 21, 1994,
between the Company and Charles F. Morgo.* Previously filed
as Exhibit 10(x) to the Company's Quarterly Report on
Form 10-Q for the period ended June 18, 1994. Here
incorporated by reference.
10(y) Employment Agreement dated April 21, 1994, between the
Company and Charles F. Morgo.* Previously filed as
Exhibit 10(y) to the Company's Quarterly Report on Form 10-Q
for the period ended June 18, 1994. Here incorporated by
reference.
10(z) Restricted Stock Agreement dated April 21, 1994, between the
Company and Charles F. Morgo.* Previously filed as
Exhibit 10(z) to the Company's Quarterly Report on Form 10-Q
for the period ended June 18, 1994. Here incorporated by
reference.
10(aa) 1994 Directors' Stock Option Plan.* Previously filed as
Exhibit 10(aa) to the Company's Quarterly Report on Form 10-
Q for the period ended June 18, 1994. Here incorporated by
reference.
11 Computation of Per Share Earnings.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney
27 Financial Data Schedule
___________________________
*Management contract or compensatory plan or arrangement.
-4-
EXHIBIT 4(C)
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF OCTOBER 13, 1994
BY AND AMONG
WOLVERINE WORLD WIDE, INC.
NBD BANK, N.A.
HARRIS TRUST AND SAVINGS BANK
COMERICA BANK
OLD KENT BANK AND TRUST COMPANY
AND
NBD BANK, NA., AS AGENT
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. THE COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Commitments of the Banks.. . . . . . . . . . . . . . . . . . . 9
2.2 Termination and Reduction of Commitments.. . . . . . . . . . . 9
2.3 Commitment Fees. . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Unavailable Portion of Commitment; Fee
Adjustment.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Agent's Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III. THE LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Disbursement of Loans. . . . . . . . . . . . . . . . . . . . . 10
3.2 Conditions for Disbursement of Initial Loan. . . . . . . . . . 12
3.3 Conditions for Disbursement of Each Loan.. . . . . . . . . . . 13
3.4 Minimum Amounts. . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Subsequent Elections as to Loans.. . . . . . . . . . . . . . . 13
3.6 Discretion of the Banks as to Manner of Funding. . . . . . . . 14
ARTICLE IV. PAYMENTS AND PREPAYMENTS OF LOANS . . . . . . . . . . . . . . . 14
4.1 Principal Payments.. . . . . . . . . . . . . . . . . . . . . . 14
4.2 Interest Payments. . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Optional Prepayment. . . . . . . . . . . . . . . . . . . . . . 14
4.4 Mandatory Prepayment.. . . . . . . . . . . . . . . . . . . . . 15
4.5 Payment Method.. . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 No Setoff or Deduction.. . . . . . . . . . . . . . . . . . . . 15
4.7 Payment on Non-Business Day; Payment
Computations.. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V. YIELD PROTECTION AND CONTINGENCIES. . . . . . . . . . . . . . . . 16
5.1 Additional Costs.. . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Limitation of Requests and Elections.. . . . . . . . . . . . . 16
5.3 Illegality and Impossibility.. . . . . . . . . . . . . . . . . 17
5.4 Additional Contingencies.. . . . . . . . . . . . . . . . . . . 17
5.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Capital Adequacy.. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 19
6.1 Corporate Existence and Power. . . . . . . . . . . . . . . . . 19
6.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . 19
6.3 Binding Effect.. . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . 20
-i-
6.6 Financial Condition. . . . . . . . . . . . . . . . . . . . . . 20
6.7 Use of Loans.. . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Title to Properties. . . . . . . . . . . . . . . . . . . . . . 21
6.11 Note Agreements. . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Environmental and Safety Matters.. . . . . . . . . . . . . . . 21
6.13 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . 22
(a) Preservation of Corporate Existence, Etc.. . . . . . . . . 22
(b) Compliance with Laws, Etc. . . . . . . . . . . . . . . . . 23
(c) Maintenance of Insurance.. . . . . . . . . . . . . . . . . 23
(d) Reporting Requirements.. . . . . . . . . . . . . . . . . . 23
(e) Access to Records, Books, Etc. . . . . . . . . . . . . . . 24
7.2 Negative Covenants.. . . . . . . . . . . . . . . . . . . . . . 25
(a) Current Ratio. . . . . . . . . . . . . . . . . . . . . . . 25
(b) Tangible Net Worth.. . . . . . . . . . . . . . . . . . . . 25
(c) Total Liabilities to Tangible Net Worth. . . . . . . . . . 25
(d) Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . 25
(e) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Merger; Sale of Assets; Etc. . . . . . . . . . . . . . . . 26
(h) Nature of Business.. . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX. THE AGENT AND THE BANKS. . . . . . . . . . . . . . . . . . . . . 30
9.1 Appointment of Agent.. . . . . . . . . . . . . . . . . . . . . 30
9.2 Scope of Agency. . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Duties of Agent. . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 Resignation of Agent.. . . . . . . . . . . . . . . . . . . . . 31
9.5 Pro Rata Sharing by Banks. . . . . . . . . . . . . . . . . . . 32
ARTICLE X. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1 Amendments; Etc. . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 Conduct No Waiver; Remedies Cumulative. . . . . . . . . . . . 33
10.4 Reliance on and Survival of Various Provisions.. . . . . . . . 34
10.5 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.6 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . 34
-ii-
10.7 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 36
10.9 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.10 Construction of Certain Provisions. . . . . . . . . . . . . . 36
10.11 Integration and Severability. . . . . . . . . . . . . . . . . 36
10.12 Interest Rate Limitation. . . . . . . . . . . . . . . . . . . 36
10.13 Independence of Covenants . . . . . . . . . . . . . . . . . . 36
10.14 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 37
SCHEDULE 6.4 Subsidiaries
SCHEDULE 6.5 Litigation
SCHEDULE 6.12 Environmental and Safety Matters
SCHEDULE 6.13 Indebtedness Greater than $100,000
SCHEDULE 7.2(e) Permitted Indebtedness
EXHIBIT A REVOLVING CREDIT NOTE
EXHIBIT B REQUEST FOR LOAN
EXHIBIT C REQUEST FOR CONTINUATION OR CONVERSION OF LOAN
EXHIBIT D ASSIGNMENT AND ACCEPTANCE
-iii-
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated October 13,
1994 (this "Agreement"), is among WOLVERINE WORLD WIDE, INC., a Delaware
corporation (the "Company"), the Banks named in Section 2.1 hereof
(collectively, the "Banks" and, individually, a "Bank"), and NBD BANK,
N.A., a national banking association as agent for the Banks (in such
capacity, the "Agent").
RECITAL
The Company desires to amend and restate in its entirety the
Credit Agreement among the Company, NBD Bank, N.A., Harris Trust and
Savings Bank, Old Kent Bank and Trust Company, Comerica Bank (as successor
by merger to Manufacturers Bank, N.A.) and the Agent dated as of March 11,
1993 (the "Prior Credit Agreement"), in order to obtain a revolving bank
credit in principal sum not to exceed $50,000,000 to provide funds for its
general corporate and working capital purposes, and the Banks are willing
to so amend and restate the Prior Credit Agreement on the terms and
conditions herein set forth.
AGREEMENT
In consideration of the premises and of the mutual agreements
herein contained, the parties hereto agree that the Prior Credit Agreement
shall be amended and restated in its entirety as follows:
ARTICLE I. DEFINITIONS
1.1 As used herein the following terms shall have the following
respective meanings:
"Affiliate", when used with respect to any person, means any
person which, directly or indirectly, controls or is controlled by or is
under common control with such person. For purposes of this definition,
control (including the correlative meanings of the terms "controlled by"
and "under common control with"), with respect to any person, means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting securities or by contract or otherwise.
"Applicable Margin" means the following margins for purposes of
determining the Eurodollar Rate, as indicated in the following table:
<TABLE>
<CAPTION>
Fixed Charge Coverage Ratio
Total Liabilities 3.0 to 1.0
to Tangible Net Less than through Greater than
Worth Ratio 3.0 to 1.0 4.0 to 1.0 4.0 to 1.0
<S> <C> <C> <C>
Greater than
1.0 to 1.0 1.00% .875% .75%
0.8 to 1.0
through
1.0 to 1.0 .875% .75% .625%
Less than
0.8 to 1.0 .75% .625% .50%
</TABLE>
The Applicable Margin shall be adjusted as of the first day of
each fiscal quarter of the Company based on the Total Liabilities to
Tangible Net Worth Ratio and the Fixed Charge Coverage Ratio at the end of
the fiscal quarter immediately preceding the fiscal quarter most recently
ended.
"Business Day" means a day other than a Saturday, Sunday or
other day on which the Agent or any Bank is not open for the transaction of
substantially all of its banking functions.
"Commitments" means the commitments of the Banks to lend
hereunder pursuant to Section 2.1, in the respective amounts specified in
Section 2.1, as such amounts may be reduced from time to time pursuant to
Section 2.2.
"Contingent Liabilities" of any person means, as of any date, all
obligations of such person or of others for which such person is
contingently liable, as obligor, guarantor, surety or in any other
capacity, or in respect of which obligations such person assures a creditor
against loss or agrees to take any action to prevent any such loss (other
than endorsements of negotiable instruments for collection in the ordinary
course of business), including without limitation all reimbursement
obligations of such person in respect of any letters of credit or similar
obligations and all obligations of such person to advance funds to, or to
purchase assets, property or services from, any other person in order to
maintain the financial condition of such other person.
"Current Assets" and "Current Liabilities" of any person means,
as of any date, all assets or liabilities, respectively, of such person
which, in accordance with generally accepted accounting principles, should
be classified as current assets or current liabilities, respectively, on a
-2-
balance sheet of such person; provided, however, that for purposes of
calculating the covenant contained in Section 7.2(a) and to the extent not
otherwise included therein, all Loans and interest thereon shall be
included in the term "Current Liabilities".
"Current Ratio" of any person means, as of any date, the ratio of
Current Assets of such person to Current Liabilities of such person.
"Dollars" and "$" means the lawful money of the United States of
America.
"Effective Date" means the effective date specified in the final
paragraph of this Agreement.
"Environmental Laws" at any date means all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions,
decrees, orders, awards and standards (but only to the extent such
standards could be determined to be legally binding or the violation of
such standards could give rise to liability of the Company or any of its
Subsidiaries) promulgated by the government of the United States of America
or any foreign government or by any state, province, municipality or other
political subdivision thereof or therein or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances
into, the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurodollar Business Day" means, with respect to any Eurodollar
Rate Loan, a day which is both a Business Day and a day on which dealings
in Dollar deposits are carried out in the interbank market selected by the
Agent with respect to such Eurodollar Rate Loan.
"Eurodollar Interest Period" means, with respect to any
Eurodollar Rate Loan, the period commencing on the day such Eurodollar Rate
Loan is made or converted to a Eurodollar Rate Loan and ending on the date
1, 2, 3, or 6 months thereafter, as the Company may elect under Section 3.1
or 3.5, and each subsequent period commencing on the expiry of the
immediately preceding Eurodollar Interest Period and ending on the date 1,
2, 3, or 6 months thereafter, as the Company may elect under Section 3.1 or
3.5, provided, however, that (a) any Eurodollar Interest Period which
commences on the last Eurodollar Business Day of a calendar month (or on
any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Eurodollar
Business Day of the appropriate subsequent calendar month, (b) each
Eurodollar Interest Period which would otherwise end on a day which is not
a Eurodollar Business Day shall end on the next succeeding Eurodollar
Business Day or, if such next succeeding Eurodollar Business Day falls in
-3-
the next succeeding calendar month, on the next preceding Eurodollar
Business Day, and (c) no Eurodollar Interest Period shall be permitted
which would end after the Termination Date.
"Eurodollar Rate" means, with respect to any Eurodollar Rate Loan
and the related Eurodollar Interest Period, the per annum rate that is
equal to the sum of:
(a) the Applicable Margin, plus
(b) the per annum rate of interest determined by dividing (i)
the per annum rate of interest at which deposits in Dollars for such
Eurodollar Interest Period in an aggregate amount comparable to the amount
of the Agent's portion of such Eurodollar Rate Loan are offered to NBD
Bank, N.A. by other prime banks in the London or Nassau interbank market,
selected in the Agent's discretion, at approximately 11:00 a.m. Detroit
time, as the case may be, on the second Eurodollar Business Day prior to
the first day of such Eurodollar Interest Period; by (ii) a percentage
equal to 100% minus that percentage (expressed as a decimal) that is
specified on the first day of such Eurodollar Interest Period by the Board
of Governors of the Federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement (including,
without limitation, any marginal, emergency or special reserves) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank of
such System;
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of 1/100 of 1%, and such
Eurodollar Rate to be adjusted as and when any change occurs in the reserve
requirements referred to in subparagraph (b) above.
"Eurodollar Rate Loan" means any Loan which bears interest at
the Eurodollar Rate.
"Event of Default" means any of the events or conditions
described in Section 8.1.
"Existing Note Agreements" means the Note Agreements, each dated
as of August 1, 1994, Re: $30,000,000 7.81% Senior Notes Due August 15,
2004, together with any document or instrument executed pursuant thereto,
between the Company and each of Teachers Insurance and Annuity Association
of America, The Minnesota Mutual Life Insurance Company, Farm Bureau Life
Insurance Company of Michigan, FB Annuity Company, Federated Life Insurance
Company and Federated Mutual Insurance Company.
"Fixed Charge Coverage Ratio" shall have the meaning ascribed
thereto in Section 7.2(f).
-4-
"Fixed Charges" means, for any period, the sum of (i) the excess
of (x) all Interest expense on all Indebtedness (including imputed interest
charges with respect to any lease, which in accordance with generally
accepted accounting principles, is or should be capitalized on the books of
the lessee) of the Company and its Subsidiaries payable with respect to
such period over (y) all interest earnings received during such period and
(ii) 33-1/3% of all Rentals (excluding Rentals payable with respect to
leases which are or should be capitalized on the books of the lessee)
payable during such period by the Company and its Subsidiaries.
"Floating Rate Loan" means any Loan which bears interest at the
Prime Rate.
"generally accepted accounting principles" means generally
accepted accounting principles in effect from time to time applied on a
basis consistent with that reflected in the financial statements referred
to in Section 6.6.
"Indebtedness" of any person means, as of any date, (a) all
obligations of such person for borrowed money, (b) all obligations as
lessee under any lease which, in accordance with generally accepted
accounting principles, is or should be capitalized on the books of the
lessee, and (c) all obligations of others similar in character to those
described in clauses (a) and (b) of this definition for which such person
is liable, contingently or otherwise, as obligor, guarantor or in any other
capacity, or in respect of which obligations such person assures a creditor
against loss or agrees to take any action to prevent any such loss (other
than endorsements of negotiable instruments for the collection in the
ordinary course of business), including without limitation all
reimbursement obligations of such person in respect of letters of credit
or similar obligations and all obligations of such person to advance funds
to, or to purchase assets, property or services from, any other person in
order to maintain the financial condition of such person.
