SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 2,1994
INTERCO INCORPORATED
--------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware I-91 43-0337683
-------------- ----------- -----------------------
(State of (Commission (IRS Employer
Incorporation) File Number) Identification Number)
101 South Hanley Road, St. Louis, Missouri 63105
------------------------------------------------
(Address of principal executive offices)
(314) 863-1100
-------------------------------
(Registrant's telephone number)<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 17, 1994, INTERCO INCORPORATED (the "Company")
distributed all of the issued and outstanding shares of common
stock of its wholly-owned subsidiaries, Converse Inc. and The
Florsheim Shoe Company. The distribution was made in the form of
a dividend to shareholders of record of the Company at the close
of business on November 17, 1994. As a result, shareholders of
the Company received one share of Converse Inc. Common Stock for
every three shares of the Company's Common Stock and one share of
The Florsheim Shoe Company Common Stock for every six shares of
the Company's Common Stock held on the record date.
The Company continues to operate its furniture businesses,
Broyhill Furniture Industries, Inc. and The Lane Company,
Incorporated. Converse continues in the athletic and athleisure
footwear business and Florsheim continues in the men's dress,
dress casual and casual footwear business, each as an
independent, publicly-held company.
In connection with the distributions, the Company and
Converse Inc. and the Company and The Florsheim Shoe Company have
entered into distribution and services agreements and tax sharing
agreements, copies of which are filed as exhibits hereto.
Additional information concerning Converse Inc. and the
distribution is contained in Converse Inc.'s Registration
Statement on Form 10, as amended, (File 1-13430), and additional
information concerning The Florsheim Shoe Company and the
distribution is contained in The Florsheim Shoe Company's
Registration Statement on Form 10, as amended, (File 0-24730),
both filed under the Securities Exchange Act of 1934.
Also on November 17, 1994, the Company entered into a $285
million term loan agreement and a $75 million revolving credit
facility with Bankers Trust Company and Credit Lyonnais, and a
$150 million receivables securitization facility with Credit
Lyonnais. Proceeds from these borrowings have been used to repay
the outstanding indebtedness issued in 1992 in connection with
the reorganization of the Company and will be used to fund the
Company's working capital needs.
<PAGE>
Item 7. Pro Forma Financial Information and Exhibits
(a) Pro Forma Financial Information
Page Number
-----------
5 Introduction to Pro Forma Consolidated Condensed
Financial Information
6 Pro Forma Consolidated Condensed Balance Sheet as of
September 30, 1994
7 Pro Forma Consolidated Condensed Statement of
Operations for the Nine Months Ended September 30,
1994
8 Pro Forma Consolidated Condensed Statement of
Operations for the Twelve Months ended December 31,
1993
9 Notes to Pro Forma Consolidated Condensed Financial
Information
(b) Exhibits
99(a) Distribution and Services Agreement, dated
November 17, 1994, between INTERCO INCORPORATED
and Converse Inc.
99(b) Tax Sharing Agreement, dated November 17, 1994,
between INTERCO INCORPORATED and Converse Inc.
99(c) Distribution and Services Agreement, dated
November 17, 1994, among INTERCO INCORPORATED,
The Florsheim Shoe Company and certain of its
subsidiaries.
99(d) INTERCO/Florsheim Tax Sharing Agreement, dated
November 17, 1994, among INTERCO INCORPORATED,
The Florsheim Shoe Company and certain of its
subsidiaries.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements 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.
INTERCO INCORPORATED
BY: Steven W. Alstadt
-------------------------
Steven W. Alstadt
Controller and Chief
Accounting Officer
December 2, 1994
<PAGE>
INTERCO INCORPORATED
INTRODUCTION TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
On November 17, 1994, pursuant to a resolution adopted by the Board of
Directors of INTERCO INCORPORATED (the "Company"), a distribution by the
Company to holders of its common stock of all the shares of the common
stock of The Florsheim Shoe Company, and of all the shares of the common
stock of Converse Inc., each a wholly-owned subsidiary of the Company,
became effective. The Company's continuing business consists of the
operations of Broyhill Furniture Industries, Inc. and The Lane Company,
Incorporated.
The following unaudited pro forma consolidated condensed balance sheet
of the Company makes adjustments to the historical balance sheet at
September 30, 1994 as if the distribution had occurred on September 30,
1994. The pro forma consolidated condensed balance sheet gives effect
to the refinancing of most of the Company's indebtedness and the
distributions, all of which occurred concurrently.
The following unaudited pro forma consolidated condensed statements of
operations of the Company make adjustments to the historical statements
of operations for the nine months ended September 30, 1994 and for the
twelve months ended December 31, 1993 in order to present the
consolidated results of operations as if the refinancing and
distribution had occurred at the beginning of the earliest period
presented.
The pro forma consolidated condensed balance sheet and statements of
operations of the Company should be read in conjunction with the
historical financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 and the Company's Form 10-Q for the period ended September 30,
1994. The pro forma consolidated condensed financial information
presented herein is for informational purposes only and may not
necessarily reflect the results of operations or financial position of
the Company had the distribution actually occurred at the beginning of
the periods presented or as of September 30, 1994, and the pro forma
consolidated condensed financial information is not necessarily
indicative of future results of operations or financial position of the
Company.
<PAGE>
<TABLE>
INTERCO INCORPORATED
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<CAPTION>
September 30, 1994
---------------------------------------------------
Pro Forma Adjustments
---------------------------
(Dollars in thousands) Refinance Record
Historical Debt Distribution (H) Pro Forma
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 33,129 $ (11,763) $ (10,473) $ 10,893
Receivables 329,043 2,500 (A) (133,780) 197,763
Inventories 378,120 (216,606) 161,514
Prepaid expenses and other
current assets 37,626 (154) (B) (20,389) 17,083
---------- --------- --------- ---------
Total current assets 777,918 (9,417) (381,248) 387,253
Net property, plant & equipment 223,891 (38,337) 185,554
Reorganization value in excess
of amounts allocable to
identifiable assets, net 93,188 37,051 130,239
Trademarks and trade names, net 150,268 (1,935) 148,333
Other assets 37,210 (576) (B) (25,423) 20,961
9,750 (C)
---------- --------- --------- ---------
$1,282,475 $ (243) $(409,892) $ 872,340
========== ========= ========= =========
Liabilities
Current liabilities:
Notes payable $ 25,004 $ $ (25,004) $ -
Current maturities of
long-term debt 10,328 (3,724) (D) (5,045) 16,559
15,000 (D)
Accrued interest expense 11,094 (7,630) (E) (3,252) 212
Accounts payable and accrued
expenses 162,008 (66,648) 95,360
Income taxes payable 3,650 (5,730) (F) 6,257 4,177
----------- --------- --------- ---------
Total current liabilities 212,084 (2,084) (93,692) 116,308
Long-term debt, less current
maturities 566,965 (388,157) (D) (168,930) 409,878
400,000 (D)
Other long-term liabilities 122,601 (20,463) 102,138
Shareholders' equity:
Common stock 50,062 50,062
Paid-in capital 226,891 (32,937) 193,954
Retained earnings 103,872 (10,002) (G) (93,870) -
----------- --------- --------- ---------
Total shareholders' equity 380,825 (10,002) (126,807) 244,016
----------- --------- --------- ---------
$ 1,282,475 $ (243) $(409,892) $ 872,340
=========== ========= ========= =========
See accompanying notes to pro forma consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERCO INCORPORATED
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Nine Months ended September 30, 1994
----------------------------------------------------
Pro Forma Adjustments
---------------------------
(Dollars in thousands, Refinance Record
except per share data) Historical Debt Distribution Pro Forma
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Net sales $ 1,371,629 $ $(576,177) $ 795,452
Cost of sales 923,646 (349,969) 573,677
----------- --------- --------- ---------
Gross profit 447,983 (226,208) 221,775
Selling, general and
administrative expenses 348,187 (187,052) 161,135
Royalty income 8,989 (8,613) 376
----------- --------- --------- ---------
Earnings from operations 108,785 (47,769) 61,016
Interest expense 41,564 (28,905) (I) (12,611) 24,124
24,076 (I)
Other income (expense), net (132) 1,032 900
----------- --------- --------- ---------
Earnings before income tax
expense 67,089 4,829 (34,126) 37,792
Income tax expense 27,661 1,847 (J) (12,469) 17,039
----------- --------- --------- ---------
Net earnings $ 39,428 $ 2,982 $ (21,657) $ 20,753
=========== ========= ========= =========
Net earnings per common share:
Primary $ 0.76 $ 0.40
====== ======
Fully diluted $ 0.76 $ 0.40
====== ======
Weighted average common and
common equivalent shares
outstanding (in thousands):
Primary 51,620 51,859
====== ======
Fully diluted 51,665 51,926
====== ======
See accompanying notes to pro forma consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERCO INCORPORATED
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Twelve months ended December 31, 1993
---------------------------------------------------
(Dollars in thousands, Pro Forma Adjustments
except per share data) ---------------------------
Refinance Record
Historical Debt Distribution Pro Forma
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Net sales $1,656,814 $ $(676,281) $ 980,533
Cost of sales 1,114,867 (409,658) 705,209
---------- --------- --------- ---------
Gross profit 541,947 (266,623) 275,324
Selling, general and
administrative expenses 421,372 (221,968) 199,404
Royalty income 11,946 (11,214) 732
---------- --------- --------- ---------
Earnings from operations 132,521 (55,869) 76,652
Interest expense 56,472 (39,347) (I) (17,065) 33,150
33,090 (I)
Other income (expense), net (77) 1,841 1,764
---------- --------- --------- ---------
Earnings before income tax
expense 75,972 6,257 (36,963) 45,266
Income tax expense 30,604 2,393 (J) (14,014) 18,983
---------- --------- --------- ---------
Net earnings $ 45,368 $ 3,864 $ (22,949) $ 26,283
========== ========= ========= =========
Net earnings per common share:
Primary $ 0.88 $ 0.51
====== ======
Fully diluted $ 0.88 $ 0.51
====== ======
Weighted average common and common
equivalent shares outstanding
(in thousands):
Primary 51,375 51,429
====== ======
Fully diluted 51,397 51,443
====== ======
See accompanying notes to pro forma consolidated condensed financial statements.
INTERCO INCORPORATED
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(A) To record effect of defeasing 10% Secured Notes.
(B) To write off deferred debt issuance costs associated with the Company's previous
working capital facility.
(C) To record deferred debt issuance costs on INTERCO's new bank credit facility
($9,000) and receivables securitization facility ($750).
(D) To record the repayment of INTERCO's portion of long-term debt ($391,881) funded by
borrowings under the new bank credit facility ($285,000) and receivables
securitization facility ($130,000).
(E) To record payment of accrued interest.
(F) To record income tax benefit of financial restructuring expenses.
(G) To record expenses of financial restructuring, net of income taxes. These
nonrecurring charges have not been reflected in the pro forma consolidated condensed
statement of operations.
(H) To record distribution of common stock of The Florsheim Shoe Company and of common
stock of Converse Inc. to shareholders of INTERCO INCORPORATED.
(I) To reverse interest expense on repaid debt and record interest expense on new bank
credit facility, receivables securitization facility and amortization of deferred
debt issuance costs on the facilities.
(J) To record the income tax effect of pro forma adjustments.
</TABLE>
Exhibit 99(a)
DISTRIBUTION AND SERVICES AGREEMENT
dated as of
November 17, 1994
between
INTERCO INCORPORATED
and
CONVERSE INC.
and the
OTHER ENTITIES LISTED
ON THE SIGNATURE PAGES HEREOF<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . 2
Section 1.01. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE DISTRIBUTION . . . . . . . . . . 6
Section 2.01. Cooperation Prior to the Distribution . . . . 6
Section 2.02. INTERCO Board Action; Conditions Precedent to
the Distribution . . . . . . . . . . . . . . . 7
Section 2.03. The Distribution . . . . . . . . . . . . . . . 8
Section 2.04. Sale of Fractional Shares and Odd Lot Shares . 8
Section 2.05. Fees and Expenses of Distribution Agent. . . . 9
ARTICLE III
TRANSITION ARRANGEMENTS . . . . . . . . 9
Section 3.01. Conduct of Converse Business Pending
Distribution . . . . . . . . . . . . . . . . . 9
Section 3.02. Revolving Credit Agreement . . . . . . . . . . 9
Section 3.03. Repayment of Allocable Debt . . . . . . . . . 9
Section 3.04. Intercompany Accounts . . . . . . . . . . . . . 9
Section 3.05. Certain Intellectual Property Matters . . . . 9
ARTICLE IV
INDEMNIFICATION . . . . . . . . . . 10
Section 4.01. Converse Indemnification of the INTERCO
Group . . . . . . . . . . . . . . . . . . . . 10
Section 4.02. INTERCO Indemnification of the Converse
Group . . . . . . . . . . . . . . . . . . . . 11
Section 4.03. Insurance and Third Party Obligations . . . . 11
SL01 222188.6 i
Page
ARTICLE V
INDEMNIFICATION PROCEDURES . . . . . . . 11
Section 5.01. Notice and Payment of Claims . . . . . . . . . 11
Section 5.02. Notice and Defense of Third-Party Claims . . . 11
ARTICLE VI
SERVICES . . . . . . . . . . . . 13
Section 6.01. Provision of Services . . . . . . . . . . . . 13
Section 6.02. Risk Management . . . . . . . . . . . . . . . 13
Section 6.03. Reimbursement . . . . . . . . . . . . . . . . 13
ARTICLE VII
EMPLOYEE MATTERS . . . . . . . . . . 14
Section 7.01. General . . . . . . . . . . . . . . . . . . . 14
Section 7.02. Supplemental Pension Plan . . . . . . . . . . 14
Section 7.03. Asset Transfers . . . . . . . . . . . . . . . 15
Section 7.04. Stock Options . . . . . . . . . . . . . . . . 15
Section 7.05. Health and Welfare Plans . . . . . . . . . . . 16
Section 7.06. Multiemployer Pension Plans . . . . . . . . . 16
Section 7.07. No Third Party Beneficiaries . . . . . . . . . 16
ARTICLE VIII
INTERCO GUARANTEES . . . . . . . . . 16
Section 8.01. Dunn & Bradstreet . . . . . . . . . . . . . . 16
ARTICLE IX
INFORMATION . . . . . . . . . . . 17
Section 9.01. Provision of Corporate Records . . . . . . . . 17
Section 9.02. Access to Information . . . . . . . . . . . . 17
SL01 222188.6 ii
Page
Section 9.03. Litigation Cooperation . . . . . . . . . . . . 17
Section 9.04. Reimbursement . . . . . . . . . . . . . . . . 17
Section 9.05. Retention of Records . . . . . . . . . . . . . 17
Section 9.06. Confidentiality . . . . . . . . . . . . . . . 18
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . 18
Section 10.01. Expenses . . . . . . . . . . . . . . . . . . . 18
Section 10.02. Notices . . . . . . . . . . . . . . . . . . . 19
Section 10.03. Amendment and Waiver . . . . . . . . . . . . . 19
Section 10.04. Counterparts . . . . . . . . . . . . . . . . . 19
Section 10.05. Governing Law . . . . . . . . . . . . . . . . 19
Section 10.06. Entire Agreement . . . . . . . . . . . . . . . 19
Section 10.07. Parties in Interest . . . . . . . . . . . . . 20
Section 10.08. Tax Sharing Agreement; After-Tax Payments . . 20
Section 10.09. Further Assurances and Consents . . . . . . . 20
Section 10.10. Arbitration . . . . . . . . . . . . . . . . . 21
SL01 222188.6 iii
DISTRIBUTION AND SERVICES AGREEMENT
DISTRIBUTION AND SERVICES AGREEMENT ("Agreement") dated
as of November 17, 1994 by and between INTERCO INCORPORATED, a
Delaware corporation (together with its successors and permitted
assigns, "INTERCO") and Converse Inc., a Delaware corporation
(together with its successors and permitted assigns, "Converse"),
and the other entities listed on the signature pages hereof.
RECITALS
A. Converse is presently a wholly-owned subsidiary of
INTERCO.
B. The Board of Directors of INTERCO has determined
that it is in the best interest of INTERCO and the stockholders
of INTERCO to distribute (the "Distribution") to the holders of
INTERCO Common Stock (as defined herein) all of the outstanding
shares of Converse Common Stock (as defined herein).
C. It is the intention of the parties that the
Distribution will not be taxable to the stockholders of INTERCO
(pursuant to Section 355 of the Code (as defined herein)).
D. The parties have determined that it is necessary
and desirable to set forth the principal corporate transactions
required to effect the Distribution and to set forth other
agreements that will govern certain other matters following such
Distribution.
E. In connection with the Distribution, INTERCO is
concurrently herewith entering into the Tax Sharing Agreement (as
defined herein) with Converse and its subsidiaries.
F. INTERCO is entering into the Florsheim Distribution
Agreement (as defined herein) providing for a distribution of the
Florsheim Common Stock (as defined herein) in connection with the
Distribution.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual agreements, provisions and covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used herein, the
following terms have the following meaning:
"Action" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental
or other regulatory or administrative agency or commission or any
other tribunal.
"Allocable Debt" means that portion of the debt of
INTERCO and/or its subsidiaries allocated to members of the
Converse Group pursuant to the Allocation Agreement.
"Allocation Agreement" means that certain Allocation
Agreement dated January 27, 1993 by and among INTERCO, Converse
and other members of the INTERCO Group and the Converse Group.
"Ancillary Agreements" means all of the agreements,
instruments, understandings, assignments and other arrangements
entered into in connection with the transactions contemplated
hereby, including, without limitation, the Tax Sharing Agreement.
"Assumed Liabilities" means the Liabilities arising
from the conduct or operation of the Converse Business or the
ownership or use of assets or other activities in connection
therewith, whether arising before, on or after the Distribution
Date, including but not limited to the Allocable Debt, any
Liabilities arising in connection with the Form 10 or the
Registration Statement, and any Liabilities set forth or
referenced in the audited financial statements of Converse
included in the Form 10 or the Registration Statement.
Notwithstanding the foregoing, the Assumed Liabilities shall not
include (i) any debt of the INTERCO Group for money borrowed
(including but not limited to any such debt evidenced by a note,
debenture or other instrument) other than the Allocable Debt,
(ii) (X) any third party claims arising from the conduct or
operation of the Converse Business or the ownership or use of
assets in connection therewith prior to the Distribution Date if
and only to the extent that such claims ("Covered Claims") are
covered by the insurance of INTERCO (other than insurance related
to matters described in Article VII, which shall be dealt with as
described therein), (Y) any self-insured retention for such
Covered Claims that would be covered but for such retention, and
(Z) any letters of credit of INTERCO in favor of an insurance
carrier relating to such retention, (iii) any Liability
specifically retained by INTERCO pursuant to Article VII hereof
or (iv) any claims, losses, damages, demands, costs, expenses or
liabilities for any Tax (which shall be governed by the Tax
Sharing Agreement).
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange
Commission.
"Converse Business" means the business of
manufacturing, wholesaling and retailing of footwear as conducted
by the Converse Group or any present or former subsidiary or
division thereof.
"Converse Bylaws" means the bylaws of Converse in the
form filed as an exhibit to the Form 10.
"Converse Certificate" means the restated certificate
of incorporation of Converse in the form filed as an exhibit to
the Form 10.
"Converse Common Stock" means the outstanding shares of
common stock, no par value, of Converse.
"Converse Group" means Converse and the Converse
Subsidiaries.
"Converse Liabilities" means all of (i) the Liabilities
of the Converse Group under this Agreement, (ii) the Assumed
Liabilities, and (iii) the Liabilities of the Converse Group
arising after the Distribution Date.
"Converse Subsidiaries" means Converse EMEA, Ltd.,
Converse Star I, Inc., Calzado Deportivo de Reynosa S.A.,
Converse Export Co., Limited, Converse Europe, Inc., Converse
Germany, Inc. Converse Benelux Holding Company, Inc., Converse
France, Inc., Converse Benelux, Inc., Converse Iberia, Inc.,
Converse Italy, Inc. and Converse All Star do Brasil Industria e
Comercio Ltda.
"Credit Facility" means a secured revolving credit and
term loan facility for Converse in the amount of $200 million for
(i) the repayment of a portion of the Allocable Debt, (ii) the
repayment of the MIFA Bonds, and (iii) Converse's capital
expenditures and any additional working capital needs following
the Distribution.
"Distribution Agent" means KeyCorp Shareholder
Services, Inc.
"Distribution Date" means the business day as of which
the Distribution shall be effective, as determined by the Board
of Directors of INTERCO or the Executive Committee thereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Florsheim" means The Florsheim Shoe Company, a
Delaware corporation and a wholly-owned subsidiary of INTERCO.
"Florsheim Common Stock" means the Common Stock, no par
value, of Florsheim.
"Florsheim Credit Facility" means a secured credit
facility for Florsheim in the amount of $75 million.
"Florsheim Distribution" means the distribution of
Florsheim Common Stock to the shareholders of INTERCO pursuant to
the Florsheim Distribution Agreement.
"Florsheim Distribution Agreement" means that certain
distribution agreement by and among INTERCO, Florsheim and the
subsidiaries of Florsheim relating to the distribution of
Florsheim Common Stock by INTERCO to the shareholders of INTERCO.
"Florsheim Form 10" means the registration statement on
Form 10 filed by Florsheim with the Commission to effect the
registration of the Florsheim Common Stock pursuant to the
Exchange Act, as such registration statement may be amended from
time to time.
"Florsheim Notes" means the senior notes of Florsheim
being offered pursuant to the Florsheim Registration Statement.
"Florsheim Notes Registration Statement" means the
registration statement on Form S-1 under the Securities Act
concerning the public offering of up to $85 million in Florsheim
Notes.
