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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
September 30, 1995 No. 0-17540
MONTGOMERY WARD HOLDING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3571585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Montgomery Ward Plaza
Chicago, Illinois 60671
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number Including Area Code:
(312) 467-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No .
At October 28, 1995, there were 19,775,232 shares of Class A Common Stock and
25,000,000 shares of Class B Common Stock of the Registrant outstanding.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX
Page
Montgomery Ward Holding Corp.
Consolidated Statements of Income 2
Consolidated Condensed Balance Sheet 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 7
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share amounts)
For the13-Week
Period Ended
September 30, October 1,
1995 1994
Revenues
Net sales, including leased and licensed
department sales $1,562 $1,571
Direct response marketing revenues,
including insurance 142 119
Total Revenue 1,704 1,690
Costs and Expenses
Cost of goods sold, including net occupancy
and buying expense 1,240 1,235
Operating, selling, general and
administrative expenses, including
benefits and losses of directreponse operations 435 416
Interest expense, net of investment
income 24 16
Total Costs and Expenses 1,699 1,667
Income Before Income Taxes 5 23
Income Tax Expense 2 8
Net Income 3 15
Preferred Stock Dividend Requirements 1 1
Net Income Applicable to
Common Shareholders $ 2 $ 14
Net Income per Common Share
Class A $ .05 $ .33
Class B $ .04 $ .29
See notes to consolidated condensed financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share amounts)
For the 39-Week
Period Ended
September 30, October 1,
1995 1994
Revenues
Net sales, including leased and licensed
department sales $4,439 $4,305
Direct response marketing revenues,
including insurance 407 339
Total Revenues 4,846 4,644
Costs and Expenses
Cost of goods sold, including net occupancy
and buying expense 3,528 3,350
Operating, selling, general and
administrative expenses, including
benefits and losses of direct
response operations 1,237 1,174
Interest expense, net of investment
income 67 41
Total Costs and Expenses 4,832 4,565
Income Before Income Taxes 14 79
Income Tax Expense 4 26
Net Income 10 53
Preferred Stock Dividend Requirements 3 2
Net Income Applicable to
Common Shareholders $7 $51
Net Income per Common Share
Class A $ .17 $ 1.18
Class B $ .14 $ 1.02
Cash Dividends Declared Per Common Share
Class A $ - $ .50
Class B $ - $ .50
See notes to consolidated condensed financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED CONDENSED BALANCE SHEET
(Millions of dollars)
ASSETS
September 30, December 31,
1995 1994
Cash and cash equivalents. . . . . . . . . . $ 43 $ 33
Short-term investments . . . . . . . . . . . 3 3
Investments of insurance operations. . . . . 349 314
Total Cash and Investments . . . . . . . . 395 350
Trade and other accounts receivable. . . . . 136 112
Accounts and notes receivable from affiliates 20 6
Total Receivables 156 118
Merchandise inventories. . . . . . . . . . . 1,794 1,625
Prepaid pension contribution . . . . . . . . 329 324
Properties, plants and equipment,
net of accumulated depreciation and
amortization. . . . . . . . . . . . . . 1,374 1,396
Direct response and insurance acquisition costs 359 322
Other assets . . . . . . . . . . . . . . . . 472 402
Total Assets . . . . . . . . . . . . . . . . $4,879 $4,537
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings. . . . . . . . . . . . $ 670 $ 144
Trade accounts payable . . . . . . . . . . . 1,486 1,719
Accrued liabilities and other obligations. . 1,090 1,231
Federal income taxes payable . . . . . . . . 5 14
Insurance policy claim reserves. . . . . . . 238 236
Long-term debt . . . . . . . . . . . . . . . 427 228
Obligations under capital leases . . . . . . 68 81
Deferred federal income taxes. . . . . . . . 121 122
Total Liabilities. . . . . . . . . . . . 4,105 3,775
Redeemable Preferred Stock . . . . . . . . . 75 75
Shareholders' Equity
Common stock. . . . . . . . . . . . . . . . - -
Capital in excess of par value. . . . . . . 27 23
Retained earnings . . . . . . . . . . . . . 758 751
Unrealized gain on marketable equity securities 10 2
Less: Treasury stock, at cost. . . . . . . (96) (89)
Total Shareholders' Equity . . . . . . . 699 687
Total Liabilities andShareholders' Equity. . $4,879 $4,537
See notes to consolidated condensed financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
For the 39-Week
Period Ended
September 30, October 1,
1995 1994
Cash flows from operating activities:
Net income $ 10 $ 53
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . 93 78
Deferred income taxes. . . . . . . . . . . . (5) 10
Gain on sales/retirements of assets. . . . . (10) -
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade and other accounts receivable. . . . . (24) (20)
Accounts and notes receivable from affiliates (14) (10)
Merchandise inventories. . . . . . . . . . . (169) (248)
Prepaid pension contribution . . . . . . . . (5) (11)
Other assets . . . . . . . . . . . . . . . . (84) (43)
Increase (decrease) in:
Trade accounts payable . . . . . . . . . . . (233) (17)
Federal income taxes payable, net. . . . . . (10) (4)
Accrued liabilities and other obligations. . (159) (125)
Insurance policy claim reserves. . . . . . . 2 (1)
Net cash used in operations . . . . . . . . (608) (338)
Cash flows from investing activities:
Acquisition of Lechmere, net of cash acquired . - (109)
Investment in ValueVision International, Inc. . (8) -
Purchase of short-term investments. . . . . . . (14) (183)
Purchase of investments of insurance operations (465) (476)
Sale of short-term investments. . . . . . . . . 14 177
Sale of investments of insurance operations . . 443 470
Capital expenditures. . . . . . . . . . . . . . (90) (114)
Disposition of properties, plants and equipment, net 24 1
Sale of assets held for disposition. . . . . - 1
Net cash used for investing activities. . . (96) (233)
See notes to consolidated condensed financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
For the 39-Week
Period Ended
September 30, October 1,
1995 1994
Cash flows from financing activities:
Proceeds from short-term borrowings . . . . . . $10,529 $6,255