"Interest" means, for any period, all interest and all
amortization of debt discount and expense on any particular Indebtedness
for which such calculations are being made.
"Interest Payment Date" means (a) with respect to any Floating
Rate Loan, the first Business Day of each month, commencing with the first
such day occurring after the Effective Date, and (b) with respect to any
Eurodollar Rate Loan, the last day of the Interest Period with respect to
such Eurodollar Rate Loan and, if such Interest Period exceeds three
months, the day in the third month following the month the Loan proceeds
were disbursed (or, in the case of the continuation of a Loan as, or
conversion of a Loan to, a Eurodollar Rate Loan, the day in the third month
following the month in which such continuation or conversion occurred) that
numerically corresponds to the date on which the Loan proceeds were
disbursed (or to the date on which such continuation or conversion
occurred) or, if there is no numerically corresponding day, the last
Eurodollar Business Day of that third month.
-5-
"Interest Period" means any Eurodollar Interest Period.
"Loan" means any borrowing under Section 3.1 and "Loans" means
all of the borrowings under Section 3.1.
"Majority Banks" means Banks holding not less than 66-2/3% of the
aggregate principal amount of the Notes then outstanding (or 66-2/3% of the
Commitments if no principal amount is outstanding under the Notes).
"Material Subsidiary" shall mean any Subsidiary of the Company
if:
(1) The assets of such Subsidiary (valued at the greater of book
or fair market) as at the end of the immediately preceding fiscal year
exceed 5% of Consolidated Total Assets (as defined in the Existing Note
Agreements) of the Company and its Subsidiaries; or
(2) The aggregate sum of all assets (valued at the greater of
book or fair market) of such Subsidiary, when combined with the assets of
all other Subsidiaries to which Section 8.1(i) would have applied if not
for the limitations set forth herein at any time during the three-year
period immediately preceding the date of such determination, exceeds 5% of
Consolidated Total Assets of the Company and its Subsidiaries; or
(3) The percentage of Consolidated Net Earnings (as defined in
the Existing Note Agreements) of the Company and its Subsidiaries
contributed by such Subsidiary during the immediately preceding fiscal year
exceeds 5%; or
(4) 5% is less than the sum of (i) the percentage of
Consolidated Net Earnings of the Company and its Subsidiaries contributed
by such Subsidiary during its Applicable Year and (ii) the percentage of
Consolidated Net Earnings of the Company and its Subsidiaries contributed
during its Applicable Year by each other Subsidiary of the Company to which
Section 8.1(i) would have applied at any time during the three-year period
immediately preceding the date of such determination if not for the
limitations set forth herein. The "Applicable Year" for each such
Subsidiary shall be the last complete fiscal year of the Company and its
Subsidiaries immediately preceding the date of the occurrence of the
relevant event or circumstance described in Section 8.1(i).
"Net Income" of any person means, for any period, the net income
(after deduction for income and other taxes of such person determined by
reference to income or profits of such person) for such period, all as
determined in accordance with generally accepted accounting principles.
"Net Income Available for Fixed Charges" means, for any period,
the sum of (i) consolidated Net Income of the Company and its Subsidiaries
during such period plus (ii) to the extent deducted in determining Net
-6-
Income, all provisions for all federal, state or other income taxes made by
the Company and its Subsidiaries during such period plus (iii) consolidated
Fixed Charges of the Company and its Subsidiaries during such period.
"Notes" means the promissory notes of the Company issued to the
Banks evidencing the Loans, in substantially the form annexed hereto as
Exhibit A, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Overdue Rate" means (a) in respect of principal on Floating Rate
Loans, a rate per annum that is equal to the sum of three percent (3%) plus
the Prime Rate, (b) in respect of Eurodollar Rate Loans, a rate per annum
that is equal to the sum of three percent (3%) plus the per annum rate in
effect thereon until the end of the then-current Eurodollar Interest Period
for such Loan and thereafter a rate per annum that is equal to the sum of
three percent (3%) plus the Prime Rate, and (c) in respect of other amounts
payable by the Company hereunder (other than interest) a per annum rate
that is equal to the sum of three percent (3%) plus the Prime Rate.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"person" shall include an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, an
unincorporated organization, a joint venture, a government (foreign or
domestic), and any agency or political subdivision thereof, and any other
entity.
"Plan" means, with respect to any person, any employee benefit or
other plan maintained by such person for its employees and covered by Title
IV of ERISA or to which Sec. 412 of the Internal Revenue Code of 1986, as
amended from time to time, applies.
"Prime Rate" means the greater of (a) the per annum rate
announced by the Agent from time to time as its "prime rate", which "prime
rate" may not be the lowest rate charged by the Agent to any of its
customers, such Prime Rate to change simultaneously with any change in such
"prime rate", and (b) the per annum rate equal to the sum of one-half of
one percent (1/2%) per annum plus the per annum rate established and
announced by the Agent from time to time as the opening federal funds rate
paid or payable by the Agent in its regional federal funds market for
overnight borrowings from other banks.
"Rentals" means, with respect to any period, the excess of (x)
all fixed rents (including all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the
property) payable with respect to such period by the Company or its
-7-
Subsidiaries as lessee or sublessee under a lease of real or personal
property (exclusive of any amounts required to be paid by the Company or
its Subsidiaries, whether designated as rents or additional rents, on
account of maintenance, repairs, insurance, taxes and similar charges) over
(y) all such amounts received by the Company and its Subsidiaries as lessor
under a lease of real or personal property during such period.
"Subsidiary" of any person means any corporation (whether now
existing or hereafter organized or acquired) in which at least a majority
of the securities of each class having ordinary voting power for the
election of directors (other than securities which have such power only by
reason of the happening of a contingency), at the time as of which any
determination is being made, is owned, beneficially and of record, by such
person or by one or more of the other Subsidiaries of such person or by any
combination thereof.
"Tangible Net Worth" of any person means, as of any date (a) the
amount of any capital stock or similar ownership liability plus (or minus
in the case of a deficit) the capital surplus and retained earnings of such
person and the amount of any foreign currency translation adjustment
account shown as a capital account of such person, less (b) the net book
value of all items of the following character which are included in the
assets of such person: (i) goodwill, including without limitation the
excess of cost over book value of any asset, (ii) organization or
experimental expenses, (iii) unamortized debt discount and expense, (iv)
stock discount and expense, (v) patents, trademarks, trade names and
copyrights, (vi) treasury stock, (vii) deferred taxes and deferred charges,
(viii) franchises, licenses and permits, and (ix) other assets which are
deemed intangible assets under generally accepted accounting principles.
"Termination Date" means the earlier to occur of (a) October 13,
1998, and (b) the date on which the Commitments shall be terminated
pursuant to Section 2.2 or 8.2.
"Total Liabilities" of any person means, as of any date, all
obligations which, in accordance with generally accepted accounting
principles, are or should be classified as liabilities on a balance sheet
of such person.
"Total Liabilities to Tangible Net Worth Ratio" means, as of any
date, the ratio of consolidated Total Liabilities of the Company and its
Subsidiaries to consolidated Tangible Net Worth of the Company and its
Subsidiaries.
1.2 As used herein, the terms "Agent", "Bank", "Banks",
"Company" and "this Agreement" shall have the respective meanings ascribed
thereto in the introductory paragraph of this Agreement. Such terms,
together with the other terms defined in Section 1.1, shall include both
the singular and the plural forms thereof and shall be construed
accordingly. All computations required hereunder and all financial terms
used herein shall be made or construed in accordance with generally
accepted accounting principles unless such principles are inconsistent with
-8-
the express requirements of this Agreement. Use of the terms "herein",
"hereof", and "hereunder" shall be deemed references to this Agreement in
its entirety and not to the Section or clause in which such term appears.
ARTICLE II. THE COMMITMENTS
2.1 Commitments of the Banks. The aggregate Commitment of the
Banks shall be $50,000,000. Each Bank agrees, for itself only, subject to
the terms and conditions of this Agreement, to lend to the Company from
time to time from the Effective Date until the Termination Date, sums not
to exceed in aggregate principal amount at any time outstanding the amount
set forth opposite its name below (or such proportionate lesser amount as
may result from a reduced amount of the available aggregate Commitment of
the Banks during such period):
<TABLE>
<CAPTION>
NAME OF BANK COMMITMENT AMOUNT
<S> <C> <C>
NBD Bank, N.A. $27,500,000
Harris Trust $10,000,000
and Savings
Bank
Comerica Bank $ 7,500,000
Old Kent Bank and $ 5,000,000
Trust Company
$50,000,000
</TABLE>
Each borrowing under this Section 2.1 shall be made from the
Banks pro rata in accordance with their Commitments.
2.2 Termination and Reduction of Commitments. The Company shall
have the right to terminate or reduce the aggregate Commitments at any time
and from time to time, provided that (a) the Company shall give five days'
prior written notice of such termination or reduction to the Agent (with
sufficient executed copies for each Bank) specifying the amount and
effective date thereof, (b) each partial reduction of the aggregate
Commitments shall be in a minimum amount of $3,000,000 and in an integral
multiple of $1,000,000, and shall reduce all Commitments proportionately,
(c) no such termination or reduction shall be permitted with respect to any
portion of the Commitments as to which a request for a Loan pursuant to
Section 3.1 is then pending, and (d) the Commitments may not be terminated
if any Loans are then outstanding and may not be reduced below the
principal amount of Loans then outstanding. The Commitments or any portion
thereof so terminated or reduced may not be reinstated.
-9-
2.3 Commitment Fees. The Company agrees to pay to the Agent for
the pro rata benefit of the Banks a commitment fee on the daily average
unused amount of the Commitments, for the period from the Effective Date to
but excluding the Termination Date, in arrears, at a rate equal to three-
eighths of one percent (3/8%) per annum. Accrued commitment fees shall be
payable quarterly, in arrears, on the first Business Day of each January,
April, July and October, commencing on such Business Day in the month of
January, 1995, and on the Termination Date.
2.4 Unavailable Portion of Commitment; Fee Adjustment. The
Company may, by a written notice delivered to the Agent, designate as
unavailable up to $20,000,000 of the Commitment, in increments of
$5,000,000, provided that the maximum unavailable portion of the Commitment
may not exceed the lesser of (i) $20,000,000 or (ii) the unused portion of
the Commitment at the time of such designation. In the event of such
designation, the commitment fee payable with respect to the unavailable
portion of the Commitment for the period subsequent to the date of
receiving such designation by the Agent shall be three-sixteenths of one
percent (3/16%) rather than three-eighths of one percent (3/8%) as
specified in Section 2.3. The Company may thereafter, upon not less than
three (3) Business Days' prior written notice to the Agent, elect to make
available hereunder all or any portion of the Commitment previously
designated as unavailable, in increments of $5,000,000, provided, that the
Company shall pay to the Agent for the Banks' ratable benefit on or before
the date such reinstated availability becomes effective, a commitment fee
recovery computed on such reinstated amount at the rate of three-sixteenths
of one percent (3/16%) per annum for a period of ninety (90) days.
2.5 Agent's Fee. The Company agrees to pay to the Agent an
agency fee for its services as Agent under this Agreement in such amounts
and at such times as may be agreed upon by the Company and the Agent.
2.6 Closing Fee. The Company agrees to pay to the Agent for the
pro rata benefit of the Banks a closing fee in an amount equal to $62,500,
payable on the Effective Date.
ARTICLE III. THE LOANS
3.1 Disbursement of Loans. (a)The Company shall give the Agent
notice of each requested Loan in substantially the form of Exhibit B hereto
(with sufficient executed copies for each Bank) not later than 11:00 a.m.
Detroit time (i) three Eurodollar Business Days prior to the date of such
requested Loan in the case of any Eurodollar Rate Loan, and (ii) on the
date of such requested Loan in the case of a Floating Rate Loan, which
notice shall specify whether a Eurodollar Rate Loan or Floating Rate Loan
-10-
is requested and, in the case of each requested Eurodollar Rate Loan, the
Interest Period to be initially applicable to such Loan. The Agent shall
provide notice of such requested Loan to each Bank by 2:00 p.m. Detroit
time on the date such notice is received by the Agent.
(b) Subject to the terms and conditions of this Agreement,
the proceeds of any such requested Loan shall be made available to the
Company by depositing the proceeds thereof, in immediately available funds,
in an account maintained and designated by the Company at the principal
office of the Agent, provided, that the proceeds of the initial Loan shall
be used to pay all amounts owing to the Banks pursuant the Prior Credit
Agreement and the promissory notes issued by the Company thereunder, at
which time the commitments of the Banks under the Prior Credit Agreement
shall be terminated. Each Bank, on the date of any such requested Loan,
shall make its pro rata share of such Loan available in immediately
available funds at the principal office of the Agent for disbursement to
the Company. Unless the Agent shall have received notice from any Bank
prior to the date of any requested borrowing under this Section 3.1 that
such Bank will not make available to the Agent such Bank's pro rata portion
of such borrowing, the Agent may assume that such Bank has made such
portion available to the Agent on the date of such borrowing in accordance
with this Section 3.1(b). If and to the extent such Bank shall not have so
made such pro rata portion available to the Agent, the Agent may (but shall
not be obligated to) make such amount available to the Company, and such
Bank and the Company severally agree to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the
date such amount is made available to the Company by the Agent until the
date such amount is paid to the Agent, at a rate per annum equal to the
rate at which overnight borrowings are available to the Agent from other
banks in its regional federal funds market. If such Bank shall pay to the
Agent such amount, the amount so paid shall constitute a Loan by such Bank
as a part of such borrowing for purposes of this Agreement. The failure of
any Bank to make its pro rata portion of any such borrowing available to
the Agent shall not relieve any other Bank of its obligations to make
available its pro rata portion of such borrowing on the date of such
borrowing, but no Bank shall be responsible for failure of any other Bank
to make such pro rata portion available to the Agent on the date of any
such borrowing. Acceptance by the Company of any Loan in an amount less
than the amount requested by the Company as a result of any Bank's failure
to make its pro rata portion of such borrowing available shall not
constitute a waiver of the Company's right against such Bank for any
damages resulting therefrom.
(c) All borrowings hereunder shall be evidenced by the
Notes, and all such borrowings shall be due and payable and bear interest
as provided in Article IV hereof. Each Bank is hereby authorized by the
Company to note on the schedule attached to its Note or on its books and
records, the date, the amount of its pro rata share of and the type of each
Loan and the duration of the related Interest Period (if applicable), the
amount of each payment or prepayment of principal thereon, and the other
information provided for on such schedule, which schedule shall constitute
-11-
prima facie evidence of the information so noted, provided that failure of
any Bank to make any such notation shall not relieve the Company of its
obligation to repay the outstanding principal amount of the Loans, all
accrued interest thereon and other amounts payable with respect thereto in
accordance with the terms of the Notes and this Agreement. Subject to the
terms and conditions of this Agreement, the Company may borrow, prepay
pursuant to Section 4.1 and reborrow Loans under this Section 3.1.