"Form 10" means the registration statement on Form 10
filed by Converse with the Commission to effect the registration
of the Converse Common Stock pursuant to the Exchange Act, as
such registration statement may be amended from time to time.
"Group" means either the Converse Group or the INTERCO
Group.
"Indemnifiable Loss" has the meaning set forth in
Section 4.01.
"Information Statement" means the information statement
to be sent to each holder of INTERCO Common Stock in connection
with the Distribution.
"Initial Borrowing" means a borrowing by the Converse
Group under the Credit Facility in an amount equal to $75 million
plus an amount determined by INTERCO to be equal to the seasonal
working capital needs of the Converse Group as of the
Distribution Date.
"INTERCO Common Stock" means the outstanding shares of
common stock, no par value, of INTERCO.
"INTERCO Group" means INTERCO and its direct or
indirect subsidiaries (other than any member of the Converse
Group), including without limitation Florsheim and its direct or
indirect subsidiaries.
"INTERCO Liabilities" means all of (i) the Liabilities
of INTERCO under this Agreement, (ii) the Liabilities of the
INTERCO Group (other than any Converse Liabilities), whether
arising before, on or after the Distribution Date, (iii) (X) any
claims arising from the conduct or operation of the Converse
Business or the ownership or use of assets in connection
therewith prior to the Distribution Date if and only to the
extent that such claims ("Covered Claims") are covered by the
insurance of INTERCO (other than insurance related to matters
described in Article VII, which shall be dealt with as described
therein), (Y) any self-insured retention for such Covered Claims
that would be covered but for such retention, and (Z) any letters
of credit of INTERCO in favor of an insurance carrier relating to
such retention, and (iv) any Liability specifically retained by
INTERCO pursuant to Article VII hereof.
"Liabilities" means any and all claims, debts,
liabilities and obligations, absolute or contingent, matured or
not matured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever arising, including all costs and
expenses relating thereto, and including, without limitation,
those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, action, order or consent
decree of any governmental entity or any award of any arbitrator
of any kind, and those arising under any contract, commitment or
undertaking.
"MIFA Bonds" means $8 million of Massachusetts
Industrial Finance Agency bonds issued on behalf of Converse.
"Record Date" means the date determined by INTERCO's
Board of Directors or the Executive Committee thereof as the
record date for determining the stockholders of INTERCO entitled
to receive the Distribution.
"Registration Statement" means the registration
statement of Converse on Form S-1 under the Securities Act which
was filed on August 24, 1994.
"Securities Act" means the Securities Act of 1933, as
amended.
"Tax" shall have the meaning given to such term in the
Tax Sharing Agreement.
"Tax Sharing Agreement" means the Tax Agreement of even
date herewith among INTERCO, Converse and certain subsidiaries of
Converse, as amended from time to time.
"Transferred Employee" means all current employees and
former employees (including without limitation all terminated
employees, retirees, laid-off employees, employees on leave, or
employees on short-term or long-term disability) of the Converse
Group or any former subsidiary or division thereof.
ARTICLE II
THE DISTRIBUTION
Section 2.01. Cooperation Prior to the Distribution.
(a) INTERCO and Converse shall prepare, and INTERCO shall mail to
the holders of INTERCO Common Stock as of the Record Date, the
Information Statement, which shall set forth appropriate
disclosure concerning Converse, the Distribution and any other
appropriate matters. INTERCO and Converse shall also prepare,
and Converse shall file with the Commission, the Form 10, which
shall include or incorporate by reference the Information
Statement. INTERCO and Converse shall use reasonable efforts to
cause the Form 10 to become effective under the Exchange Act.
(b) INTERCO and Converse shall cooperate in preparing,
filing with the Commission and causing to become effective any
registration statements or amendments thereto that are
appropriate to reflect the establishment of or amendments to any
employee benefit and other plans contemplated by this Agreement.
(c) INTERCO and Converse shall take all such action as
may be necessary or appropriate under the securities or blue sky
laws of states or other political subdivisions of the United
States in connection with the transactions contemplated by this
Agreement.
(d) Converse shall prepare, file and pursue an
application to permit listing of the Converse Common Stock on the
New York Stock Exchange.
Section 2.02. INTERCO Board Action; Conditions
Precedent to the Distribution. INTERCO's Board of Directors or
the Executive Committee thereof shall, in its discretion,
establish the Record Date and the Distribution Date and any
appropriate procedures in connection with the Distribution. In
no event shall the Distribution occur unless the following
conditions shall, unless waived by INTERCO, have been satisfied:
(a) all necessary regulatory approvals shall have been
received;
(b) the Form 10 shall have become effective under the
Exchange Act;
(c) a favorable response shall have been received from
the Staff of the Commission with respect to INTERCO's no-action
request concerning, among other things, whether the Distribution
may be effected without registration of the Converse Common Stock
under the Securities Act and whether the Florsheim Distribution
may be effected without registration of the Florsheim Common
Stock under the Securities Act;
(d) Converse shall have arranged for the Credit
Facility;
(e) The Florsheim Notes Registration Statement shall
have become effective and the sale of the Florsheim Notes
pursuant thereto shall have been completed, Florsheim shall have
arranged for the Florsheim Credit Facility, and Florsheim shall
have repaid its allocated portion of the debt of INTERCO and/or
its subsidiaries as specified by the Florsheim Distribution
Agreement;
(f) The Florsheim Form 10 shall have become effective
under the Exchange Act and the Florsheim Distribution shall have
been formally approved by the INTERCO Board of Directors and
shall not have been abandoned or deferred;
(g) Converse shall have paid the Allocable Debt in
full in accordance with this Agreement;
(h) Converse's Board of Directors, as named in the
Form 10, shall have been elected by INTERCO, as sole stockholder
of Converse, and the Converse Certificate and Converse Bylaws
shall be in effect;
(i) the Converse Common Stock shall have been approved
for listing on the New York Stock Exchange, subject to official
notice of issuance;
(j) INTERCO's Board of Directors shall have formally
approved the Distribution and shall not have abandoned, deferred
or modified the Distribution at any time prior to the Record
Date;
(k) INTERCO's Board of Directors shall have received an
opinion of counsel satisfactory to it that the Distribution
should not be taxable to the stockholders of INTERCO (pursuant to
Section 355 of the Code);
(l) the transactions contemplated by Sections 3.02 and
3.03 shall have been consummated in all material respects and the
MIFA Bonds shall have been repaid;
(m) the Converse Group shall have obtained, or INTERCO
shall have obtained for the Converse Group, insurance (or binders
therefor) providing coverage to the Converse Group similar to the
coverage provided by insurance in place prior to the Distribution
Date; and
(n) the INTERCO Group (not including Florsheim and its
direct and indirect subsidiaries) shall have obtained refinancing
of its debt on terms acceptable to it in its sole discretion.
Section 2.03. The Distribution. On the Distribution
Date or as soon thereafter as practicable, subject to the
conditions set forth in this Agreement, INTERCO shall deliver to
the Distribution Agent a certificate or certificates representing
all of the then outstanding shares of Converse held by the
INTERCO Group, endorsed in blank, and shall instruct the
Distribution Agent, except as otherwise provided in Section 2.04,
to distribute to each holder of record of INTERCO Common Stock on
the Record Date a certificate or certificates representing one
share of Converse Common Stock for each three shares of INTERCO
Common Stock so held. Converse agrees to provide all
certificates for shares of Converse Common Stock that the
Distribution Agent shall require in order to effect the
Distribution.
Section 2.04. Sale of Fractional Shares and Odd Lot
Shares. The Distribution Agent shall not distribute (a) any
fractional share of Converse Common Stock ("Fractional Shares")
to any holder or (b) fewer than 100 shares of Converse Common
Stock ("Odd Lot Shares") to any holder who elects prior to a
specified date to have the Distribution Agent sell such Odd Lot
Shares for its account. The Distribution Agent shall aggregate
all such Fractional Shares and Odd Lot Shares and sell them in an
orderly manner after the Distribution Date in the open market
and, after completion of such sales, distribute a pro rata
portion of the proceeds from such sales, based upon the average
gross selling price of all such Converse Common Stock, less a pro
rata portion of the aggregate brokerage commissions payable in
connection with such sales, to each holder of INTERCO Common
Stock who would otherwise have received a Fractional Share or Odd
Lot Shares.
Section 2.05. Fees and Expenses of Distribution Agent.
The fees and expenses of the Distribution Agent, except as
provided in Section 2.04, shall be paid by INTERCO.
ARTICLE III
TRANSITION ARRANGEMENTS
Section 3.01. Conduct of Converse Business Pending
Distribution. (a) Prior to the Distribution Date, Converse or
any member of the Converse Group shall not, without the prior
consent in writing of INTERCO, make any public announcement,
issue any press release or distribute any prospectus (as defined
in the Securities Act) and each shall use its best efforts not to
take any action which may prejudice or delay the consummation of
the Distribution.
(b) Prior to satisfaction or waiver of the conditions
set forth in Section 2.02, the business of the Converse Group
shall be operated for the sole benefit of INTERCO and its
stockholders.
Section 3.02. Revolving Credit Agreement. On or prior
to the Distribution Date INTERCO shall obtain refinancing of its
current revolving credit agreement, the new terms of which shall
not constitute obligations of the Converse Group.
Section 3.03. Repayment of Allocable Debt. On or
prior to the Distribution Date, INTERCO shall contribute to
Converse's capital an amount equal to the Allocable Debt less the
difference between the net proceeds of the Initial Borrowing and
the amount needed to repay the MIFA Bonds. Immediately following
the establishment of the Credit Facility and the Initial
Borrowing thereunder, the Converse Group shall repay to the
lenders of the Allocable Debt an amount equal to the Allocable
Debt, upon which payment the Converse Group shall be released
from any and all claims or obligations arising under the
Allocation Agreement.
Section 3.04. Intercompany Accounts. Other than as
specifically described herein, all intercompany accounts as of
the Distribution Date will be cancelled.
Section 3.05. Certain Intellectual Property Matters.
(a) Except as otherwise set forth herein, after the Distribution
Date, neither Converse nor any member of the Converse Group shall
use the name "INTERCO" or any similar trademarks (collectively,
the "INTERCO Tradenames") or any tradename or trademark likely to
cause confusion with the INTERCO Tradenames.
(b) After the Distribution Date, the Converse Group
shall have the right to sell existing inventory and to use
existing brochures, packaging, labelling, containers, supplies,
advertising materials, technical data sheets and any similar
materials bearing any INTERCO Tradenames until the earlier of (i)
one year after the Distribution Date and (ii) the date existing
stocks are exhausted. The Converse Group shall have the right to
use the INTERCO Tradenames in advertising that cannot be changed
by the Converse Group using reasonable efforts for a period not
to exceed twelve months after the Distribution Date. The
Converse Group shall comply with all applicable laws or
regulations in any use of packaging or labelling containing the
INTERCO Tradenames.
(c) The Converse Group shall not be obligated to
change the INTERCO Tradenames on finished goods in inventory and
goods in the hands of dealers, distributors and customers at the
time of expiration of a time period set forth in (b) above.
(d) Converse agrees to use, and shall cause the other
members of the Converse Group to use, reasonable efforts to cease
using the INTERCO Tradenames on buildings, cars, trucks and other
fixed assets as soon as possible but in any event within a period
not to exceed one year after the Distribution Date.
(e) The obliteration of the INTERCO Tradenames shall
be deemed compliance with the Converse Group's covenants not to
use the INTERCO Tradenames pursuant to this Section 3.05.
(f) Except with the prior written consent of Converse,
after the Distribution Date neither INTERCO nor any member of the
INTERCO Group shall use the name "Converse" or any other
trademarks of the Converse Group (collectively the "Converse
Tradenames") or any tradename or trademark likely to cause
confusion with the Converse Tradenames.
ARTICLE IV
INDEMNIFICATION
Section 4.01. Converse Indemnification of the INTERCO
Group. Subject to Section 4.03, on and after the Distribution
Date, each member of the Converse Group shall jointly and
severally indemnify, defend and hold harmless the INTERCO Group,
and each of their respective directors, officers, employees and
agents (the "INTERCO Indemnitees") from and against any and all
damage, loss, liability and expense (including, without
limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all
Actions or threatened Actions) (collectively, "Indemnifiable
Losses") incurred or suffered by any of the INTERCO Indemnitees
and arising out of, or due to the failure of any member of the
Converse Group to pay, perform or otherwise discharge, any of the
Converse Liabilities.
Section 4.02. INTERCO Indemnification of the Converse
Group. Subject to Section 4.03, on and after the Distribution
Date, INTERCO shall indemnify, defend and hold harmless the
Converse Group, and each of their respective directors, officers,
employees and agents (the "Converse Indemnitees") from and
against any and all Indemnifiable Losses incurred or suffered by
any of the Converse Indemnitees and arising out of, or due to the
failure of any member of the INTERCO Group to pay, perform or
otherwise discharge, any of the INTERCO Liabilities.
Section 4.03. Insurance and Third Party Obligations.
Any indemnification pursuant to Sections 4.01 or 4.02 shall be
paid net of the amount of any insurance (other than any insurance
paid for by the applicable Indemnitee) or other amounts that
would be payable by any third party to the indemnified party in
the absence of this Agreement. It is expressly agreed that no
insurer or any other third party shall be (a) entitled to a
benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions, (b) relieved of the
responsibility to pay any claims to which it is obligated or (c)
entitled to any subrogation rights with respect to any obligation
hereunder.
ARTICLE V
INDEMNIFICATION PROCEDURES
Section 5.01. Notice and Payment of Claims. If any
INTERCO or Converse Indemnitee (the "Indemnified Party")
determines that it is or may be entitled to indemnification by
any party (the "Indemnifying Party") under Article IV (other than
in connection with any Action or claim subject to Section 5.02),
the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable,
the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to
be indemnified. After the Indemnifying Party shall have been
notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days
after receipt of such notice, pay the Indemnified Party such
amount in cash or other immediately available funds (or reach
agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) unless the Indemnifying Party
objects to the claim for indemnification or the amount thereof.
If the Indemnifying Party does not give the Indemnified Party
written notice objecting to such claim and setting forth the
grounds therefor within the same 30 day period, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its
rights under applicable law to collect such amount.
Section 5.02. Notice and Defense of Third-Party
Claims. Promptly following the earlier of (a) receipt of notice
of the commencement by a third party of any Action against or
otherwise involving any Indemnified Party or (b) receipt of
information from a third party alleging the existence of a claim
against an Indemnified Party, in either case, with respect to
which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the
Indemnifying Party written notice thereof. The failure of the
Indemnified Party to give notice as provided in this Section 5.02
shall not relieve the Indemnifying Party of its obligations under
this Agreement, except to the extent that the Indemnifying Party
is prejudiced by such failure to give notice. Within 30 days
after receipt of such notice, the Indemnifying Party may (a) by
giving written notice thereof to the Indemnified Party,
acknowledge liability for and at its option elect to assume the
defense of such Third-Party Claim at its sole cost and expense or
(b) object to the claim of indemnification set forth in the
notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 5.02; provided that if the Indemnifying
Party does not within the same 30 day period give the Indemnified
Party written notice objecting to such claim and setting forth
the grounds therefor or electing to assume the defense, the
Indemnifying Party shall be deemed to have acknowledged its
liability for such Third-Party Claim. Any contest of a Third-
Party Claim as to which the Indemnifying Party has elected to
assume the defense shall be conducted by attorneys employed by
the Indemnifying Party and reasonably satisfactory to the
Indemnified Party; provided that the Indemnified Party shall have
the right to participate in such proceedings and to be
represented by attorneys of its own choosing at the Indemnified
Party's sole cost and expense. If the Indemnifying Party assumes
the defense of a Third-Party Claim, the Indemnifying Party may
settle or compromise the claim without the prior written consent
of the Indemnified Party; provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any such
remedy or relief, other than monetary damages for which the
Indemnifying Party shall be responsible hereunder, shall be
applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party, which consent shall not
be unreasonably withheld. If the Indemnifying Party does not
assume the defense of a Third-Party Claim for which it has
acknowledged liability for indemnification under Article IV, the
Indemnified Party may require the Indemnifying Party to reimburse
it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-
pocket expenses incurred in defending against such Third-Party
Claim and the Indemnifying Party shall be bound by the result
obtained with respect thereto by the Indemnified Party; provided
that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not
be unreasonably withheld. The Indemnifying Party shall pay to
the Indemnified Party in cash the amount for which the
Indemnified Party is entitled to be indemnified (if any) within
15 days after the final resolution of such Third-Party Claim
(whether by the final nonappealable judgment of a court of
competent jurisdiction or otherwise) or, in the case of any
Third-Party Claim as to which the Indemnifying Party has not
acknowledged liability, within 15 days after such Indemnifying
Party's objection has been resolved by settlement, compromise or
the final nonappealable judgment of a court of competent
jurisdiction.
ARTICLE VI
SERVICES
Section 6.01. Provision of Services. Each party shall
make available to the other Party during normal business hours
and in a manner that will not unreasonably interfere with such
party's business, its financial, tax, accounting, employee
benefits and similar staff and services (collectively "Services")
whenever and to the extent that they may be reasonably required
in connection with the preparation of tax returns, audits,
claims, litigation or administration of employee benefit plans
and otherwise to assist in effecting an orderly transition
following the Distribution. The Services shall be provided for a
one year period following the Distribution Date.
Section 6.02 Risk Management. From the Distribution
Date until March 1, 1997, INTERCO shall provide Converse with
risk management services with respect to property and casualty
insurance, including without limitation loss control, claims
administration and policy administration, as historically
provided by INTERCO to Converse ("Risk Services"). It is
understood that Risk Services shall not be provided with respect
to any medical, disability or life insurance. Any premiums for
any insurance for the Converse Group shall be the sole liability
of and paid by Converse. Converse can terminate the Risk
Services at any time upon payment of any termination fees or
expenses associated with such cancellation.
Any first party claims pending or drafts in process
will be forwarded to Converse to reimburse it for losses to its
property or goods incurred prior to the Distribution Date.
Section 6.03. Reimbursement. A party providing
Services to the other party pursuant to this Article VI shall be
entitled to receive from the recipient upon the presentation of
invoices therefor, payment for all out-of-pocket costs and
expenses as may be reasonably incurred in providing such
Services. INTERCO and Converse recognize that, because of the
nature and volume of Services historically provided by INTERCO to
Converse, the value of the services provided by INTERCO to
Converse under this Article VI greatly exceed the value of the
services to be provided by Converse to INTERCO. Accordingly, in
view of this and the provision of Risk Services by INTERCO to
Converse, Converse shall pay to INTERCO $500,000 in total for the
Services and Risk Services, payable as follows: (i) $125,000 on
each of March 31, 1995, June 30, 1995, and September 30, 1995,
and (ii) $125,000 in total on December 31, 1994 and on the first
anniversary of the Distribution Date (the $125,000 total payment
to be prorated between such two dates based upon the number of
days from the Distribution Date through December 31, 1994, and
for the number of days from October 1, 1995 to the first
anniversary of the Distribution Date, respectively).
ARTICLE VII
EMPLOYEE MATTERS
Section 7.01. General. (a) Except as otherwise set
forth in this Article VII, (i) the INTERCO Group shall retain any
and all liabilities relating to or arising out of any employee
benefit, compensation, or welfare arrangement (a "Plan") in
respect of any employee ("INTERCO Employee") of INTERCO or its
subsidiaries who is not a Transferred Employee and (ii) the
INTERCO Group shall have no liability relating to or arising out
of any Plan in respect of Transferred Employees.
(b) All persons formerly entitled to rights or
benefits under The Londontown Pension Plan or The Londontown
Salesmen Pension Plan, which such plans were merged with the
Converse Inc. Retirement Plan ("Converse Retirement Plan") shall
continue to be entitled to their rights and benefits under the
Converse Retirement Plan. INTERCO shall transfer to Converse its
records concerning such persons and their benefits under the
Converse Retirement Plan as soon as practicable following the
Distribution Date. Converse shall assume and be responsible for
the administration of benefits under such plan to all such
persons following such transfer.
(c) Except as otherwise set forth in this Article VII,
any participant in the Plans maintained for Converse employees
prior to the Distribution Date (including without limitation the
Converse Inc. Retirement Plan, the Converse Inc. Thrift Savings
Plan or the Converse medical and dental plans) who continues as
an officer of INTERCO following the Distribution Date (but not as
an employee of Converse) ("Participant") will be treated as if he
retired or resigned as an employee of Converse as of the
Distribution Date for purposes of such Plans and Converse shall
retain all liability for any such Participant under all such
Converse Plans.
Section 7.02. Supplemental Pension Plan. The Converse
Group shall assume as of the Distribution Date all of the
obligations, if any, of the INTERCO Group to Transferred
Employees under supplemental pension or welfare plans,
arrangements or agreements with Transferred Employees, including
without limitation the INTERCO INCORPORATED Supplemental
Retirement Plan ("INTERCO Supplemental Plan") (other than with
respect to the Participant). For this purpose, Converse agrees
to establish a supplemental employee retirement plan containing
substantially the same terms as the INTERCO Supplemental Plan,
covering any Transferred Employee currently covered by such plan
(other than the Participant), and providing the same benefits to
such employee as such employee would have received had the
Distribution not occurred and the employee remained eligible
under the INTERCO Supplemental Plan until normal retirement age.
Section 7.03. Asset Transfers. The assets for the
Converse Retirement Plan and the Converse Inc. Defined
Contribution Pension Plan for Hourly Employees ("Converse Hourly
Plan") are currently held in trust pursuant to the INTERCO
INCORPORATED Master Pension Trust Agreement ("Master Trust").
Converse shall create a new trust (with sub-accounts) or trusts
to hold the assets of such Plans. An amount equal to the value
of the unit shares in the accounts in the Master Trust for the
Converse Retirement Plan and the Converse Hourly Plan at the end
of the month in which the Distribution Date occurs will be
transferred by INTERCO as soon as practicable following the end
of such month to such new trusts.
