<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee required)
For the fiscal year ended December 31, 1995 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No fee required)
For the transition period from_________________ to __________________
Commission file number I-91
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INTERCO INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314/863-1100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange on
Title of each class which registered
------------------- --------------------------
Common Stock - $1.00 Stated Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 31, 1995, was approximately 140,924,800.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
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Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
50,120,079 shares as of December 31, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Definitive Proxy Statement for Annual Meeting
of Stockholders on April 23, 1996................... Part III
<PAGE>
Item 6. Selected Financial Data
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<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED(1) YEAR ENDED DECEMBER 31,
--------------- --------------------------- ------------------------------
FEBRUARY 29, AUGUST 2, | DECEMBER 31,
1992 1992 | 1992 1993 1994 1995
--------------- ------------ | ------------ -------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> | <C> <C> <C> <C>
SUMMARY OF OPERATIONS: |
Net sales.............. $ 819,359 $ 356,705 | $394,873 $980,532 $1,072,696 $1,073,889
Gross profit........... 229,219 96,849 | 108,858 275,323 298,712 291,237
Interest expense....... 88,310 29,689 | 16,358 38,621 37,886 33,845
Earnings (loss) before |
income tax expense |
(benefit), |
discontinued |
operations, |
extraordinary item and |
cumulative effect of |
accounting change..... (39,087) 247,716 | 18,045 37,266 48,841 57,038
Income tax expense |
(benefit)............. (3,589) (1,206) | 6,807 15,924 20,908 22,815
Net earnings (loss) |
from continuing |
operations............ (35,498) 248,922 | 11,238 21,342 27,933 34,223(4)
Discontinued |
operations............ (13,394) (136,347) | 10,088 24,026 10,339 --
Extraordinary item..... -- 1,075,466 | -- -- -- (5,815)
Cumulative effect of |
accounting change..... -- (1,719) | -- -- -- --
|
Net earnings (loss) |
applicable to |
common stock.......... $ (48,892) $1,186,322 | $ 21,326 $ 45,368 $ 38,272 $ 28,408
|
Per share of common |
stock--fully diluted: |
Net earnings (loss) |
from continuing |
operations.......... $ (0.92) $ 6.42 | $ 0.23 $ 0.41 $ 0.54 $ 0.65(4)
Discontinued |
operations.......... (0.34) (3.52) | 0.20 0.47 0.20 --
Extraordinary item... -- 27.72 | -- -- -- (0.11)
Cumulative effect of |
accounting change... -- (0.04) | -- -- -- --
|
Net earnings (loss) |
applicable to common |
stock................. $ (1.26) $ 30.58 | $ 0.43 $ 0.88 $ 0.74 $ 0.54
|
Weighted average common |
and common equivalent |
shares outstanding-- |
fully diluted (in |
thousands)............ 38,731 38,796 | 50,000 51,397 51,506 52,317
Other Information |
(continuing |
operations): |
Working capital........ $ 426,852 $ 261,357 | $261,967 $271,588 $ 308,323 $ 455,036
Property, plant and |
equipment, net........ 114,239(2) 189,039(2)| 186,046 191,581 181,393 306,406
Capital expenditures... 20,099 7,041 | 8,850 30,197 21,108 35,616
Total assets........... 800,840 893,012 | 870,115 858,163 881,735 1,291,739
Long-term debt......... --(3) 443,165 | 407,898 403,255 409,679 705,040
Shareholders' equity |
(deficit)............. $(1,186,522) $ 275,400 | $293,114 $338,557 $ 275,394 $ 301,156
</TABLE>
(1) Effective December 31, 1992, the Company changed its fiscal year to end on
December 31. The Company's adoption of fresh-start reporting required
reporting calendar 1992 results in two 22 week periods.
(2) In connection with the adoption of fresh-start reporting, property, plant
and equipment was adjusted to fair value resulting in an increase of
approximately $77,500 as of August 2, 1992.
(3) Long-term debt (including debt pertaining to discontinued operations)
totaling $1,055,132 was reclassified to liabilities subject to compromise as
of February 29, 1992.
(4) Net earnings from continuing operations before gain on insurance settlement,
net of income tax expense, and net earnings per common share from continuing
operations before gain on insurance settlement, net of income tax expense,
were $29,463 and $0.56, respectively.