Payments on short-term borrowings . . . . . . . (10,003) (5,693)
Proceeds from issuance of long-term debt. . . . 205 166
Payments of Montgomery Ward long-term debt . . (6) (172)
Payments of Lechmere long-term debt . . . . . . - (88)
Payments of obligations under capital leases. . (5) (6)
Proceeds from issuance of Common Stock. . . . . 4 2
Proceeds from issuance of Preferred Stock . . . - 75
Cash dividends paid . . . . . . . . . . . . . . (3) (24)
Purchase of treasury stock, at cost . . . . . . (7) (5)
Net cash provided by financing activities. . 714 510
Increase (decrease) in cash and cash equivalents 10 (61)
Cash and cash equivalents at beginning of period 33 98
Cash and cash equivalents at end of period . . . $ 43 $ 37
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes . . . . . . . . . . . . . . . . $ 22 $ 25
Interest . . . . . . . . . . . . . . . . . . $ 61 $ 40
Non-cash financing activity:
Notes issued for purchase of Treasury stock. . $ - $ 3
Non-cash investing activity:
Change in unrealized gain on marketable
equity securities . . . . . . . . . . . . . $ 8 $ 2
Like-kind exchange of assets. . . . . . . . . . $ - $ 4
See notes to consolidated condensed financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
1. Condensed Financial Statements
Montgomery Ward Holding Corp. (the Company or MW Holding) conducts its
operations through its only direct subsidiary, Montgomery Ward & Co.,
Incorporated (Montgomery Ward). In the opinion of management, the unaudited
financial statements of the Company include all adjustments necessary for a fair
presentation. All such adjustments are of a normal recurring nature. The
condensed financial statements should be read in the context of the financial
statements and notes thereto filed with the Securities and Exchange Commission
in MW Holding's 1994 Annual Report on Form 10-K. Certain prior period amounts
have been reclassified to be comparable with the current period presentation.
2. Net Income Per Common Share
Net income per common share is computed as follows:
13-Week Period Ended
September 30, 1995
Class A Class B
Earnings available for Common Shareholders $ 1 $ 1
Weighted average number of common and common
equivalent shares (stock options) outstanding 20,919,243 25,000,000
Earnings per share $ .05 $ . 04
13-Week Period Ended
October 1, 1994
Class A Class B
Earnings available for Common Shareholders $ 7 $ 7
Weighted average number of common and common
equivalent shares (stock options) outstanding 21,309,266 25,000,000
Earnings per share $ .33 $ .29
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
2. Net Income Per Common Share (continued)
39-Week Period Ended
September 30, 1995
Class A Class B
Earnings available for Common Shareholders $ 3 $ 4
Weighted average number of common and common
equivalent shares (stock options) outstanding 19,915,677 25,000,000
Earnings per share $ .17 $ .14
39-Week Period Ended
October 1, 1994
Class A Class B
Earnings available for Common Shareholders $ 25 $ 26
Weighted average number of common and common
equivalent shares (stock options) outstanding 21,459,648 25,000,000
Earnings per share $ 1.18 $ 1.02
3. Benefits and Losses
Operating, selling, general and administrative expenses include benefits and
losses related to direct response marketing operations of $28 and $26 for the
13-week periods ended September 30, 1995 and October 1, 1994, respectively and
$83 and $78 for the 39-week periods ended September 30, 1995 and
October 1, 1994, respectively.
4. Debt Agreements
On July 11, 1995, Montgomery Ward entered into a Note Purchase Agreement
(1995 Note Purchase Agreement) with various lenders involving the private
placement of $180 of Senior Notes which have maturities of from five to ten
years at fixed interest rates varying from 6.52% to 6.98%. Proceeds from the
debt issue were used to pay short-term borrowings incurred to fund the acquisi-
tion of Lechmere.
On September 29, 1995, Montgomery Ward borrowed $25 under a Term Loan
Agreement (Term Loan Agreement) with a bank. The borrowings mature on
September 30, 1999. Under the Term Loan Agreement, Montgomery Ward may select
among several interest rate options which are based on market rates.
Borrowings under the 1995 Note Purchase Agreement and the Term Loan Agreement
are subject to various restrictions on Montgomery Ward, including the
satisfaction of certain financial tests which include restrictions on the pay-
ment of dividends. The dividend restrictions under the 1995 Note Purchase
Agreement and the Term Loan Agreement are currently no more restrictive than the
restrictions imposed by the Long Term Credit Agreement and Short Term Credit
Agreement.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Millions of dollars)
5. Subsequent Event
Subsequent to quarter end, Signature Financial/Marketing, Inc. ( Signature
and, together with its subsidiaries, the Signature Group ) and Amoco Oil
Holding Company entered into a letter of intent for the sale of all the out-
standing capital stock of Amoco Enterprises, Inc., operator of the Amoco Motor
Club, to the Signature Group. Signature is a wholly-owned subsidiary of
Montgomery Ward & Co., Incorporated, which is, in turn, a wholly-owned sub-
sidiary of Montgomery Ward Holding Corp. The purchase price is $100 million,
subject to certain specified adjustments based upon the closing balance sheet of
Amoco Enterprises, Inc. The transaction is subject to certain conditions, in-
cluding the completion of a due diligence review, the approval of both
companies' Board of Directors, the receipt of all regulatory and third party
approvals, as well as the execution of a definitive agreement between the two
companies.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of results of operations for MW Holding
compares the third quarter of 1995 to the third quarter of 1994, as well as the
first nine months of 1995 to the first nine months of 1994. All dollar amounts
referred to in this discussion are in millions, and all income and expense items
are shown before income taxes, unless specifically stated otherwise.
MW Holding's business is seasonal, with one-third of the sales traditionally
occurring in the fourth quarter; accordingly, the results of operations for the
quarter and the first nine months are not necessarily indicative of the results
for the entire year.