Section 7.04. Stock Options. (a) Any Transferred
Employees who hold options for INTERCO Common Stock ("INTERCO
Options") which are exercisable at the time of the Distribution
Date will be given the right, in lieu of exercising such options
for INTERCO Common Stock in accordance with their terms, to
exchange such options, in whole or in part, for options to
purchase Converse Common Stock ("Converse Options"). The number
of shares of Converse Common Stock purchasable under the Converse
Options to be received by a Transferred Employee who exercises
such right, the exercise price of such Converse Options, and the
other rights of option holders will be determined so as to at
least substantially preserve the economic gain or loss inherent
in the INTERCO Options being exchanged. Transferred Employees
who choose to exchange their exercisable INTERCO Options for
Converse Options and who have not exercised such options prior to
six months following the Distribution will be paid by Converse at
such time an amount in cash equal to 10% of any economic gain
inherent in the INTERCO Options exchanged.
(b) Any Transferred Employees who hold INTERCO Options
which are not exercisable at the time of the Distribution Date
(which options will therefore terminate unexercised) will be
granted new Converse Options following the Distribution Date.
The number of shares of Converse Common Stock purchasable under
the Converse Options to be received by such Transferred Employee,
the exercise price of such Converse Options, and the other rights
of option holders will be determined so as to substantially
preserve the economic gain or loss inherent in the INTERCO
options which terminate.
(c) In general, the terms and exercise dates of the
Converse Options granted to Transferred Employees hereunder shall
be the same as those for the INTERCO options previously held.
Section 7.05. Health and Welfare Plans. (a) The
Converse Group shall assume as of the Distribution Date all the
obligations, if any, of the INTERCO Group, whether existing on
the Distribution Date or arising thereafter, to provide coverage
and benefits for Transferred Employees under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and
Section 4980B of the Code.
(b) Converse shall establish a plan qualified under
Section 125 of the Code, providing substantially the same
benefits as does the Flexible Compensation Plan for Employees of
INTERCO INCORPORATED and Its Operating Companies ("INTERCO
INCORPORATED BEST Plan"). INTERCO shall grant a royalty-free,
perpetual, non-exclusive license to Converse to use the name
"BEST Plan" in connection with the new Converse Section 125 plan
(including the right to use "BEST Plan" in conjunction with the
name "Converse" for such Plan) so long as the new Converse
Section 125 plan remains qualified under Section 125 of the Code.
Converse shall have no right whatsoever to sell, transfer, assign
or sublicense the name "BEST Plan" to any other person or use
such name in connection with any other use.
Section 7.06. Multiemployer Pension Plans. Converse
currently has no obligation to make contributions to any
multiemployer pension plan as such term is defined in Section
4001(a)(3) of ERISA (a "Multiemployer Plan"). Converse has never
had an obligation to contribute to a MultiEmployer Plan with
respect to employees working in the United States but has in the
past had an obligation to contribute to a Multiemployer Plan with
respect to employees working in Puerto Rico. The parties agree
that included within the definition of Assumed Liabilities is any
and all liability to any Multiemployer Plan to the extent that
such liability is attributable to contributions made to any such
Multiemployer Plan on behalf of any Transferred Employee
(including, without limitation, present or former employees of
any member of the Converse Group or any former subsidiary or
division of the Converse Group). Each member of the Converse
Group jointly and severally agrees that it will indemnify and
defend any member of the INTERCO Group from and against any such
liability.
Section 7.07. No Third Party Beneficiaries. Neither
Transferred Employees nor any current, former or retired employee
of any member of the INTERCO Group shall be entitled to enforce
the provisions of this Article 7 against the respective parties
as third party beneficiaries thereof.
ARTICLE VIII
INTERCO GUARANTEES
Section 8.01. Dun & Bradstreet. INTERCO agrees to
notify Dun & Bradstreet of the termination of INTERCO's ownership
of the Converse Group immediately after the Distribution Date.
The Converse Group agrees to take such ministerial actions as
INTERCO may reasonably request to notify any person who is a
beneficiary of any Dun & Bradstreet guarantee of the termination
of INTERCO's ownership of the Converse Group, and to certify to
such notification.
ARTICLE IX
INFORMATION
Section 9.01. Provision of Corporate Records. Each
Group shall arrange as soon as practicable following the
Distribution Date for the provision to the other Group of
existing corporate governance documents (e.g. minute books, stock
registers, stock certificates, documents of title, etc.) in its
possession relating to such other Group or its business and
affairs.
Section 9.02. Access to Information. From and after
the Distribution Date each Group shall afford the other Group and
its accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and
duplicating rights during normal business hours to all records,
books, contacts, instruments, computer data and other data and
information in such Group's possession relating to the business
and affairs of such other Group (other than data and information
subject to an attorney/client or other privilege), insofar as
such access is reasonably required by such other Group including,
without limitation, for audit, accounting and litigation
purposes, as well as for purposes of fulfilling disclosure and
reporting obligations.
Section 9.03. Litigation Cooperation. Each Group
shall use reasonable efforts to make available to the other
Group, upon written request, its officers, directors, employees
and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal,
administrative or other proceedings arising out of the business
of the other Group prior to the Distribution Date in which the
requesting party may from time to time be involved.
Section 9.04. Reimbursement. Each Group providing
information or witnesses under Sections 9.01, 9.02 or 9.03 to the
other Group shall be entitled to receive from the recipient, upon
the presentation of invoices therefor, payment for all out-of-
pocket costs and expenses as may be reasonably incurred in
providing such information or witnesses.
Section 9.05. Retention of Records. Except as
otherwise required by law or agreed to in writing, each party
shall, and shall cause the members of its respective Group to,
retain all information relating to the other Group's business in
accordance with the past practice of such party. Notwithstanding
the foregoing, except as provided in the Tax Sharing Agreement,
any party may destroy or otherwise dispose of any information at
any time, provided that, prior to such destruction or disposal,
(a) such party shall provide no less than 90 days' prior written
notice to the other party, specifying the information proposed to
be destroyed or disposed of and (b) if the recipient of such
notice shall request in writing prior to the scheduled date for
such destruction or disposal that any of the information proposed
to be destroyed or disposed of be delivered to such requesting
party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
Section 9.06. Confidentiality. Each party shall hold
and shall cause its directors, officers, employees, agents,
consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or,
in the opinion of its counsel, by other requirements of law, all
information (other than any such information relating solely to
the business or affairs of such party) concerning the other party
(except to the extent that such information can be shown to have
been (a) in the public domain through no fault of such party or
(b) later lawfully acquired on a non-confidential basis from
other sources by the party to which it was furnished), and
neither party shall release or disclose such information to any
other person, except its auditors, attorneys, financial advisors,
bankers and other consultants and advisors who shall be advised
of and agree in writing to comply with the provisions of this
Section 9.06. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar
information.
ARTICLE X
MISCELLANEOUS
Section 10.01. Expenses. Except as specifically
provided in this Agreement (or the Tax Sharing Agreement, if
relevant), all costs and expenses incurred in connection with the
preparation, execution, delivery and implementation of this
Agreement and with the consummation of the transactions
contemplated by this Agreement (including transfer taxes and the
fees and expenses of all counsel, accountants and financial and
other advisors) shall be paid by the party incurring such cost or
expense. It is understood and agreed that the Converse Group
shall pay or be responsible for the initial fees payable to the
lenders and the agent under the Credit Facility. Notwithstanding
the foregoing, it is understood and agreed that the INTERCO Group
(not including Florsheim and its direct and indirect
subsidiaries) shall pay the legal, filing, accounting, printing
222188.6 18
and other accountable and out-of-pocket expenditures in
connection with the (i) preparation, printing and filing of the
Form 10, (ii) obtaining of the Credit Facility and
(iii) preparation, printing and filing of the Registration
Statement incurred in connection with its filing on August 24,
1994.
Section 10.02. Notices. All notices and communications
under this Agreement shall be in writing and any communication or
delivery hereunder shall be deemed to have been duly given when
received addressed as follows:
If to INTERCO, to:
INTERCO INCORPORATED
101 South Hanley Road
St. Louis, Missouri 63105
Attention: Secretary
If to Converse, to:
Converse Inc.
One Fordham Road
North Reading, MA 01864
Attention: Secretary
Any party may, by written notice so delivered to the other
parties, change the address to which delivery of any notice shall
thereafter be made.
Section 10.03. Amendment and Waiver. This Agreement
may not be altered or amended, nor may rights hereunder be
waived, except by an instrument in writing executed by the party
or parties to be charged with such amendment or waiver. No
waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this
Agreement, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term,
provision, condition, right or remedy or as a waiver of any other
term, provision or condition of this Agreement.
Section 10.04. Counterparts. This Agreement may be
executed in one or more counterparts each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same Agreement.
Section 10.05. Governing Law. This Agreement shall be
construed in accordance with, and governed by, the laws of the
State of Missouri, without regard to the conflicts of law rules
of such state.
Section 10.06. Entire Agreement. This Agreement,
together with the Ancillary Agreements, constitute the entire
understanding of the parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions
and prior agreements and understandings relating to such subject
matter. To the extent that the provisions of this Agreement are
inconsistent with the provisions of any Ancillary Agreements, the
provisions of such Ancillary Agreement shall prevail.
Section 10.07. Parties in Interest. None of the
parties hereto may assign its rights or delegate any of its
duties under this Agreement without the prior written consent of
each other party. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Nothing contained
in this Agreement, express or implied, is intended to confer any
benefits, rights or remedies upon any person or entity other than
the INTERCO Group and the Converse Group, and the INTERCO and
Converse Indemnitees under Articles IV and V hereof.
Section 10.08. Tax Sharing Agreement; After-Tax
Payments. (a) This Agreement shall not govern any Tax, and any
and all claims, losses, damages, demands, costs, expenses,
liabilities, refunds, deductions, write-offs, or benefits
relating to Taxes shall be exclusively governed by the Tax
Sharing Agreement.
(b) If at the time Converse is required to make any
payment to INTERCO under this Agreement INTERCO owes Converse any
amount under the Tax Sharing Agreement, then such amounts shall
be offset and the excess shall be paid by the party liable for
such excess. Similarly, if at the time INTERCO is required to
make any payment to Converse under this Agreement Converse owes
INTERCO any amount under the Tax Sharing Agreement, then such
amounts shall be offset and the excess shall be paid by the party
liable for such excess.
(c) Except as otherwise provided herein, any amount
payable under Section 4.01 of this Agreement shall be paid in an
"After-Tax Amount" (as defined in the Tax Sharing Agreement).
Section 10.09. Further Assurances and Consents. In
addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto will use its
reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as any
other party may reasonably request in order to effectuate the
purposes of this Agreement and to carry out the terms hereof and
(ii) take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its
reasonable efforts to obtain any consents and approvals and to
make any filings and applications necessary or desirable in order
to consummate the transactions contemplated by this Agreement;
provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents, approvals
and amendments are requested or to take any action or omit to
take any action if the taking of or the omission to take such
action would be unreasonably burdensome to the party, its Group
or its Group's business.
Section 10.10 Arbitration. Resolution of any and all
disputes arising from or in connection with this Agreement,
whether based on contract, tort, statute or otherwise, including,
but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively,
"Disputes") shall be exclusively governed by and settled in
accordance with the provisions of this Section 10.10; provided,
however, that nothing contained herein shall preclude either
party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions
hereof or to preserve the status quo pending resolution of
Disputes hereunder. INTERCO or Converse (each a "Party") may
commence proceedings hereunder by delivering a written notice to
the other Party providing a reasonable description of the Dispute
to the other, and expressly requesting arbitration hereunder.
The parties hereby agree to submit all Disputes to arbitration
under the terms hereof, which arbitration shall be final,
conclusive and binding upon the parties, their successors and
assigns. The arbitration shall be conducted in St. Louis by
three arbitrators acting by majority vote (the "Panel") selected
by agreement of the Parties not later than ten (10) days after
delivery of the Demand or, failing such agreement, appointed
pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed.
The arbitration shall be conducted pursuant to the Federal
Arbitration Act and such procedures as the Parties may agree, or,
in the absence of or failing such agreement, pursuant to the AAA
Rules. Notwithstanding the foregoing: (a) each Party shall have
the right to audit the books and records of the other Party that
are reasonably related to the Dispute; (b) each Party shall
provide to the other, reasonably in advance of any hearing,
copies of all documents which a Party intends to present in such
hearing; (c) each party shall be allowed to conduct reasonable
discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the
nature and extent of which discovery shall be determined by the
Panel, taking into account the needs of the Parties and the
desirability of making discovery expeditious and cost effective.
All hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either party may at its
expense make a stenographic record thereof. The Panel shall
complete all hearings not later than ninety (90) days after its
selection or appointment, and shall make a final award not later
than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The
Panel shall apportion all costs and expenses of arbitration,
including the Panel's fees and expenses and fees and expenses of
experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing,
in no event may the Panel award multiple, punitive or exemplary
damages.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY
BE ENFORCED BY THE PARTIES
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the day and year first above
written.
INTERCO INCORPORATED
By:David P. Howard
Name: David P. Howard
Title: Vice President
CONVERSE INC.
By:Donald J. Camacho
Name: Donald J. Camacho
Title: Senior Vice President
CONVERSE EMEA, LTD.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE STAR I, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE EUROPE, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE BENELUX HOLDING COMPANY, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE EXPORT CO., LTD.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE GERMANY, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE FRANCE, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE BENELUX, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE IBERIA, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
CONVERSE ITALY, INC.
By:Jack A. Green
Name: Jack A. Green
Title: Vice President
Exhibit 99(b)
INTERCO/CONVERSE
TAX SHARING AGREEMENT
AGREEMENT dated as of November 17, 1994, by and among
INTERCO INCORPORATED ("INTERCO"), a Delaware corporation,
Converse Inc. ("Converse"), a Delaware corporation, and
Converse's domestic affiliates that are signatories to this
Agreement (each a "Converse Subsidiary").
WHEREAS, INTERCO and Converse are parties to a
Distribution Agreement dated as of November 17, 1994 (the
"Distribution Agreement"), providing for the distribution by
INTERCO of the stock of Converse;
WHEREAS, INTERCO and Converse desire to set forth their
agreement on the proper allocation among INTERCO, Converse and
their Affiliates of foreign, federal, state and local Taxes
incurred in taxable periods beginning prior to (and in certain
respects, subsequent to) the Distribution Date and their
respective obligations in respect of same;
NOW, THEREFORE, in consideration of their mutual
promises, the parties hereby agree as follows:
1. Definitions.
(a) As used in this Agreement:
Capitalized terms not otherwise defined herein are
used as defined in the Distribution Agreement.
"Affiliate" of any person means any person,
corporation, partnership or other entity directly or indirectly
controlling, controlled by or under common control with such
person excluding any shareholder of INTERCO. References herein
to an Affiliate of INTERCO shall mean any Affiliate of INTERCO
excluding, on and after the Distribution Date, Converse and all
shareholders of Converse. References herein to an Affiliate of
Converse, on and after the Distribution Date, shall exclude
INTERCO and all shareholders of Converse.
"After-Tax Amount" means an amount that shall be equal
to the hypothetical after-Tax amount of the indemnity payment due
hereunder, taking into account the hypothetical Tax consequences
of the payments or accruals of the amounts which give rise to the
indemnity obligation. References to "after-Tax basis",
"hypothetical Tax consequences" and "hypothetical after-Tax
amount" refer to calculations of Tax at the maximum statutory
rate (or rates, in the case of an item that affects more than one
Tax) applicable to a INTERCO Indemnitee or a Converse Indemnitee,
as the case may be, for the relevant year.
"Applicable Rate" means the interest rate determined
under the provisions of sections 6621 and 6622 of the Code.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Consolidated State Tax" means, with respect to each
State, any income or franchise Tax payable to any such State in
which Converse or any of its Subsidiaries is or may be liable for
such Tax on a consolidated, combined or unitary basis with
INTERCO or any of its Affiliates.
"Federal Tax" means any United States Federal net
income, environmental, excise, alternative or add-on minimum Tax.
"Final Determination" means (i) with respect to Federal
Taxes, (A) a "determination" as defined in section 1313(a) of the
Code, or (B) the date of acceptance by or on behalf of the
Internal Revenue Service of Form 870-AD (or any successor form
thereto) as a final resolution of tax liability for any taxable
period, except that a Form 870-AD (or successor form thereto)
that reserves the right of the taxpayer to file a claim for
refund and/or the right of the Internal Revenue Service to assert
a further deficiency shall not constitute a Final Determination
with respect to the item or items so reserved; (ii) with respect
to Taxes other than Federal Taxes, any final determination of
liability in respect of a Tax provided for under applicable law;
(iii) any final disposition by reason of the expiration of the
applicable statute of limitations; and (iv) the payment of Tax by
INTERCO or Converse, or any of their Affiliates, whichever is
responsible for payment of such Tax under applicable law, with
respect to any item disallowed by a Taxing Authority, provided
that the provisions of Section 6(b) hereof have been complied
with, or, if such Section 6(b) is inapplicable, that the party
responsible under the terms of this Agreement for such Tax is
notified by the party paying such Tax that it has determined that
no action should be taken to recoup such disallowed item, and the
other party agrees with such determination.
"Converse Group" means Converse and each member, if
any, of the affiliated group of corporations of which Converse
(or any successor in interest by merger or otherwise) will be the
common parent (within the meaning of section 1504 of the Code).
"Converse Indemnitee" is defined in Section 2(f).
"Income Taxes" is defined as any Federal Tax, state or
local income or franchise tax or other tax measured by income and
all other taxes reported on returns which include federal, state
or local income or franchise taxes or other taxes measured by
income, together with any interest, penalties or additions to tax
imposed with respect thereto, but excluding therefrom any taxes
imposed by any foreign government or subdivision thereof.
"Income Tax Returns" is defined as any federal, state
or local consolidated or separate Tax Return which reports Income
Taxes of INTERCO, Converse or any Affiliate thereof.
"Indemnitee" is defined in Section 6(b).
"Other Taxes" are defined in Section 4.
"INTERCO Consolidated Group" means, with respect to any
taxable period, the corporations which are members of the
affiliated group of corporations of which INTERCO is the common
parent (within the meaning of section 1504) of the Code.
"INTERCO Group" means, with respect to any taxable
period, the corporations which are members of the INTERCO
Consolidated Group during such period, excluding the corporations
which are included in the Converse Group.
"INTERCO Indemnitee" is defined in Section 2(g).
"Post-Distribution Tax Period" is defined in Section
3(a).
"Pre-Distribution Tax Liability" means (i) the Federal
Tax liability of INTERCO and each corporation included in the
INTERCO Consolidated Group for any period as to which a
consolidated Federal Tax return was or will be filed by INTERCO
for such group, (ii) the Consolidated State Tax liability of any
consolidated, combined or unitary group which includes both
INTERCO or any of its Affiliates (excluding Converse and its
Affiliates) and Converse and its Affiliates (each a "State
Consolidated Group") and (iii) any other Income Taxes of INTERCO
or any of its Affiliates or of Converse and its Affiliates for
any taxable period ending prior to the Distribution Date or
allocated to any such party pursuant to Section 2(d) of this
Agreement for any taxable period ending prior to the Distribution
Date regardless of whether any such liability has been previously
assessed in whole or in part or is assessed in whole or in part
after the date hereof, or whether such liability is or was
imposed on the INTERCO Consolidated Group or a State Consolidated
Group collectively or on any corporation included within any such
Group separately, but excluding therefrom any taxes imposed by
any foreign government or subdivision thereof.
"Pre-Distribution Tax Period" is defined in Section
3(a).
"Tax" means (A) any net income, alternative or add-on
minimum, gross income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment,
excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
to tax or additional amount imposed by any governmental authority
responsible for the imposition of any such domestic or foreign
tax (a "Taxing Authority"); and (B) any liability of Converse,
INTERCO or any Affiliate (or, in each case, any successor in
interest thereto by merger or otherwise), as the case may be, for
the payment of any amounts of the type described in clause (A)
for any taxable period resulting from the application of Treasury
Regulation Section 1.1502-6 or, in the case of any Consolidated
State Tax, any similar provision applicable under State law.
"Tax Affiliate" shall mean, with respect to a company,
any member of an affiliated group as defined in section 1504 of
the Code, or member of a combined or unitary group of which such
company is or was a member.
"Tax Counsel" means a nationally recognized,
independent Tax counsel selected by INTERCO and approved (which
approval may not be unreasonably withheld) by Converse.
"Tax Reserves" means the reserves for any current Tax
liability (not including any deferred or prepaid income tax
accounts), as shown on the unaudited, consolidated and combined
balance sheet of Converse and its Affiliates prepared by INTERCO
as of the day preceding the Distribution Date, and in the case of
any such reserves for any taxable period including the date
immediately preceding the Distribution Date, as such reserves may
be adjusted on or after the Distribution Date for adjustments in
or to the deferred income tax accounts (including both deferred
and prepaid items) in accordance with INTERCO's customary
procedures for adjusting such reserves in connection with the
preparation and filing of INTERCO's tax returns.
"Tax Return" means all reports, estimates, extensions,
information statements and returns relating to or required by law
to be filed by Converse and its Affiliates in connection with any
Taxes and in the case of consolidated or combined tax returns, by
INTERCO on behalf of Converse and its Affiliates, and all
information returns (e.g., Form W-2, Form 1099) and reports
relating to Taxes and employee benefit plans of Converse and its
Affiliates.
(b) Any term used in this Agreement which is not
defined in this Agreement or in the Distribution Agreement shall,
to the extent the context requires, have the meaning assigned to
it in the Code or applicable Treasury Regulations thereunder.