1
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma condensed consolidated statement of operations
reflects the acquisition of Thomasville, which was consummated on December 29,
1995, and the incurrence of indebtedness by the Company in connection therewith
and in connection with the refinancing of a portion of the Company's then-
existing indebtedness as of the beginning of the period presented.
Management believes that the assumptions used provide a reasonable basis on
which to present the pro forma condensed consolidated statement of operations.
The pro forma condensed consolidated statement of operations is presented for
informational purposes only and is not necessarily indicative of the combined
results of operations in the future or of what the combined results of
operations would have been if the foregoing transactions had actually been
consummated as of such date. In addition, the pro forma condensed consolidated
statement of operations does not give effect to profit improvement
opportunities, if any, which may be realized by the Company as a result of the
acquisition of Thomasville.
The pro forma condensed consolidated statement of operations has been
prepared on the basis of assumptions described in the notes thereto and include
assumptions relating to the allocation of the consideration paid for the
Thomasville acquisition to its respective assets and liabilities based on
preliminary estimates of their respective fair values. The actual allocation of
such consideration may differ from that reflected in the pro forma condensed
consolidated statement of operations after valuations and other studies to be
performed pursuant to post-closing adjustments related to the acquisition have
been completed.
2
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
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Historical Thomasville Acquisition
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The Pro Forma
Company Thomasville Adjustments Pro Forma
---------- ----------- ----------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales...................................... $1,073,889 $550,227 $ -- $1,624,116
Costs and expenses:
Cost of operations........................... 760,393 428,497 1,252 (a) 1,190,142
Selling, general and administrative
expenses................................... 198,321 70,661 3,600 (b)
(1,159)(c) 271,423
Restructuring charges........................ -- 404 (404)(d) --
Depreciation and amortization................ 36,104(k) 12,557 (257)(e)
2,644 (f)
1,005 (g) 52,053(k)
---------- -------- -------- ----------
Earnings from operations....................... 79,071 38,108 (6,681) 110,498
Interest expense............................... 33,845 12,919 12,927 (h) 59,691
Other income, net:
Gain on insurance settlement................. 7,882 -- -- 7,882
Other........................................ 3,930 2,049 (1,876)(i) 4,103
---------- -------- -------- ----------
Earnings before income tax expense............. 57,038 27,238 (21,484) 62,792
Income tax expense............................. 22,815 10,773 (8,218)(j) 25,370
---------- -------- -------- ----------
Net earnings from continuing operations........ $ 34,223 $ 16,465 $(13,266) $ 37,422
========== ======== ======== ==========
Net earnings from continuing operations before
gain on insurance settlement net of income
tax expense.................................. $ 29,463 $ 32,662
========== ==========
Net earnings per common share from
continuing operations (fully diluted)........ $ 0.65(k) $ 0.72(k)
========== ==========
Net earnings per common share from
continuing operations before gain on
insurance settlement, net of income tax
expense (fully diluted)...................... $ 0.56(k) $ 0.62(k)
========== ==========
Weighted average common and common
equivalent shares outstanding (in thousands)
(fully diluted).............................. 52,317 52,317
</TABLE>
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(a) Adjusted to reflect cost of sales based upon first-in, first-out method of
accounting for inventory from the last-in, first-out method used by
Thomasville in 1995.
(b) Adjusted to reflect the estimated pension expense to the Company associated
with the formation of the new Thomasville pension plan.
(c) Adjusted to reflect the reversal of expenses incurred by Thomasville for
certain of its employee benefit plans, which were discontinued at the time
of the acquisition by the Company.
(d) Adjusted to reflect the reversal of Thomasville's nonrecurring
restructuring charge of $404 in 1995 prior to the acquisition by the
Company.
(e) Adjusted to reverse the amortization of Thomasville's historical excess of
cost over net assets acquired for the period prior to the acquisition of
Thomasville by the Company.
(f) Adjusted to reflect the amortization of the excess of cost over net assets
of Thomasville acquired by the Company.
(g) Adjusted to reflect increased depreciation expense to the Company resulting
from recording property, plant and equipment of Thomasville at estimated
fair value.
(h) Adjusted to reflect increased interest expense to the Company related to
borrowings under the Secured Credit Agreement and Receivables
Securitization Facility in connection with the acquisition of Thomasville.
(i) Adjusted to reflect reduction in interest income of the Company
attributable to cash used by the Company to finance the Thomasville
acquisition.
(j) Adjusted to record the income tax effect of all adjustments at a combined
statutory rate of 38.25%.