Results of Operations
Third Quarter 1995 Compared with Third Quarter 1994
Net income for the third quarter of 1995 was $3, a decrease of $12 from the
prior year.
Consolidated total revenues (net sales and direct response marketing
revenues, including insurance) were $1,704 compared with $1,690 in 1994. Net
sales decreased $9. Apparel and Domestics sales decreased 6%, while Hardlines
sales increased 3%. Comparable store sales decreased 3%. The Apparel and
Domestics sales decrease includes the impact of Montgomery Ward s decision to
exit the sale of paint and painting supplies in 1995.
Direct response marketing revenues increased $23, or 19%, to $142. The
increase was due to increased insurance revenues of $6, primarily due to
increased policyholders obtained from Montgomery Ward in-store promotions, and
increased club revenues of $17, primarily due to acquisitions as well as
increased marketing efforts.
Gross margin (net sales less cost of goods sold) dollars were $322, a
decrease of $14, or 4%, from the third quarter of last year. The decrease in
gross margin was due to a decrease in the gross margin rate ($10), primarily due
to decreased Hardlines margin rates, and increased occupancy costs ($4). The
occupancy cost increase was primarily due to increased depreciation expense as
a result of 1994 and 1995 capital investments in new and existing stores.
Competitive pressures continue to have a negative impact on margin rates.
Operating, selling, general and administrative expenses increased $19, or
4%, from the prior year. This increase was due to the impact of new store
openings of $9, increased advertising and promotional costs of $10 and increased
operating and other administrative expenses of $5, partially offset by increased
income generated from the sale of product service contracts of $5. In addition,
the Company continued to incur expenditures associated with the integration of
Lechmere's operations, stores and merchandise information systems.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
Third Quarter 1995 Compared with Third Quarter 1994 (continued)
Net interest expense increased $8, or 50%, from the prior year due to
increased borrowings (as more fully described in the Discussion of Financial
Condition), as well as increased interest rates.
First Nine Months of 1995 Compared with First Nine Months of 1994
Consolidated net income was $10, a decrease of $43 from the prior year. Net
income for 1995 includes a first quarter loss from operations of Lechmere.
Lechmere was acquired on March 30, 1994, therefore 1994 results exclude
Lechmere s first quarter 1994 results. In addition, the prior year results
include a favorable income tax adjustment of $3.
Consolidated total revenues were $4,846 compared with $4,644 in 1994. Net
sales increased $134, or 3%, of which $192 was attributable to the first quarter
impact of Lechmere, as described above. Excluding Lechmere's first quarter
impact, net sales decreased $58. The decreased sales reflect a 3% decrease in
Apparel and Domestics, which includes the negative impact of exiting the sale of
paint and paint supplies, while Hardlines sales remained even with the prior
year. Sales on a comparable store basis, which reflects only the stores in
operation for both the first nine months of 1995 and 1994, decreased 3%.
Direct response marketing revenues increased $68, or 20%, to $407. The
increase was due to increased insurance revenues of $20, primarily due to
increased policyholders obtained from Montgomery Ward in-store promotions, and
increased club revenues of $48, primarily due to acquisitions as well as
increased marketing efforts. The acquisitions of Smilesaver in April, 1994 and
Credit Card Sentinel in October, 1994 accounted for an increase in revenues of
$8.
Gross margin dollars, including Lechmere, were $911, a decrease of $44, or
5%, from the first nine months of last year. The decrease was due to the
decreased gross margin rate ($61) and increased occupancy costs ($26), partially
offset by the gross margin impact of the increase in sales ($37) and decreased
buying office and other expenses ($6). Continued competitive pressures also had
a negative impact on margin rates. See Third Quarter 1995 Compared with Third
Quarter 1994 for a discussion of the increase in occupancy costs. The 1995
gross margin rate reflects the gross margin results for Lechmere for nine months
while the 1994 rate reflects Lechmere s results for only six months. Lechmere s
emphasis in appliances and electronics, which tend to have lower gross margin
rates, contributed to the decrease in the 1995 gross margin rate.
Operating, selling, general and administrative expenses, including the first
quarter impact of Lechmere, increased $63, or 5%, from the prior year.
Excluding Lechmere's first quarter impact, operating, selling, general and
administrative expenses increased by $29. This increase was due to the impact of
new store openings of $29, increased advertising and promotional costs of $14
and increased operating and other administrative expenses of $8, partially
offset by the increased income generated from the sales of product service
contracts of $22.
Net interest expense increased $26, or 63%, from the prior year due to
increased borrowings (as more fully described in the Discussion of Financial
Condition), the first quarter impact of higher borrowings due to the Lechmere
acquisition, and increased interest rates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Discussion of Financial Condition
Montgomery Ward is the only direct subsidiary of MW Holding and therefore
Montgomery Ward and its subsidiaries are MW Holding's sole source of funds.
Montgomery Ward has entered into a Long Term Credit Agreement (Long Term
Agreement) dated as of September 15, 1994 with various lenders. The Long Term
Agreement, which was extended during the third quarter of 1995 and currently
expires on September 6, 2000, provides for a revolving facility in the principal
amount of $603. As of September 30, 1995, $444 was outstanding under the Long
Term Agreement. Concurrently, Montgomery Ward also entered into a Short Term
Credit Agreement (Short Term Agreement) dated as of September 15, 1994 with
various lenders. The Short Term Agreement, which was extended during the
third quarter of 1995 and currently expires on September 6, 1996, provides for
a revolving facility in the principal amount of $297. As of September 30,
1995, $181 was outstanding under the Short Term Agreement. In addition, $45 was
outstanding under short-term uncommitted bank lines of credit as of
September 30, 1995, which the Company uses to diversify its borrowings when
interest rates under the uncommitted lines are attractive.
Under the Long Term Agreement and the Short Term Agreement (collectively, the
Agreements), Montgomery Ward may select among several interest rate options,
including a rate negotiated with one or more of the various lenders. The
interest rates for the aforementioned bank borrowings are based on market rates
and significant increases in market interest rates will increase interest
payments required. A commitment fee is payable based upon the unused amount of
each facility, although under certain circumstances, an additional fee may be
payable to lenders not participating in a negotiated rate loan.