2. Income Taxes.
(a) Applicable Agreements. Except as provided in
this Agreement, all tax-sharing agreements or similar agreements
with respect to or involving Converse or any of its Affiliates
shall be terminated effective on the day preceding the
Distribution Date and, on and after the Distribution Date,
neither Converse nor any of its Affiliates shall be bound thereby
or have any liability thereunder on amounts due in respect of
periods prior to the Distribution Date. On and after the
Distribution Date, this Agreement shall constitute the sole Tax
sharing agreement between (i) INTERCO and its Affiliates and (ii)
Converse and its Affiliates.
(b) Filing Returns.
(i) INTERCO shall prepare (or cause to be
prepared) and file (or cause to be filed) the Consolidated
Federal Income Tax Return of INTERCO's Consolidated Group and all
other consolidated, combined or unitary Tax Returns of INTERCO or
its Tax Affiliates which include Converse, and shall report the
operations of Converse and its Affiliates in such Tax Returns for
all taxable periods of Converse and its Affiliates ending prior
to the Distribution Date.
(ii) Converse shall be responsible for preparing
and filing all Income Tax Returns required to be filed by or on
behalf of Converse or any of its Affiliates, for all taxable
periods beginning on or after the Distribution Date. Those
Income Tax Returns which include any taxable period beginning
before and ending on or after the Distribution Date shall be
prepared and filed by Converse on a basis which is consistent
with the manner in which INTERCO or its Tax Affiliates filed such
Tax Returns in the past, unless a contrary treatment is required
by law.
(c) Copies of Returns Provided. With respect to
any Income Tax Return required to be filed by INTERCO for a
taxable period which includes (but does not close on) the day
immediately preceding the Distribution Date, INTERCO shall
provide Converse and its authorized representatives with copies
of their pro-forma portion of the Federal Return in accordance
with past practice. INTERCO shall also provide to Converse and
its authorized representatives a statement certifying the amount
of Tax shown on such tax returns that is allocable to Converse
pursuant to Section 2(d) hereof (the "Statement") at least 15
business days prior to the due date for the filing of such Tax
Return, and Converse and its authorized representatives shall
have the right to review such Tax Return (or pro-forma Federal
return) and Statement prior to the filing of such Tax Return.
(d) Allocation of Tax Liability. The
distribution of Converse stock shall be effective for Income
SL01 223349.2 5<PAGE>
Taxes purposes in all taxing jurisdictions as of the day
immediately preceding the Distribution Date (even though the laws
of a particular Taxing jurisdiction do not recognize a short Tax
period in respect of the distribution of Converse). With respect
to the tax returns referred to in Section 2(b)(i), all income,
deductions, losses, gains and credits incurred before the
Distribution Date shall be reported on returns prepared by
INTERCO.
In order to allocate any Income Taxes
relating to a taxable period that includes but that would not,
except for this Section 2(d), close on the day immediately
preceding the Distribution Date, INTERCO and Converse will elect,
or direct Converse's Affiliates to elect, with the relevant state
and local Taxing Authority, to the extent permitted by applicable
law, to close the taxable period of Converse and its Affiliates
on the day immediately preceding the Distribution Date. In any
case where applicable law does not permit Converse or its
Affiliates to close its taxable year on the day immediately
preceding the Distribution Date, the Income Taxes, if any,
attributable to the taxable period of Converse and its Affiliates
that includes the day immediately preceding the Distribution Date
shall be allocated to INTERCO for the portion of the taxable
period up to and including the Distribution Date only to the
extent such Income Taxes exceed the applicable Tax Reserves and
to Converse and its Affiliates to the extent of such Tax
Reserves, and to Converse and its Affiliates for the portion of
the taxable period commencing on the Distribution Date.
For purposes of this Section 2(d) hereof, the
Income Taxes for the portion of the taxable period up to but
excluding the Distribution Date shall be determined on the basis
of an interim closing of the books as of the day immediately
preceding the Distribution Date.
(e) Tax Refunds. INTERCO shall be entitled to,
and Converse agrees to promptly pay to INTERCO, an amount equal
to all foreign, federal, state and local tax refunds and interest
thereon (including, without limitation, as a credit or offset
against any other Taxes) (collectively "Refunds"), if any,
received by Converse or its Affiliates to the extent attributable
to any Taxes for which INTERCO has indemnified Converse and its
Affiliates pursuant to this Agreement.
(f) INTERCO Indemnification. INTERCO will
indemnify Converse and its Affiliates (each a "Converse
Indemnitee") against and hold them harmless from (i) any Pre-
Distribution Tax Liability and (ii) all liability for fees, costs
and expenses (including reasonable attorneys' fees) arising out
of or incident to any proceeding before any Taxing Authority or
any judicial authority with respect to any amount indemnifiable
under this sentence of this Section 2(f); provided, however, the
amount indemnifiable pursuant to this Section 2(f) is limited to
SL01 223349.2 6<PAGE>
the extent (A) any such tax liability exceeds the aggregate Tax
Reserves and (B) further limited to the extent the After-Tax
Amount of such indemnified tax liability exceeds $25,000.
INTERCO will indemnify each Converse Indemnitee against and hold
them harmless from the Income Taxes referred to in Section 2(j)
hereof.
(g) Converse Indemnification. Converse and each
Converse Subsidiary will jointly and severally indemnify INTERCO
and each member of the INTERCO Group (each an "INTERCO
Indemnitee") against and hold them harmless from (i) any
liability resulting from any Income Taxes of Converse or any of
its Affiliates with respect to any taxable period beginning on or
after the Distribution Date or any Income Taxes of Converse or
any of its Affiliates allocated to such party for any taxable
period commencing on the Distribution Date pursuant to section
3(d) hereof and (ii) all liability for fees, costs and expenses
(including reasonable attorneys' fees) arising out of or incident
to any proceedings before any Taxing Authority or any judicial
authority with respect to any amount indemnifiable under this
Section 2(g) or under Section 3(c); provided that the amount
indemnified pursuant to this sentence of this Section 2(g) shall
apply only to the extent the After-Tax Amount of such indemnified
tax liability exceeds $25,000. Converse and each Converse
Subsidiary will jointly and severally indemnify each INTERCO
Indemnitee against and hold them harmless from any liability
resulting from any Income Taxes of Converse or any of its
Affiliates with respect to any taxable period ending before the
Distribution Date or any Income Taxes of Converse or any of its
Affiliates allocated to such party for any taxable period ending
on the Distribution Date to the extent that such liability is
reflected in any Tax Reserve of Converse or any of its
Affiliates. If INTERCO is obligated to pay, or indemnify any
Converse Indemnitee in respect of, any tax of a Converse
Indemnitee by reason of any tax audit or other tax adjustment in
respect of a Pre-Distribution Tax Period and such adjustment
gives rise to an increase to any prepaid item in the Tax Reserves
of any Converse Indemnitee, Converse and each Converse Subsidiary
hereby jointly and severally agree to pay to INTERCO an amount
equal to such increase in such prepaid item, subject to Section
2(h) hereof.
(h) Indemnification Payments. INTERCO and
Converse and any Affiliate of Converse shall discharge their
obligations under Sections 2(f) and 2(g) hereof, respectively, by
paying an After-Tax Amount within 30 days of demand therefor.
Notwithstanding the foregoing, if either Converse or INTERCO
disputes in good faith the fact or the amount of an obligation
under Section 2(f) or 2(g), then no payment shall be required
until any such good faith dispute is resolved in accordance with
Section 13(b) hereof; provided, however, that any amount not paid
within 30 days of demand therefor shall bear interest at the
SL01 223349.2 7<PAGE>
Applicable Rate from the date on which such demand was made until
the date of payment.
(i) Filing Authorization. Converse and each
Converse Subsidiary hereby designates INTERCO as their agent (and
the agent of all Converse Affiliates) for the purpose of taking
any and all actions necessary or incidental to the filing of any
Federal or Consolidated State Tax Return, any Income Tax Return
for any taxable period including a period beginning before the
Distribution Date or any amended Federal or Consolidated State
Tax Return of any claim for refund of Tax attributable to any
period during which Converse was a member of the INTERCO
Consolidated Group or any State Consolidated Group, and INTERCO
shall keep Converse reasonably informed of all actions to be
taken on behalf of Converse. Converse shall provide INTERCO with
a Power of Attorney in respect of the filing of such returns.
(j) Taxes on Distribution. Any tax liability for
Income Taxes attributable to the distribution by INTERCO of
Converse stock pursuant to the Distribution Agreement shall be
and remain the sole liability of INTERCO and neither Converse nor
any Affiliate thereof shall have any responsibility therefor.
3. Carrybacks; Other Tax Adjustments.
(a) INTERCO, in its absolute and sole discretion,
will permit the use in any taxable period beginning before the
Distribution Date (a "Pre-Distribution Tax Period") of a
carryback of any net operating loss, net capital loss, investment
Tax credit, foreign Tax credit, charitable deduction or any other
credit or Tax attribute of Converse to reduce the Federal Tax or
Consolidated State Taxes, including, without limitation,
deductions and credits related to alternative minimum Taxes (each
a "Tax Asset") arising in a taxable period beginning on or after
the Distribution Date (a "Post-Distribution Tax Period") of
INTERCO or any Affiliate. Such benefit shall be considered equal
to (i) the excess of the amount of Federal or Consolidated State
Taxes, as the case may be, that would have been payable by the
INTERCO Consolidated Group or any relevant State Consolidated
Group in the absence of such carryback over (ii) the amount of
Federal or Consolidated State Taxes, as the case may be, actually
payable by the INTERCO Consolidated Group or relevant State
Consolidated Group. INTERCO shall pay to Converse 50% of the
benefit of such Tax Asset. Payment of the amount of such benefit
shall be made within 30 days of the receipt by INTERCO of any
refund, credit or other offset attributable thereto.
(b) At Converse's request and expense, INTERCO
shall undertake those actions reasonably necessary to enable
Converse to receive the benefit of any Tax Asset.
(c) If, subsequent to the payment by INTERCO to
Converse of any amount referred to in Section 3(a) above, there
SL01 223349.2 8<PAGE>
shall be (A) a Final Determination under applicable law of a
deficiency of Federal or State Consolidated Taxes of the INTERCO
Consolidated Group or the relevant State Consolidated Group on
the grounds that the Tax Asset giving rise to such payment was in
fact not available in whole or in part, or (B) a Final
Determination resulting from an audit of Converse or any of its
Affiliates (or any successor thereto) which results in a
reduction of any Tax Asset so carried back, Converse shall repay
to INTERCO, within 30 days of such Final Determination, an After-
Tax Amount reflecting the amount which would not have been
payable to Converse pursuant to this Section 3 had the amount of
the benefit been determined in light of such event.
(d) INTERCO agrees to pay Converse the detriment
to Converse and its Affiliates (or any successor thereto) from an
adjustment to the Pre-Distribution Tax Liability of the INTERCO
Consolidated Group which results in an increase of Converse's or
any Affiliate's liability for any Post-Distribution Tax Period.
Converse agrees to pay INTERCO the benefit received by Converse
or any Affiliate (or any successor thereto) from an adjustment to
the Pre-Distribution Tax Liability of the INTERCO Consolidated
Group which results in a reduction of Converse's or any
Affiliate's liability for any Post-Distribution Tax Period. Such
detriment/benefit shall be considered equal to the difference
between the amount of Federal or State Taxes, as the case may be,
that would have been payable by Converse or any Affiliate over
the amount of Federal or State Taxes, as the case may be,
actually payable by Converse or any Affiliate, taking into
account such adjustment. Payment of such detriment/benefit shall
be made within 30 days of the filing of applicable Federal or
State Tax Return (including, without limitation, any amended or
estimated return) for the taxable period for which the benefit is
utilized. Converse agrees to file such an applicable Tax Return
as soon as practicable after receiving notice from INTERCO to the
effect that such an adjustment to the Pre-Distribution Tax
Liability had been made.
4. Other Taxes.
Liability for all Taxes other than Income Taxes ("Other
Taxes") of Converse or any of its Affiliate shall be the sole
responsibility of Converse or any such Affiliate, and liability
for all Other Taxes that are attributable to INTERCO or any of
its Affiliates shall be the sole responsibility of INTERCO or any
such Affiliate. Each party agrees to indemnify and hold the
other harmless in accordance with such undertaking.
Any Tax liabilities (including, but not limited to,
sales Tax, stock transfer Tax, documentary Tax, and stamp Tax)
attributable to the distribution by INTERCO of Converse stock
pursuant to the Distribution Agreement shall be and remain the
sole liability of INTERCO and neither Converse nor any Affiliate
thereof shall have any responsibility therefor.
SL01 223349.2 9<PAGE>
5. Additional Covenants.
(a) Converse and INTERCO shall cooperate (and
shall cause each of their Affiliates to cooperate) fully at such
time and to the extent reasonably requested by the other party in
connection with the preparation and filing of any return, claim
for a refund or other claim with respect to Taxes or the conduct
of any audit, dispute, proceeding, suit or action concerning any
return, amounts indemnifiable hereunder or any other matter
contemplated hereunder. Such cooperation shall include, without
limitation, (i) the retention and provision for inspection on
reasonable request of books, records, documentation or other
information relating to any return until the expiration of the
applicable statute of limitation (giving effect to any extension,
waiver of mitigation thereof); (ii) the provision of additional
information and explanation of material provided under clause (i)
of this Section 5(a); (iii) the execution of any document that
may be necessary or helpful in connection with the filing of any
return by INTERCO of any Affiliate of INTERCO, or by Converse or
any Affiliate, or any audit, proceeding, suit or action addressed
in the preceding sentence; and (iv) the use of the parties' best
efforts to obtain any documentation from a governmental authority
or a third party that may be necessary or helpful in connection
with the foregoing.
(b) INTERCO and Converse, as the case may be,
shall promptly furnish to the other upon receipt a copy of any
revenue agent's report or similar report, notice of proposed
adjustment, or notice of deficiency received by INTERCO, any
Affiliate of INTERCO, or Converse, as the case may be, relating
to the other party's (or its Affiliate's) obligations under
Sections 2 or 3 hereof, or any adjustment referred to in Section
5(c) hereof. INTERCO and Converse shall cooperate to keep each
other fully informed with respect to any development relating to
all matters described in this Agreement.
(c) INTERCO and Converse shall advise each other
with respect to any proposed Tax adjustments relating to the
INTERCO Consolidated Group or any State Consolidated Group which
are the subject of any Internal Revenue Service or State Taxing
Authority, audit or investigation, or are the subject of any
proceeding or litigation, and which may affect any Tax attribute
of Converse, INTERCO or any Affiliate of INTERCO (including, but
not limited to, basis in an asset or the amount of earnings and
profits).
(d) INTERCO shall not without the prior written
consent of Converse modify or make any election (except as
required by law) with respect to Taxes affecting or binding on
Converse or any of its Affiliates for any taxable period
beginning on or after the Distribution Date. Converse shall not
without the prior written consent of INTERCO modify or make any
election (except as required by law) with respect to Taxes
SL01 223349.2 10<PAGE>
affecting or binding on INTERCO or any of its Affiliates for any
taxable period beginning before the Distribution Date.
6. Cooperation and Contest.
(a) INTERCO shall have control over all matters
in respect of any Tax Return filed by the INTERCO, or any Tax
audit, dispute or proceeding (whether administrative or judicial)
relating to any Tax matters in respect of any Tax Return filed by
INTERCO. INTERCO shall promptly notify Converse of any inquiries
from the Internal Revenue Service or any State Taxing Authority
which relate to matters described in Sections 2(g) and 3.
Converse shall have control over all matters in respect of any
Tax Returns filed by Converse and any Tax audit, dispute or
proceeding related thereto. Converse shall promptly notify
INTERCO of any inquiries from the Internal Revenue Service or any
State Taxing Authority which relate or may relate to matters
described in Sections 2(f) and 3.
(b) No settlement of any Internal Revenue Service
or State Taxing Authority audit relating to any matter which
would cause a payment under Section 2(f), Section 2(g) or Section
3 shall be accepted or entered into by or on behalf of the party
entitled to receive a payment under Section 2(f), Section 2(g) or
Section 3, whichever is applicable (the "Indemnitee"), unless (x)
the party ultimately responsible for such payment under Section
2(f), Section 2(g) or Section 3, whichever is applicable (the
"Indemnitor"), consents thereto in writing (which consent shall
not be unreasonably withheld), or (y) the Indemnitor has provided
the Indemnitee with an opinion of Tax Counsel that there is a
reasonable basis for the Indemnitor's position.
(c) In the event that a judgment of the United
States Tax Court or other court of competent jurisdiction results
in an adverse determination with respect to any issue which would
cause Converse to pay INTERCO any amount under Sections 2(g) or
3, Converse shall have the right to cause INTERCO to appeal from
such adverse determination at Converse's expense if Converse
delivers to INTERCO an opinion from Tax Counsel that such appeal
will more likely than not succeed.
7. Payments.
All Payments to be made hereunder shall be made in
immediately available funds and, unless otherwise provided
herein, within 30 days of the date determined herein.
8. Notices.
All notice, demand, claim, or other communication under
this Agreement shall be in writing and shall be deemed to have
been given upon the delivery or mailing thereof, as the case may
be, if delivered personally or sent by certified mail, return
SL01 223349.2 11<PAGE>
receipt requested, postage prepaid, to the parties at the
following addresses (or at such other address as a party may
specify by notice to the other):
If to the INTERCO, to:
INTERCO INCORPORATED
TAX DEPARTMENT
101 S. Hanley
St. Louis, MO 63105
If to Converse, to:
Converse Inc.
Chief Financial Officer
One Fordham Road
North Reading, Massachusetts 01864-3680
9. Costs and Expenses.
Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to
this Agreement. INTERCO shall receive reimbursement for any
expenses in respect of any Return filed by INTERCO on behalf of
Converse. Such expenses shall include any services performed by
INTERCO on behalf of Converse at the rate of $50 per hour.
10. Termination and Survival.
Notwithstanding anything in this Agreement to the
contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable
statutes of limitation (giving effect to any extension, waiver or
mitigation thereof).
11. Section Headings.
The section headings contained in this Agreement are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Amendments; No Waivers.
(a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by INTERCO and
Converse or in the case of a waiver, by the party against whom
the waiver is to be effective.
SL01 223349.2 12<PAGE>
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
13. Governing Law and Interpretation.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
(b) Any disagreement between the parties hereto
with respect to the provisions of Sections 2(a) through 2(j) and
Section 3 hereof not resolved by mutual agreement of the parties
shall be resolved by an internationally recognized, independent
accounting firm maintaining an office in St. Louis, Missouri
chosen by and mutually acceptable to the parties hereto (an
"Accounting Referee") within 5 days from the date the need to
choose such Accounting Referee arises unless one of the parties
hereto refuses to cooperate in such choice of Accounting Referee
or refuses to submit to arbitration, in which case such
Accounting Referee shall be chosen by the other party in its sole
discretion. An Accounting Referee so chosen shall resolve any
such disagreement within 30 days of appointment pursuant to such
procedures as it may deem advisable. Any such resolution shall
be binding on the parties hereto without further recourse. If
the parties are unable to choose an Accounting Referee pursuant
to this Section 13(b) because of an inability to agree on an
Accounting Referee that is independent and unbiased with respect
to each of the parties hereto, then the disagreements governed by
this Section 13(b) shall be settled by arbitration in the City of
St. Louis, State of Missouri in accordance with the Rules of the
American Arbitration Association, and judgment upon the award so
rendered may be entered in any court having jurisdiction thereof.
The cost and expense of such Accounting Referee (but not the cost
of expense of the separate counsel of each party) shall be shared
by the parties hereto as determined by the Accounting Referee
based on the outcome of such dispute.
14. Counterparts.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
15. Assignment.
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, provided that no party may assign, delegate or
SL01 223349.2 13<PAGE>
otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS
WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the day and year first above
written.
INTERCO INCORPORATED Converse Inc.
By:David P. Howard By:Donald J. Camacho
Its: Vice President
Converse Star I, Inc. Converse Germany, Inc.
By:Jack A. Green By:Jack A. Green
Converse EMEA, Ltd. Converse Benelux Holding
Company, Inc.
By:Jack A. Green By:Jack A. Green
Converse Europe, Inc. Converse Iberia, Inc.
By:Jack A. Green By:Jack A. Green
Converse Benelux, Inc. Converse France, Inc.
By:Jack A. Green By:Jack A. Green
Converse Italy, Inc.