(k) Includes $15,992 related to the 1992 asset revaluation. This item resulted
in a reduction of $12,470 in net earnings from continuing operations and a
reduction of $0.24 per share (fully diluted) in net earnings per common
share.
3
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(a) List of documents filed as part of this report:
1. Financial Statements:
Consolidated balance sheets, December 31, 1994 and 1995.
Consolidated statements of operations for each of the years in the
three-year period ended December 31, 1995.
Consolidated statement of cash flows for each of the years in the
three-year period ended December 31, 1995.
Consolidated statement of shareholders' equity for each of the years in
the three-year period ended December 31, 1995.
Notes to consolidated financial statements.
Independent Auditors' Report
2. Financial Statement Schedules:
Valuation and qualifying accounts (Schedule II).
All other schedules are omitted as the required information is presented in
the consolidated financial statements or related notes or are not
applicable.
4
<PAGE>
3. Exhibits:
3(a) Restated Certificate of Incorporation of the Company, as amended
(Incorporated by reference to Exhibit 4(a) to INTERCO
INCORPORATED's Quarterly Report on Form 10-Q for the quarter
ended on March 31, 1993.)
3(b) By-Laws of the Company revised and amended to May 5, 1993.
(Incorporated by reference to Exhibit 4(b) to INTERCO
INCORPORATED's Quarterly Report on Form 10-Q for the quarter
ended on March 31, 1993.)
4(a) Credit Agreement, dated as of November 17, 1994, as amended and
restated as of December 29, 1995, among the Company, Broyhill
Furniture Industries, Inc., The Lane Company, Incorporated,
Thomasville Furniture Industries, Inc., Various Banks, Credit
Lyonnais New York Branch, as Documentation Agent, Nationsbank,
N.A., as Syndication Agent and Bankers Trust Company, as
Administration Agent. (Incorporated by reference to Exhibit 99(a)
to INTERCO INCORPORATED's Current Report on Form 8-K, dated
January 12, 1996.)
4(b) Purchase and Contribution Agreement, dated as of November 15,
1994, as amended and restated as of December 29, 1995 among The
Lane Company, Incorporated, Action Industries, Inc., Broyhill
Furniture Industries, Inc. and Thomasville Furniture Industries
as Sellers and Interco Receivables Corp. as Purchaser.
4(c) Receivables Purchase Agreement, dated as of November 15, 1994, as
amended and restated as of December 29, 1995, among Interco
Receivables Corp. as the Seller and Atlantic Asset Securitization
Corp. as an Investor and Credit Lyonnais New York Branch as
the Agent. (Incorporated by reference to Exhibit 99(b) to
INTERCO INCORPORATED's Current Report on Form 8-K, dated January
12, 1996.)
4(d) Warrant Agreement, dated as of August 3, 1992, between the
Company and Society National Bank, as Warrant Agent.
(Incorporated by reference to Exhibit 4.5 to INTERCO
INCORPORATED's Current Report on Form 8-K, dated August 18,
1992.)
4(e) Agreement to furnish upon request of the Commission copies of
other instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries which debt does not
exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. (Incorporated by reference
to Exhibit 4(c) to INTERCO INCORPORATED's Annual Report on Form
10-K for the year ended February 28, 1981.)
5
<PAGE>
10(a) INTERCO INCORPORATED's 1992 Stock Option Plan. (Incorporated by
reference to Exhibit 10(b) to INTERCO INCORPORATED's Annual
Report on Form 10-K for the year ended December 31, 1992.)
10(b) Form of Indemnification Agreement between the Company and Richard
B. Loynd, Donald E. Lasater and Lee M. Liberman. (Incorporated by
reference to Exhibit 10(h) to INTERCO INCORPORATED's Annual
Report on Form 10-K for the year ended February 29, 1988.)
10(c) Consulting Agreement, dated as of September 23, 1992, between the
Company and Apollo Advisors, L.P. as amended on February 20,
1995.
10(d) Registration Rights Agreement, dated as of August 3, 1992,
between the Company and Apollo Interco Partners, L.P.
(Incorporated by reference to Exhibit 10(g) to INTERCO
INCORPORATED's Annual Report on Form 10-K for the year ended
December 31, 1992.)
10(e) Written description of bonus plan for management personnel of the
Lane Company, Incorporated.
10(f) Retirement Plan for directors. (Incorporated by reference to
Exhibit 10(g) to INTERCO INCORPORATED's Annual Report on Form
10-K for the year ended December 31, 1994.)