3.2 Conditions for Disbursement of Initial Loan. The obligation
of the Banks to make the initial Loan hereunder is subject to receipt by
each Bank of the following documents and satisfaction of the following
conditions, each in form and substance satisfactory to each Bank:
(a) Certificates of recent date of the appropriate
authority or official of the Company's state of incorporation listing all
charter documents of the Company on file in that office and certifying as
to the good standing and corporate existence of the Company, together with
copies of such charter documents of the Company certified as of a recent
date by such authority or official and certified as true and correct as of
the Effective Date by a duly authorized officer of the Company;
(b) Copies of the by-laws of the Company, together with all
authorizing resolutions and evidence of other corporate action taken by the
Company to authorize the execution, delivery and performance by the Company
of this Agreement and the Notes and the consummation of the transactions
contemplated hereby, each certified as true and correct as of the Effective
Date by a duly authorized officer of the Company;
(c) Certificates of incumbency of the Company containing,
and attesting to the genuineness of, the signatures of those officers
authorized to act on behalf of the Company in connection with this
Agreement and the Notes and the consummation of the transactions
contemplated hereby, certified as true and correct as of the Effective Date
by a duly authorized officer of the Company;
(d) The Notes duly executed on behalf of the Company,
appropriately completed for each Bank and dated on or before the date of
such Loan;
(e) The favorable written opinion of Warner, Norcross &
Judd, counsel for the Company, with respect to each of the matters as any
of the Banks may reasonably request;
(f) Payment of the closing fee described in Section 2.6;
and
(g) Simultaneously with disbursement of the initial Loan
hereunder, payment in full of all principal of all promissory notes issued
pursuant to the Prior Credit Agreement and all accrued interest thereon
through the Effective Date, together with payment in full of all other
indebtedness under the Prior Credit Agreement, including without limitation
-12-
the payment of all commitment and facility fees accrued through the
Effective Date under the Prior Credit Agreement, and on the Effective Date
all commitments to lend under the Prior Credit Agreement shall terminate.
3.3 Conditions for Disbursement of Each Loan. The obligation of
the Banks to make any Loan (including the initial Loan) is subject to the
satisfaction of the following conditions precedent:
(a) The representations and warranties contained in Article
VI shall be true and correct on and as of the date such Loan is made as if
such representations and warranties were made on and as of such date; and
(b) No Event of Default, and no event or condition which
would become such an Event of Default with notice or lapse of time, or
both, shall exist or shall have occurred and be continuing on the date such
Loan is made.
The Company shall be deemed to have made a certification to the Banks at
the time of the making of each Loan to the effects set forth in clauses (a)
and (b) of this Section 3.3.
3.4 Minimum Amounts. Except for conversions and prepayments of
all Loans of a particular type and conversions or payments required
pursuant to Section 4.4 or Article V, each Eurodollar Rate Loan and each
conversion and prepayment thereof shall be in a minimum amount of
$4,000,000 and in an integral multiple of $1,000,000, and each Floating
Rate Loan and each conversion and prepayment thereof shall be in a minimum
amount of $1,000,000 and in an integral multiple of $100,000.
3.5 Subsequent Elections as to Loans. The Company may elect to
continue a Eurodollar Rate Loan of one type as a Eurodollar Rate Loan of
the then-existing type or may elect to convert a Eurodollar Rate Loan of
one type to a Loan of another type by giving notice thereof to the Agent
(with sufficient executed copies for each Bank) in substantially the form
of Exhibit C hereto not later than 11:00 a.m. Detroit time (a) three
Eurodollar Business Days prior to the date any such continuation of or
conversion to a Eurodollar Rate Loan is to be effective, and (b) on the
date such continuation or conversion is to be effective in all other cases,
provided that an outstanding Eurodollar Rate Loan may only be converted on
the last day of the then-current Interest Period with respect to such Loan
and, provided further, if a continuation of a Loan as, or a conversion of a
Loan to, a Eurodollar Rate Loan is requested, such notice shall also
specify the Interest Period to be applicable thereto upon such continuation
or conversion. The Agent shall provide notice of such election to each
Bank by 2:00 p.m. Detroit time on the date such notice is received by the
Agent. If the Company shall fail timely to deliver such a notice with
respect to any outstanding Eurodollar Rate Loan, the Company shall be
deemed to have elected to convert such Loan to a Floating Rate Loan on the
last day of the then-current Interest Period with respect to such Loan.
-13-
3.6 Discretion of the Banks as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of
its portion of the Loans in any manner it sees fit, it being understood,
however that for the purposes of this Agreement all determinations
hereunder shall be made as if each Bank had actually funded and maintained
each Eurodollar Rate Loan during each related Interest Period through the
purchase of deposits in the relevant interbank market having a maturity
corresponding to such related Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.
ARTICLE IV. PAYMENTS AND PREPAYMENTS OF LOANS
4.1 Principal Payments. Unless earlier payment is required
under this Agreement, the Company shall pay to the Banks on the Termination
Date the outstanding principal amount of the Loans.
4.2 Interest Payments. The Company shall pay interest to the
Banks on the unpaid principal amount of each Loan, for the period
commencing on the date such Loan is made until such Loan is paid in full,
on each Interest Payment Date and at maturity (whether at stated maturity,
by acceleration or otherwise), and thereafter on demand, at the following
rates per annum:
(a) During such periods that such Loan is a Floating Rate
Loan, the Prime Rate.
(b) During such periods that such Loan is an Eurodollar
Rate Loan, the Eurodollar Rate applicable to such Loan for each related
Eurodollar Interest Period.
(c) Notwithstanding any of the foregoing paragraphs, the
Company hereby agrees to pay interest on demand at the Overdue Rate on the
outstanding principal amount of any Loan and any other amount payable by
the Company hereunder (other than interest) commencing upon the occurrence
and continuing thereafter during the continuance of any Event of Default.
4.3 Optional Prepayment. The Company may at any time and from
time to time prepay all or a portion of the Loans without premium or
penalty, provided that the Company may not prepay any portion of any such
Loan as to which an election for a continuation of or a conversion to any
Eurodollar Rate Loan is pending pursuant to Section 3.5 and, provided,
further, that unless earlier payment is required under this Agreement, any
such Eurodollar Rate Loan may only be prepaid on the last day of the then-
current Interest Period with respect to such Loan.
-14-
4.4 Mandatory Prepayment. In addition to all other payments and
prepayments made by the Company on the Loans, if at any time the aggregate
Loans exceeds the aggregate Commitment of the Banks, the Company shall
forthwith pay to the Banks an amount not less than the amount of such
excess.
4.5 Payment Method. All payments to be made by the Company
hereunder will be made in Dollars and in immediately available funds to the
Agent for the account of the Banks at its address set forth in Section 10.2
not later than 11:00 a.m. Detroit time on the date on which such payment
shall become due. Payments received after 11:00 a.m. Detroit time shall be
deemed to be payments made prior to 11:00 a.m. Detroit time on the next
succeeding Business Day. At the time of making each such payment, the
Company shall specify to the Agent that obligation of the Company hereunder
to which such payment is to be applied or, in the event that the Company
fails to so specify or if an Event of Default shall have occurred and be
continuing, the Agent may apply such payments as it may determine in its
sole discretion. On the day such payments are deemed received, the Agent
shall remit to the Banks their pro rata shares of such payments, in
immediately available funds, (a) in the case of payments of principal of
and interest on the Loans, determined with respect to each such Bank by the
ratio which the outstanding principal balance of its Note bears to the
outstanding principal amount of all Notes, and (b) in the case of fees paid
pursuant to Article II and other amounts payable hereunder, determined with
respect to each such Bank by the ratio which the Commitment of such Bank
bears to the Commitments of all the Banks.
4.6 No Setoff or Deduction. All payments of principal of and
interest on the Loans and other amounts payable by the Company hereunder
shall be made by the Company without setoff or counterclaim, and free and
clear of, and without deduction or withholding for, or on account of, any
present or future taxes, levies, imposts, duties, fees, assessments, or
other charges of whatever nature, imposed by any governmental authority, or
by any department, agency or other political subdivision or taxing
authority.
4.7 Payment on Non-Business Day; Payment Computations. Except
as otherwise provided in this Agreement to the contrary, whenever any
installment of principal of, or interest on, any Loan outstanding hereunder
or any other amount due hereunder becomes due and payable on a day which is
not a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, in the case of any installment of principal,
interest shall be payable thereon at the rate per annum determined in
accordance with this Agreement during such extension. Computations of
interest and other amounts due under this Agreement shall be made on the
basis of a year of 360 days for the actual number of days elapsed,
including the first day but excluding the last day of the relevant period.
-15-
ARTICLE V. YIELD PROTECTION AND CONTINGENCIES
5.1 Additional Costs. In the event that the adoption after the
Effective Date of any applicable law, treaty, rule or regulation (whether
domestic or foreign), or any interpretation or administration after the
Effective Date of any applicable law, treaty, rule or regulation (whether
domestic or foreign) by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank with
any request or directive of any such authority (whether or not having the
force of law), shall (a) affect the basis of taxation of payments to any
Bank of any amounts payable by the Company under this Agreement (other than
federal or state income taxes or taxes imposed on the overall net income of
the Bank or the Michigan Single Business Tax), or (b) shall impose, modify
or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by any Bank, or (c) shall impose any penalty or other condition with
respect to this Agreement, the Notes or the Loans, and the result of any of
the foregoing is to increase the cost to any Bank of making or maintaining
any Eurodollar Rate Loan or to reduce the amount of any sum receivable by
such Bank thereon, then, provided the Bank has complied with the notice
provisions of this Section 5.1, the Company shall pay to such Bank, from
time to time upon request by such Bank, additional amounts sufficient to
compensate the Bank for such increased cost to or reduced sum receivable by
the Bank to the extent such Bank is not expressly compensated therefor in
the computation of the interest rate applicable to such Loan. Any Bank
seeking reimbursement shall give the Company written notice, in reasonable
detail, of the law, treaty, rule or regulation, or any interpretation or
administration thereof, which may give rise to the increased cost or
reduced sum receivable to the Bank and the reimbursement obligation of the
Company. Such notice, together with a detailed statement as to the amount
of such increased cost or reduced sum receivable, prepared in good faith,
shall be given to the Company within 90 days after such Bank has actual
notice of such law, treaty, rule or regulation, or any applicable
interpretation or administration thereof, and the Company shall make
payment to such Bank of the amount due within 15 days after receipt by the
Company of such notice and statement.
5.2 Limitation of Requests and Elections. Notwithstanding any
other provision of this Agreement to the contrary, if, upon receiving a
request for a Eurodollar Rate Loan pursuant to Section 3.1, or a request
for a continuation of a Eurodollar Rate Loan as a Eurodollar Rate Loan of
the then existing type pursuant to Section 3.5, or conversion of a Loan to
a Eurodollar Rate Loan pursuant to Section 3.5, (a) in the case of any
Eurodollar Rate Loan, deposits in Dollars for periods comparable to the
Interest Period elected by the Company are not available to any Bank in the
relevant inter-bank or secondary market, or (b) the Eurodollar Rate will
not adequately and fairly reflect the cost to any Bank of making or
maintaining the related Eurodollar Rate Loan, as the case may be, or (c) by
reason of national or international financial, political or economic
conditions or by reason of any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental authority
-16-
charged with the interpretation or administration thereof, or compliance by
any Bank with any request or directive of such authority (whether or not
having the force of law), including without limitation exchange controls,
it is impracticable, unlawful or impossible for any Bank (i) to make the
relevant Eurodollar Rate Loan or (ii) to continue such Eurodollar Rate Loan
as a Eurodollar Rate Loan of the then existing type or (iii) to convert a
Loan to such a Eurodollar Rate Loan, then the Company shall not be
entitled, so long as such circumstances continue, to request a Eurodollar
Rate Loan of the affected type pursuant to Section 3.1 or a continuation of
or conversion to a Eurodollar Rate Loan of the affected type pursuant to
Section 3.5. In the event that such circumstances no longer exist, the
Banks shall again consider requests for Eurodollar Rate Loans of the
affected type pursuant to Section 3.1, and requests for continuations of
and conversions to Eurodollar Rate Loans of the affected type pursuant to
Section 3.5.
5.3 Illegality and Impossibility. In the event that any
applicable law, treaty, rule or regulation (whether domestic or foreign)
now or hereafter in effect and whether or not presently applicable to any
Bank, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Bank with any request or directive of such authority
(whether or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for any Bank to
maintain any Eurodollar Rate Loan under this Agreement, the Company shall
upon receipt of notice thereof from such Bank, repay in full to all of the
Banks the then outstanding principal amount of each Eurodollar Rate Loan so
affected together with all accrued interest thereon to the date of payment
and all amounts due to the Banks, if any, under Section 5.5, (a) on the
last day of the then-current Interest Period applicable to such Loan if the
Bank may lawfully continue to maintain such Loan to such day, or (b)
immediately if the Bank may not continue to maintain such Loan to such day.
5.4 Additional Contingencies. If by reason of the adoption
after the Effective Date of any applicable law, treaty, rule or regulation,
or any interpretation or administration after the Effective Date of any
applicable law, treaty, rule or regulation by any governmental authority
charged with the interpretation or administration thereof, or compliance by
any Bank with any request or directive of such authority (whether or not
having the force of law), the ability of the Agent to establish the Prime
Rate shall be limited or restricted (other than by limitations or
restrictions affecting the charging of interest generally), the Agent shall
promptly provide notice thereof to the Company and the Banks. Thereafter,
the Company, the Agent and the Banks shall negotiate with a view to
agreeing to a mutually acceptable alternative basis to make and maintain
Floating Rate Loans. If an alternative basis is agreed upon within 30 days
after the date of such notice, it shall apply in accordance with the terms
of such agreement. If such alternative basis is not agreed upon within
such 30-day period, the Company shall on the 31st day after such notice is
given repay in full the then-outstanding principal amount of each Floating
Rate Loan so affected together with accrued interest thereon (computed at
the rate applicable to such Floating Rate Loans immediately preceding the
-17-
imposition of such limitations or restrictions for the period after such
imposition) and, during the continuance of such circumstances, the Company
shall not be entitled to request Floating Rate Loans so affected pursuant
to Section 3.1 or continuations of or conversions to Floating Rate Loans so
affected pursuant to Section 3.5.