By:Jack A. Green
SL01 223349.2 14<PAGE>
Exhibit 99(c)
DISTRIBUTION AND SERVICES AGREEMENT
dated as of
November 17, 1994
between
INTERCO INCORPORATED
and
THE FLORSHEIM SHOE COMPANY
and the
OTHER ENTITIES LISTED
ON THE SIGNATURE PAGES HEREOF<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . 2
Section 1.01. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE DISTRIBUTION . . . . . . . . . . 6
Section 2.01. Cooperation Prior to the Distribution . . . . 6
Section 2.02. INTERCO Board Action; Conditions Precedent to
the Distribution . . . . . . . . . . . . . . . 7
Section 2.03. The Distribution . . . . . . . . . . . . . . . 8
Section 2.04. Sale of Fractional Shares and Odd Lot Shares . 9
Section 2.05. Fees and Expenses of Distribution Agent. . . . 9
ARTICLE III
TRANSITION ARRANGEMENTS . . . . . . . . 9
Section 3.01. Conduct of Florsheim Business Pending
Distribution . . . . . . . . . . . . . . . . . 9
Section 3.02. Revolving Credit Agreement . . . . . . . . . . 9
Section 3.03. Repayment of Allocable Debt . . . . . . . . . 9
Section 3.04. Intercompany Accounts . . . . . . . . . . . . 10
Section 3.05. Certain Intellectual Property Matters . . . 10
ARTICLE IV
INDEMNIFICATION . . . . . . . . . . 11
Section 4.01. Florsheim Indemnification of the INTERCO
Group . . . . . . . . . . . . . . . . . . . . 11
Section 4.02. INTERCO Indemnification of the Florsheim
Group . . . . . . . . . . . . . . . . . . . . 11
Section 4.03. Insurance and Third Party Obligations . . . . 11
SL01 203174.18 i
Page
ARTICLE V
INDEMNIFICATION PROCEDURES . . . . . . . 11
Section 5.01. Notice and Payment of Claims . . . . . . . . . 11
Section 5.02. Notice and Defense of Third-Party Claims . . . 12
ARTICLE VI
SERVICES . . . . . . . . . . . . 13
Section 6.01. Provision of Services . . . . . . . . . . . . 13
Section 6.02. Risk Management . . . . . . . . . . . . . . . 13
Section 6.03. Reimbursement . . . . . . . . . . . . . . . . 14
ARTICLE VII
EMPLOYEE MATTERS . . . . . . . . . . 14
Section 7.01. General . . . . . . . . . . . . . . . . . . . 14
Section 7.02. Pension . . . . . . . . . . . . . . . . . . . 14
Section 7.03. Savings Plans . . . . . . . . . . . . . . . . 15
Section 7.04. Stock Options . . . . . . . . . . . . . . . . 17
Section 7.05. Health and Welfare Plans . . . . . . . . . . . 17
Section 7.06. Multiemployer Pension Plans . . . . . . . . . 18
Section 7.07. No Third Party Beneficiaries . . . . . . . . . 19
ARTICLE VIII
INTERCO GUARANTEES . . . . . . . . . 19
Section 8.01. Performance of Guaranteed Leases . . . . . . . 19
Section 8.02. Termination . . . . . . . . . . . . . . . . . 21
Section 8.03 Dun & Bradstreet . . . . . . . . . . . . . . . 21
SL01 203174.18 ii
Page
ARTICLE IX
INFORMATION . . . . . . . . . . . 22
Section 9.01. Provision of Corporate Records . . . . . . . . 22
Section 9.02. Access to Information . . . . . . . . . . . . 22
Section 9.03. Litigation Cooperation . . . . . . . . . . . . 22
Section 9.04. Reimbursement . . . . . . . . . . . . . . . . 22
Section 9.05. Retention of Records . . . . . . . . . . . . . 22
Section 9.06. Confidentiality . . . . . . . . . . . . . . . 23
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . 23
Section 10.01. Expenses . . . . . . . . . . . . . . . . . . . 23
Section 10.02. Notices . . . . . . . . . . . . . . . . . . . 24
Section 10.03. Amendment and Waiver . . . . . . . . . . . . . 24
Section 10.04. Counterparts . . . . . . . . . . . . . . . . . 24
Section 10.05. Governing Law . . . . . . . . . . . . . . . . 24
Section 10.06. Entire Agreement . . . . . . . . . . . . . . . 24
Section 10.07. Parties in Interest . . . . . . . . . . . . . 25
Section 10.08. Tax Sharing Agreement; After-Tax Payments . . 25
Section 10.09. Further Assurances and Consents . . . . . . . 25
Section 10.10. Arbitration . . . . . . . . . . . . . . . . . 26
SL01 203174.18 iii
DISTRIBUTION AND SERVICES AGREEMENT
DISTRIBUTION AND SERVICES AGREEMENT ("Agreement") dated
as of November 17, 1994 by and between INTERCO INCORPORATED, a
Delaware corporation (together with its successors and permitted
assigns, "INTERCO") and The Florsheim Shoe Company, a Delaware
corporation (together with its successors and permitted assigns,
"Florsheim"), and the other entities listed on the signature
pages hereof.
RECITALS
A. Florsheim is presently a wholly-owned subsidiary of
INTERCO.
B. Pursuant to the Capital Contribution Agreement (as
defined herein) INTERCO has contributed to Florsheim all of the
assets, properties, rights, contracts, claims, operations and
business of the Florsheim Business (as defined herein) and
Florsheim has agreed to assume, pay, perform and discharge (or
cause to be paid, performed and discharged) any and all debts,
losses, liabilities, claims, damages, obligations, payments,
costs and expenses to the extent arising out of or relating to
the business and operations of the Florsheim Business (such
contribution and assumption being referred to herein as the
"Reorganization").
C. The Board of Directors of INTERCO has determined
that it is in the best interest of INTERCO and the stockholders
of INTERCO to distribute (the "Distribution") to the holders of
INTERCO Common Stock (as defined herein) all of the outstanding
shares of Florsheim Common Stock (as defined herein).
D. It is the intention of the parties that the
Distribution will not be taxable to the stockholders of INTERCO
(pursuant to Section 355 of the Code (as defined herein)), and
that the Reorganization and Distribution together constitute a
reorganization under Section 368(a)(1)(D) of the Code.
E. The parties have determined that it is necessary
and desirable to set forth the principal corporate transactions
required to effect the Distribution and to set forth other
agreements that will govern certain other matters following such
Distribution.
F. In connection with the Distribution, INTERCO is
concurrently herewith entering into the Tax Sharing Agreement (as
defined herein) with Florsheim and its subsidiaries.
SL01 203174.18 1
G. INTERCO is entering into the Converse Distribution
Agreement (as defined herein) providing for a distribution of the
Converse Common Stock (as defined herein) in connection with the
Distribution.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual agreements, provisions and covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used herein, the
following terms have the following meaning:
"Action" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental
or other regulatory or administrative agency or commission or any
other tribunal.
"Allocable Debt" means that portion of the debt of
INTERCO and/or its subsidiaries allocated to members of the
Florsheim Group pursuant to the Allocation Agreement.
"Allocation Agreement" means that certain Allocation
Agreement dated January 27, 1993 by and among INTERCO, Florsheim
and other members of the INTERCO Group and the Florsheim Group.
"Ancillary Agreements" means all of the agreements,
instruments, understandings, assignments and other arrangements
entered into in connection with the transactions contemplated
hereby, including, without limitation, the Tax Sharing Agreement.
"Assumed Liabilities" means the Liabilities arising
from the conduct or operation of the Florsheim Business or the
ownership or use of assets or other activities in connection
therewith, whether arising before, on or after the Distribution
Date, including but not limited to the Allocable Debt, any
Liabilities arising in connection with the Form 10 or the
Registration Statement, and any Liabilities set forth or
referenced in the audited financial statements of Florsheim
included in the Form 10. Notwithstanding the foregoing, Assumed
Liabilities shall not include (i) any debt of the INTERCO Group
for money borrowed (including but not limited to any such debt
evidenced by a note, debenture or other instrument) other than
the Allocable Debt, (ii) (X) any third party claims arising from
the conduct or operation of the Florsheim Business or the
ownership or use of assets in connection therewith prior to the
SL01 203174.18 2
Distribution Date if and only to the extent that such claims
("Covered Claims") are covered by the insurance of INTERCO (other
than insurance related to matters described in Article VII, which
shall be dealt with as described therein), (Y) any self-insured
retention for such Covered Claims that would be covered but for
such retention, and (Z) any letters of credit of INTERCO in favor
of an insurance carrier relating to such retention, (iii) any
Liability specifically retained by INTERCO pursuant to Article
VII hereof or (iv) any claims, losses, damages, demands, costs,
expenses or liabilities for any Tax (which shall be governed by
the Tax Sharing Agreement), but shall include any Liabilities
arising out of the Guaranteed Leases.
"Capital Contribution Agreement" means that certain
Capital Contribution Agreement dated October 1, 1994 by and
between INTERCO and Florsheim.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange
Commission.
"Converse Common Stock" means the Common Stock, no par
value, of Converse.
"Converse" means Converse Inc., a Delaware corporation
and a wholly-owned subsidiary of INTERCO.
"Converse Credit Facility" means a secured revolving
credit and term loan facility for Converse in the amount of $200
million.
"Converse Distribution" means the distribution of
Converse Common Stock to the shareholders of INTERCO pursuant to
the Converse Distribution Agreement.
"Converse Distribution Agreement" means that certain
distribution agreement by and among INTERCO, Converse and the
subsidiaries of Converse relating to the distribution of Converse
Common Stock by INTERCO to the shareholders of INTERCO.
"Converse Form 10" means the registration statement on
Form 10 filed by Converse with the Commission to effect the
registration of the Converse Common Stock pursuant to the
Exchange Act, as such registration statement may be amended from
time to time.
"Credit Facility" means a secured credit facility for
Florsheim in the amount of $75 million for (i) the repayment of
a portion of the Allocable Debt and (ii) Florsheim's capital
SL01 203174.18 3
expenditures and any additional working capital needs following
the Distribution.
"Distribution Agent" means KeyCorp Shareholder
Services, Inc.
"Distribution Date" means the business day as of which
the Distribution shall be effective, as determined by the Board
of Directors of INTERCO or the Executive Committee thereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Florsheim Business" means the business of
manufacturing, wholesaling and retailing of quality footwear as
conducted by The Florsheim Shoe Company division of INTERCO
(including without limitation any former division or subsidiary
operated in conjunction therewith) or the Florsheim Group or the
International Shoe Company or Florind Shoes Limited.
"Florsheim Bylaws" means the bylaws of Florsheim in the
form filed as an exhibit to the Form 10.
"Florsheim Certificate" means the restated certificate
of incorporation of Florsheim in the form filed as an exhibit to
the Form 10.
"Florsheim Common Stock" means the outstanding shares
of common stock, no par value, of Florsheim.
"Florsheim Group" means Florsheim and the Florsheim
Subsidiaries.
"Florsheim Liabilities" means all of (i) the
Liabilities of the Florsheim Group under this Agreement, (ii) the
Assumed Liabilities, and (iii) the Liabilities of the Florsheim
Group arising after the Distribution Date.
"Florsheim Subsidiaries" means The Florsheim Shoe Store
Company - Northeast, a Delaware corporation, The Florsheim Shoe
Store Company - West, a Delaware corporation, L.J. O'Neill Shoe
Company, a Missouri corporation, Hy-Test, Inc., a Missouri
corporation, Florsheim Australia Limited, an Australian
corporation, Florsheim Canada Inc., a Canadian corporation,
Florsheim Europe S.R.L., an Italian corporation, Florsheim
Pacific, Limited, a Hong Kong corporation and Florsheim S.A. de
C.V., a Mexican corporation.
"Form 10" means the registration statement on Form 10
filed by Florsheim with the Commission to effect the registration
of the Florsheim Common Stock pursuant to the Exchange Act, as
such registration statement may be amended from time to time.
"Group" means either the Florsheim Group or the INTERCO
Group.
"Guaranteed Lease" means any lease entered into in
connection with the Florsheim Business with respect to which any
member of the INTERCO Group is, directly or indirectly, liable by
guarantee or otherwise.
"Indemnifiable Loss" has the meaning set forth in
Section 4.01.
"Information Statement" means the information statement
to be sent to each holder of INTERCO Common Stock in connection
with the Distribution.
"Initial Borrowing" means a borrowing by the Florsheim
Group under the Credit Facility in an amount to be determined by
INTERCO on or prior to the Distribution Date.
"INTERCO Common Stock" means the outstanding shares of
common stock, no par value, of INTERCO.
"INTERCO Group" means INTERCO and its direct or
indirect subsidiaries (other than any member of the Florsheim
Group), including without limitation Converse and its direct or
indirect subsidiaries.
"INTERCO Liabilities" means all of (i) the Liabilities
of INTERCO under this Agreement, (ii) the Liabilities of the
INTERCO Group (other than any Florsheim Liabilities and any
Liabilities arising out of the Guaranteed Leases), whether
arising before, on or after the Distribution Date, (iii) (X) any
claims arising from the conduct or operation of the Florsheim
Business or the ownership or use of assets in connection
therewith prior to the Distribution Date if and only to the
extent that such claims ("Covered Claims") are covered by the
insurance of INTERCO (other than insurance related to matters
described in Article VII, which shall be dealt with as described
therein), (Y) any self-insured retention for such Covered Claims
that would be covered but for such retention, and (Z) any letters
of credit of INTERCO in favor of an insurance carrier relating to
such retention, and (iv) any Liability specifically retained by
INTERCO pursuant to Article VII hereof.
"Liabilities" means any and all claims, debts,
liabilities and obligations, absolute or contingent, matured or
not matured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever arising, including all costs and
expenses relating thereto, and including, without limitation,
those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, action, order or consent
decree of any governmental entity or any award of any arbitrator
of any kind, and those arising under any contract, commitment or
undertaking.
"Notes" means the senior notes of Florsheim being
offered pursuant to the Registration Statement.
"Record Date" means the date determined by INTERCO's
Board of Directors or the Executive Committee thereof as the
record date for determining the stockholders of INTERCO entitled
to receive the Distribution.
"Registration Statement" means the registration
statement on Form S-1 under the Securities Act concerning the
public offering of up to $85 million in Notes, all of the net
proceeds of which shall be used for the repayment of a portion of
the Allocable Debt.
"Securities Act" means the Securities Act of 1933, as
amended.
"Tax" shall have the meaning given to such term in the
Tax Sharing Agreement.
"Tax Sharing Agreement" means the Tax Agreement of even
date herewith among INTERCO, Florsheim and certain subsidiaries
of Florsheim, as amended from time to time.
"Transferred Employee" means all current employees and
former employees (including without limitation all terminated
employees, retirees, laid-off employees, employees on leave, or
employees on short-term or long-term disability) of The
Florsheim Shoe Company division of INTERCO or the Florsheim Group
(including without limitation any former division or subsidiary
operated in conjunction therewith) or the International Shoe
Company.
ARTICLE II
THE DISTRIBUTION
Section 2.01. Cooperation Prior to the Distribution.
(a) INTERCO and Florsheim shall prepare, and INTERCO shall mail
to the holders of INTERCO Common Stock as of the Record Date, the
Information Statement, which shall set forth appropriate
disclosure concerning Florsheim, the Distribution and any other
appropriate matters. INTERCO and Florsheim shall also prepare,
and Florsheim shall file with the Commission, the Form 10, which
shall include or incorporate by reference the Information
Statement. INTERCO and Florsheim shall use reasonable efforts to
cause the Form 10 to become effective under the Exchange Act.
INTERCO and Florsheim shall also prepare, and Florsheim shall
file with the Commission, the Registration Statement. INTERCO
and Florsheim shall use reasonable efforts to cause the
Registration Statement to become effective under the Securities
Act.
(b) INTERCO and Florsheim shall cooperate in
preparing, filing with the Commission and causing to become
effective any registration statements or amendments thereto that
are appropriate to reflect the establishment of or amendments to
any employee benefit and other plans contemplated by this
Agreement.
(c) INTERCO and Florsheim shall take all such action
as may be necessary or appropriate under the securities or blue
sky laws of states or other political subdivisions of the United
States in connection with the transactions contemplated by this
Agreement.
(d) Florsheim shall prepare, file and pursue an
application to permit listing of the Florsheim Common Stock on
the Nasdaq National Market.
Section 2.02. INTERCO Board Action; Conditions
Precedent to the Distribution. INTERCO's Board of Directors or
the Executive Committee thereof shall, in its discretion,
establish the Record Date and the Distribution Date and any
appropriate procedures in connection with the Distribution. In
no event shall the Distribution occur unless the following
conditions shall, unless waived by INTERCO, have been satisfied:
(a) all necessary regulatory approvals shall have been
received;
(b) the Form 10 shall have become effective under the
Exchange Act;
(c) The Registration Statement shall have become
effective and the sale of the Notes pursuant thereto shall have
been completed.
(d) a favorable response shall have been received from
the Staff of the Commission with respect to INTERCO's no-action
request concerning, among other things, whether the Distribution
may be effected without registration of the Florsheim Common
Stock under the Securities Act and whether the Converse
Distribution may be effected without registration of the Converse
Common Stock under the Securities Act;
(e) Florsheim shall have arranged for the Credit
Facility;
(f) Converse shall have arranged for the Converse
Credit Facility and Converse shall have repaid its allocated
portion of the debt of INTERCO and/or its subsidiaries as
specified by the Converse Distribution Agreement;
(g) The Converse Form 10 shall have become effective
under the Exchange Act and the Converse Distribution shall have
been formally approved by the INTERCO Board of Directors and
shall not have been abandoned or deferred;
(h) Florsheim shall have paid the Allocable Debt in
accordance with this Agreement;
(i) Florsheim's Board of Directors, as named in the
Form 10, shall have been elected by INTERCO, as sole stockholder
of Florsheim, and the Florsheim Certificate and Florsheim Bylaws
shall be in effect;
(j) the Florsheim Common Stock shall have been
approved for listing on the Nasdaq National Market, subject to
official notice of issuance;
(k) INTERCO's Board of Directors shall have formally
approved the Distribution and shall not have abandoned, deferred
or modified the Distribution at any time prior to the Record
Date;
(l) INTERCO's Board of Directors shall have received an
opinion of counsel satisfactory to it that the Distribution
should not be taxable to the stockholders of INTERCO (pursuant to
Section 355 of the Code);
(m) the transactions contemplated by Sections 3.02 and
3.03 shall have been consummated in all material respects;
(n) the Florsheim Group shall have obtained insurance
(or binders therefor) providing coverage to the Florsheim Group
similar to the coverage provided by insurance in place prior to
the Distribution Date; and
(o) the INTERCO Group shall have obtained refinancing
of its debt on terms acceptable to it in its sole discretion.
Section 2.03. The Distribution. On the Distribution
Date or as soon thereafter as practicable, subject to the
conditions set forth in this Agreement, INTERCO shall deliver to
the Distribution Agent a certificate or certificates representing
all of the then outstanding shares of Florsheim held by the
INTERCO Group, endorsed in blank, and shall instruct the
Distribution Agent, except as otherwise provided in Section 2.04,
to distribute to each holder of record of INTERCO Common Stock on
the Record Date a certificate or certificates representing one
share of Florsheim Common Stock for each six shares of INTERCO
Common Stock so held. Florsheim agrees to provide all
certificates for shares of Florsheim Common Stock that the
Distribution Agent shall require in order to effect the
Distribution.
Section 2.04. Sale of Fractional Shares and Odd Lot
Shares. The Distribution Agent shall not distribute (a) any
fractional share of Florsheim Common Stock ("Fractional Shares")
to any holder or (b) fewer than 100 shares of Florsheim Common
Stock ("Odd Lot Shares") to any holder who elects prior to a
specified date to have the Distribution Agent sell such Odd Lot
Shares for its account. The Distribution Agent shall aggregate
all such Fractional Shares and Odd Lot Shares and sell them in an
orderly manner after the Distribution Date in the open market
and, after completion of such sales, distribute a pro rata
portion of the proceeds from such sales, based upon the average
gross selling price of all such Florsheim Common Stock, less a
pro rata portion of the aggregate brokerage commissions payable
in connection with such sales, to each holder of INTERCO Common
Stock who would otherwise have received a Fractional Share or Odd
Lot Shares.
Section 2.05. Fees and Expenses of Distribution Agent.
The fees and expenses of the Distribution Agent, except as
provided in Section 2.04, shall be paid by INTERCO.
ARTICLE III
TRANSITION ARRANGEMENTS
Section 3.01. Conduct of Florsheim Business Pending
Distribution. (a) Prior to the Distribution Date, Florsheim or
any member of the Florsheim Group shall not, without the prior
consent in writing of INTERCO, make any public announcement,
issue any press release or distribute any prospectus (as defined
in the Securities Act) and each shall use its best efforts not to
take any action which may prejudice or delay the consummation of
the Distribution.
(b) Prior to satisfaction or waiver of the conditions
set forth in Section 2.02, the business of the Florsheim Group
shall be operated for the sole benefit of INTERCO and its
stockholders.
Section 3.02. Revolving Credit Agreement. On or prior
to the Distribution Date INTERCO shall obtain refinancing of its
current revolving credit agreement, the new terms of which shall
not constitute obligations of the Florsheim Group.
Section 3.03. Repayment of Allocable Debt. On or
prior to the Distribution Date, INTERCO shall contribute to
Florsheim's capital an amount equal to the Allocable Debt less
the net proceeds of the offering of the Notes and the Initial
Borrowing. Immediately following the sale of the Notes and
establishment of the Credit Facility and the Initial Borrowing,
the Florsheim Group shall repay to the lenders of the Allocable
Debt an amount equal to the Allocable Debt, upon which payment
the Florsheim Group shall be released from any and all claims or
obligations arising under the Allocation Agreement.
Section 3.04. Intercompany Accounts. Other than as
specifically described herein, all intercompany accounts as of
the Distribution Date will be cancelled.
Section 3.05. Certain Intellectual Property Matters.
(a) Except as otherwise set forth herein, after the Distribution
Date, neither Florsheim nor any member of the Florsheim Group
shall use the name "INTERCO" or any similar trademarks
(collectively, the "INTERCO Tradenames") or any tradename or
trademark likely to cause confusion with the INTERCO Tradenames.
(b) After the Distribution Date, the Florsheim Group
shall have the right to sell existing inventory and to use
existing brochures, packaging, labelling, containers, supplies,
advertising materials, technical data sheets and any similar
materials bearing any INTERCO Tradenames until the earlier of (i)
one year after the Distribution Date and (ii) the date existing
stocks are exhausted. The Florsheim Group shall have the right
to use the INTERCO Tradenames in advertising that cannot be
changed by the Florsheim Group using reasonable efforts for a
period not to exceed twelve months after the Distribution Date.
The Florsheim Group shall comply with all applicable laws or
regulations in any use of packaging or labelling containing the
INTERCO Tradenames.
(c) The Florsheim Group shall not be obligated to
change the INTERCO Tradenames on finished goods in inventory and
goods in the hands of dealers, distributors and customers at the
time of expiration of a time period set forth in (b) above.