10(g) INTERCO Corporate Executive Incentive Plan. (Incorporated by
reference to Exhibit 10(h) to INTERCO INCORPORATED's Annual
Report on Form 10-K for the year ended December 31, 1994.)
10(h) Broyhill Furniture Industries, Inc. Executive Incentive Plan.
(Incorporated by reference to Exhibit 10(i) to INTERCO
INCORPORATED's Annual Report on Form 10-K for the year ended
December 31, 1994.)
11 Statement regarding computation of per share earnings.
21 List of Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
99(a) Distribution and Services Agreement, dated November 17, 1994,
between the Company and Converse Inc. (Incorporated by reference
to Exhibit 99(a) to INTERCO INCORPORATED's Annual Report on Form
8-K, dated December 2, 1994.)
99(b) Tax Sharing Agreement, dated November 17, 1994, between the
Company and Converse Inc. (Incorporated by reference to Exhibit
99(b) to INTERCO INCORPORATED's Annual Report on Form 8-K, dated
December 2, 1994.
99(c) Distribution and Services Agreement, dated November 17, 1994,
among the Company, The Florsheim Shoe Company and certain of its
subsidiaries. (Incorporated by reference to Exhibit 99(c) to
INTERCO INCORPORATED's Annual Report on Form 8-K, dated December
2, 1994.
99(d) INTERCO/Florsheim Tax Sharing Agreement, dated November 17, 1994,
among the Company, The Florsheim Shoe Company and certain of its
subsidiaries. (Incorporated by reference to Exhibit 99(d) to
INTERCO INCORPORATED's Annual Report on Form 8-K, dated December
2, 1994.)
99(e) Amendment to Tax Sharing Agreement, dated as of February 21,
1996, between the Company and Converse Inc.*
* Filed herewith
(b) Reports on Form 8-K.
A Form 8-K was filed on November 27, 1995, reporting the signing of an
agreement to acquire Thomasville Furniture Industries, Inc., a Form 8-K
was filed on January 12, 1996, as amended by Form 8-K/A-1 filed on January
16, 1996 and Form 8-K/A-2 filed on February 1, 1996, reporting the
acquisition of Thomasville Furniture Industries, Inc., summarizing the
Company's amended credit agreements and filing the agreements as exhibits
thereto and a Form 8-K was filed on January 31, 1996 reporting information
in the Company's press releases dated January 30, 1996.
SHAREHOLDERS REQUESTING COPIES OF EXHIBITS TO FORM 10-K
WILL BE SUPPLIED ANY OR ALL SUCH EXHIBITS AT A CHARGE OF
TEN CENTS PER PAGE.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERCO INCORPORATED
-------------------------
(Registrant)
By /s/ Lynn Chipperfield
----------------------
Lynn Chipperfield
Vice President
and Secretary
Date: February 22, 1996
7
<PAGE>
EXHIBIT 99(e)
AMENDMENT TO TAX SHARING AGREEMENT
This Amendment to Tax Sharing Agreement is dated as of February 21, 1996,
by and among INTERCO INCORPORATED, a Delaware Corporation ("Interco"), and
Converse Inc., a Delaware corporation ("Converse") and the Converse
Subsidiaries. Defined terms used in this Agreement but not herein defined shall
have the same meanings set forth in the Tax Sharing Agreement dated as of
November 17, 1994 by and among Interco, Converse and the Converse Subsidiaries
(the "Tax Sharing Agreement").
WHEREAS, Interco, Converse and the Converse Subsidiaries are parties to the
Tax Sharing Agreement;
WHEREAS, Section 12 of the Tax Sharing Agreement provides that it may be
amended in a writing signed by Interco and Converse;
WHEREAS, pursuant to the Tax Sharing Agreement, the consent of both Interco
and Converse is required to carryback any Post-Distribution Tax Asset to Pre-
Distribution Periods;
WHEREAS, Interco will not receive any economic benefit from a Converse
Post-Distribution Tax Asset unless Converse forgoes its ability to carry the Tax
Asset forward and instead carries it back to Pre-Distribution Periods;
WHEREAS, Converse cannot determine with certainty what benefit, if any, it
might receive if it carries the Tax Asset forward and it desires to obtain an
immediate economic benefit from the Tax Asset; and
WHEREAS, in order to carryback certain of Converse's Post-Distribution Tax
Assets arising in Converse's tax period ended December 30, 1995 and December 28,
1996, instead of forward, Interco and Converse desire to amend the Tax Sharing
Agreement in respect to certain Tax Assets.