5.5 Indemnification. If the Company makes any payment of
principal with respect to any Eurodollar Rate Loan on any other date than
the last day of an Interest Period applicable thereto (whether pursuant to
Section 4.4, Section 5.3, Section 8.2 or otherwise), or if the Company
fails to borrow any Eurodollar Rate Loan after notice has been given in
accordance with Section 3.1 (except if such failure is due to circumstances
described in Section 5.2), or fails to make any payment of principal or
interest in respect of a Eurodollar Rate Loan when due, the Company shall
reimburse each Bank on demand for any resulting loss or expense incurred by
each such Bank, including without limitation any loss incurred in
obtaining, liquidating or employing deposits from third parties, provided
that (a) the Company shall not be required to reimburse any Bank under this
Section 5.5 for any such loss or expense not attributable to the relevant
Loan (i.e., the Loan with respect to which such nonconforming payment is
made, or the Loan that is not borrowed by the Company after such notice is
given, or the Loan with respect to which such due payment is not made)
being a Eurodollar Rate Loan, and (b) the Company shall have no liability
under this Section 5.5 with respect to any prepayment pursuant to Section
5.3 that is required due to the application of any law, treaty, rule or
regulation, any interpretation or administration thereof, or any request or
directive, as the case may be, in effect prior to the Effective Date. A
detailed statement as to the amount of such loss or expense, prepared in
good faith and submitted by such Bank to the Company, shall be prima facie
evidence of the amount thereof.
5.6 Capital Adequacy. In the event that the adoption after the
Effective Date of any applicable law, treaty, rule or regulation (whether
domestic or foreign), or any interpretation or administration after the
Effective Date of any applicable law, treaty, rule or regulation by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank or any corporation controlling such Bank
with any request or directive of any such authority (whether or not having
force of law) regarding capital adequacy or a change therein, or compliance
by any Bank, any such controlling corporation or any of their branches
with any request or directive regarding capital adequacy of any such
authority, has or would have the effect of reducing the rate of return on
such Bank's or such controlling corporation's capital as a consequence of
its obligations hereunder to a level below that which such Bank or such
controlling corporation would have achieved but for any of the foregoing by
an amount deemed by such Bank to be material, the Company shall pay to such
Bank, from time to time upon request by such Bank, additional amounts
sufficient to compensate such Bank or such controlling corporation for such
reduction, provided that the Company shall not be required to pay such
compensation to any Bank or corporation controlling such Bank, as the case
may be, to the extent such reduction is attributable to any such law,
treaty, rule or regulation, or interpretation or administration thereof, or
-18-
request or directive, as the case may be, that is not generally applicable
to (a) in the case of each Bank that is a national bank, all national
banks, or (b) in the case of any of the Banks, all banks organized under
the same authority as such Bank (i.e., if such Bank is a State of Michigan
chartered bank, all State of Michigan chartered banks and if such Bank is a
federal savings bank, all federal savings banks, etc.) in any of the states
in which such Bank has an office. Any Bank seeking reimbursement shall
give the Company written notice, and reasonable detail, of the law, treaty,
rule or regulation, or any interpretation or administration thereof, which
may give rise to the increased cost or reduce some receivable to the Bank
or such controlling corporation and the reimbursement obligation of the
Company. Such notice, together with a detailed statement as to the amount
of such increased cost or reduce some receivable, prepared in good faith,
shall be given to the Company within ninety (90) days after such Bank has
actual notice of such law, treaty, rule or regulation, or any applicable
interpretation or administration thereof, and the Company shall make
payment to such Bank of the amount due within fifteen (15) days after
receipt by the Company of such notice and statement.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
6.1 Corporate Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business in each additional
jurisdiction in which (a) such qualification is necessary under applicable
law and (b) the failure to be so qualified would have a material adverse
effect on the properties, business, prospects, profits or condition
(financial or otherwise) of the Company or of the Company and its
Subsidiaries taken as a whole. The Company has all requisite corporate
power to own its properties land to carry on its business as now being
conducted and as proposed to be conducted, and to execute and deliver this
Agreement and the Notes and to engage in the transactions contemplated by
this Agreement.
6.2 Corporate Authority. The execution, delivery and
performance by the Company of this Agreement and the Notes are within its
corporate powers, have been duly authorized by all necessary corporate
action and are not in contravention of any law, rule or regulation, or any
judgment, decree, writ, injunction, order or award of any arbitrator, court
or governmental authority, or of the terms of the Company's charter or by-
laws, or of any contract or undertaking to which the Company is a party or
by which the Company or its property may be bound or affected.
6.3 Binding Effect. This Agreement is, and the Notes when
delivered hereunder will be, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
-19-
enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding at law or in equity).
6.4 Subsidiaries. Schedule 6.4 hereto correctly sets forth the
corporate name, jurisdiction of incorporation and ownership percentage with
respect to each Subsidiary of the Company. Each such Subsidiary and each
corporation becoming a Subsidiary of the Company after the date hereof is
and will be a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is and
will be duly qualified to do business in each additional jurisdiction in
which (a) such qualification is necessary under applicable law and (b) the
failure to be so qualified would have a material adverse effect on the
properties, business, prospects, profits or condition (financial or
otherwise) of the Company or of the Company and its Subsidiaries taken as a
whole, except WWW Europe, Ltd., which is in the process of being dissolved
and liquidated, is not in good standing in the United Kingdom, which is the
jurisdiction in which it was organized. Each Subsidiary of the Company has
and will have all requisite corporate power to own its properties and to
carry on its business as now being conducted and as proposed to be
conducted. All outstanding shares of capital stock of each class of each
Subsidiary of the Company have been and will be validly issued and are
fully paid and nonassessable and, except as otherwise indicated in Schedule
6.4 hereto or disclosed in writing to the Banks from time to time, are and
will be owned, beneficially and of record, by the Company or another
Subsidiary of the Company free and clear of any liens, charges,
encumbrances or rights of others whatsoever.
6.5 Litigation. Except as disclosed on Schedule 6.5 hereto,
there is no action, suit or proceeding pending or, to the best of the
Company's knowledge, threatened against or affecting the Company or any of
its Subsidiaries before or by any court, governmental authority, or
arbitrator, which if adversely decided might result, either individually or
collectively, in any material adverse change in the business, properties,
operations or conditions, financial or otherwise, of the Company or of the
Company and its Subsidiaries taken as a whole, and, to the best of the
Company's knowledge, there is no basis for any such action, suit or
proceeding.
6.6 Financial Condition. The consolidated balance sheet of the
Company and its Subsidiaries and the consolidated statements of income,
retained earnings and changes in financial position of the Company and its
Subsidiaries for the fiscal year ended December 31, 1993, and certified by
Ernst & Young, independent certified public accountants, and the interim
consolidated balance sheet and interim consolidated statements of income,
retained earnings and changes in financial position of the Company and its
Subsidiaries, as of or for the fifth accounting period ended on May 21,
1994, copies of which have been furnished to the Banks, fairly present the
consolidated financial position of the Company and its Subsidiaries as at
the respective dates thereof, and the consolidated results of operations of
the Company and its Subsidiaries for the respective periods indicated, all
in accordance with generally accepted accounting principles consistently
applied (subject, in the case of said interim statements, to year-end audit
-20-
adjustments). There has been no material adverse change in the business,
properties, operations or condition, financial or otherwise, of the Company
or of the Company and its Subsidiaries taken as a whole, since December 31,
1993.
6.7 Use of Loans. Neither the Company nor any of its
Subsidiaries extends or maintains, in the ordinary course of business,
credit for the purpose, whether immediate, incidental, or ultimate, of
buying or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Loan will be used for the purpose, whether immediate,
incidental, or ultimate, of buying or carrying any such margin stock or
maintaining or extending credit to others for such purpose.
6.8 Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental person or entity, including without limitation any creditor
or stockholder of the Company or any of its Subsidiaries, is required on
the part of the Company in connection with the execution, delivery and
performance of this Agreement or the Notes or the transactions contemplated
hereby or as a condition to the legality, validity or enforceability of
this Agreement or the Notes.
6.9 Taxes. The Company and its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed and have paid all
taxes shown thereon to be due, including interest and penalties, or have
established adequate financial reserves on their respective books and
records for payment thereof.
6.10 Title to Properties. Except as set forth in the financial
statements described in Section 6.6 or as otherwise disclosed in the
financial statements delivered pursuant to Section 7.1(d), the Company and
its Subsidiaries have good and marketable title to, and valid indefeasible
ownership interests in, all of their respective material properties and
assets free and clear of any lien, charge, security interest or other
encumbrance of any kind, except such as are permitted by Section 7.2(f).
6.11 Existing Note Agreements. There is no default under any
Existing Note Agreement, as amended or modified from time to time, or under
any agreement, document or instrument issued in exchange or substitution
therefor or as a supplement thereto, nor is there any event or condition
which would, unless sooner cured, become such a default with notice or
lapse of time, or both.
6.12 Environmental and Safety Matters. Except as described on
Schedule 6.12 attached hereto, (a) the Company and each Subsidiary is in
substantial compliance with all federal, state and local laws, ordinances
and regulations relating to safety and industrial hygiene or to the
environmental condition, including without limitation all Environmental
Laws in jurisdictions in which the Company or any Subsidiary owns or
operates, or has owned or operated, a facility or site, or arranges or has
arranged for disposal or treatment of hazardous substances, solid waste, or
-21-
other wastes, accepts or has accepted for transport any hazardous
substances, solid wastes or other wastes or holds or has held any interest
in real property or otherwise; (b) no material demand, claim, notice, suit,
suit in equity, action, administrative action, investigation or inquiry
whether brought by any governmental authority, private person or entity or
otherwise, arising under, relating to or in connection with any
Environmental Laws is pending or threatened against the Company or any of
its Subsidiaries, any real property in which the Company or any such
Subsidiary holds or has held an interest or any past or present operation
of the Company or any Subsidiary; (c) neither the Company nor any of its
Subsidiaries (i) is the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of
any toxic substances, radioactive materials, hazardous wastes or related
materials into the environment, (ii) has received any notice of any toxic
substances, radioactive materials, hazardous waste or related materials in,
or upon any of its properties in violation of any Environmental Laws, or
(iii) knows of any basis for any such investigation, notice or violation;
and (d) no material release, threatened release or disposal of hazardous
waste, solid waste or other wastes is occurring or has occurred on, under
or to any real property in which the Company or any of its Subsidiaries
holds any interest or performs any of its operations, in violation of any
Environmental Law. Notwithstanding the foregoing, the Company will not be
in default or breach of this Section unless and until any of the events or
matters referenced in this Section is reasonably expected to result in any
material adverse change in the business, operations, properties, or
condition, financial or otherwise, of the Company and its Subsidiaries, on
a consolidated basis.
6.13 Indebtedness. All Indebtedness of the Company and its
Subsidiaries in a principal amount equal to or greater than $100,000, other
than the Existing Note Agreements, is listed on Schedule 6.13 hereto.
ARTICLE VII. COVENANTS
7.1 Affirmative Covenants. The Company covenants and agrees
that, until the Termination Date and thereafter until the payment in full
of the principal of and accrued interest on the Notes and the performance
of all other obligations of the Company under this Agreement, unless the
Majority Banks shall otherwise consent in writing, it shall, and except as
to subsection (d), shall cause each of its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights, privileges, licenses, franchises
and permits and qualify and remain qualified as a validly existing
corporation in good standing in each jurisdiction where the failure to so
qualify and be in good standing would have a material adverse effect on the
business, property, operations or condition, financial or otherwise, of the
Company or of the Company and its Subsidiaries taken as a whole.
-22-
(b) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and orders of any
governmental authority (compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property), noncompliance with which
could materially and adversely affect the financial condition or operations
of the Company or of the Company and its Subsidiaries taken as a whole, or
the legality, validity or enforceability of this Agreement or the Notes,
except to the extent that compliance with any of the foregoing is then
being contested in good faith by appropriate legal proceedings and with
respect to which adequate financial reserves have been established on the
books and records of the Company or such Subsidiary.
(c) Maintenance of Insurance. Maintain insurance with
responsible and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties similarly situated.
(d) Reporting Requirements. Furnish to the Banks the
following:
(i) Immediately after becoming aware of the occurrence
of any Event of Default or any event or condition which, with
notice or lapse of time, or both, would constitute an Event of
Default, a statement of the chief financial officer of the
Company setting forth details of such Event of Default or such
event or condition and the action which the Company has taken and
proposes to take with respect thereto;
(ii) As soon as available and in any event within 45
days after the end of each of the first three fiscal quarters of
each fiscal year of the Company, the consolidated balance sheet
of the Company and its Subsidiaries as of the end of such
quarter, and the related consolidated statements of income,
retained earnings and changes in financial position for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the
corresponding date or period of the preceding fiscal year, all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Company as
having been prepared in accordance with generally acceptable
accounting principles, together with a certificate of the chief
financial officer of the Company stating (A) that no Event of
Default or event or condition which, with notice or lapse of
time, or both, would constitute an Event of Default, has occurred
and is continuing or, if an Event of Default or such an event or
condition has occurred and is continuing, a statement setting
forth the details thereof and the action which the Company has
taken and proposes to take with respect thereto, and (B) that a
computation (which computation shall accompany such certificate
and shall be in reasonable detail) showing whether compliance
-23-
with Sections 7.2(a) through (d) is in conformity with the terms
of this Agreement;
(iii) As soon as available and in any event within 90
days after the end of each fiscal year of the Company, a copy of
the consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, retained earnings and changes
in financial position of the Company and its Subsidiaries for
such fiscal year, certified without qualifications unacceptable
to either the Agent or the Majority Banks by Ernst & Young, or
other independent certified public accountants selected by the
Company and acceptable to the Agent, together with a certificate
of such accountants stating (A) that they have reviewed this
Agreement and stating further whether, in the course of their
review of such financial statements, they have become aware of
any Event of Default or any event or condition which, with notice
or lapse of time, or both, would constitute an Event of Default
and, if such an Event of Default or such a condition or event
then exists and is continuing, a statement setting forth the
nature and status thereof, and (B) that a computation by the
Company (which computation shall accompany such certificate and
shall be in reasonable detail) showing whether compliance with
Sections 7.2(a) through (d), is in conformity with the terms of
this Agreement;
(iv) Promptly after the sending or filing thereof,
copies of all reports, proxy statements and financial statements
which the Company or any of its Subsidiaries sends to any of
their respective security holders or to any securities exchange
or to the Securities and Exchange Commission or any successor
agency thereof;
(v) Promptly, written notice of any extension,
renewal, supplement, amendment, modification, substitution,
restatement or replacement of, to or for any Existing Note
Agreement, together with a copy of such extension, renewal,
supplement, amendment, modification, substitution, restatement or
replacement, as the case may be, and all documents issued in
connection therewith; and
(vi) Promptly, such other information respecting the
business, properties or the condition or operations, financial or
otherwise, of the Company or any of it Subsidiaries as any Bank
may from time to time reasonably request.
(e) Access to Records, Books, Etc. At any reasonable time
and from time to time, permit any Bank or any agents or representatives
thereof to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Company and its
Subsidiaries, and to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with their respective officers and employees.
-24-
7.2 Negative Covenants. Until the Termination Date and
thereafter until payment in full of the principal of and accrued interest
on the Notes and the performance of all other obligations of the Company
under this Agreement, the Company agrees that, unless the Majority Banks
shall otherwise consent in writing, it shall not itself and shall not
permit any Subsidiary to:
(a) Current Ratio. Permit or suffer the consolidated
Current Ratio of the Company and its Subsidiaries to be less than 1.5 to
1.0 at any time.