(d) Florsheim agrees to use, and shall cause the other
members of the Florsheim Group to use, reasonable efforts to
cease using the INTERCO Tradenames on buildings, cars, trucks and
other fixed assets as soon as possible but in any event within a
period not to exceed one year after the Distribution Date.
(e) The obliteration of the INTERCO Tradenames shall
be deemed compliance with the Florsheim Group's covenants not to
use the INTERCO Tradenames pursuant to this Section 3.05.
(f) Except with the prior written consent of
Florsheim, after the Distribution Date neither INTERCO nor any
member of the INTERCO Group shall use the name "Florsheim" or any
other trademarks of the Florsheim Group (collectively the
"Florsheim Tradenames") or any tradename or trademark likely to
cause confusion with the Florsheim Tradenames.
ARTICLE IV
INDEMNIFICATION
Section 4.01. Florsheim Indemnification of the INTERCO
Group. Subject to Section 4.03, on and after the Distribution
Date, each member of the Florsheim Group shall jointly and
severally indemnify, defend and hold harmless the INTERCO Group,
and each of their respective directors, officers, employees and
agents (the "INTERCO Indemnitees") from and against any and all
damage, loss, liability and expense (including, without
limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all
Actions or threatened Actions) (collectively, "Indemnifiable
Losses") incurred or suffered by any of the INTERCO Indemnitees
and arising out of, or due to the failure of any member of the
Florsheim Group to pay, perform or otherwise discharge, any of
the Florsheim Liabilities.
Section 4.02. INTERCO Indemnification of the Florsheim
Group. Subject to Section 4.03, on and after the Distribution
Date, INTERCO shall indemnify, defend and hold harmless the
Florsheim Group, and each of their respective directors,
officers, employees and agents (the "Florsheim Indemnitees") from
and against any and all Indemnifiable Losses incurred or suffered
by any of the Florsheim Indemnitees and arising out of, or due to
the failure of any member of the INTERCO Group to pay, perform or
otherwise discharge, any of the INTERCO Liabilities.
Section 4.03. Insurance and Third Party Obligations.
Any indemnification pursuant to Sections 4.01 or 4.02 shall be
paid net of the amount of any insurance (other than any insurance
paid for by the applicable Indemnitee) or other amounts that
would be payable by any third party to the indemnified party in
the absence of this Agreement. It is expressly agreed that no
insurer or any other third party shall be (a) entitled to a
benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions, (b) relieved of the
responsibility to pay any claims to which it is obligated or (c)
entitled to any subrogation rights with respect to any obligation
hereunder.
ARTICLE V
INDEMNIFICATION PROCEDURES
Section 5.01. Notice and Payment of Claims. If any
INTERCO or Florsheim Indemnitee (the "Indemnified Party")
determines that it is or may be entitled to indemnification by
any party (the "Indemnifying Party") under Article IV (other than
in connection with any Action or claim subject to Section 5.02),
the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable,
the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to
be indemnified. After the Indemnifying Party shall have been
notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days
after receipt of such notice, pay the Indemnified Party such
amount in cash or other immediately available funds (or reach
agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) unless the Indemnifying Party
objects to the claim for indemnification or the amount thereof.
If the Indemnifying Party does not give the Indemnified Party
written notice objecting to such claim and setting forth the
grounds therefor within the same 30 day period, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its
rights under applicable law to collect such amount.
Section 5.02. Notice and Defense of Third-Party
Claims. Promptly following the earlier of (a) receipt of notice
of the commencement by a third party of any Action against or
otherwise involving any Indemnified Party or (b) receipt of
information from a third party alleging the existence of a claim
against an Indemnified Party, in either case, with respect to
which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the
Indemnifying Party written notice thereof. The failure of the
Indemnified Party to give notice as provided in this Section 5.02
shall not relieve the Indemnifying Party of its obligations under
this Agreement, except to the extent that the Indemnifying Party
is prejudiced by such failure to give notice. Within 30 days
after receipt of such notice, the Indemnifying Party may (a) by
giving written notice thereof to the Indemnified Party,
acknowledge liability for and at its option elect to assume the
defense of such Third-Party Claim at its sole cost and expense or
(b) object to the claim of indemnification set forth in the
notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 5.02; provided that if the Indemnifying
Party does not within the same 30 day period give the Indemnified
Party written notice objecting to such claim and setting forth
the grounds therefor or electing to assume the defense, the
Indemnifying Party shall be deemed to have acknowledged its
liability for such Third-Party Claim. Any contest of a Third-
Party Claim as to which the Indemnifying Party has elected to
assume the defense shall be conducted by attorneys employed by
the Indemnifying Party and reasonably satisfactory to the
Indemnified Party; provided that the Indemnified Party shall have
the right to participate in such proceedings and to be
represented by attorneys of its own choosing at the Indemnified
Party's sole cost and expense. If the Indemnifying Party assumes
the defense of a Third-Party Claim, the Indemnifying Party may
settle or compromise the claim without the prior written consent
of the Indemnified Party; provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any such
remedy or relief, other than monetary damages for which the
Indemnifying Party shall be responsible hereunder, shall be
applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party, which consent shall not
be unreasonably withheld. If the Indemnifying Party does not
assume the defense of a Third-Party Claim for which it has
acknowledged liability for indemnification under Article IV, the
Indemnified Party may require the Indemnifying Party to reimburse
it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-
pocket expenses incurred in defending against such Third-Party
Claim and the Indemnifying Party shall be bound by the result
obtained with respect thereto by the Indemnified Party; provided
that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not
be unreasonably withheld. The Indemnifying Party shall pay to
the Indemnified Party in cash the amount for which the
Indemnified Party is entitled to be indemnified (if any) within
15 days after the final resolution of such Third-Party Claim
(whether by the final nonappealable judgment of a court of
competent jurisdiction or otherwise) or, in the case of any
Third-Party Claim as to which the Indemnifying Party has not
acknowledged liability, within 15 days after such Indemnifying
Party's objection has been resolved by settlement, compromise or
the final nonappealable judgment of a court of competent
jurisdiction.
ARTICLE VI
SERVICES
Section 6.01. Provision of Services. Each party shall
make available to the other Party during normal business hours
and in a manner that will not unreasonably interfere with such
party's business, its financial, tax, accounting, employee
benefits and similar staff and services (collectively "Services")
whenever and to the extent that they may be reasonably required
in connection with the preparation of tax returns, audits,
claims, litigation or administration of employee benefit plans
and otherwise to assist in effecting an orderly transition
following the Distribution. The Services shall be provided for a
one year period following the Distribution Date.
Section 6.02 Risk Management. From the Distribution
Date until March 1, 1997, INTERCO shall provide Florsheim with
risk management services with respect to property and casualty
insurance, including without limitation loss control, claims
administration and policy administration, as historically
provided by INTERCO to Florsheim ("Risk Services"). It is
understood that Risk Services shall not be provided with respect
to any medical, disability or life insurance. Any premiums for
any insurance for the Florsheim Group shall be the sole liability
of and paid by Florsheim. Florsheim can terminate the Risk
Services at any time upon payment of any termination fees or
expenses associated with such cancellation.
Any first party claims pending or drafts in process
will be forwarded to Florsheim to reimburse it for losses to its
property or goods incurred prior to the Distribution Date.
Section 6.03. Reimbursement. A party providing
Services to the other party pursuant to this Article VI shall be
entitled to receive from the recipient upon the presentation of
invoices therefor, payment for all out-of-pocket costs and
expenses as may be reasonably incurred in providing such
Services.
ARTICLE VII
EMPLOYEE MATTERS
Section 7.01. General. Except as otherwise set forth
in this Article VII, (a) the INTERCO Group shall retain any and
all liabilities relating to or arising out of any employee
benefit, compensation, or welfare arrangement (a "Plan") in
respect of any employee ("INTERCO Employee") of INTERCO or its
subsidiaries who is not a Transferred Employee and (b) the
INTERCO Group shall have no liability relating to or arising out
of any Plan in respect of Transferred Employees.
Section 7.02. Pension. (a) Each Transferred Employee
who is a participant in the INTERCO INCORPORATED Retirement Plan
("INTERCO Retirement Plan") will cease accruing benefits
thereunder, and shall become fully vested for any previously
accrued benefits, as of the Distribution Date.
(b) Florsheim shall establish a new retirement plan or
plans, if applicable (the "Florsheim Retirement Plan"), which
shall provide that Transferred Employees previously covered under
the INTERCO Retirement Plan shall receive service credit for
their service with any member of any Group prior to the
Distribution Date to the extent that such service was recognized
by the INTERCO Retirement Plan and for all purposes for which
such credit was relevant under the INTERCO Retirement Plan. The
Florsheim Retirement Plan shall be designed so that the combined
benefits under the INTERCO Retirement Plan and the Florsheim
Retirement Plan for Transferred Employees who remain participants
in the Florsheim Plan shall be substantially similar to the
benefits that would have accrued under the INTERCO Retirement
Plan had the Transferred Employees remained participants thereof.
Florsheim shall provide INTERCO with all relevant employee
information necessary for INTERCO to calculate the benefits to
which such Transferred Employees are eligible under the INTERCO
Retirement Plan as described under Section 7.02(a) or otherwise
to fulfill its obligations hereunder.
(c) The Florsheim Group shall assume as of the
Distribution Date all of the obligations, if any, of the INTERCO
Group to Transferred Employees under supplemental pension or
welfare plans, arrangements or agreements with Transferred
Employees, including without limitation the INTERCO INCORPORATED
Supplemental Retirement Plan ("INTERCO Supplemental Plan"). For
this purpose, Florsheim agrees to establish a supplemental
employee retirement plan containing substantially the same terms
as the INTERCO Supplemental Plan, covering at least the one
Transferred Employee currently covered by such plan, and
providing the same benefits to such employee as such employee
would have received had the Distribution not occurred and the
employee remained eligible under the INTERCO Supplemental Plan
until normal retirement age. In addition, INTERCO shall transfer
to Florsheim its rights and obligations under the Split Dollar
Agreement currently in place between INTERCO and the president of
Florsheim, including all rights in the split-dollar life
insurance policy issued in connection therewith.
Section 7.03. Savings Plans. (a) INTERCO shall take
all appropriate or necessary action to spin-off from the Savings
Plan for the Employees of INTERCO INCORPORATED and Affiliates
("INTERCO Savings Plan") into a new savings plan ("New Savings
Plan") the entire accumulated assets representing the interests
(whether vested or non-vested) of Transferred Employees,
calculated as of the close of business on the date of such spin-
off ("Valuation Date"). As of the date of such spin-off,
Florsheim shall become the sponsor of the New Savings Plan and
any ties or liability of INTERCO to or for such plan, either as
plan sponsor or adopting employer or otherwise, shall cease. The
transaction described in this Section 7.03 shall be referred to
as the "Spin-off".
(b) Florsheim and INTERCO each warrant to the other
that they will comply with the requirements of Section 414(l) of
the Code and that accrued benefits of Transferred Employees under
the New Savings Plan immediately after the Spin-off will not be
less than such Transferred Employees' accrued benefits under the
INTERCO Savings Plan immediately prior to the Spin-off.
Florsheim and INTERCO shall, in connection with the Spin-off,
cooperate in making all appropriate filings required under the
Code or the Employee Retirement Income Security Act of 1974, and
the regulations thereunder. Following the Spin-off, Florsheim
shall provide evidence acceptable to INTERCO of the qualification
of, or the filing of a determination letter with respect to, the
New Savings Plan under Section 401(a) of the Code, and the
exemption from tax of any related trust under Section 501(a) of
the Code. In no event may any additional contributions be made
by the Transferred Employees to the INTERCO Savings Plan
following the Distribution Date. Without limiting the generality
of the foregoing, any amounts withheld by Florsheim for
contribution to the INTERCO Savings Plan prior to the
Distribution Date, which contributions have not been processed
and charged to Florsheim prior to the Distribution Date, will be
contributed by Florsheim to the New Savings Plan following the
Distribution Date for the account of the Transferred Employees
from whom such amounts were withheld.
(c) The account balances of Transferred Employees
under the INTERCO Savings Plan shall be spun-off in kind (unless
the respective parties otherwise agree), credited with any
proportionate contributions to the respective date of spin-off
and reduced by any customary plan expense, benefit or withdrawal
payments in respect of Transferred Employees occurring prior to
the date of the Spin-off. Such spun-off amounts shall not
include any amounts attributable to Transferred Employees which
have been forfeited.
(d) Florsheim shall, effective as of the date of the
Spin-off, assume all of the obligations of the INTERCO Group in
respect of the account balances of the Transferred Employees
under the INTERCO Savings Plan (exclusive of any portion of such
account balances which is paid or otherwise withdrawn prior to
the date of spin-off described in this Section 7.03) on or prior
to the Distribution Date. The Florsheim Group shall not assume
any other obligations or liabilities arising under or
attributable to the INTERCO Savings Plan.
(e) It shall be a condition of INTERCO's obligation to
spin-off any account balances hereunder that INTERCO shall have
obtained the consent to such Spin-off of any insurance company
under any guaranteed investment contract, or shall otherwise have
avoided or minimized any penalty or market adjustment for
premature termination of such vehicle or other impairment of the
value thereof or the return thereon. In the event such penalty
or adjustment cannot be avoided, INTERCO may elect that all
account balances shall be retained in the INTERCO Savings Plan.
(f) If the conditions of this Section 7.03 are met
with respect to the New Savings Plan, INTERCO shall grant a
royalty-free, perpetual, non-exclusive license to Florsheim to
use the name "SMART Program" in connection with the New Savings
Plan (including the right to use "SMART Program" in conjunction
with the name "Florsheim" for such Plan) so long as the New
Savings Plan remains qualified under Section 401(a) and
Section 401(k) of the Code. Florsheim shall have no right
whatsoever to transfer or sublicense the name "SMART Program" to
any other person or in connection with any other use.
(g) In the event that the Spin-off as described in (a)
above does not occur by the Distribution Date, then INTERCO shall
cause the INTERCO Savings Plan to provide (i) for full vesting of
the account balances of the respective Transferred Employees
under the INTERCO Savings Plan as of the Distribution Date and
(ii) that no additional contributions by Transferred Employees to
the INTERCO Savings Plan can be made following the Distribution
Date.
Section 7.04. Stock Options. (a) Any Transferred
Employees who hold options for INTERCO Common Stock ("INTERCO
Options") which are exercisable at the time of the Distribution
Date will be given the right, in lieu of exercising such options
for INTERCO Common Stock in accordance with their terms, to
exchange such options, in whole or in part, for options to
purchase Florsheim Common Stock ("Florsheim Options"). The
number of shares of Florsheim Common Stock purchasable under the
Florsheim Options to be received by a Transferred Employee who
exercises such right, the exercise price of such Florsheim
Options, and the other rights of option holders will be
determined so as to at least substantially preserve the economic
gain or loss inherent in the INTERCO options being exchanged.
Transferred Employees who choose to exchange their exercisable
INTERCO Options for Florsheim Options and who have not exercised
such options prior to six months following the Distribution will
be paid by Florsheim at such time an amount in cash equal to 10%
of any economic gain inherent in the INTERCO Options exchanged.
(b) Any Transferred Employees who hold INTERCO Options
which are not exercisable at the time of the Distribution Date
(which options will therefore terminate unexercised) will be
granted new Florsheim Options following the Distribution Date.
The number of shares of Florsheim Common Stock purchasable under
the Florsheim Options to be received by such Transferred
Employee, the exercise price of such Florsheim Options, and the
other rights of option holders will be determined so as to
substantially preserve the economic loss or gain inherent in the
INTERCO options which terminate.
(c) In general, the terms and exercise dates of the
Florsheim Options granted to Transferred Employees hereunder
shall be the same as those for the INTERCO options previously
held.
Section 7.05. Health and Welfare Plans. (a) The
Florsheim Group shall assume as of the Distribution Date all the
obligations, if any, of the INTERCO Group, whether existing on
the Distribution Date or arising thereafter, to provide coverage
and benefits for Transferred Employees under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and
Section 4980B of the Code.
(b) Florsheim shall establish a new medical plan
("Florsheim Medical Plan") for the Transferred Employees
providing substantially the same benefits as currently provided
to the Transferred Employees under the INTERCO INCORPORATED
Medical Care Plan ("INTERCO Medical Plan"). All medical expenses
otherwise covered under the INTERCO Medical Plan which are
incurred prior to the Distribution Date (even if a claim for
reimbursement thereof is not made until after the Distribution
Date) will be paid out of the INTERCO Medical Plan. All other
medical expenses otherwise covered under the Florsheim Medical
Plan (without reference to any pre-existing condition or waiting
periods) shall be paid out of the Florsheim Medical Plan.
(c) INTERCO shall take all appropriate or necessary
action to spin-off from The Flexible Compensation Plan for
Employees of INTERCO INCORPORATED and Its Operating Companies
("INTERCO BEST Plan") into a new flexible compensation plan ("New
BEST Plan") the entire accumulated assets representing the
interests of Transferred Employees, calculated as of the close of
business on the date of such spin-off. As of the date of such
spin-off, Florsheim shall become the sponsor of the New BEST Plan
and any ties or liability of INTERCO to or for such plan, either
as plan sponsor or adopting employer or otherwise shall cease.
INTERCO shall grant a royalty-free, perpetual, non-exclusive
license to Florsheim to use the name "BEST Plan" in connection
with the New BEST Plan (including the right to use "BEST Plan" in
conjunction with the name "Florsheim" for such Plan) so long as
the New BEST Plan remains qualified under Section 125 of the
Code. Florsheim shall have no right whatsoever to sell,
transfer, assign or sublicense the name "BEST Plan" to any other
person or use such name in connection with any other use.
(d) Florsheim shall establish a long term disability
plan, a short term disability plan and an accidental death plan
("Other Florsheim Welfare Plans") with substantially the same
features and providing substantially the same benefits to the
Transferred Employees as do the INTERCO INCORPORATED long term
disability plan, short term disability plan and accidental death
plan ("Other INTERCO Welfare Plans") with respect to the
Transferred Employees. Claims incurred by Transferred Employees
prior to the Distribution Date shall be paid out of the Other
INTERCO Welfare Plans; claims incurred by Transferred Employees
on or following the Distribution Date shall be paid out of the
Other Florsheim Welfare Plans.
Section 7.06. Multiemployer Pension Plans. Florsheim
has had in the past, and continues to have, an obligation to make
contributions to the Central States, Southeast and Southwest
Areas Pension Plan ("Central States"), a multiemployer pension
plan as such term is defined in Section 4001(a)(3) of ERISA (a
"Multiemployer Plan"). In the past, International Shoe Company
also had a contribution obligation to Central States. The
parties agree that included within the definition of Assumed
Liabilities is any and all liability to any Multiemployer Plan
(including, without limitation, Central States) to the extent
that such liability is attributable to contributions made to any
such Multiemployer Plan on behalf of any Transferred Employee
(including, without limitation, present or former employees of
any member of the Florsheim Group or of International Shoe
Company). Each member of the Florsheim Group jointly and
severally agrees that it will indemnify and defend any member of
the INTERCO Group from and against any such liability.
Section 7.07. No Third Party Beneficiaries. Neither
Transferred Employees nor any current, former or retired employee
of any member of the INTERCO Group shall be entitled to enforce
the provisions of this Article 7 against the respective parties
as third party beneficiaries thereof.
ARTICLE VIII
INTERCO GUARANTEES
Section 8.01. Performance of Guaranteed Leases.
(a) Each member of the Florsheim Group jointly and severally
agrees that it will (i) perform all of its obligations under each
Guaranteed Lease to the extent necessary to avoid any liability
of any member of the INTERCO Group with respect thereto and
(ii) indemnify, defend and hold harmless each member of the
INTERCO Group from and against any and all damage, loss,
liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and
expenses in connection with any and all Actions or threatened
Actions) incurred or suffered by any member of the INTERCO Group
and arising out of, or due to the failure or alleged failure of
any member of the Florsheim Group to perform or otherwise dis-
charge, any of such obligations. The Florsheim Group shall use
its reasonable best efforts to obtain a release of the INTERCO
Group from its obligations under the Guaranteed Leases if and to
the extent that such efforts are consistent with the business
objectives of the Florsheim Group and do not adversely affect the
relationship between the Florsheim Group and the lessors under
the Guaranteed Leases.
(b) So long as the obligations of all members of the
INTERCO Group under any Guaranteed Leases have not been fully and
finally discharged:
(i) Florsheim will keep, and will cause each
member of the Florsheim Group to keep, proper books of
record and account in which full, true and correct
entries shall be made in all material respects of all
dealings and transactions in relation to the business
conducted by the Florsheim Group, and will permit, and
will cause each member of the Florsheim Group to
permit, representatives of INTERCO or any member of the
INTERCO Group to visit and inspect any of their
respective properties, to examine and make abstracts
from any of their respective books and records and to
discuss their respective affairs, finances and accounts
with their respective officers, employees and
independent public accountants and, subject to any
applicable privilege, counsel, all at such reasonable
times and as often as may be reasonably desired;
(ii) Florsheim will keep, and will cause each
member of the Florsheim Group to keep, all material
property useful and necessary in the Florsheim Business
in good working order and condition, ordinary wear and
tear excepted, and will preserve, renew and keep in
full force and effect, and will cause each member of
the Florsheim Group to preserve, renew and keep in full
force and effect, all material licenses necessary to
conduct the Florsheim Business;
(iii) Florsheim will deliver to INTERCO:
(A) as soon as available and in any event
within 90 days after the end of each fiscal year
of Florsheim, its annual report on Form 10-K for
such fiscal year;
(B) as soon as available and in any event
within 45 days after the end of each of the first
three quarters of each fiscal year of Florsheim,
its quarterly report on Form 10-Q for such fiscal
quarter;
(C) as soon as available and in any event
within sixty days after the end of each calendar
quarter of Florsheim, a certificate of the chief
financial officer setting forth in reasonable
detail information concerning the remaining
obligations under the Guaranteed Leases as of the
end of such quarter; and
(D) from time to time such additional
information regarding the financial position or
business of the Florsheim Group and the Guaranteed
Leases, as INTERCO may reasonably request; and
(iv) From time to time as reasonably requested by
INTERCO, appropriate representatives of Florsheim
(including one or more members of its senior
management) will make themselves available to review
with representatives of INTERCO the status of the
Guaranteed Leases. At least one meeting each calendar
quarter, within 60 days of the end of each quarter,
shall be deemed to be reasonable if requested by
INTERCO.