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. Tax Sharing Agreement Not to Apply. Notwithstanding the provisions of
----------------------------------
the Tax Sharing Agreement, including Sections 2(e) and 3 thereof, Interco and
Converse agree that Converse shall carryback federal income tax operating losses
from its tax period ended December 30, 1995 and December 28, 1996 (the "Subject
Post-Distribution Tax Asset") to one or more Pre-Distribution Tax Periods. This
Agreement shall apply to the first $41 million of net operating losses carried
back for federal income tax purposes arising in Converse's tax years ending
December 31, 1995 and 1996 and to the extent such net operating loss carryback
available for such years exceed $41 Million ("Excess Tax Assets"), any tax
refund arising from such Excess Tax Assets shall be shared on a 50/50 basis
between Converse and Interco in accordance with Section 3(a) of the Tax Sharing
Agreement and
<PAGE>
notwithstanding Section 4 hereof, such Excess Tax Assets shall be subject to all
other provisions of the Tax Sharing Agreement.
2. Payments. On the first business day following the Effective Date (as
--------
herein defined) Interco shall pay to Converse, in cash, the amount of Eight
Million Dollars ($8,000,000) in full payment of Converse's share of the benefits
expected to arise from such carrybacks. Except for possible payments in respect
of Excess Tax Assets, no further payments shall be required to be made to
Converse in respect of such carrybacks or any tax benefit therefrom and Converse
agrees that any refund received by Interco on account of the Subject
Post-Distribution Tax Asset will be solely for Interco's account. In the event
Converse receives any payment on account of such refunds, it agrees that it will
receive such payment in trust for the account of Interco and will immediately
upon receipt turn the payment over to Interco with all necessary endorsements.
3. Representations and Covenants.
-----------------------------
(i) Commencing on the date hereof, Interco and Converse shall consult
regarding the preparation of the 1995 Converse federal income tax return.
Converse shall deliver to Interco on or before March 1, 1996, a working draft of
the 1995 Converse federal income tax return. By March 7, 1996, Converse shall
provide Interco with a copy of its completed and unfiled federal income tax
return for the period ended December 30, 1995, and Interco shall have six days
to review and comment on such return.
(ii) By March 15, 1996, Converse shall file and provide Interco with a copy
of its federal income tax return, as filed, relating to its year ended
December 30, 1995.
(iii) Interco shall file federal income tax carryback refund claims with
respect to all of the losses shown on the return described in Section 3(ii)
promptly after receipt of such return and provide Converse with copies of such
filings from which Interco may delete any information relevant to its other
Subsidiaries so long as sufficient information is made available to Converse to
compute any carry forward of Converse from such years.
(iv) Converse and Interco agree to cooperate fully with each other in
connection with the carrybacks and claims for refund described herein and in
connection with any federal tax audits of Converse or Interco in respect of the
tax years in which the carried back losses arose or to which such losses were
carried.
(v) Interco represents that it has not filed any amended returns nor
Request for a carryback Refund for the carryback years.
(vi) Converse represents that it has not filed any amended returns nor
Request for a carryback Refund for the carryback years.
2
<PAGE>
(vii) Converse represents and warrants to Interco that:
(a) the 1995 federal income tax return to be prepared and filed by
Converse pursuant to Section 3(ii) hereof will report a net
operating loss aggregating at least $31 million;
(b) the 1995 and 1996 federal income tax returns to be prepared and
filed by Converse pursuant to Sections 3(ii) and (ix) will
report aggregate net operating losses that may be carried back
to the Interco consolidated federal income tax return for one
or more Pre-Distribution Tax Periods in an amount available to
be carried back equal to at least $31 million after the Final
Determination of any IRS audit; and
(c) Converse shall not settle any federal income tax audit for the
1995 tax year or the 1996 tax year without the written consent
of Interco which consent will not be unreasonably withheld.
(viii) Converse shall deliver to Interco on or before March 1, 1997, a
working draft of the 1996 Converse federal income tax return. By March 7, 1997,
Converse shall provide Interco with a copy of its completed and unfiled federal
income tax return for the period ended December 28, 1996, and Interco shall have
six days to review and comment on such return.
(ix) By March 15, 1997, Converse shall file and provide Interco with a
copy of its federal income tax return, as filed, relating to its year ended
December 28, 1996.