(b) Tangible Net Worth. Permit or suffer consolidated
Tangible Net Worth of the Company and its Subsidiaries to be less than the
sum of (i) $92,000,000 plus (ii) an amount equal to 40% of the Net Income
of the Company and its Subsidiaries for each fiscal quarter of the Company,
such Net Income for each fiscal quarter of the Company to be added
effective as of the last day of such fiscal quarter, commencing with the
fiscal quarter ending June 30, 1994, provided that if such Net Income is
negative in any fiscal quarter, it shall not be subtracted from the amount
required to be maintained pursuant to this subsection or from any future
amount to be added to the amount of Tangible Net Worth to be maintained
under this subsection.
(c) Total Liabilities to Tangible Net Worth. Permit or
suffer the ratio of consolidated Total Liabilities of the Company and its
Subsidiaries to consolidated Tangible Net Worth of the Company and its
Subsidiaries to be greater than 1.5 to 1.0 at any time.
(d) Fixed Charge Coverage Ratio. Permit or suffer the
ratio of (i) the consolidated Net Income Available for Fixed Charges for
the period of twelve-complete calendar months immediately preceding the
date of any computation hereunder to (ii) the consolidated Fixed Charges
for such period (the "Fixed Charge Coverage Ratio") to be less than 2.0 to
1.0 at any time.
(e) Indebtedness. Create, incur, assume, guaranty or in
any manner become liable in respect of, or suffer to exist, at any time any
Indebtedness other than:
(i) the Loans;
(ii) Indebtedness permitted by Section 5.8 of the
Existing Note Agreements (including all subsections thereof as
modified below), which entire Section 5.8 of the Existing Note
Agreements as modified below, together with definitions of
defined terms used therein and exhibits referred to therein, is
by this reference incorporated and made a part of this Agreement
with the same force and effect as though herein set forth in
full, except that reference to "20% of Consolidated Adjusted Net
Worth" contained in Section 5.8(a)(3) of the Existing Note
Agreements as incorporated herein shall be deemed reference to
20% of consolidated Tangible Net Worth (as defined in this
Agreement) of the Company and its Subsidiaries; and
-25-
(iii) Indebtedness described on Schedule 7.2(e) hereto.
(f) Liens. Create, incur or suffer to exist, any lien
(including without limitation any pledge, mortgage, title retaining
contract or other type of security interest, hereinafter "Liens") to exist
on any of its property, real, personal or mixed, tangible or intangible,
whether now owned or hereafter acquired, except those permitted by Section
5.9 of the Existing Note Agreements (including all subsections thereof) as
modified below, which entire Section 5.9 of the Existing Note Agreements as
modified below, together with defined terms used therein and exhibits
referred to therein, is by this reference incorporated in and made a part
of this Agreement with the same force and effect as though herein set forth
in full, except that (i) Section 5.9(a)(7) of the Existing Note Agreements
is excluded and not incorporated herein, and all Liens described in such
Section 5.9(a)(7) shall not be permitted unless otherwise permitted by
Section 5.9(a)(9) of the Existing Note Agreements as incorporated herein;
and (ii) reference to "20% of Consolidated Adjusted Net Worth" contained in
Section 5.8(a)(3) of the Existing Note Agreements (as incorporated herein
pursuant to Section 5.9(a)(9) of the Existing Note Agreements) shall be
deemed reference to 20% of consolidated Tangible Net Worth (as defined in
this Agreement) of the Company and its Subsidiaries.
(g) Merger; Sale of Assets; Etc. Sell, lease, transfer or
otherwise dispose of all or a substantial portion of its assets or business
to any person or purchase or otherwise acquire all or a substantial portion
of any assets of any person, or all or a substantial portion of the shares
of stock of or other ownership interest in any other person, nor merge or
consolidate with any other person; provided, however, any of the foregoing
shall be permitted if permitted under Section 5.10 of the Existing Note
Agreements, which Section 5.10 of the Existing Note Agreements (including
all subsections thereof), together with all defined terms used therein and
exhibits referred to therein, is by this reference incorporated in and made
a part of this Agreement with the same force and effect as though herein
set forth in full, except that (i) Section 5.10(a)(3) of the Existing Note
Agreements is excluded and not incorporated herein, and all transactions
described therein shall not be permitted, and (ii) all references in
Section 5.10(a)(2) of the Existing Note Agreements to the "Notes" and "this
Agreement" shall be deemed references to the Notes issued by the Company to
the Banks hereunder and this Agreement among the Company, the Banks and the
Agent, respectively, and all references in Section 5.10 of the Existing
Note Agreements to an "Event of Default" and "Default" shall mean an Event
of Default hereunder and any event or condition which with notice or lapse
of time, or both, would become such an Event of Default hereunder,
respectively.
(h) Nature of Business. Engage in any business if, as a
result, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Company and its Subsidiaries would be
substantially changed from the general nature of the business engaged in by
the Company and its Subsidiaries on the Effective Date.
-26-
Whenever any section or other provision of the Existing Note Agreements is
incorporated in Sections 7.2(e), (f) and (g) hereof or otherwise in this
Agreement, such sections and provisions shall be incorporated in the form
contained in the Existing Note Agreements in the form as certified by the
Company to the Banks as of the Effective Date and without giving effect to
any retroactive or other amendments thereto executed at any time unless
described in such certification and included therewith as of the Effective
Date, and such sections and provisions shall be and continue effective
regardless of whether the Existing Note Agreements continue in effect or
the promissory notes issued thereunder are paid, and no supplement,
amendment, modification, waiver, consent or termination of the Existing
Note Agreements made or granted after the Effective Date shall have any
effect whatsoever upon the sections and provisions thereof as they are
incorporated herein.
ARTICLE VIII. DEFAULT
8.1 Events of Default. The occurrence of any one of the
following events or conditions shall be deemed an "Event of Default"
hereunder unless waived pursuant to Section 10.1:
(a) The Company shall (i) fail to pay when due any
principal of the Notes, or (ii) fail to pay within five days after the date
when due any interest on the Notes or any commitment or facility fees or
any other amount payable hereunder; or
(b) Any representation or warranty made by the Company in
Article VI hereof, or in any other document or certificate furnished by or
on behalf of the Company in connection with this Agreement, shall prove to
have been incorrect in any material respect when made; or
(c) The Company shall fail to perform or observe any term,
covenant or agreement contained in Section 7.2 other than subsection (f);
or
(d) The Company shall fail to perform or observe any term,
covenant or agreement contained in subsection (f) of Section 7.2 and, if
such failure relates to a nonconsensual Lien, either (i) such failure shall
remain unremedied for 30 calendar days after the earlier of (1) the day on
which the President, the Chief Executive Officer, the Chief Financial
Officer or the Treasurer of the Company first obtains knowledge of such
failure or (2) the day on which notice of such failure is given to the
Company by the Agent or any Bank (the "Commencement Date") or (ii) the
Company or its Subsidiary, as the case may be, shall fail, before the
expiration of 15 calendar days after the Commencement Date, to begin, and
at all times thereafter to continue, to contest such nonconsensual Lien in
good faith by appropriate legal proceedings; or
(e) The Company shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement (other than such
failures addressed in Sections 8.1(c) and (d) above), and any such failure
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shall remain unremedied for 30 calendar days after notice thereof shall
have been given to the Company by the Agent or any Bank; or
(f) (i) Any Indebtedness of the Company or any of its
Subsidiaries aggregating more than $3,000,000 (other than Indebtedness
hereunder) becomes or is declared to be due and payable prior to the stated
maturity thereof as a result of any default or event of default occurring
with respect thereto, or (ii) any part of the principal of, the premium, if
any, or the interest on, or any other payment of money due under, any
Indebtedness of the Company or any of its Subsidiaries aggregating more
than $3,000,000 is not paid when due or within the period of grace, if any,
provided with respect thereto, or (iii) the Company or any of its
Subsidiaries fails to perform or observe any other covenant or agreement
contained in any document(s) evidencing or securing any Indebtedness
aggregating more than $3,000,000, or in any agreement(s) or instrument(s)
under which any such Indebtedness was issued or created, and such
nonperformance or nonconformity continues beyond the period of grace, if
any, provided with respect thereto, if the effect of such failure is to
cause, or permit the holder or holders of such Indebtedness (or a trustee
on behalf of such holder or holders) to cause, or permit any party to such
document to cause, any payment in respect of such Indebtedness aggregating
more than $3,000,000 to become due prior to their respective due dates,
including without limitation the occurrence of any event of default of the
Company or any of its Subsidiaries under any of the Existing Note
Agreements; or
(g) One or more judgments or orders for the payment of
money which, together with other such judgments or orders which are not
otherwise covered by insurance or reserves, exceed the aggregate amount of
$5,000,000, shall be rendered against the Company or any of its
Subsidiaries and (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment(s) or order(s) in such aggregate amount and
for a period of 20 consecutive days after commencement of such proceedings
(A) such judgment(s) or order(s) in such aggregate amount shall have
remained unsatisfied and (B) such proceedings shall have remained unstayed,
or (ii) for a period of 20 consecutive days, such judgment(s) or order(s)
in such aggregate amount shall have remained unsatisfied and a stay of
enforcement thereof, by reason of pending appeal or otherwise, shall not
have been in effect, or (iii) the total of such judgment(s) or order(s)
with respect to which at least one of the foregoing clauses (i) and (ii)
applies shall equal or exceed $5,000,000; or
(h) The occurrence of any "reportable event," as defined in
ERISA, which is finally determined after all applicable appeal periods have
expired to constitute grounds (i) for termination by the PBGC of any Plan
maintained by or on behalf of the Company or any trade or business (whether
or not incorporated) which together with the Company would be treated as a
single employer under Section 4001 of ERISA or (ii) for the appointment by
the appropriate United States District Court of a trustee to administer
such Plan and such reportable event is not corrected and such determination
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is not revoked within 30 days after notice thereof has been given to the
administrator of such Plan or to the Company or such trade or business, as
the case may be; or the institution of proceedings by the PBGC to
terminate any such Plan or to appoint a trustee to administer such Plan and
the failure of the Company to (i) appropriately, diligently and in good
faith successfully contest such proceedings within the applicable required
period therefor or (ii) to establish adequate financial reserves on its
books and records with respect thereto; or the appointment of a trustee by
the appropriate United States District Court to administer any such Plan;
or
(i) The Company or any of its Material Subsidiaries shall
generally not pay its debts as they become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute, or there shall
be instituted against the Company or any of its Material Subsidiaries, any
proceeding or case seeking to adjudicate it a bankrupt or insolvent or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief or protection of
debtors or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property, and, if such proceeding is instituted
against the Company or such Material Subsidiary and is being contested by
the Company or such Material Subsidiary, as the case may be, in good faith
by appropriate proceedings, such proceedings shall remain undismissed or
unstayed for a period of 60 days; or the Company or such Material
Subsidiary shall take any action (corporate or other) to authorize or
further any of the actions described above in this subsection.
8.2 Remedies. (a) Upon the occurrence and during the
continuance of any Event of Default, the Agent shall, upon being directed
to do so by the Majority Banks, by notice to the Company terminate the
Commitments or declare the outstanding principal of, and accrued interest
on, the Notes and all other amounts due under this Agreement to be
immediately due and payable, or both, whereupon the Commitments shall
terminate forthwith or all such amounts shall become immediately due and
payable, or both, as the case may be, provided that in the case of any
event or condition described in Section 8.1(i) with respect to the Company,
the Commitments shall automatically terminate forthwith and all such
amounts shall automatically become immediately due and payable without
notice; in each case without demand, presentment, protest, diligence,
notice of dishonor or other formality, all of which are hereby expressly
waived.
(b) Upon the occurrence and during the continuance of any
Event of Default, the Agent may, and upon being directed to do so by the
Majority Banks shall, in addition to the remedies provided in Section
8.2(a), enforce its rights and those of the Banks either by suit in equity,
or by action at law, or by other appropriate proceedings, whether for the
specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Agreement or in the Notes or in aid of the
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exercise of any power granted in this Agreement or the Notes, and may
enforce the payment of the Notes and any of its other rights available to
the Agent or the Banks at law or in equity.
(c) Upon the occurrence and during the continuance of any
Event of Default hereunder and, except for the occurrence of any Event or
Default set forth in Section 8.1(i), a declaration of acceleration pursuant
to Section 8.2(a), each Bank may at any time and from time to time, without
notice to the Company (any requirement for such notice being expressly
waived by the Company) set off and apply against any and all of the
obligations of the Company to the Banks and the Agent now or hereafter
existing under this Agreement any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the
account of the Company and any property of the Company from time to time in
possession of such Bank, irrespective of whether the Banks shall have made
any demand hereunder and although such obligations may be contingent and
unmatured. The rights of the Banks under this Section 8.2(c) are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Banks may have.
ARTICLE IX. THE AGENT AND THE BANKS
9.1 Appointment of Agent. NBD Bank, N.A. is hereby appointed
Agent for the Banks and accepts such appointment and agrees to act as such
upon the conditions herein set forth. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement, and
shall not, by reason of this Agreement, have a fiduciary relationship with
any Bank.
9.2 Scope of Agency. Neither the Agent nor any of its
directors, officers or agents shall be liable for any action taken or
omitted by any of them hereunder or under the Notes, except for its, his or
her own gross negligence or willful misconduct and except as provided in
Section 9.3; or be responsible for any recitals, warranties or
representations herein or in the Notes or for the execution or validity of
this Agreement or the Notes; or be required to make any inquiry concerning
the performance by the Company of any of its obligations under this
Agreement or the Notes. In the absence of gross negligence or willful
misconduct, the Agent shall be entitled to rely, without liability
therefor, upon any certificate or other document or other communication
believed by it to be genuine and correct and to have been signed or sent by
the proper officer or person and upon the advice of legal counsel (which
may be legal counsel for the Company), independent public accountants and
other experts concerning all matters pertaining to the agency. The Company
agrees, upon demand, to pay or to reimburse the Agent for the payment of
all reasonable compensation of such counsel, accountants and other experts
and all other reasonable out-of-pocket expenses of the Agent. To the
extent that the Company shall fail to pay or to reimburse the Agent for the
payment of the same, each Bank shall reimburse the Agent pro rata in
accordance with the Commitments, and any such amount so paid shall be
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immediately due and payable to the Banks by the Company. The Banks agree
to indemnify the Agent ratably in accordance with the Commitments for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of this
Agreement or the transactions contemplated hereby, provided that no Bank
shall be liable for any of the foregoing to the extent they arise from the
Agent's gross negligence or willful misconduct.