(c) Florsheim shall promptly (and in any event within
five days) notify INTERCO of:
(i) any notice or other communication
(including any cure notice or notice of default)
from any other party that any Guaranteed Lease is
not being performed substantially in accordance
with its terms (provided that Florsheim shall not
have to notify INTERCO of an erroneous
notification of a late lease payment by a landlord
resulting from misapplication of the lease payment
by the landlord); and
(ii) any termination of any Guaranteed Lease;
(d) Florsheim shall propose to INTERCO its response to
any matter requiring notice to INTERCO under Section 8.02(c)
promptly (and in any event not more than 10 days) after the
giving of such notice. Florsheim thereafter shall keep INTERCO
advised of such matter and, prior to taking or agreeing to take
any material action in response to or related to any such matter,
consider in good faith any comments INTERCO may make in
connection therewith.
(e) Without the prior written consent of INTERCO,
neither Florsheim nor any member of the Florsheim Group shall
take any action that would reasonably be expected to adversely
affect the potential liability of any member of the INTERCO Group
with respect to the Guaranteed Leases, whether by increasing the
likelihood or amount of any such liability, extending the time
during which such liability remains or otherwise, including any
such increase or extension caused by an amendment, renewal or
extensions of any Guaranteed Lease (or any part thereof).
Notwithstanding the foregoing, Florsheim may exercise existing
renewal options if (i) the rental provided for in the option is
below fair market rent or (ii) the store is in a location that is
of material importance to Florsheim in light of potential
alternate locations and would not be available to Florsheim
unless an existing renewal option is exercised. Florsheim will
provide at least 30 days' prior written notice to INTERCO of the
exercise of an option of a Guaranteed Lease and furnish details
to INTERCO demonstrating that Florsheim is entitled to exercise
the option pursuant to the foregoing sentence.
Section 8.02. Termination. All provisions of this
Article VIII shall terminate if all obligations of all members of
the INTERCO Group under the Guaranteed Leases shall be fully and
finally discharged.
Section 8.03. Dun & Bradstreet. INTERCO agrees to
notify Dun & Bradstreet of the termination of INTERCO's ownership
of the Florsheim Group immediately after the Distribution Date.
The Florsheim Group agrees to take such ministerial actions as
INTERCO may reasonably request to notify any person who is a
beneficiary of any Dun & Bradstreet guarantee of the termination
of INTERCO's ownership of the Florsheim Group, and to certify to
such notification.
ARTICLE IX
INFORMATION
Section 9.01. Provision of Corporate Records. Each
Group shall arrange as soon as practicable following the
Distribution Date for the provision to the other Group of
existing corporate governance documents (e.g. minute books, stock
registers, stock certificates, documents of title, etc.) in its
possession relating to such other Group or its business and
affairs.
Section 9.02. Access to Information. From and after
the Distribution Date each Group shall afford the other Group and
its accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and
duplicating rights during normal business hours to all records,
books, contacts, instruments, computer data and other data and
information in such Group's possession relating to the business
and affairs of such other Group (other than data and information
subject to an attorney/client or other privilege), insofar as
such access is reasonably required by such other Group including,
without limitation, for audit, accounting and litigation
purposes, as well as for purposes of fulfilling disclosure and
reporting obligations.
Section 9.03. Litigation Cooperation. Each Group
shall use reasonable efforts to make available to the other
Group, upon written request, its officers, directors, employees
and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal,
administrative or other proceedings arising out of the business
of the other Group prior to the Distribution Date in which the
requesting party may from time to time be involved.
Section 9.04. Reimbursement. Each Group providing
information or witnesses under Sections 9.01, 9.02 or 9.03 to the
other Group shall be entitled to receive from the recipient, upon
the presentation of invoices therefor, payment for all out-of-
pocket costs and expenses as may be reasonably incurred in
providing such information or witnesses.
Section 9.05. Retention of Records. Except as
otherwise required by law or agreed to in writing, each party
shall, and shall cause the members of its respective Group to,
retain all information relating to the other Group's business in
accordance with the past practice of such party. Notwithstanding
the foregoing, except as provided in the Tax Sharing Agreement,
any party may destroy or otherwise dispose of any information at
any time, provided that, prior to such destruction or disposal,
(a) such party shall provide no less than 90 days' prior written
notice to the other party, specifying the information proposed to
be destroyed or disposed of and (b) if the recipient of such
notice shall request in writing prior to the scheduled date for
such destruction or disposal that any of the information proposed
to be destroyed or disposed of be delivered to such requesting
party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.
Section 9.06. Confidentiality. Each party shall hold
and shall cause its directors, officers, employees, agents,
consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or,
in the opinion of its counsel, by other requirements of law, all
information (other than any such information relating solely to
the business or affairs of such party) concerning the other party
(except to the extent that such information can be shown to have
been (a) in the public domain through no fault of such party or
(b) later lawfully acquired on a non-confidential basis from
other sources by the party to which it was furnished), and
neither party shall release or disclose such information to any
other person, except its auditors, attorneys, financial advisors,
bankers and other consultants and advisors who shall be advised
of and agree in writing to comply with the provisions of this
Section 9.06. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar
information.
ARTICLE X
MISCELLANEOUS
Section 10.01. Expenses. Except as specifically
provided in this Agreement (or the Tax Sharing Agreement, if
relevant), all costs and expenses incurred in connection with the
preparation, execution, delivery and implementation of this
Agreement and with the consummation of the transactions
contemplated by this Agreement (including transfer taxes and the
fees and expenses of all counsel, accountants and financial and
other advisors) shall be paid by the party incurring such cost or
expense. It is understood and agreed that the Florsheim Group
shall pay or be responsible for the initial fees payable to the
lenders and the agent under the Credit Facility and the
underwriting and discounts and commissions payable in respect of
the offering of the Notes. Notwithstanding the foregoing, it is
understood and agreed that the INTERCO Group (not including
Converse and its direct and indirect subsidiaries) shall pay the
legal, filing, accounting, printing and other accountable and
out-of-pocket expenditures in connection with the
(i) preparation, printing and filing of the Form 10,
(ii) obtaining of the Credit Facility and (iii) preparation,
printing and filing of the Registration Statement and the
offering and sale of the Notes.
Section 10.02. Notices. All notices and communications
under this Agreement shall be in writing and any communication or
delivery hereunder shall be deemed to have been duly given when
received addressed as follows:
If to INTERCO, to:
INTERCO INCORPORATED
101 South Hanley Road
St. Louis, Missouri 63105
Attention: Secretary
If to Florsheim, to:
The Florsheim Shoe Company
130 South Canal Street
Chicago, Illinois 60606
Attention: Secretary
Any party may, by written notice so delivered to the other
parties, change the address to which delivery of any notice shall
thereafter be made.
Section 10.03. Amendment and Waiver. This Agreement
may not be altered or amended, nor may rights hereunder be
waived, except by an instrument in writing executed by the party
or parties to be charged with such amendment or waiver. No
waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this
Agreement, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term,
provision, condition, right or remedy or as a waiver of any other
term, provision or condition of this Agreement.
Section 10.04. Counterparts. This Agreement may be
executed in one or more counterparts each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same Agreement.
Section 10.05. Governing Law. This Agreement shall be
construed in accordance with, and governed by, the laws of the
State of Missouri, without regard to the conflicts of law rules
of such state.
Section 10.06. Entire Agreement. This Agreement,
together with the Ancillary Agreements, constitute the entire
understanding of the parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions
and prior agreements and understandings relating to such subject
matter. To the extent that the provisions of this Agreement are
inconsistent with the provisions of any Ancillary Agreements, the
provisions of such Ancillary Agreement shall prevail.
Section 10.07. Parties in Interest. None of the
parties hereto may assign its rights or delegate any of its
duties under this Agreement without the prior written consent of
each other party. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Nothing contained
in this Agreement, express or implied, is intended to confer any
benefits, rights or remedies upon any person or entity other than
the INTERCO Group and the Florsheim Group, and the INTERCO and
Florsheim Indemnitees under Articles IV and V hereof.
Section 10.08. Tax Sharing Agreement; After-Tax
Payments. (a) This Agreement shall not govern any Tax, and any
and all claims, losses, damages, demands, costs, expenses,
liabilities, refunds, deductions, write-offs, or benefits
relating to Taxes shall be exclusively governed by the Tax
Sharing Agreement.
(b) If at the time Florsheim is required to make any
payment to INTERCO under this Agreement INTERCO owes Florsheim
any amount under the Tax Sharing Agreement, then such amounts
shall be offset and the excess shall be paid by the party liable
for such excess. Similarly, if at the time INTERCO is required
to make any payment to Florsheim under this Agreement Florsheim
owes INTERCO any amount under the Tax Sharing Agreement, then
such amounts shall be offset and the excess shall be paid by the
party liable for such excess.
(c) Except as otherwise provided herein, any amount
payable under Section 4.01 of this Agreement shall be paid in an
"After-Tax Amount" (as defined in the Tax Sharing Agreement).
Section 10.09. Further Assurances and Consents. In
addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto will use its
reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as any
other party may reasonably request in order to effectuate the
purposes of this Agreement and to carry out the terms hereof and
(ii) take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its
reasonable efforts to obtain any consents and approvals and to
make any filings and applications necessary or desirable in order
to consummate the transactions contemplated by this Agreement;
provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents, approvals
and amendments are requested or to take any action or omit to
take any action if the taking of or the omission to take such
action would be unreasonably burdensome to the party, its Group
or its Group's business.
Section 10.10 Arbitration. Resolution of any and all
disputes arising from or in connection with this Agreement,
whether based on contract, tort, statute or otherwise, including,
but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively,
"Disputes") shall be exclusively governed by and settled in
accordance with the provisions of this Section 10.10; provided,
however, that nothing contained herein shall preclude either
party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions
hereof or to preserve the status quo pending resolution of
Disputes hereunder. INTERCO or Florsheim (each a "Party") may
commence proceedings hereunder by delivering a written notice to
the other Party providing a reasonable description of the Dispute
to the other, and expressly requesting arbitration hereunder.
The parties hereby agree to submit all Disputes to arbitration
under the terms hereof, which arbitration shall be final,
conclusive and binding upon the parties, their successors and
assigns. The arbitration shall be conducted in St. Louis by
three arbitrators acting by majority vote (the "Panel") selected
by agreement of the Parties not later than ten (10) days after
delivery of the Demand or, failing such agreement, appointed
pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed.
The arbitration shall be conducted pursuant to the Federal
Arbitration Act and such procedures as the Parties may agree, or,
in the absence of or failing such agreement, pursuant to the AAA
Rules. Notwithstanding the foregoing: (a) each Party shall have
the right to audit the books and records of the other Party that
are reasonably related to the Dispute; (b) each Party shall
provide to the other, reasonably in advance of any hearing,
copies of all documents which a Party intends to present in such
hearing; (c) each party shall be allowed to conduct reasonable
discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the
nature and extent of which discovery shall be determined by the
Panel, taking into account the needs of the Parties and the
desirability of making discovery expeditious and cost effective.
All hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either party may at its
expense make a stenographic record thereof. The Panel shall
complete all hearings not later than ninety (90) days after its
selection or appointment, and shall make a final award not later
than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The
Panel shall apportion all costs and expenses of arbitration,
including the Panel's fees and expenses and fees and expenses of
experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing,
in no event may the Panel award multiple, punitive or exemplary
damages.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY
BE ENFORCED BY THE PARTIES
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the day and year first above
written.
INTERCO INCORPORATED
By:David P. Howard
Name: David P. Howard
Title: Vice President
THE FLORSHEIM SHOE COMPANY
By:Larry J. Svoboda
Name: Larry J. Svoboda
Title: Vice President
THE FLORSHEIM SHOE STORE COMPANY - NORTHEAST
By:Larry J. Svoboda
Name: Larry J. Svoboda
Title: Vice President
THE FLORSHEIM SHOE STORE COMPANY - WEST
By:Larry J. Svoboda
Name: Larry J. Svoboda
Title: Vice President
L.J. O'NEILL SHOE COMPANY
By:Larry J. Svoboda
Name: Larry J. Svoboda
Title: Vice President
HY-TEST, INC.
By:Larry J. Svoboda
Name: Larry J. Svoboda
Title: Vice President
Exhibit 99(d)
INTERCO/FLORSHEIM
TAX SHARING AGREEMENT
AGREEMENT dated as of November 17, 1994, by and among
INTERCO INCORPORATED ("INTERCO"), a Delaware corporation, The
Florsheim Shoe Company ("Florsheim"), a Delaware corporation, and
Florsheim's domestic affiliates that are signatories to this
Agreement (each a "Florsheim Subsidiary").
WHEREAS, INTERCO and Florsheim are parties to a
Distribution Agreement dated as of November 17, 1994 (the
"Distribution Agreement"), providing for the distribution by
INTERCO of the stock of Florsheim;
WHEREAS, INTERCO and Florsheim desire to set forth
their agreement on the proper allocation among INTERCO, Florsheim
and their Affiliates of foreign, federal, state and local Taxes
incurred in taxable periods beginning prior to (and in certain
respects, subsequent to) the Distribution Date and their
respective obligations in respect of same;
NOW, THEREFORE, in consideration of their mutual
promises, the parties hereby agree as follows:
1. Definitions.
(a) As used in this Agreement:
Capitalized terms not otherwise defined herein are
used as defined in the Distribution Agreement.
"Affiliate" of any person means any person,
corporation, partnership or other entity directly or indirectly
controlling, controlled by or under common control with such
person excluding any shareholder of INTERCO. References herein
to an Affiliate of INTERCO shall mean any Affiliate of INTERCO
excluding, on and after the Distribution Date, Florsheim and all
shareholders of Florsheim. References herein to an Affiliate of
Florsheim, on and after the Distribution Date, shall exclude
INTERCO and all shareholders of Florsheim.
"After-Tax Amount" means an amount that shall be equal
to the hypothetical after-Tax amount of the indemnity payment due
hereunder, taking into account the hypothetical Tax consequences
of the payments or accruals of the amounts which give rise to the
indemnity obligation. References to "after-Tax basis",
"hypothetical Tax consequences" and "hypothetical after-Tax
amount" refer to calculations of Tax at the maximum statutory
rate (or rates, in the case of an item that affects more than one
Tax) applicable to a INTERCO Indemnitee or a Florsheim
Indemnitee, as the case may be, for the relevant year.<PAGE>
"Applicable Rate" means the interest rate determined
under the provisions of sections 6621 and 6622 of the Code.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Consolidated State Tax" means, with respect to each
State, any income or franchise Tax payable to any such State in
which Florsheim or any of its Subsidiaries is or may be liable
for such Tax on a consolidated, combined or unitary basis with
INTERCO or any of its Affiliates.
"Federal Tax" means any United States Federal net
income, environmental, excise, alternative or add-on minimum Tax.
"Final Determination" means (i) with respect to Federal
Taxes, (A) a "determination" as defined in section 1313(a) of the
Code, or (B) the date of acceptance by or on behalf of the
Internal Revenue Service of Form 870-AD (or any successor form
thereto) as a final resolution of tax liability for any taxable
period, except that a Form 870-AD (or successor form thereto)
that reserves the right of the taxpayer to file a claim for
refund and/or the right of the Internal Revenue Service to assert
a further deficiency shall not constitute a Final Determination
with respect to the item or items so reserved; (ii) with respect
to Taxes other than Federal Taxes, any final determination of
liability in respect of a Tax provided for under applicable law;
(iii) any final disposition by reason of the expiration of the
applicable statute of limitations; and (iv) the payment of Tax by
INTERCO or Florsheim, or any of their Affiliates, whichever is
responsible for payment of such Tax under applicable law, with
respect to any item disallowed by a Taxing Authority, provided
that the provisions of Section 6(b) hereof have been complied
with, or, if such Section 6(b) is inapplicable, that the party
responsible under the terms of this Agreement for such Tax is
notified by the party paying such Tax that it has determined that
no action should be taken to recoup such disallowed item, and the
other party agrees with such determination.
"Florsheim Group" means Florsheim and each member, if
any, of the affiliated group of corporations of which Florsheim
(or any successor in interest by merger or otherwise) will be the
common parent (within the meaning of section 1504 of the Code).
"Florsheim Indemnitee" is defined in Section 2(f).
"Income Taxes" is defined as any Federal Tax, state or
local income or franchise tax or other tax measured by income and
all other taxes reported on returns which include federal, state
or local income or franchise taxes or other taxes measured by
income, together with any interest, penalties or additions to tax
SL01 205466.15 2<PAGE>
imposed with respect thereto, but excluding therefrom any taxes
imposed by any foreign government or subdivision thereof.
"Income Tax Returns" is defined as any federal, state
or local consolidated or separate Tax Return which reports Income
Taxes of INTERCO, Florsheim or any Affiliate thereof.
"Indemnitee" is defined in Section 6(b).
"Other Taxes" are defined in Section 4.
"INTERCO Consolidated Group" means, with respect to any
taxable period, the corporations which are members of the
affiliated group of corporations of which INTERCO is the common
parent (within the meaning of section 1504) of the Code.
"INTERCO Group" means, with respect to any taxable
period, the corporations which are members of the INTERCO
Consolidated Group during such period, excluding the corporations
which are included in the Florsheim Group.
"INTERCO Indemnitee" is defined in Section 2(g).
"Post-Distribution Tax Period" is defined in Section
3(a).
"Pre-Distribution Tax Liability" means (i) the Federal
Tax liability of INTERCO and each corporation included in the
INTERCO Consolidated Group for any period as to which a
consolidated Federal Tax return was or will be filed by INTERCO
for such group, (ii) the Consolidated State Tax liability of any
consolidated, combined or unitary group which includes both
INTERCO or any of its Affiliates (excluding Florsheim and its
Affiliates) and Florsheim and its Affiliates (each a "State
Consolidated Group") and (iii) any other Income Taxes of INTERCO
or any of its Affiliates or of Florsheim and its Affiliates for
any taxable period ending prior to the Distribution Date or
allocated to any such party pursuant to Section 2(d) of this
Agreement for any taxable period ending prior to the Distribution
Date regardless of whether any such liability has been previously
assessed in whole or in part or is assessed in whole or in part
after the date hereof, or whether such liability is or was
imposed on the INTERCO Consolidated Group or a State Consolidated
Group collectively or on any corporation included within any such
Group separately, but excluding therefrom any taxes imposed by
any foreign government or subdivision thereof.
"Pre-Distribution Tax Period" is defined in Section
3(a).
"Tax" means (A) any net income, alternative or add-on
minimum, gross income, gross receipts, sales, use, ad valorem,
SL01 205466.15 3<PAGE>
franchise, profits, license, withholding, payroll, employment,
excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
to tax or additional amount imposed by any governmental authority
responsible for the imposition of any such domestic or foreign
tax (a "Taxing Authority"); and (B) any liability of Florsheim,
INTERCO or any Affiliate (or, in each case, any successor in
interest thereto by merger or otherwise), as the case may be, for
the payment of any amounts of the type described in clause (A)
for any taxable period resulting from the application of Treasury
Regulation Section 1.1502-6 or, in the case of any Consolidated
State Tax, any similar provision applicable under State law.
"Tax Affiliate" shall mean, with respect to a company,
any member of an affiliated group as defined in section 1504 of
the Code, or member of a combined or unitary group of which such
company is or was a member.
"Tax Counsel" means a nationally recognized,
independent Tax counsel selected by INTERCO and approved (which
approval may not be unreasonably withheld) by Florsheim.
"Tax Reserves" means the reserves for any current Tax
liability (not including any deferred or prepaid income tax
accounts), as shown on the unaudited, consolidated and combined
balance sheet of Florsheim and its Affiliates prepared by INTERCO
as of the day preceding the Distribution Date, and in the case of
any such reserves for any taxable period including the date
immediately preceding the Distribution Date, as such reserves may
be adjusted on or after the Distribution Date for adjustments in
or to the deferred income tax accounts (including both deferred
and prepaid items) in accordance with INTERCO's customary
procedures for adjusting such reserves in connection with the
preparation and filing of INTERCO's tax returns.
"Tax Return" means all reports, estimates, extensions,
information statements and returns relating to or required by law
to be filed by Florsheim and its Affiliates in connection with
any Taxes and in the case of consolidated or combined tax
returns, by INTERCO on behalf of Florsheim and its Affiliates,
and all information returns (e.g., Form W-2, Form 1099) and
reports relating to Taxes and employee benefit plans of Florsheim
and its Affiliates.
(b) Any term used in this Agreement which is not
defined in this Agreement or in the Distribution Agreement shall,
to the extent the context requires, have the meaning assigned to
it in the Code or applicable Treasury Regulations thereunder.
SL01 205466.15 4<PAGE>
2. Income Taxes.
(a) Applicable Agreements. Except as provided in
this Agreement, all tax-sharing agreements or similar agreements
with respect to or involving Florsheim or any of its Affiliates
shall be terminated effective on the day preceding the
Distribution Date and, on and after the Distribution Date,
neither Florsheim nor any of its Affiliates shall be bound
thereby or have any liability thereunder on amounts due in
respect of periods prior to the Distribution Date. On and after
the Distribution Date, this Agreement shall constitute the sole
Tax sharing agreement between (i) INTERCO and its Affiliates and
(ii) Florsheim and its Affiliates.