During the fourth quarter of 1994, Montgomery Ward entered into interest rate
exchange and cap agreements with various banks to offset the market risk
associated with an increase in interest rates under both the Long Term Agreement
and Short Term Agreement. The aggregate notional principal amounts under the
interest rate exchange agreements is $175 in 1995. Under the terms of the
interest rate exchange agreements, Montgomery Ward pays the banks a weighted
average fixed rate of 7.4% multiplied by the notional principal amount in 1995
and will receive the one-month daily average London Interbank Offered (LIBO)
rate multiplied by the notional principal amount. The average aggregate
notional principal amount under the various cap agreements is $154 in 1995.
Under the terms of the cap agreements, Montgomery Ward receives payments from
the banks when the one-month daily average LIBO rate exceeds the 5.5% cap strike
rate in 1995. Such payments will equal the amount determined by multiplying the
notional principal amount by the excess of the percentage rate, if any, of the
one-month daily average LIBO rate over the cap strike rate. The interest rate
exchange and cap agreements increased the effective borrowing rate under the
Agreements by .45% for the 39-week period ended September 30, 1995. Montgomery
Ward is exposed to credit risk in the event of nonperformance by the other
parties to the interest rate exchange and cap agreements; however, Montgomery
Ward anticipates full performance by the counterparties.
On July 11, 1995, Montgomery Ward entered into a Note Purchase Agreement
(1995 Note Purchase Agreement) with various lenders involving the private
placement of $180 of Senior Notes which have maturities of from five to ten
years at fixed interest rates varying from 6.52% to 6.98%. Proceeds from the
debt issue were used to repay short-term borrowings incurred to fund the
Company's acquisition of Lechmere. See Note 4 to the Consolidated Condensed
Financial Statements.
On September 29, 1995, Montgomery Ward borrowed $25 under a Term Loan
Agreement (Term Loan Agreement) with a bank. The borrowings mature on
September 30, 1999. Under the Term Loan Agreement, Montgomery Ward may select
among several interest rate options which are based on market rates. See Note 4
to the Consolidated Condensed Financial Statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Discussion of Financial Condition (continued)
The Agreements, the 1993 Note Purchase Agreements, the 1995 Note Purchase
Agreement and the Term Loan Agreement impose various restrictions on Montgomery
Ward, including the satisfaction of certain financial tests which include
restrictions on payments of dividends. Under the terms of the Agreements and
the Term Loan Agreement, which are currently the most restrictive of the
financing agreements as to dividends, distributions and redemptions, Montgomery
Ward may not pay dividends or make any other distributions to the Company or
redeem any Common Stock in excess of (1) $63 on a cumulative basis, plus (2) 50%
of Consolidated Net Income of Montgomery Ward (as defined in the Agreements)
after January 1, 1994, plus (3) any repayment by the Company of any loan or
advance made by Montgomery Ward to the Company which was received after
January 1, 1994, plus (4) capital contributions received by Montgomery Ward
after January 1, 1994, plus (5) net proceeds received by Montgomery Ward from
(a) the issuance of capital stock including treasury stock but excluding Debt-
Like Preferred Stock (as defined in the Agreements) or (b) any indebtedness
which is converted into shares of capital stock other than Debt-Like Preferred
Stock of Montgomery Ward or the Company, after January 1, 1994, plus (6) an ad-
justment of $45 for 1994 through 1996, $30 in 1997 and $15 in 1998.
Financing requirements were expected to increase in 1995 due to new store
openings and the Lechmere acquisition. The Company has made, and will continue
to make significant investments in Lechmere's operations, particularly in the
computer systems used by store and buying office associates. However, lower
than expected sales and lower inventory turnover also contributed to the in-
crease in debt levels and interest expense over the prior year. The prior year
debt levels were reduced by a dividend received by Montgomery Ward from Signa-
ture of $15. Signature did not pay a 1995 dividend. Increased short term in-
terest rates also caused an increase in interest expense. Inventory management
initiatives are underway which are intended to reduce working capital and debt
levels by year-end, although management can not assure these initiatives will be
successful.
Future cash needs are expected to be provided by ongoing operations, the sale
of customer receivables to Montgomery Ward Credit Corporation (Montgomery Ward
Credit), a subsidiary of General Electric Capital Corporation and borrowings
under the Agreements.
Capital expenditures during the first nine months of 1995 of $90 were
primarily related to expenditures for the opening of three Electric Avenue &
More stores, the relocation of one Lechmere store and various merchandise fix-
ture and presentation programs. Capital expenditures for the comparable 1994
period were $114.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
On September 13, 1995, the Registrant filed a Form 8-K to communicate its in-
tention to acquire newly issued shares of common stock of Levitz Furniture In-
corporated. The press release issued by the Registrant jointly with Levitz
Furniture Incorporated on September 5, 1995 was included as an exhibit thereto.
10.(i)(H)(1) Amended Schedule 1 to the Long Term Credit Agreement dated as of
September 15,1994 among Montgomery Ward & Co., Incorporated,
various banks, The First National Bank of Chicago, as Documentary
Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank
of New York, as Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent.
10.(i)(I)(1) Amended Schedule 1 to the Short Term Credit Agreement dated as of
September 15,1995 among Montgomery Ward & Co., Incorporated,
various banks, The First National Bank of Chicago, as Documentary
Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank
of New York, as Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent.
10.(i)(K) Term Loan Agreement dated as of September 29, 1995 between
Montgomery Ward & Co., Incorporated and The Industrial Bank of
Japan, Limited, Chicago Branch.
<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 under-
signed thereunto duly authorized.
REGISTRANT MONTGOMERY WARD HOLDING CORP.