9.3 Duties of Agent. In carrying out the agency, the Agent
shall have only the duties and responsibilities expressly set forth in this
Agreement and in performing such duties and responsibilities the Agent
shall exercise the same degree of care as it would if the Loans were
entirely for its own account, but the Agent shall not be deemed to have
knowledge of the occurrence of any Event of Default, or any event or
condition which with notice or lapse of time, or both, could become such an
Event of Default and need not take or continue any action with respect
thereto or toward the enforcement of this Agreement or the Notes, nor
prosecute or defend any suit with respect to this Agreement or the Notes,
unless directed to do so by the Majority Banks and unless indemnified to
its satisfaction against any loss, cost, liability or expense which it
might incur as a consequence of taking such action. The Agent may employ
agents and attorneys and shall not be answerable for the negligence or
misconduct of any such agents or attorneys selected by it with reasonable
care. The Agent in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent hereunder. Each Bank agrees that it
has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its Subsidiaries in connection
with its decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement.
9.4 Resignation of Agent. The Agent may resign as such at any
time upon 30 days' prior written notice to the Company and the Banks. In
the event of any such resignation, the Majority Banks shall, by an
instrument in writing delivered to the Company and the Agent, appoint a
successor which shall be an incorporated bank or trust company. If a
successor is not so appointed or does not accept such appointment at least
5 days before the Agent's resignation becomes effective, the Agent may
appoint a temporary successor to act until such appointment by the Majority
Banks is made and accepted. Any successor to the Agent shall execute and
deliver to the Company and the Banks an instrument accepting such
appointment and thereupon such successor Agent, without further act, deed,
conveyance or transfer shall become vested with all of the properties,
rights, interests, powers, authorities and obligations of its predecessor
hereunder with like effect as if originally named as Agent hereunder. Upon
request of such successor Agent, the Company and the Agent ceasing to act
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shall execute and deliver such instruments of conveyance, assignment and
further assurance and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in such successor Agent
all such properties, rights, interests, powers, authorities and
obligations.
9.5 Pro Rata Sharing by Banks. Each Bank agrees with every
other Bank that, in the event that it shall receive and retain any payment
on account of any Note in excess of its pro rata portion, according to the
principal amount of the Notes then outstanding, of the payment due all of
the Banks, whether such payment be voluntary, involuntary or by operation
of law, by application of set-off of any indebtedness or otherwise, then
such Bank shall promptly purchase from the other Banks, without recourse,
for cash and at face value, ratably in accordance with the principal amount
of the Notes then outstanding, interests in the Notes of the other Banks in
such an amount that each Bank shall have received payment pro rata on
account of the Notes in accordance with the unpaid principal amount thereof
then owing to it; provided, that if any such purchase be made by any Bank
and if any such excess payment relating thereto or any part thereof is
thereafter recovered from such Bank, appropriate adjustment in the related
purchase from the other Banks shall be made by rescission and restoration
of the purchase price as to the portion of such excess payment so
recovered. It is further agreed that, to the extent there is then owing by
the Company to any Bank Indebtedness other than that evidenced by the
Notes, to which such Bank may apply any involuntary payments of
indebtedness by the Company, including those resulting from exercise of
rights of set-off or similar rights, such Bank shall apply all such
involuntary payments first to obligations of the Company to the Banks
hereunder and under the Notes and then to such other Indebtedness owed to
such Bank by the Company.
ARTICLE X. MISCELLANEOUS
10.1 Amendments; Etc. This Agreement and any term or provision
hereof may be amended, waived or terminated by an instrument in writing
executed by the Company and the Majority Banks, provided that, except by an
instrument in writing executed by the Company and all of the Banks, no such
amendment, waiver or termination shall:
(a) Authorize or permit the extension of the time or times
of payment or prepayment of the principal of, or interest on, the Notes or
any of them, including without limitation amending the Termination Date, or
the increase or reduction in principal amount thereof or the reduction in
the rate of interest thereon, or the rate of any fees or compensating
balances or any other modification in the terms of the payment or
prepayment of the principal of or interest on the Notes; or
(b) Amend or change the respective amounts of the Banks'
Commitments set forth in Section 2.1, or reduce the percentage of the
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aggregate principal amount of the Notes required by the provisions of this
Section for the taking of any action under this Section 10.1; or
(c) Permit the termination of the obligations of any Bank
hereunder, provided that upon any such termination, (i) the Company shall
have the option to select a bank to replace such terminating Bank and to
assume the rights and obligations of such Bank hereunder, provided that
such replacement bank is acceptable to each non-terminating Bank, and (ii)
in the event that such terminating Bank is not so replaced, each
non-terminating Bank shall be entitled, but shall not be obligated, to
increase its Commitment by an amount equal to that amount of the
terminating Bank's Commitment bearing the same ratio to such terminating
Bank's Commitment as such non-terminating Bank's Commitment bears to the
aggregate Commitment of all non-terminating Banks. In the event that any
non-terminating Bank shall not elect to increase its Commitment as
specified in clause (ii), each Bank making such election shall be entitled,
but shall not be obligated, to further increase its Commitment by an amount
equal to that amount of each non-electing Bank's Commitment bearing the
same ratio to such non-electing Bank's Commitment as such electing Bank's
Commitment bears to the aggregate Commitment of all electing Banks. The
procedure set forth in the preceding sentence shall be followed until the
entire Commitment of the terminating Bank is allocated or until no
non-terminating Bank shall desire to further increase its Commitment.
Any such amendment, waiver or termination shall be effective only
in the specific instance and for the specific purpose for which given.
10.2 Notices. (a) Except as otherwise provided in Section
10.2(c), all notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered or sent to the Company at 9341
Courtland Drive, Rockford, Michigan 49351, Attention: Treasurer; and to
the Agent at 611 Woodward Avenue, Detroit, Michigan 48226, Attention:
Michigan Banking Division; and to the Banks at the respective addresses for
notices set forth on the signature pages hereof, or to such other address
as may be designated by the Company, the Agent or any Bank by notice to the
other parties hereto. All notices shall be deemed to have been given at
the time of actual delivery thereof to such address or, if sent by the
Agent or any Bank to the Company by certified or registered mail, postage
prepaid, to such address, on the date of mailing.
(b) Notices by the Company with respect to terminations or
reductions of the Commitments pursuant to Section 2.2, requests for Loans
pursuant to Section 3.1, requests for continuations or conversions of Loans
pursuant to Section 3.5 and notices of prepayment pursuant to Section 4.3
shall be irrevocable and binding on the Company.
(c) Any notice to be given by the Company to the Banks
pursuant to Sections 3.1, 3.5 or 4.3 and any notice to be given by the
Banks hereunder, may be given by telephone or by facsimile transmission and
must be immediately confirmed in writing in the manner provided in Section
10.2(a). Any such notice given by telephone and facsimile transmission
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shall be deemed effective upon receipt thereof by the party to whom such
notice is given.
10.3 Conduct No Waiver; Remedies Cumulative. No course of
dealing on the part of the Agent or the Banks, nor any delay or failure on
the part of the Agent or the Banks in exercising any right, power or
privilege hereunder shall operate as a waiver of such right or privilege or
otherwise prejudice the Agent's or any Bank's rights and remedies
hereunder; nor shall any single or partial exercise thereof preclude any
further exercise thereof or the exercise of any other right, power or
privilege. No right or remedy conferred upon or reserved to the Banks
under this Agreement is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in addition to
every other right or remedy given hereunder or now or hereafter existing
under any applicable law. Every right and remedy given by this Agreement
or by applicable law to the Agent or the Banks may be exercised from time
to time and as often as may be deemed expedient by them.
10.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company made
herein or in any certificate or other document delivered pursuant hereto
shall be deemed to be material and to have been relied upon by each Bank,
notwithstanding any investigation heretofore or hereafter made by any Bank
or on any Bank's behalf, and those covenants and agreements of the Company
set forth in Article V and in Section 10.5 shall survive the repayment in
full of the Loans and the termination of the Commitments.
10.5 Expenses. The Company agrees to pay and save the Agent and
the Banks harmless from liability for the payment of (a) the reasonable
fees and expenses of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel
for the Agent, in connection with the preparation, execution and delivery
of this Agreement and the Notes and the consummation of the transactions
contemplated hereby, and in connection with any amendments, waivers or
consents in connection therewith, and (b) all reasonable costs and expenses
of the Agent and the Banks (including reasonable fees and expenses of
counsel) in connection with any Event of Default or the enforcement of this
Agreement or the Notes.
10.6 Successors and Assigns. (a) This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that the Company may not, without the
prior consent of the Banks, assign its rights or obligations hereunder or
under the Notes and the Banks shall not be obligated to make any Loan
hereunder to any entity other than the Company.
(b) Any Bank may sell a participation interest to any
financial institution or institutions, and such financial institution or
institutions may further sell, a participation interest (undivided or
divided) in, the Loans and such Bank's rights and benefits under this
Agreement and the Notes, and to the extent of that participation, such
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participant or participants shall have no rights or benefits against the
Company hereunder, provided, however, that (i) such Bank's obligations
under this Agreement shall remain unmodified and fully effective and
enforceable against such Bank, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of its Note for all
purposes of this Agreement, (iv) the Company, the Agent and the other Banks
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement, and (v) such
Bank shall not grant to its participant any rights to consent or withhold
consent to any action taken by such Bank or the Agent under this Agreement
other than action requiring the consent of all of the Banks hereunder.
(c) Each Bank may, with the prior consent of the Company
and the Agent (and not otherwise), assign to one or more banks or other
entities all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, the Loans owing to it and the Note or Notes held by it);
provided, however, that (i) each such assignment shall be of a uniform, and
not a varying, percentage of all rights and obligations, (ii) except in the
case of an assignment of all of a Bank's rights and obligations under this
Agreement, (A) the amount of the Commitment of the assigning Bank being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than $3,000,000, and in integral multiples of $1,000,000
thereafter, or such lesser amount as the Company and the Agent may consent
to and (B) after giving effect to each such assignment, the amount of the
Commitment of the assigning Bank when the Commitments are at their lower
amounts shall in no event be less than $3,000,000, and (iii) the parties to
each such assignment shall execute and deliver to the Agent, for its
acceptance and recording, an Assignment and Acceptance in the form of
Exhibit D hereto (an "Assignment and Acceptance"), together with any Note
or Notes subject to such assignment and a processing fee of $5,000. Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and (y) the Bank assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Bank's
rights and obligations under this Agreement, such Bank shall cease to be a
party hereto).
(d) The Agent shall at all times maintain a minimum
Commitment of $3,000,000, unless such Commitment is terminated pursuant to
Section 2.2 or 8.2.
10.7 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
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same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart, and this Agreement shall enter into force and
effect only if counterparts executed by the Company and by each Bank named
in Section 2.1(a) are returned to and executed by the Agent. Upon such
execution by the Agent, this Agreement shall be deemed effective as of the
Effective Date.
10.8 Governing Law. This Agreement is a contract made under, and
the rights and obligations of the parties hereunder shall be governed by
and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be performed entirely within such
State.
10.9 Headings. The headings of the various subdivisions hereof
are for the convenience of reference only and shall in no way modify any of
the terms or provisions hereof.
10.10 Construction of Certain Provisions. All computations
required hereunder and all financial terms used herein shall be made or
construed in accordance with generally accepted accounting principles
unless such principles are inconsistent with the express requirements of
this Agreement. If any provision of this Agreement refers to any action to
be taken by any person, or which such person is prohibited from taking,
such provision shall be applicable whether such action is taken directly or
indirectly by such person, whether or not expressly specified in such
provision.
10.11 Integration and Severability. This Agreement embodies the
entire agreement and understanding among the Company, the Agent and the
Banks, and supersedes all prior agreements and understandings relating to
the subject matter hereof. In case any one or more of the obligations of
the Company under this Agreement or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Company shall not in any
way be affected or impaired thereby, and such invalidity, illegality or
enforceability in one jurisdiction shall not affect the validity, legality
or enforceability of the obligations of the Company under this Agreement or
the Notes in any other jurisdiction.
10.12 Interest Rate Limitation. Notwithstanding any provisions
of this Agreement or the Notes, in no event shall the amount of interest
paid or agreed to be paid by the Company exceed an amount computed at the
highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement or
the Notes at the time performance of such provision shall be due, shall
involve exceeding the interest rate limitation validly prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law,
and if for any reason whatsoever the Banks shall ever receive as interest
an amount which would be deemed unlawful under such applicable law, such
interest shall be automatically applied to the payment of principal of the
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Loans outstanding hereunder (whether or not then due and payable) and not
to the payment of interest, or shall be refunded to the Company if such
principal has been paid in full.
10.13 Independence of Covenants. All covenants contained herein
shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise within the limitation of,
another covenant shall not avoid the occurrence of an Event of Default if
such action is taken or condition exits.
10.14 Waiver of Jury Trial. The Banks and the Agent and the
Company, after consulting or having had the opportunity to consult with
counsel, knowingly, voluntarily and intentionally waive any right any of
them may have to a trial by jury in any litigation based upon or arising
out of this Agreement or any related instrument or agreement or any of the
transactions contemplated by this Agreement or any course of conduct,
dealing, statement (whether oral or written) or actions of any of them.
Neither any Bank, the Agent, nor the Company shall seek to consolidate, by
counterclaim or otherwise, any such action in which a jury trial has been
waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified in
any respect or relinquished by any party thereto except by a written
instrument executed by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the 13th day of October, 1994,
which shall be the Effective Date of this Agreement, notwithstanding the
day and year first above written.
Address for Notices: WOLVERINE WORLD WIDE, INC.
9341 Courtland Drive
Rockford, Michigan 49351 By: /s/ Thomas P. Mundt
Attention: Treasurer
Telephone: (616) 866-5500 Its: Vice President of Strategic
Telecopy: (616) 866-0257 Planning and Treasurer
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Address for Notices: NBD BANK, N.A., individually
as a Bank and as Agent
611 Woodward Avenue
Detroit, Michigan 48226 By: /s/ William Goodhue
Attention: Michigan Banking Division William Goodhue
Telephone: (313) 225-2227 Its: Vice President
Telecopy: (313) 225-1671
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Address for Notices: HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690 By: /s/ Peter Krawchuk
Attention: Peter Krawchuk Peter Krawchuk
Telephone: (312) 461-2783 Its: Vice President
Telecopy: (312) 461-2591
Address for Notices: COMERICA BANK
P.O. Box 75000
Detroit, Michigan 48275-3269 By: /s/ Robert M. Porterfield
Attention: Robert M. Porterfield Robert M. Porterfield
Telephone: (313) 222-7802 Its: Vice President
Telecopy: (313) 222-9516
Address for Notices: OLD KENT BANK AND TRUST COMPANY
Corporate Banking Department
1 Vandenberg Center By: /s/ Calvin Hekman
Grand Rapids, Michigan 49503 Calvin Hekman
Attention: Calvin Hekman Its: Vice President
Telephone: (616) 771-5265
Telecopy: (616) 771-4641
-39-
EXHIBIT A
REVOLVING CREDIT NOTE
$___________________ ______________, 1994
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, WOLVERINE WORLD WIDE, INC.,
a Delaware corporation (the "Company"), hereby promises to pay to the order
of ____________________, a _______________ (the "Bank"), at the principal
banking office of NBD Bank, N.A., the Agent, at 611 Woodward Avenue,
Detroit, Michigan, in lawful money of the United States of America and in
immediately available funds, the principal sum of __________ Dollars
($__________) or such lesser aggregate principal sum outstanding of loans
made by the Bank to the Company under the Credit Agreement referred to
below, on the Termination Date; and to pay interest on the unpaid principal
balance hereof from time to time outstanding, in like money and funds, for
the period from the date hereof until such loans shall be paid in full, at
the rates per annum and on the dates provided in the Credit Agreement
referred to below.