(b) Filing Returns.
(i) INTERCO shall prepare (or cause to be
prepared) and file (or cause to be filed) the Consolidated
Federal Income Tax Return of INTERCO's Consolidated Group and all
other consolidated, combined or unitary Tax Returns of INTERCO or
its Tax Affiliates which include Florsheim, and shall report the
operations of Florsheim and its Affiliates in such Tax Returns
for all taxable periods of Florsheim and its Affiliates ending
prior to the Distribution Date.
(ii) Florsheim shall be responsible for
preparing and filing all Income Tax Returns required to be filed
by or on behalf of Florsheim or any of its Affiliates, for all
taxable periods beginning on or after the Distribution Date,
except that INTERCO, at Florsheim's request and expense in
accordance with Section 9 hereof, shall prepare Florsheim's
consolidated federal Income Tax return for the period commencing
on the Distribution Date and ending on December 31, 1994. Those
Income Tax Returns which include any taxable period beginning
before and ending on or after the Distribution Date shall be
prepared and filed by INTERCO, at Florsheim's request and expense
in accordance with Section 9 hereof, on a basis which is
consistent with the manner in which INTERCO or its Tax Affiliates
filed such Tax Returns in the past, unless a contrary treatment
is required by law.
(c) Copies of Returns Provided. With respect to
any Income Tax Return required to be filed by INTERCO for a
taxable period which includes (but does not close on) the day
immediately preceding the Distribution Date, INTERCO shall
provide Florsheim and its authorized representatives with copies
of their pro-forma portion of the Federal Return in accordance
with past practice and each of their State Tax Returns. INTERCO
shall also provide to Florsheim and its authorized
representatives a statement certifying the amount of Tax shown on
such tax returns that is allocable to Florsheim pursuant to
Section 2(d) hereof (the "Statement") at least 15 business days
SL01 205466.15 5<PAGE>
prior to the due date for the filing of such Tax Return, and
Florsheim and its authorized representatives shall have the right
to review such Tax Return (or pro-forma Federal return) and
Statement prior to the filing of such Tax Return.
(d) Allocation of Tax Liability. The
distribution of Florsheim stock shall be effective for Income
Taxes purposes in all taxing jurisdictions as of the day
immediately preceding the Distribution Date (even though the laws
of a particular Taxing jurisdiction do not recognize a short Tax
period in respect of the distribution of Florsheim). All income,
deductions, losses, gains and credits incurred before the
Distribution Date shall be reported on returns prepared by
INTERCO.
In order to allocate any Income Taxes
relating to a taxable period that includes but that would not,
except for this Section 2(d), close on the day immediately
preceding the Distribution Date, INTERCO and Florsheim will
elect, or direct Florsheim's Affiliates to elect, with the
relevant state and local Taxing Authority, to the extent
permitted by applicable law, to close the taxable period of
Florsheim and its Affiliates on the day immediately preceding the
Distribution Date. In any case where applicable law does not
permit Florsheim or its Affiliates to close its taxable year on
the day immediately preceding the Distribution Date, the Income
Taxes, if any, attributable to the taxable period of Florsheim
and its Affiliates that includes the day immediately preceding
the Distribution Date shall be allocated to INTERCO for the
portion of the taxable period up to and including the
Distribution Date only to the extent such Income Taxes exceed the
applicable Tax Reserves and to Florsheim and its Affiliates to
the extent of such Tax Reserves, and to Florsheim and its
Affiliates for the portion of the taxable period commencing on
the Distribution Date.
For purposes of this Section 2(d) hereof, the
Income Taxes for the portion of the taxable period up to but
excluding the Distribution Date shall be determined on the basis
of an interim closing of the books as of the day immediately
preceding the Distribution Date.
(e) Tax Refunds. INTERCO shall be entitled to,
and Florsheim agrees to promptly pay to INTERCO, an amount equal
to all foreign, federal, state and local tax refunds and interest
thereon (including, without limitation, as a credit or offset
against any other Taxes) (collectively "Refunds"), if any,
received by Florsheim or its Affiliates to the extent
attributable to any Taxes for which INTERCO has indemnified
Florsheim and its Affiliates pursuant to this Agreement.
SL01 205466.15 6<PAGE>
(f) INTERCO Indemnification. INTERCO will
indemnify Florsheim and its Affiliates (each a "Florsheim
Indemnitee") against and hold them harmless from (i) any Pre-
Distribution Tax Liability, (ii) the Tax imposed by Revenue
Canada for withholding taxes relating to the interest free loans
made between Florsheim Canada, Inc. and INTERCO for the 1984
through 1989 tax years, and (iii) all liability for fees, costs
and expenses (including reasonable attorneys' fees) arising out
of or incident to any proceeding before any Taxing Authority or
any judicial authority with respect to any amount indemnifiable
under this sentence of this Section 2(f); provided, however, the
amount indemnifiable pursuant to this Section 2(f) is limited to
the extent (A) any such tax liability exceeds the aggregate Tax
Reserves and (B) further limited to the extent the After-Tax
Amount of such indemnified tax liability exceeds $25,000.
INTERCO will indemnify each Florsheim Indemnitee against and hold
them harmless from the Income Taxes referred to in Section 2(j)
hereof.
(g) Florsheim Indemnification. Florsheim and
each Florsheim Subsidiary will jointly and severally indemnify
INTERCO and each member of the INTERCO Group (each an "INTERCO
Indemnitee") against and hold them harmless from (i) any
liability resulting from any Income Taxes of Florsheim or any of
its Affiliates with respect to any taxable period beginning on or
after the Distribution Date or any Income Taxes of Florsheim or
any of its Affiliates allocated to such party for any taxable
period commencing on the Distribution Date pursuant to section
3(d) hereof and (ii) all liability for fees, costs and expenses
(including reasonable attorneys' fees) arising out of or incident
to any proceedings before any Taxing Authority or any judicial
authority with respect to any amount indemnifiable under this
Section 2(g) or under Section 3(c); provided that the amount
indemnified pursuant to this sentence of this Section 2(g) shall
apply only to the extent the After-Tax Amount of such indemnified
tax liability exceeds $25,000. Florsheim and each Florsheim
Subsidiary will jointly and severally indemnify each INTERCO
Indemnitee against and hold them harmless from any liability
resulting from any Income Taxes of Florsheim or any of its
Affiliates with respect to any taxable period ending before the
Distribution Date or any Income Taxes of Florsheim or any of its
Affiliates allocated to such party for any taxable period ending
on the Distribution Date to the extent that such liability is
reflected in any Tax Reserve of Florsheim or any of its
Affiliates. If INTERCO is obligated to pay, or indemnify any
Florsheim Indemnitee in respect of, any tax of a Florsheim
Indemnitee by reason of any tax audit or other tax adjustment in
respect of a Pre-Distribution Tax Period and such adjustment
gives rise to an increase to any prepaid item in the Tax Reserves
of any Florsheim Indemnitee, Florsheim and each Florsheim
Subsidiary hereby jointly and severally agree to pay to INTERCO
SL01 205466.15 7<PAGE>
an amount equal to such increase in such prepaid item, subject to
Section 2(h) hereof.
(h) Indemnification Payments. INTERCO and
Florsheim and any Affiliate of Florsheim shall discharge their
obligations under Sections 2(f) and 2(g) hereof, respectively, by
paying an After-Tax Amount within 30 days of demand therefor.
Notwithstanding the foregoing, if either Florsheim or INTERCO
disputes in good faith the fact or the amount of an obligation
under Section 2(f) or 2(g), then no payment shall be required
until any such good faith dispute is resolved in accordance with
Section 13(b) hereof; provided, however, that any amount not paid
within 30 days of demand therefor shall bear interest at the
Applicable Rate from the date on which such demand was made until
the date of payment.
(i) Filing Authorization. Florsheim and each
Florsheim Subsidiary hereby designates INTERCO as their agent
(and the agent of all Florsheim Affiliates) for the purpose of
taking any and all actions necessary or incidental to the filing
of any Federal or Consolidated State Tax Return, any Income Tax
Return for any taxable period including a period beginning before
the Distribution Date or any amended Federal or Consolidated
State Tax Return of any claim for refund of Tax attributable to
any period during which Florsheim was a member of the INTERCO
Consolidated Group or any State Consolidated Group, and INTERCO
shall keep Florsheim reasonably informed of all actions to be
taken on behalf of Florsheim. Florsheim shall provide INTERCO
with a Power of Attorney in respect of the filing of such
returns.
(j) Taxes on Distribution. Any tax liability for
Income Taxes attributable to the distribution by INTERCO of
Florsheim stock pursuant to the Distribution Agreement shall be
and remain the sole liability of INTERCO and neither Florsheim
nor any Affiliate thereof shall have any responsibility therefor.
3. Carrybacks; Other Tax Adjustments.
(a) INTERCO, in its absolute and sole discretion,
will permit the use in any taxable period beginning before the
Distribution Date (a "Pre-Distribution Tax Period") of a
carryback of any net operating loss, net capital loss, investment
Tax credit, foreign Tax credit, charitable deduction or any other
credit or Tax attribute of Florsheim to reduce the Federal Tax or
Consolidated State Taxes, including, without limitation,
deductions and credits related to alternative minimum Taxes (each
a "Tax Asset") arising in a taxable period beginning on or after
the Distribution Date (a "Post-Distribution Tax Period") of
INTERCO or any Affiliate. Such benefit shall be considered equal
to (i) the excess of the amount of Federal or Consolidated State
Taxes, as the case may be, that would have been payable by the
SL01 205466.15 8<PAGE>
INTERCO Consolidated Group or any relevant State Consolidated
Group in the absence of such carryback over (ii) the amount of
Federal or Consolidated State Taxes, as the case may be, actually
payable by the INTERCO Consolidated Group or relevant State
Consolidated Group. INTERCO shall pay to Florsheim 50% of the
benefit of such Tax Asset. Payment of the amount of such benefit
shall be made within 30 days of the receipt by INTERCO of any
refund, credit or other offset attributable thereto.
(b) At Florsheim's request and expense, INTERCO
shall undertake those actions reasonably necessary to enable
Florsheim to receive the benefit of any Tax Asset.
(c) If, subsequent to the payment by INTERCO to
Florsheim of any amount referred to in Section 3(a) above, there
shall be (A) a Final Determination under applicable law of a
deficiency of Federal or State Consolidated Taxes of the INTERCO
Consolidated Group or the relevant State Consolidated Group on
the grounds that the Tax Asset giving rise to such payment was in
fact not available in whole or in part, or (B) a Final
Determination resulting from an audit of Florsheim or any of its
Affiliates (or any successor thereto) which results in a
reduction of any Tax Asset so carried back, Florsheim shall repay
to INTERCO, within 30 days of such Final Determination, an After-
Tax Amount reflecting the amount which would not have been
payable to Florsheim pursuant to this Section 3 had the amount of
the benefit been determined in light of such event.
(d) INTERCO agrees to pay Florsheim the detriment
to Florsheim and its Affiliates (or any successor thereto) from
an adjustment to the Pre-Distribution Tax Liability of the
INTERCO Consolidated Group which results in an increase of
Florsheim's or any Affiliate's liability for any Post-
Distribution Tax Period. Florsheim agrees to pay INTERCO the
benefit received by Florsheim or any Affiliate (or any successor
thereto) from an adjustment to the Pre-Distribution Tax Liability
of the INTERCO Consolidated Group which results in a reduction of
Florsheim's or any Affiliate's liability for any Post-
Distribution Tax Period. Such detriment/benefit shall be
considered equal to the difference between the amount of Federal
or State Taxes, as the case may be, that would have been payable
by Florsheim or any Affiliate over the amount of Federal or State
Taxes, as the case may be, actually payable by Florsheim or any
Affiliate, taking into account such adjustment. Payment of such
detriment/benefit shall be made within 30 days of the filing of
applicable Federal or State Tax Return (including, without
limitation, any amended or estimated return) for the taxable
period for which the benefit is utilized. Florsheim agrees to
file such an applicable Tax Return as soon as practicable after
receiving notice from INTERCO to the effect that such an
adjustment to the Pre-Distribution Tax Liability had been made.
SL01 205466.15 9<PAGE>
4. Other Taxes.
Liability for all Taxes other than Income Taxes ("Other
Taxes") of Florsheim or any of its Affiliate (including any tax
liability in respect of the operations of Florsheim or any of its
Affiliates prior to the Distribution Date whether such operations
were conducted as a division of INTERCO) shall be the sole
responsibility of Florsheim or any such Affiliate, and liability
for all Other Taxes that are attributable to INTERCO or any of
its Affiliates (other than any operations of Florsheim or any of
its Affiliates operated as a division of INTERCO) shall be the
sole responsibility of INTERCO or any such Affiliate. Each party
agrees to indemnify and hold the other harmless in accordance
with such undertaking.
Any Tax liabilities (including, but not limited to,
sales Tax, stock transfer Tax, documentary Tax, and stamp Tax)
attributable to the transfer by INTERCO to Florsheim of the
properties of the former Florsheim division of INTERCO or the
distribution by INTERCO of Florsheim stock pursuant to the
Distribution Agreement shall be and remain the sole liability of
INTERCO and neither Florsheim nor any Affiliate thereof shall
have any responsibility therefor.
5. Additional Covenants.
(a) Florsheim and INTERCO shall cooperate (and
shall cause each of their Affiliates to cooperate) fully at such
time and to the extent reasonably requested by the other party in
connection with the preparation and filing of any return, claim
for a refund or other claim with respect to Taxes or the conduct
of any audit, dispute, proceeding, suit or action concerning any
return, amounts indemnifiable hereunder or any other matter
contemplated hereunder. Such cooperation shall include, without
limitation, (i) the retention and provision for inspection on
reasonable request of books, records, documentation or other
information relating to any return until the expiration of the
applicable statute of limitation (giving effect to any extension,
waiver of mitigation thereof); (ii) the provision of additional
information and explanation of material provided under clause (i)
of this Section 5(a); (iii) the execution of any document that
may be necessary or helpful in connection with the filing of any
return by INTERCO of any Affiliate of INTERCO, or by Florsheim or
any Affiliate, or any audit, proceeding, suit or action addressed
in the preceding sentence; and (iv) the use of the parties' best
efforts to obtain any documentation from a governmental authority
or a third party that may be necessary or helpful in connection
with the foregoing.
(b) INTERCO and Florsheim, as the case may be,
shall promptly furnish to the other upon receipt a copy of any
revenue agent's report or similar report, notice of proposed
SL01 205466.15 10<PAGE>
adjustment, or notice of deficiency received by INTERCO, any
Affiliate of INTERCO, or Florsheim, as the case may be, relating
to the other party's (or its Affiliate's) obligations under
Sections 2 or 3 hereof, or any adjustment referred to in Section
5(c) hereof. INTERCO and Florsheim shall cooperate to keep each
other fully informed with respect to any development relating to
all matters described in this Agreement.
(c) INTERCO and Florsheim shall advise each other
with respect to any proposed Tax adjustments relating to the
INTERCO Consolidated Group or any State Consolidated Group which
are the subject of any Internal Revenue Service or State Taxing
Authority, audit or investigation, or are the subject of any
proceeding or litigation, and which may affect any Tax attribute
of Florsheim, INTERCO or any Affiliate of INTERCO (including, but
not limited to, basis in an asset or the amount of earnings and
profits).
(d) INTERCO shall not without the prior written
consent of Florsheim modify or make any election (except as
required by law) with respect to Taxes affecting or binding on
Florsheim or any of its Affiliates for any taxable period
beginning on or after the Distribution Date. Florsheim shall not
without the prior written consent of INTERCO modify or make any
election (except as required by law) with respect to Taxes
affecting or binding on INTERCO or any of its Affiliates for any
taxable period beginning before the Distribution Date.
6. Cooperation and Contest.
(a) INTERCO shall have control over all matters
in respect of any Tax Return filed by the INTERCO, or any Tax
audit, dispute or proceeding (whether administrative or judicial)
relating to any Tax matters in respect of any Tax Return filed by
INTERCO. INTERCO shall promptly notify Florsheim of any
inquiries from the Internal Revenue Service or any State Taxing
Authority which relate to matters described in Sections 2(g) and
3. Florsheim shall have control over all matters in respect of
any Tax Returns filed by Florsheim and any Tax audit, dispute or
proceeding related thereto. Florsheim shall promptly notify
INTERCO of any inquiries from the Internal Revenue Service or any
State Taxing Authority which relate or may relate to matters
described in Sections 2(f) and 3.
(b) No settlement of any Internal Revenue Service
or State Taxing Authority audit relating to any matter which
would cause a payment under Section 2(f), Section 2(g) or Section
3 shall be accepted or entered into by or on behalf of the party
entitled to receive a payment under Section 2(f), Section 2(g) or
Section 3, whichever is applicable (the "Indemnitee"), unless (x)
the party ultimately responsible for such payment under Section
2(f), Section 2(g) or Section 3, whichever is applicable (the
SL01 205466.15 11<PAGE>
"Indemnitor"), consents thereto in writing (which consent shall
not be unreasonably withheld), or (y) the Indemnitor has provided
the Indemnitee with an opinion of Tax Counsel that there is a
reasonable basis for the Indemnitor's position.
(c) In the event that a judgment of the United
States Tax Court or other court of competent jurisdiction results
in an adverse determination with respect to any issue which would
cause Florsheim to pay INTERCO any amount under Sections 2(g) or
3, Florsheim shall have the right to cause INTERCO to appeal from
such adverse determination at Florsheim's expense if Florsheim
delivers to INTERCO an opinion from Tax Counsel that such appeal
will more likely than not succeed.
7. Payments.
All Payments to be made hereunder shall be made in
immediately available funds and, unless otherwise provided
herein, within 30 days of the date determined herein.
8. Notices.
All notice, demand, claim, or other communication under
this Agreement shall be in writing and shall be deemed to have
been given upon the delivery or mailing thereof, as the case may
be, if delivered personally or sent by certified mail, return
receipt requested, postage prepaid, to the parties at the
following addresses (or at such other address as a party may
specify by notice to the other):
If to the INTERCO, to:
INTERCO INCORPORATED
TAX DEPARTMENT
101 S. Hanley
St. Louis, MO 63105
If to Florsheim, to:
The Florsheim Shoe Company
Chief Financial Officer
130 South Canal Street
Chicago, IL 60606
9. Costs and Expenses.
Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to
this Agreement. INTERCO shall receive reimbursement for any
SL01 205466.15 12<PAGE>
expenses in respect of any Return filed by INTERCO on behalf of
Florsheim. Such expenses shall include any services performed by
INTERCO on behalf of Florsheim at the rate of $50 per hour;
provided that the charge by INTERCO to Florsheim for the
preparation of the Income Tax Returns described in
Section 2(b)(ii) hereof shall be at a flat rate of One Hundred
Thousand Dollars ($100,000).
10. Termination and Survival.
Notwithstanding anything in this Agreement to the
contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable
statutes of limitation (giving effect to any extension, waiver or
mitigation thereof).
11. Section Headings.
The section headings contained in this Agreement are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12. Amendments; No Waivers.
(a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by INTERCO and
Florsheim or in the case of a waiver, by the party against whom
the waiver is to be effective.
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
13. Governing Law and Interpretation.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
(b) Any disagreement between the parties hereto
with respect to the provisions of Sections 2(a) through 2(j) and
Section 3 hereof not resolved by mutual agreement of the parties
shall be resolved by an internationally recognized, independent
accounting firm maintaining an office in St. Louis, Missouri
chosen by and mutually acceptable to the parties hereto (an
"Accounting Referee") within 5 days from the date the need to
choose such Accounting Referee arises unless one of the parties
hereto refuses to cooperate in such choice of Accounting Referee
or refuses to submit to arbitration, in which case such
Accounting Referee shall be chosen by the other party in its sole
SL01 205466.15 13<PAGE>
discretion. An Accounting Referee so chosen shall resolve any
such disagreement within 30 days of appointment pursuant to such
procedures as it may deem advisable. Any such resolution shall
be binding on the parties hereto without further recourse. If
the parties are unable to choose an Accounting Referee pursuant
to this Section 13(b) because of an inability to agree on an
Accounting Referee that is independent and unbiased with respect
to each of the parties hereto, then the disagreements governed by
this Section 13(b) shall be settled by arbitration in the City of
St. Louis, State of Missouri in accordance with the Rules of the
American Arbitration Association, and judgment upon the award so
rendered may be entered in any court having jurisdiction thereof.
The cost and expense of such Accounting Referee (but not the cost
of expense of the separate counsel of each party) shall be shared
by the parties hereto as determined by the Accounting Referee
based on the outcome of such dispute.
14. Counterparts.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
15. Assignment.
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors, provided that no party may assign, delegate or
SL01 205466.15 14<PAGE>
otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
THIS AGREEMENT CONTAINS BINDING ARBITRATION PROVISIONS
WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the day and year first above
written.
INTERCO INCORPORATED
By:David P. Howard
Its: Vice President
THE FLORSHEIM SHOE COMPANY, f/k/a,
THE FLORSHEIM SHOE STORE
COMPANY-MIDWEST
By:Larry J. Svoboda
Its: Vice President
THE FLORSHEIM SHOE COMPANY- L.J. O'NEILL SHOE COMPANY
NORTHEAST
By:Larry J. Svoboda By:Larry J. Svoboda
Its: Vice President Its: Vice President
THE FLORSHEIM SHOE STORE COMPANY- HY-TEST, INC.
WEST
By:Larry J. Svoboda By:Larry J. Svoboda
Its: Vice President Its: Vice President