BY JOHN L. WORKMAN
NAME AND TITLE John L. Workman, Executive Vice
President, Chief Financial Officer
and Assistant Secretary
DATE November 14, 1995
EXHIBIT 10.(i)(H)(1)
Schedule 1
To Long Term Credit Agreement
Commitment Termination
The Bank of New York 40,200,000 9/06/00
The Bank of Nova Scotia 40,200,000 9/06/00
CIBC, Inc. 40,200,000 9/06/00
NationsBank of North Carolina 40,200,000 9/06/00
The Long-Term Credit Bank of Japan, Ltd. 36,850,000 9/06/00
Credit Lyonnais Chicago Branch and Credit
Lyonnais Cayman Island Branch 33,500,000 9/06/00
The First National Bank of Chicago 33,500,000 9/06/00
Banca Commerciale Italiana, Chicago Branch 20,100,000 9/06/00
The Dai-Ichi Kangyo Bank, Ltd.,
Chicago Branch 20,100,000 9/06/00
The Mitsubishi Bank, Ltd, Chicago Branch 20,100,000 9/06/00
Bank of America National Trust and Savings
Association 16,750,000 9/06/00
Bank of America Illinois 16,750,000 9/06/00
The Northern Trust Company 16,750,000 9/06/00
The Sakura Bank, Ltd. 16,750,000 9/06/00
The Sanwa Bank, Ltd, Chicago Branch 16,750,000 9/06/00
Swiss Bank Corporation 16,750,000 9/06/00
U.S. National Bank of Oregon 16,750,000 9/06/00
Union Bank 16,750,000 9/06/00
ABN AMRO Bank N.V. 13,400,000 9/06/00
First Bank National Association 13,400,000 9/06/00
The First National Bank of Boston 13,400,000 9/06/00
The Fuji Bank, Ltd. 13,400,000 9/06/00
PNC Bank, National Association 13,400,000 9/06/00
The Yasuda Trust and Banking Co., Ltd. 13,400,000 9/06/00
The First National Bank of Maryland 10,050,000 9/06/00
Istituto Bancario San Paolo di Torino,
S.P.A., New York Bank 10,050,000 9/06/00
Kredietbank N.V. 10,050,000 9/06/00
Union Bank of Switzerland, Chicago Branch 10,050,000 9/06/00
Wells Fargo Bank, N.A. 10,050,000 9/06/00
Banca di Roma, S.P.A. 6,700,000 9/06/00
Comerica Bank 6,700,000 9/06/00
EXHIBIT 10.(i)(I)(1)
Schedule 1
To Short Term Credit Agreement
Commitment Termination
The Bank of New York 19,800,000 09/06/96
The Bank of Nova Scotia 19,800,000 09/06/96
CIBC, Inc. 19,800,000 09/06/96
NationsBank of North Carolina 19,800,000 09/06/96
The Long-Term Credit Bank of Japan, Ltd. 18,150,000 09/06/96
Credit Lyonnais Chicago Branch and
Credit Lyonnais Cayman Island Branch 16,500,000 09/06/96
The First National Bank of Chicago 16,500,000 09/06/96
Banca Commerciale Italiana, Chicago Branch 9,900,000 09/06/96
The Dai-Ichi Kangyo Bank, Ltd., Chicago Branch 9,900,000 09/06/96
The Mitsubishi Bank, Ltd, Chicago Branch 9,900,000 09/06/96
Bank of America National Trust and Savings
Association 8,250,000 09/06/96
Bank of America Illinois 8,250,000 09/06/96
The Northern Trust Company 8,250,000 09/06/96
The Sakura Bank, Ltd. 8,250,000 09/06/96
The Sanwa Bank, Ltd, Chicago Branch 8,250,000 09/06/96
Swiss Bank Corporation 8,250,000 09/06/96
U.S. National Bank of Oregon 8,250,000 09/06/96
Union Bank 8,250,000 09/06/96
ABN AMRO Bank N.V. 6,600,000 09/06/96
First Bank National Association 6,600,000 09/06/96
The First National Bank of Boston 6,600,000 09/06/96
The Fuji Bank, Ltd. 6,600,000 09/06/96
PNC Bank, National Association 6,600,000 09/06/96
The Yasuda Trust and Banking Co., Ltd. 6,600,000 09/06/96
The First National Bank of Maryland 4,950,000 09/06/96
Istituto Bancario San Paolo di Torino,
S.P.A., New York Bank 4,950,000 09/06/96
Kredietbank N.V. 4,950,000 09/06/96
Union Bank of Switzerland, Chicago Branch 4,950,000 09/06/96
Wells Fargo Bank, N.A. 4,950,000 09/06/96
Banca di Roma, S.P.A. 3,300,000 09/06/96
Comerica Bank 3,300,000 09/06/96
EXHIBIT 10.(i)(K)
TERM LOAN AGREEMENT
dated as of September 29, 1995
between
MONTGOMERY WARD & CO., INCORPORATED,
and
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
CHICAGO BRANCH
TABLE OF CONTENTS
Page
SECTION 1 CERTAIN DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 THE TERM LOAN . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Amount of Term Loan . . . . . . . . . . . . . . . . . . . . . 14
2.2 Type of Loan Disbursement. . . . . . . . . . . . . . . . . . . 14
SECTION 3 THE NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Recordkeeping. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4 REPAYMENT; PREPAYMENTS. . . . . . . . . . . . . . . . . . . . 15
4.1 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5 CONVERSIONS AND CONTINUATIONS . . . . . . . . . . . . . . . . 15
5.1 Conversion and Continuation Procedures . . . . . . . . . . . . 15
5.2 Automatic Continuations. . . . . . . . . . . . . . . . . . . . 15
SECTION 6 INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Eurodollar Margin Increment. . . . . . . . . . . . . . . . . . 16
6.3 Interest Payment Dates . . . . . . . . . . . . . . . . . . . . 16
6.4 Setting and Notice of Rates. . . . . . . . . . . . . . . . . . 17
6.5 Computation of Interest. . . . . . . . . . . . . . . . . . . . 17
6.6 Determination of Margin. . . . . . . . . . . . . . . . . . . . 17
SECTION 7 MAKING OF PAYMENTS; SETOFF. . . . . . . . . . . . . . . . . . 18
7.1 Making of Payments . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Tax Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Tax Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 9 CHANGE OF CIRCUMSTANCES.. . . . . . . . . . . . . . . . . . . 21
9.1 Reserve and Capital Adequacy Costs . . . . . . . . . . . . . . 21
9.2 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 Basis for Determining Interest Rate Inadequate or Unfair . . . 24
9.4 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.5 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 24
9.6 Discretion of Bank as to Manner of Funding . . . . . . . . . . 25
9.7 Conclusiveness of Statements; Survival of Provisions . . . . . 25
SECTION 10 REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Organization, etc . . . . . . . . . . . . . . . . . . . . . . 26
10.2 Authorization; No Conflict. . . . . . . . . . . . . . . . . . 26