The Bank is hereby authorized by the Company to note on the
schedule attached to this Note, or on its books and records, the date,
amount and type of each loan made by the Bank under the Credit Agreement,
the interest rate and duration of the related Interest Period (if
applicable), the amount of each payment or prepayment of principal thereon
and the other information provided for on such schedule, which schedule or
such books and records, as the case may be, shall constitute prima facie
evidence of the information so noted, provided that any failure by the Bank
to make any such notation shall not relieve the Company of its obligation
to repay the outstanding principal amount of this Note, all accrued
interest hereon and any amount payable with respect hereto in accordance
with the terms of this Note and the Credit Agreement.
The Company and each endorser or guarantor hereof waives demand,
presentment, protest, diligence, notice of dishonor and any other formality
in connection with this Note. Should the indebtedness evidenced by this
Note or any part thereof be collected in any proceeding or be placed in the
hands of attorneys for collection, the Company agrees to pay, in addition
to the principal and interest due and payable hereon, all costs of
collecting this Note, including attorneys' fees and expenses.
This Note evidences one or more loans made by the Bank under an
Amended and Restated Credit Agreement, dated on or about the date hereof
(as amended, supplemented, extended or otherwise modified from time to
time, the "Credit Agreement"), by and among the Company, the banks
(including the Bank) named therein and NBD Bank, N.A., as agent, to which
reference is hereby made for a statement of the circumstances under which
this Note is subject to prepayment and under which its due date may be
accelerated. Capitalized terms used but not defined in this Note shall
have the respective meanings assigned to them in the Credit Agreement.
WOLVERINE WORLD WIDE, INC.
By: _____________________________________
Its: ________________________________
-2-
Schedule to Revolving Credit Note, dated
__________________, 1994 made by Wolverine World Wide, Inc.
(in favor of ______________________)
<TABLE>
<CAPTION>
Principal
Date Amount
Loan Principal Type Interest Paid, Pre- Principal
Made or Amount of of Interest Period (if paid or Balance Notation
Converted Loan Loan Rate applicable) Converted Outstanding Made by
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-3-
EXHIBIT B
REQUEST FOR LOAN
[Date]
NBD Bank, N.A.
Harris Trust and Savings Bank
Comerica Bank
Old Kent Bank and Trust Company
The undersigned (the "Company") hereby requests a Loan pursuant to
Section 3.1 of the Amended and Restated Credit Agreement, dated as of
October __, 1994(as amended, supplemented, extended or otherwise modified
from time, the "Credit Agreement"), among the Company, each of you, and NBD
Bank, N.A., as agent, in the amount of $_____________, to be made on
_______________, 19__, and to be evidenced by the Company's Note. After
giving effect to such Loan, the aggregate outstanding principal amount of
the Loans on the date thereof will be $__________. Capitalized terms used
but not defined herein shall have the respective meanings assigned to them
in the Credit Agreement.
Such Loan shall be a ____________________[insert either Eurodollar
Rate Loan or Floating Rate Loan] and the initial Interest Period, if such
requested Loan is a Eurodollar Rate Loan, shall be ________________ [insert
permitted Interest Period].
In support of this request, the Company hereby certifies that:
1. The representations and warranties contained in Article VI of the
Credit Agreement are true and correct on and as of the date hereof, and
will be true and correct on the date of the making of such Loan, as if such
representations and warranties were made on and as of such dates.
2. No Event of Default, and no event or condition which might become
such an Event of Default with notice or with lapse of time, or both, has
occurred and is continuing or will exist on the date of the making of such
Loan.
Acceptance of the proceeds of such Loan by the Company shall be deemed to
be a further representation that the representations made herein are true
and correct at the time such proceeds are disbursed.
WOLVERINE WORLD WIDE, INC.
By:___________________________
Its:_______________________
-2-
EXHIBIT C
REQUEST FOR CONTINUATION OR CONVERSION OF LOAN
[Date]
NBD Bank, N.A.
Harris Trust and Savings Bank
Comerica Bank
Old Kent Bank and Trust Company
The undersigned (the "Company") hereby requests that $_______ of
the principal amount of the Loan originally made on _______________, 19__,
which Loan is currently a ________________________ [insert type of Loan
based on type of interest rate applicable], be continued as or converted
to, as the case may be, a _______________________ [insert type of Loan
requested based on type of interest rate desired] on _______________, 19__.
If such Loan is requested to be converted to a Eurodollar Rate Loan, the
Company hereby elects an Interest Period for such Loan of
______________________ [insert permitted Interest Period]. Capitalized
terms used but not defined herein shall have the respective meanings
assigned to them in the Amended and Restated Credit Agreement, dated as of
October ___, 1994 (as amended, supplemented, extended or otherwise modified
from time to time, the "Credit Agreement") among the Company, each of you
and NBD Bank, N.A., as agent.
In support of this request, the Company hereby certifies that:
1. The representations and warranties contained in Article VI
of the Credit Agreement are true and correct on and as of the date hereof,
and will be true and correct on the date of the continuation or conversion
of such Loan, as if such representations and warranties were made on and as
of such dates.
2. No Event of Default, and no event or condition which might
become such an Event of Default with notice or with lapse of time, or both,
has occurred and is continuing or will exist on the date of the
continuation or conversion of such Loan.
Acceptance of the continuation or conversion of such Loan by the Company
shall be deemed to be a further representation that the representations
made herein are true and correct at the time such proceeds are disbursed.
WOLVERINE WORLD WIDE, INC.
By: ________________________________
Its:___________________________
-2-
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit Agreement,
dated as of October ___, 1994 (the "Credit Agreement"), among WOLVERINE
WORLD WIDE, INC., a Delaware corporation (the "Borrower"), the banks named
therein (the "Banks") and NBD BANK, N.A., as agent for the Banks (the
"Agent"). Terms defined in the Credit Agreement are used herein with the
same meaning.
1. The "Assignor" and the "Assignee" referred to on Schedule 1
agree as follows:
2. The Assignor hereby sells and assigns (without recourse) to
the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under
the Credit Agreement as of the date hereof equal to the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement. After giving effect to such sale and assignment, the
Assignee's Commitments and the amounts of the Loans owing to the Assignee
will be as set forth on Schedule 1.
3. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes
no representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under the Credit Agreement or any
other instrument or document furnished pursuant thereto; and (iv) attaches
the Note or Notes held by the Assignor and requests that the Agent exchange
such Note or Notes for a new Note or Notes payable to the order of the
Assignee in an amount equal to the Commitments assumed by the Assignee
pursuant hereto and the Assignor in an amount equal to the Commitments
retained by the Assignor under the Credit Agreement, respectively, as
specified on Schedule 1.
4. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred
to therein and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank 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 the Credit Agreement; (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement as are delegated to the Agent by the
terms thereof, together with such powers and discretion as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with
their terms of all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Bank; and (v) if the
Assignee is organized under the laws of a jurisdiction outside the United
States, attaches the forms prescribed by the Internal Revenue Service of
the United States certifying as to the Assignee's status for purposes of
determining exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Credit Agreement and the
Notes or such other documents as are necessary to indicate that all such
payments are subject to such taxes at a rate reduced by an applicable tax
treaty.
5. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date")
shall be the date of acceptance hereof by the Agent, unless otherwise
specified on Schedule 1.
6. Upon such acceptance by the Agent, as of the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement. All
representations and agreements by the Assignor and the Assignee herein may
be relied upon by the Agent and the Banks under the Credit Agreement.
7. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the
Credit Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments under the
Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
8. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Michigan.
9. This Assignment and Acceptance may be executed in any number
of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery
-2-
of an executed counterpart of Schedule 1 to this Assignment and Acceptance
by telecopier shall be effective as delivery of a manually executed
counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date described in Section 4 above.
[ASSIGNOR]
By: ____________________________________
Its: _______________________________
[ASSIGNEE]
________________________________________
By: ____________________________________
Its: _______________________________
Accepted and Agreed:
WOLVERINE WORLD WIDE, INC.
By: __________________________
Its: ______________________
Dated: _______________________
-3-
NBD BANK, N.A. as Agent
By: __________________________
Its: ______________________
Dated: _______________________
-4-
EXHIBIT 4(f)
SECOND AMENDMENT TO RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO RIGHTS AGREEMENT (the "Second
Amendment") is made as of October 28, 1994, by and between WOLVERINE WORLD
WIDE, INC., a Delaware corporation (the "Company") and NBD BANK, N.A., a
national banking corporation (the "Rights Agent"). This Second Amendment
amends the Rights Agreement dated as of May 7, 1987, as amended and
restated as of October 24, 1990, between the Company and the Rights Agent
(the "Rights Agreement"). Capitalized terms used but not defined in this
Second Amendment have the meanings ascribed to them in the Rights
Agreement.
RECITALS
The Board of Directors of the Company wants to appoint Harris
Trust and Savings Bank of Chicago, Illinois ("Harris"), as successor Rights
Agent and transfer to Harris the duties of the Rights Agent under the
Rights Agreement. To facilitate the transfer of the duties of the Rights
Agent to Harris, the Board of Directors of the Company determined to amend
Section 21 of the Rights Agreement to expand the eligibility requirements
for the rights agent to include Illinois trust institutions.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Amendment of Section 21 of Rights Agreement. Section 21 of the
Rights Agreement is hereby amended in its entirety to read as follows:
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its
duties under this Agreement upon thirty (30) days' notice in
writing mailed to the Company, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-
class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the
Rights Agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by
the Company), then any registered holder of any Rights
-1-
Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall
be a corporation organized and doing business under the laws of
the United States or of the State of New York, Michigan or
Illinois (or of any other state of the United States so long as
such corporation is authorized to do business as a banking
institution in the State of New York, Michigan or Illinois), in
good standing, having a principal office in the State of New
York, Michigan or Illinois, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision
or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SIGNED as of the date first written above.
WOLVERINE WORLD WIDE, INC.
By /S/ Geoffrey B. Bloom
Geoffrey B. Bloom
President and Chief Executive Officer
NBD BANK, N.A.
By /S/ Donald E. Kleckner
Name: Donald E. Kleckner
Title: Second Vice President
-2-
EXHIBIT 10(j)
SCHEDULE PERTAINING TO EXHIBIT 10(j)
A. The Company has entered into Deferred Compensation Agreements
(with disability benefits) with the named executive officers and other
executive officers listed below. Each such agreement is identical to the
blank agreement which is incorporated by reference from Exhibit 10(i)
of the Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993, except for the name of the officer and the dates and
amounts indicated. The numbers over the columns below correspond to the
numbers in the blanks in the blank agreement incorporated by reference.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6)
Date of Officer Retire. Death Partici- Disa.
Agmt. * Name Benefit Benefit pant Since Benefit
<S> <C> <C> <C> <C> <C>
10-02-90 George A. Andrews $40,000 $40,000 03-01-77 $20,000
02-01-92 Steve Duffy 20,000 20,000 09-01-90 6,000
04-27-93 Stephen L. Gulis, Jr. 20,000 20,000 07-22-85 -0-
11-09-93 Thomas P. Mundt 15,000 15,000 11-09-93 10,000
04-27-93 Timothy O'Donovan 55,000 55,000 03-01-76 27,100
11-01-93 Robert Sedrowski 20,000 20,000 08-20-92 9,000
</TABLE>
B. The Company has also entered into a Deferred Compensation
Agreement with Messrs. Thomas D. Gleason and Geoffrey B. Bloom which
differs in some respects from those listed above. These agreements are
incorporated by reference from Exhibit 10(i) of the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993.
_________________________
* Dates shown are the dates of the Agreement or latest Amendment.
EXHIBIT 10(k)
SCHEDULE PERTAINING TO EXHIBIT 10(k)
A. The Company has entered into a Deferred Compensation Agreement
(without disability benefits) with the executive officer listed below. The
agreement is identical to the agreement which is incorporated by reference
from Exhibit 10(j) of the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993, except for the name of the executive
officer and the date and amounts indicated. The numbers over the columns
below correspond to the numbers in the blanks in the agreement incorporated
by reference.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Date of Officer Retire. Death Partici-
Agmt. * Name Benefit Benefit pant Since
<S> <C> <C> <C> <C>
10-01-91 L. James Lovejoy 6,000 6,000 10-01-91
</TABLE>
B. The Company has also entered into a Deferred Compensation
Agreement with Mr. Charles F. Morgo dated April 21, 1994, which differs
from the one listed above and is incorporated by reference from
Exhibit 10(x) of the Company's Quarterly Report on Form 10-Q for the period
ended June 18, 1994.
______________________________
* Date shown is the date of the Agreement or latest Amendment.
EXHIBIT 10(o)
The Company has entered into Termination of Employment and Change of
Control Agreements with Steven M. Duffy, Stephen L. Gulis, Jr., L. James
Lovejoy, Charles F. Morgo, Thomas P. Mundt, Timothy J. O'Donovan, and
Robert J. Sedrowski which are identical to the form of agreement which is
incorporated by reference from Exhibit 10(m) of the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993.
EXHIBIT 10(p)
SCHEDULE PERTAINING TO EXHIBIT 10(p)
Each of the officers and directors of the Company listed below
have entered into an Indemnification Agreement identical to the one which
is incorporated by reference from Exhibit 10(n) of the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993. Each is
dated as of February 20, 1987, except where indicated otherwise.
Geoffrey B. Bloom (May 7, 1987)
Daniel T. Carroll
Steven M. Duffy (April 27, 1993)
Thomas D. Gleason
Stephen L. Gulis, Jr. (April 27, 1993)
David T. Kollat (May 7, 1992)
Blake W. Krueger (May 3, 1993)
L. James Lovejoy (October 2, 1991)
Phillip D. Matthews
David P. Mehney
Charles F. Morgo
Thomas P. Mundt (November 9, 1993)
Stuart J. Northrop (August 23, 1990)
Timothy J. O'Donovan
Joseph A. Parini (May 7, 1987)
Joan Parker
Robert J. Sedrowski (November 1, 1993)
EXHIBIT 10(t)
Wolverine World Wide, Inc. - Rockford, Michigan 49351
616-866-5500 Fax 616-866-0257
Geoffrey B. Bloom
President and Chief Executive Officer
May 2, 1994
Mr. George A. Andrews
8655 Wolven
Rockford, Michigan 49341
Dear George:
In order to confirm our earlier offer to you regarding your acceptance of
your new position as Senior Vice President of Finance and Administration
for the Global Operations Group effective February 28, 1994, I believe it
is helpful to set forth our agreement and list these terms in writing. We
appreciate your past contributions at Wolverine and look forward to working
closely with you in your new position.