(x) Converse covenants and agrees that:
(a) the 1995 and 1996 federal tax returns and the 1995 and 1996
records will be prepared consistently with past practice, except
for any changes required by law;
(b) no extraordinary bookkeeping measures will be taken for the
purpose of reducing the amount of tax loss in 1995 or 1996, or
for the purpose of shifting any such tax loss to any year other
than 1995 or 1996, including, without limitation, the
establishment of excessive reserves, the failure to expense a
bad debt as and when it becomes recognizable as such, or the
shifting of losses from Converse to one of its subsidiaries, if
a purpose of such measure is to diminish or defeat Interco's
rights hereunder, provided, however, that Converse retains the
flexibility to exercise its judgment with respect to tax
and business matters and routine tax and business planning; and
3
<PAGE>
(c) to the extent allowable under the federal income tax laws,
Converse will claim as losses in 1995 and 1996 all losses,
including but not limited to the write-off or partial write-off
of all advances or loans to Apex, associated with its investment
in Apex.
(xi) Interco shall file federal refund claims with respect to all of the
losses shown on the return described in Section 3(ix) promptly after receipt of
such return and provide Converse with copies of such filings from which Interco
may delete any information relevant to its other Subsidiaries so long as
sufficient information is made available to Converse to compute any carry
forward of Converse from such years.
(xii) Interco shall not settle any federal income tax audit relating to the
claims for refunds described in Section 3(iii) and (xi) without the written
consent of Converse (which consent shall not be unreasonably withheld) if the
issue involved in such audit, if determined adversely, could result in payment
by Converse hereunder or if such issue would reduce the carry forward of
Converse from such years.
4. Tax Sharing Agreement to Continue. Except with respect to any matter
---------------------------------
relating to or arising out of the carrybacks and refunds described in this
Amendment, which shall be governed solely by this Amendment, the Tax Sharing
Agreement shall continue in full force and effect. It is specifically agreed
that sections 2, 3, 6(a) and 9 of the Tax Sharing Agreement shall not apply to
any matter relating to or arising out of the carrybacks and refunds described in
this Amendment; provided, however, that the balance of the agreement shall
apply.
5. Converse Executive Committee Approval. Any provision herein to the
-------------------------------------
contrary notwithstanding, the obligations of the parties hereunder are expressly
subject to the approval of this Amendment in its final form by the Executive
Committee of Converse's Board of Directors. Converse agrees to provide Interco
with notice in writing (the "Notice of Approval") promptly upon such approval,
and the date upon which Converse provides such Notice of Approval shall be known
as the "Effective Date." On the Effective Date, this Amendment shall be deemed
to be fully effective and the obligations of the parties undertaken herein shall
be deemed binding. If no Notice of Approval shall have been received by Interco
on or prior to March 15, 1996, this Amendment shall be considered null and void
and the original Tax Sharing Agreement shall be deemed to be in full force and
effect without amendment. Notwithstanding the foregoing, and regardless of
whether or not the Notice of Approval has yet been given, between the date
hereof and the earlier of (a) March 15, 1996 or (b) the date upon which Converse
notifies Interco in writing of its intention not to provide the Notice of
Approval, Converse shall comply with its obligations under Sections 3(i), (ii)
and (x) hereof, and the satisfaction of those obligations (to the extent the
date for performance of same predates the Notice of Approval) shall be a
condition precedent to Converse's right to give valid Notice of Approval.
4
<PAGE>
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: /s/ Lynn Chipperfield By: /s/ Donald J. Camacho
--------------------- ---------------------
Its: Vice President Senior Vice President
and Secretary
Converse Star I, Inc. Converse Germany, Inc.
By: /s/ Donald J. Camacho By: /s/ Donald J. Camacho
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Vice President Vice President
Converse EMEA, Ltd. Converse Benelux Holding Company, Inc.
By: /s/ Donald J. Camacho By: /s/ Donald J. Camacho
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Vice President Vice President
Converse Europe, Inc. Converse Iberia, Inc.
By: /s/ Donald J. Camacho By: /s/ Donald J. Camacho
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Vice President Vice President
Converse Benelux, Inc. Converse France, Inc.
By: /s/ Donald J. Camacho By: /s/ Donald J. Camacho
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Vice President Vice President
Converse Italy, Inc.
By: /s/ Donald J. Camacho
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Vice President
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