10.3 Validity and Binding Nature . . . . . . . . . . . . . . . . . 26
10.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . 26
10.5 Litigation and Contingent Liabilities . . . . . . . . . . . . 27
10.6 Title to Property . . . . . . . . . . . . . . . . . . . . . . 27
10.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 27
10.9 Plans and Welfare Plans . . . . . . . . . . . . . . . . . . . 27
10.10 Investment Company Act . . . . . . . . . . . . . . . . . . . 28
10.11 Public Utility Holding Company Act . . . . . . . . . . . . . 28
10.12 Regulations G, U and X . . . . . . . . . . . . . . . . . . . 28
10.13 Labor Controversies. . . . . . . . . . . . . . . . . . . . . 28
10.14 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.15 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.16 Compliance with Applicable Laws. . . . . . . . . . . . . . . 29
10.17 Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . 29
10.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 11 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.1 Reports, Certificates and Other Information . . . . . . . . . 30
11.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Minimum Consolidated Shareholder's Equity . . . . . . . . . . 35
11.4 Ratio of Debt to Total Capitalization . . . . . . . . . . . . 36
11.5 Purchase or Redemption of the Company's Securities; Dividend
Restrictions; Payments to the Parent . . . . . . . . . . . . . 36
11.6 Mergers, Consolidations, Sales. . . . . . . . . . . . . . . . 38
11.7 Compliance with Applicable Laws . . . . . . . . . . . . . . . 39
11.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.9 Corporate Existence and Franchises. . . . . . . . . . . . . . 40
11.10 Maintenance of Tangible Property . . . . . . . . . . . . . . 40
11.11 Maintenance of Intangible Property . . . . . . . . . . . . . 40
11.12 Books, Records and Inspections . . . . . . . . . . . . . . . 41
11.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.14 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 41
11.15 Other Agreements . . . . . . . . . . . . . . . . . . . . . . 41
11.16 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . 41
11.17 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . 41
11.18 Debt-Like Preferred Stock. . . . . . . . . . . . . . . . . . 42
11.19 Further Assurances . . . . . . . . . . . . . . . . . . . . . 42
SECTION 12 CONDITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . 42
12.1 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.2 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT . . . . . . . . . . . . . 44
13.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 44
13.2 Effect of Event of Default. . . . . . . . . . . . . . . . . . 47
SECTION 14 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 15 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.1 Waiver; Amendments. . . . . . . . . . . . . . . . . . . . . . 47
15.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.3 Computations. . . . . . . . . . . . . . . . . . . . . . . . . 48
15.4 Participations. . . . . . . . . . . . . . . . . . . . . . . . 49
15.5 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . 50
15.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 51
15.7 Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . 51
15.8 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.9 Governing Law; Severability . . . . . . . . . . . . . . . . . 51
15.10 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 52
15.11 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . 52
15.12 Supersession . . . . . . . . . . . . . . . . . . . . . . . . 52
15.13 Successors and Assigns . . . . . . . . . . . . . . . . . . . 52
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I Litigation (Section 10.5)
SCHEDULE II Liens (Section 10.7)
SCHEDULE III Subsidiaries and Restricted Subsidiaries
(Section 10.8)
SCHEDULE IV Post-Retirement Welfare Plan Benefits (Section
10.9)
SCHEDULE V Tax Sharing Arrangements (Section 11.5)
EXHIBITS FORM OF
EXHIBIT A Term Note (Section 3.1)
EXHIBIT B Officer's Certificate (Section 11.1(c))
EXHIBIT C Opinion of Counsel for the Company (Section 12.1)
EXHIBIT D Certificate as to Satisfaction of Conditions (Section
12.1)
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT (this "Agreement"), dated as of September
29, 1995, is between MONTGOMERY WARD & CO., INCORPORATED, an Illinois
corporation (herein, together with its successors and permitted assigns,
called the "Company"), and THE INDUSTRIAL BANK OF JAPAN, LIMITED, CHICAGO
BRANCH (herein, together with its successors and assigns, called the "Bank").
WHEREAS, the Company wishes to be able to borrow from the Bank on
a term loan basis; and
WHEREAS, subject to the terms and conditions set forth herein, the
Bank is willing to make a term loan to the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
When used herein the following terms have the following respective
meanings:
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if such first Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agreement" - see Preamble.
"Authorized Officer" means the President, the Chief Executive
Officer, the Chief Financial Officer, the Treasurer or any Assistant Treasurer
of the Company.
"Bank" - see Preamble.
"Bank Parties" - see Section 15.6.
"Base Rate" means at any time and from time to time the higher of
(i) the rate per annum then most recently publicly announced or established by
the Bank as its "reference rate" or "prime rate" (or the Bank's equivalent
thereof) at its Funding Office for Base Rate loans, or (ii) the Federal Funds
Rate plus 1/2 of 1% per annum.
"Base Rate Interest Period" means an Interest Period during which
time the Loan is being maintained as a Base Rate Loan.
"Base Rate Loan" means the Loan during which time the Loan is then
bearing interest at a rate determined by reference to the Base Rate.