Wolverine will provide you the following compensation package in connection
with your new position.
- - - Position. Senior Vice President of Finance and Administration
for the Global Operations Group reporting to Rick DeBlasio. You
have previously received a copy of this position description.
- - - Salary. Annual salary of $130,000. You will be eligible for
annual performance reviews based upon your performance in this
position.
- - - Car Allowance. You would retain your present car allowance of
$5,902 per year with this figure being frozen until it was in
line with allowances for similar positions.
- - - Stock Awards. You would be eligible for annual stock awards
beginning in 1994 subject to Compensation Committee approval of
both Restricted Stock Grants and Incentive Stock Options. These
awards, when granted, would be similar to those offered other
participants in the current "B" category. Last year these awards
averaged 500 Restricted Shares and 2,000 ISOs.
- - - Bonus.
a. Annual Plan. You will be a participant in the 1994 Annual
Executive Plan at a 20% target payout.
Mr. George A. Andrews
May 2, 1994
Page 2
b. Three Year Plans. You will be a participant in the 1994-
1996 Three Year Plan at a target payout of 20% of your
annual average compensation earned during those years. You
will retain your participation in both the 1992-1994 Plan
and the 1993-1995 Plan at a 30% target payout with your 1994
and 1995 compensation level being calculated at $171,000
annually for purposes of these two Three Year Plans.
- - - Deferred Compensation. You will retain your current benefit in
your Deferred Compensation Agreement. If you are employed by the
company until age 58 we will waive any early draw reductions,
permitting you to begin to draw full benefit payments at the
later of age 58 or your termination from the company.
- - - Vacation. We will pay you the difference between your current
salary and your new salary for the eight weeks' vacation time you
are currently owed. You will earn future years vacation at your
future salary.
- - - Executive Life and Disability. You will continue these benefits
under similar terms to others in similar positions.
- - - Pension. You will be eligible for normal pension plan benefits
due you from our qualified "Pension Plan" according to its terms
and provisions. Should you leave the company, for whatever
reason other than for cause termination by the company in 1994,
the company will provide, in addition to the above benefits, the
difference between the Pension Plan calculation and the benefit
that would have been calculated, based on your same years of
service, had your 1994 compensation been comprised of your former
$171,000 salary, in addition to your normally included current
car allowance, and your 1993 annual bonus payment payable in
March, 1994. Should you leave the company, for whatever reason,
other than termination for cause, in any time in 1995 through
1997, the company will provide, in addition to your normally
calculated pension benefit, the difference between the normally
calculated pension benefit and the greater of the (i) benefit
calculated, based on your then years of service, on your eligible
compensation as defined in the then current Pension Plan, or (ii)
$200,000.
- - - Termination/Severance. You understand and agree that the company
may terminate you for any reason, with or without cause, at any
time. To the extent that your employment is unilaterally
terminated by the company without cause prior to the end of
-2-
Mr. George A. Andrews
May 2, 1994
Page 3
fiscal 1996, you will be entitled to receive, in exchange and in
consideration for the execution and delivery at that time of a
release in form satisfactory to the company, the payments and
benefits set forth below:
- Salary/Car Allowance Continuation.
(a) Should your termination, as described above, occur between
January 1, 1994 and December 31, 1994, the company would pay
you an annual salary of $171,000 and car allowance of $5,902
for a period not to exceed the lesser of 24 months from the
termination date or until you obtained a new position.
(b) Should your termination, as described above, occur on or
after January 1, 1995 and on or before December 31, 1996,
the company would pay you an annual salary and car allowance
equal to the average annual salary and car allowance earned
from January 1, 1993 to date of termination. This
compensation level would be paid to you for the lesser of
the term shown below or until you obtain a new position.
<TABLE>
<CAPTION>
<S> <C> <C>
Date of Termination January, 1995 24 months
Date of Termination February, 1995 23 months
Date of Termination March, 1995 22 months
Date of Termination April, 1995 21 months
Date of Termination May, 1995 20 months
Date of Termination June, 1995 19 months
Date of Termination July, 1995 18 months
Date of Termination August, 1995 17 months
Date of Termination September, 1995 16 months
Date of Termination October, 1995 15 months
Date of Termination November, 1995 14 months
Date of Termination December, 1995 13 months
Date of Termination January, 1996 -
December, 1996 12 months
</TABLE>
(c) In the event you are terminated, as described above, on or
after January 1, 1997, the company will consider an offer of
pay in lieu of notice, if any, in its sole discretion based
on its review of the facts and circumstances.
- - - Stock Awards. You would receive full vesting on all unvested
restricted stock grants, incentive stock options and non-
qualified stock options that have previously been granted to you.
-3-
Mr. George A. Andrews
May 2, 1994
Page 4
- - - Bonus. You are currently due an annual bonus payment from the
1993 plan which will be paid to you in March, 1994. In addition,
you will be eligible to receive a pro rata portion of a payout,
if any, from all existing Three Year Plans of which you had been
elected a participant.
- - - Deferred Compensation. Should your employment be unilaterally
terminated by the Company without cause as described above:
(a) Before August 20, 1995, the vested benefit referenced in
Section 2 of your Deferred Compensation Agreement shall be
$32,200 for 15 years beginning at age 58.
(b) On or after August 20, 1995, and on or before August 19,
1996, the vested benefit referenced in Section 2 of your
Deferred Compensation Agreement shall be $34,800 for 15
years beginning at age 58.
(c) On or after August 20, 1996, and on or before August 19,
1997, the vested benefit referenced in Section 2 of your
Deferred Compensation Agreement shall be $37,400 for 15
years beginning at age 58.
An earlier section of this agreement addresses this benefit for
termination after your age 58 (August 20, 1994). All other
provisions of your Deferred Compensation Agreement remain
unchanged.
- - - Pension Benefits. You would receive all pension benefits that
would be currently owed you under the pension plan and the terms
of this agreement.
- - - Health and Dental Insurance. The company would subsidize the
first twelve months of COBRA eligibility for you and your then
enrolled dependents, subject to normal payroll deductions.
- - - Vacation. You would be paid all unused eligible vacation that is
owed to you on the termination date.
- - - Other Benefits. All other benefits would be canceled as of your
termination date.
RELEASE
Because this compensation package is substantially more generous to
that normally provided for this position, in consideration for such
sums you hereby release, waive and forever discharge Wolverine World
Wide, Inc., its officers, directors, agents, representatives,
-4-
Mr. George A. Andrews
May 2, 1994
Page 5
affiliates and employees as well as all affiliated, subsidiary or
parent corporations, and their officers, directors, agents,
representatives, affiliates, and employees, from any and all actions,
claims, suits, charges, damages and demands, whether known or unknown,
contingent or accrued, which you may now have or hereafter acquire on
account of, arising out of or relating to your prior employment by the
company and/or its affiliates, or your termination of employment or
change in position as contemplated by this Agreement. This release,
waiver and discharge specifically includes but is not limited to
claims for any violation of any express or implied contract or
agreement, written or oral, or for violation of any common law duty or
public policy, or any statute or order, including, but not limited to,
the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, 42 USC 1981, 42 USC 1983, 42 USC 1985, 42 USC 1986, and 42 USC
1988, the Age Discrimination in Employment Act, the Employee
Retirement Income Security Act, the Michigan Civil Rights Act, the
Michigan Handicappers Civil Rights Act, and any other federal, state
or local civil rights statute, ordinance or regulation. This waiver
of rights and release of all claims through the date hereof is knowing
and voluntary. The invalidity in whole or in part of any provision of
this release will not affect the validity of any other provision.
Neither this release nor any other provision of this Agreement is an
admission of any wrongdoing by either party.
Since you are age 40 or older, you have a period of up to 21 days after
original receipt of this letter to decide whether to accept this financial
assistance by signing and returning this letter.
You may voluntarily waive this 21-day period. After you sign, you will
have an additional period of seven days following signature to request that
it be returned to you thus canceling this offer and waiver and release. If
you do nothing during this seven-day period, then your compensation will be
computed as stated. As required by law, since you are age 40 or older you
are being advised to consult an attorney before you sign this letter. Be
advised to consult an attorney before you sign this letter. By signing
below you agree that you have carefully reviewed this letter as written so
you understand its contents and the effect.
Very truly yours,
/S/ Geoffrey B. Bloom
GBB:jjc
Read, Understood and Accepted
/S/ George A. Andrews
George A. Andrews
May 16, 1994
Date
-5-
Exhibit 11 Statement Regarding Computation of Per Share Earnings(A)
Wolverine World Wide, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Fiscal year ended
December 31, January 1, January 2,
1994 1994 1993
<S> <C> <C> <C>
Primary, as reported
Average shares outstanding 10,548,796 10,144,671 9,941,154
Net effect of dilutive stock options-based on the
treasury stock method using average market price 356,575 333,153 (B)
10,905,371 10,477,824 9,941,154
Net earnings (loss) $16,598,000 $11,492,000 $(10,941,000)
Per share amount $1.52 $1.10 $(1.10)
Primary, including dilutive stock options in all years
Average shares outstanding 10,548,796 10,144,671 9,941,154
Net effect of dilutive stock options-based on the
treasury stock method using average market price 356,575 333,153 62,438
10,905,371 10,477,824 10,003,592
Net earnings (loss) $16,598,000 $11,492,000 $(10,941,000)
Per share amount $1.52 $1.10 $(1.09)
Fully diluted
Average shares outstanding 10,548,796 10,144,671 9,941,154
Net effect of dilutive stock options-based on the
treasury stock method using the year-end market
price, if higher than the average market price 382,294 394,608 234,813
Assumed conversion of 6.5% convertible
subordinated notes 145,467 300,000 300,000
11,076,557 10,839,279 10,475,967
Net earnings (loss) $16,598,000 $11,492,000 $(10,941,000)
Add 6.5% convertible subordinated debentures interest,
net of income tax effect 49,641 104,000 104,000
$16,647,641 $11,596,000 $(10,837,000)
Per share amount $1.50 $1.07 $(1.03)
<FN>
(A) On March 10, 1994, the Company announced a three-for-two stock split on shares of common stock
outstanding as of March 21, 1994. All share and per share data have been retroactively adjusted
for the increased shares resulting from the stock split.
(B) The net effect of dilutive stock options in fiscal 1992 is not included in the computation of
earnings per share as reported in the consolidated financial statements since they were less
than 3% dilutive.
</TABLE>
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF THE REGISTRANT
WOLVERINE WORLD WIDE, INC.
<CAPTION>
State or Country of
Name Incorporation or Organization
<S> <C>
Aguadilla Shoe Corporation Michigan
BSI Shoes, Inc. Michigan
Brooks France, S.A. France
Dominican Wolverine Shoe Company Cayman Islands
Limited
Frolic de Mexico S.A. de C.V. Mexico
Spartan Shoe Company Limited Cayman Islands
WWW Europe Ltd. England
Hush Puppies Retail, Inc. Michigan
d/b/a Little Red Shoe House
Hush Puppies Factory Direct
Wolverine Design Center, Inc. Michigan
Wolverine Procurement, Inc. Michigan
Wolverine Sourcing, Inc. Michigan
Hush Puppies Canada Footwear, Ltd. Canada
(controlling interest)
Wan Hau Enterprise Co., Ltd. Republic of China
(minority interest) (Taiwan)
</TABLE>
All of the subsidiaries of the Registrant are wholly owned, except as
otherwise indicated.
-1-
Exhibit 23 Consent of Independent Auditors
We consent to the incorporation by reference in Registration Statement
Number 33-55213 on Form S-8 dated August 24, 1994, Registration Statement
Number 33-64854 on Form S-8 dated June 22, 1993, Registration Statement
Numbers 33-23195 and 33-23196 on Form S-8 dated July 21, 1988, Registration
Statement Number 2-92600 on Form S-8 dated August 25, 1984, and Post-
Effective Amendment Number 2 to Registration Statement Number 2-68548 on
Form S-8 effective August 9, 1980, of our report dated February 16, 1995,
with respect to the consolidated financial statements and schedule of
Wolverine World Wide, Inc. and subsidiaries included in the Annual Report
on Form 10-K of Wolverine World Wide, Inc. for the fiscal year ended
December 31, 1994.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
March 24, 1995
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 23, 1995 /s/ Phillip D. Matthews
Phillip D. Matthews
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
February 5, 1995 /s/ Thomas D. Gleason
Thomas D. Gleason
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 30, 1995 /s/ Timothy J. O'Donovan
Timothy J. O'Donovan
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 25, 1995 /s/ Stephen L. Gulis, Jr.
Stephen L. Gulis, Jr.
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
March 10, 1995 /s/ Daniel T. Carroll
Daniel T. Carroll
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 23, 1995 /s/ David T. Kollat
David T. Kollat
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
February 15, 1995 /s/ David P. Mehney
David P. Mehney
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 24, 1995 /s/ Stuart J. Northrop
Stuart J. Northrop
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
March 13, 1995 /s/ Joseph A. Parini
Joseph A. Parini
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
March 10, 1995 /s/ Joan Parker
Joan Parker
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 26, 1995 /s/ Alberto L. Grimoldi
Alberto L. Grimoldi
Exhibit 24--POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or
officer, or both, as the case may be, of Wolverine World Wide, Inc., does
hereby appoint GEOFFREY B. BLOOM; TIMOTHY J. O'DONOVAN; STEPHEN L. GULIS,
JR.; BLAKE W. KRUEGER; and JEFFREY A. OTT, or any of them, his or her
attorneys or attorney, with full power of substitution, to execute in his
or her name an Annual Report of Wolverine World Wide, Inc. on Form 10-K for
its fiscal year ended December 31, 1994, and any amendments to that report,
and to file it or them with the Securities and Exchange Commission. Each
attorney shall have power and authority to do and perform in the name and
on behalf of the undersigned, in any and all capacities, every act to be
done in the premises as fully and to all intents and purposes as the
undersigned could do in person, and the undersigned hereby ratifies and
approves the acts of such attorneys.
Date Signature
January 26, 1995 /s/ Elizabeth A. Sanders
Elizabeth A. Sanders
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM APPENDIX A FOR THE YEAR ENDED DECEMBER 31, 1994, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-02-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> YEAR
<CASH> 2,949
<SECURITIES> 0
<RECEIVABLES> 70,659
<ALLOWANCES> 3,959
<INVENTORY> 79,025
<CURRENT-ASSETS> 168,538
<PP&E> 97,028
<DEPRECIATION> 61,680
<TOTAL-ASSETS> 230,151
<CURRENT-LIABILITIES> 43,020
<BONDS> 45,218
0
0
<COMMON> 11,315
<OTHER-SE> 121,209
<TOTAL-LIABILITY-AND-EQUITY> 230,151
<SALES> 378,473
<TOTAL-REVENUES> 378,473
<CGS> 258,818
<TOTAL-COSTS> 258,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,981
<INCOME-PRETAX> 25,423
<INCOME-TAX> 7,373
<INCOME-CONTINUING> 18,050
<DISCONTINUED> (1,452)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,598
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.50
</TABLE>