"Business Day" means (i) any day of the year other than a
Saturday, a Sunday or other day on which banks in Chicago are authorized or
required by law to close, and (ii) if the applicable Business Day relates to
the determination of a Eurodollar Rate or to the funding or payment of the
Loan (if the Loan is then a Eurodollar Loan) a day on which dealings are
carried on in the London interbank eurodollar market.
"Capital Base" means at any time the sum of Subordinated Debt plus
Consolidated Shareholder's Equity of the Company plus the FAS 106 Capital Base
Factor, each as at the end of the Fiscal Year or Fiscal Quarter, as the case
may be, ended on the date as of which "Capital Base" is being determined, less
each of (i) the aggregate amount of all outstanding advances by the Company
to, and investments of the Company in, Non-Restricted Subsidiaries, (ii) the
aggregate value of all treasury stock carried as an asset by the Company or
any Subsidiary the equity of which is included in the Company's Consolidated
Shareholder's Equity, and (iii) the aggregate amount of all general
intangibles (including, without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks, brand names and
corporate organization expense) of the Company and its Restricted
Subsidiaries; provided, however, that the following shall not be included as a
general intangible of the Company and its Restricted Subsidiaries for purposes
of this definition: (a) assets under capital leases, (b) prepaid expenses
(including, without limitation, prepaid pension costs and prepaid royalties)
and other costs or expenditures which under GAAP are capitalized and amortized
over the periods to which such costs or expenditures relate (including,
without limitation, unamortized deferred marketing acquisition costs,
unamortized customer service contract costs and unamortized system development
costs), (c) as of the date of determination, the unamortized balance of the
value at June 23, 1988 of insurance licenses of the Company's insurance
Restricted Subsidiaries, (d) as of the date of determination, the unamortized
balance of the value at June 23, 1988 of marketing rights of the Company and
its Restricted Subsidiaries, and (e) all goodwill arising out of the
acquisition by the Company of all the stock of LMR Acquisition Corporation and
its wholly-owned subsidiary, Lechmere, Inc. (including any goodwill on the
books of LMR Acquisition Corporation and Lechmere, Inc. at the time of such
acquisition by the Company) pursuant to the Agreement and Plan of Merger dated
March 17, 1994 by and among the Company, MW Merger Corp., LMR Acquisition
Corporation, Lechmere, Inc. and the stockholders of LMR Acquisition
Corporation who became parties thereto, as heretofore and hereafter amended,
all as determined (except as set forth in Section 15.3) in accordance with
GAAP.
"Capitalized Lease Obligations" means with respect to any Person
any amounts payable by such Person with respect to any lease of any tangible
or intangible property (whether real, personal or mixed), however denoted,
which is required by GAAP to be reflected as a liability on such Person's
balance sheet.
"Change" - see Section 9.1(b).
"Change of Control" has the same meaning as such term is defined
in the Long Term Credit Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" - see Preamble.
"Conditional Sale Obligations" means with respect to any Person
any amounts payable by such Person which are required by GAAP to be reflected
as liabilities on such Person's balance sheet with respect to agreements for
the purchase of real property or other tangible fixed assets on extended
deferred payment terms covering a period of one year or more and under which a
security interest (other than a statutory vendor's lien) is specifically
retained by the seller until the deferred purchase price is paid in full, but
excluding any agreements under which the asset being acquired is classified as
an asset under a capital lease rather than as an asset which is owned in
accordance with GAAP.
"Consolidated Net Income" means the aggregate of the net income of
the Company and its Subsidiaries, determined (except as otherwise provided in
Section 15.3) on a consolidated basis in accordance with GAAP.
"Consolidated Shareholder's Equity" has (except as otherwise
provided in Section 15.3) the meaning assigned to such phrase by GAAP.
"Continue," "Continuation" and "Continued" refer to continuations
of the Loan pursuant to Section 5.1.
"Conversion Notice" - see Section 5.1.
"Convert", "Conversion" and "Converted" refer to conversions of
the Loan pursuant to Section 5.1.
"Corporate Transaction" - see Section 11.6.
"Debt" means as to any Person at any time (i) all of such Person's
Indebtedness for Borrowed Money, plus (ii) all of such Person's Capitalized
Lease Obligations, plus (iii) if such Person is the Company or a Restricted
Subsidiary, without double counting, the Capitalized Lease Obligations of any
Non-Restricted Subsidiary reflected on the balance sheet of such Non-
Restricted Subsidiary for which the Company or such Restricted Subsidiary is
liable directly or indirectly under a Guaranty, less (iv) all Subordinated
Debt.
"Debt-Like Preferred Stock" means any class of stock of the
Company which by its terms (i) has any of the following characteristics: (x)
it is redeemable at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, (y) it is redeemable at the option
of the holder or (z) it has conditions for redemption which are not solely
within the control of the issuer, such as stock which must be redeemed out of
future earnings, and (ii) is validly and effectively made subordinate and
junior in right of payment to the Liabilities in the event of the occurrence
and continuance of any Event of Default.
"Dollar(s)" and the sign "$" mean lawful money of the United
States of America.
"Effective Date" - means the date of this Agreement.
"Equalization Amount" - see Section 8.3.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder and under the Code, in each case as in effect from time
to time. References to sections of ERISA shall be deemed also to refer to any
successors to such sections.
"ERISA Affiliate" means any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or
a controlled group of trades or businesses, as described in sections 414(b)
and 414(c), respectively, of the Code or section 4001 of ERISA.
"Eurocurrency Reserve Percentage" means, with respect to any day,
a percentage (expressed as a decimal) equal to the percentage in effect on
such day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including,
without limitation, any marginal reserve requirement) applicable to
"Eurocurrency liabilities" pursuant to Regulation D or any other then
applicable regulation of said Board of Governors which prescribes reserve
requirements applicable to "Eurocurrency liabilities" as presently defined in
Regulation D.
"Eurodollar Interest Period" means an Interest Period during which
time the Loan is being maintained as a Eurodollar Loan.
"Eurodollar Loan" means the Loan during any time the Loan is then
bearing interest at a rate determined by reference to the Eurodollar Rate.
"Eurodollar Margin Increment" - see Section 6.2.
"Eurodollar Rate" means, with respect to any Interest Period in
which the Loan is being maintained as a Eurodollar Loan, the rate per annum
at which Dollar deposits are offered by the principal London office of the
Bank to prime banks in the London interbank eurodollar market at or about
11:00 a.m., London time, for delivery for same day value on the first day of
such Interest Period, for the number of days comprised therein and in an
amount approximately equal to the amount of the Loan for such Interest Period.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
"Event of Default" means any of the events described in Section
13.1.
<PAGE>
"FAS 106 Capital Base Factor" means, as at the date of
determination, the dollar amount set forth below opposite the Fiscal Year in
which such date occurs:
Fiscal Year FAS 106 Capital Base Factor
1995 60,000,000
1996 45,000,000
1997 30,000,000
1998 15,000,000
1999 and each 0
Fiscal Year thereafter
"FAS 106 Minimum Equity Factor" means, as at the date of
determination, the dollar amount set forth below opposite the Fiscal Year in
which such date occurs:
Fiscal Year FAS 106 Minimum Equity Factors
1995 60,000,000
1996 45,000,000
1997 30,000,000
1998 15,000,000
1999 and each 0
Fiscal Year thereafter
"FAS 106 Restricted Payment Factor" means, as at the date of
determination, the dollar amount set forth below opposite the Fiscal Year in
which such date occurs:
Fiscal Year FAS 106 Restricted Payment Factors
1995 45,000,000
1996 45,000,000
1997 30,000,000
1998 15,000,000
1999 and each 0
Fiscal Year thereafter
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve System
(including any such successor, "H.15(519)") for that day opposite the caption
"Federal Funds (Effective)". If on any relevant day such rate is not yet
published in H.15(519), the rate for that day will be the rate set forth in
the daily statistical release designated as the Composite 3:30 P.M. Quotations
for U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor, the "Composite
3:30 P.M. Quotations") for that day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for such day is not yet
published in either H.15(519) or the Composite 3:30 P.M. Quotations, the rate
for such day will be the arithmetic mean of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m., New York time, on that
day by each of three leading brokers of Federal funds transactions in New York
City, selected by the Bank.
"Finance Obligation(s)" means with respect to any Person, as of
the date of determination thereof, (i) any and all of such Person's
Indebtedness for Borrowed Money, (ii) any and all of such Person's actual or
contingent reimbursement obligations with respect to letters of credit issued
for such Person's account, (iii) any and all of such Person's actual or
contingent obligations with respect to interest swap agreements or currency
swap agreements or other hedge agreements relating to fluctuations in interest
rates or currencies, (iv) any and all of such Person's liabilities under Title
IV of ERISA, and (v) any and all indebtedness or obligations of any of the
types described in the preceding clauses (i), (ii), (iii) and (iv) for which
such Person is liable, directly or indirectly, under a Guaranty.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means a fiscal year of the Company which begins on
the Sunday following the Saturday closest to December 31 of any calendar year
and ends on the Saturday closest to December 31 of the next succeeding
calendar year.
"Funding Date" means the date on which the Loan is funded.
"Funding Office" means with respect to the Loan as a Eurodollar
Loan or Base Rate Loan, as the case may be, the office or Affiliate of the
Bank specified therefor beneath the Bank's signature hereto. Subject to
Section 9.6(b), each Funding Office of the Bank may be changed to another
domestic or foreign office of the Bank or domestic or foreign office of any
Affiliate of the Bank upon written notice from the Bank to the Company.
"GAAP" means the generally accepted accounting principles applied
in the preparation of the audited consolidated financial statements of the
Company and its Subsidiaries as at January 1, 1994, with (except as otherwise
provided in Section 15.3) such changes thereto as (a) shall be consistent with
the then effective principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors and successors, and (b) shall
be concurred in by the independent certified public accounts of recognized
national standing certifying any financial statements of the Company and its
Subsidiaries.
"GE Capital" means General Electric Capital Corporation, together
with its successors and assigns.
"Guaranty" means any instrument or document by which a Person has
directly or indirectly guaranteed (whether by discount or otherwise), endorsed
(other than for collection or deposit in the ordinary course of business),
discounted with recourse to such Person or with respect to which such Person
is otherwise directly or indirectly liable for the indebtedness or obligations
of any other Persons, including, without limitation, indebtedness in effect
guaranteed by such Person through any agreement (contingent or otherwise) to
(i) purchase, repurchase or otherwise acquire such indebtedness, (ii) provide
funds for the payment or discharge of such indebtedness or any other liability
of the obligor of such indebtedness (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), (iii) maintain the
solvency or other financial condition of the obligor of such indebtedness, or
(iv) make payment for any products, materials, supplies, transportation or
services pursuant to an agreement which requires such payment regardless of
the non-delivery or non-furnishing thereof, if in any such case the purpose or
intent of such agreement is to provide assurance that such indebtedness will
be paid or discharged or that any agreements relating thereto will be complied
with or that the holders of such indebtedness will be protected against loss
in respect thereof.
"Indebtedness for Borrowed Money" means with respect to any
Person, as of the date of determination thereof, (i) any and all of such
Person's indebtedness for borrowed money (including, without limitation,
indebtedness for borrowed money which is subordinated), (ii) any and all of
such Person's Conditional Sale Obligations, (iii) any and all indebtedness
secured by any Lien with respect to any property or asset owned by such
Person, regardless of whether the indebtedness secured thereby shall be of or
shall have been assumed by such Person, and (iv) any and all indebtedness or
obligations of any of the types described in the preceding clauses (i), (ii)
and (iii) for which such Person is liable, directly or indirectly, under a
Guaranty; provided, however, that the obligations of a lessee under a lease
shall not constitute Indebtedness for Borrowed Money and any indebtedness
incurred by such Person which by the terms of the related agreement is
required to be used to retire a payment obligation to a trade creditor arising
from the purchase by such Person of goods and services acquired for the
purpose of resale in the ordinary course of such Person's business shall not
constitute Indebtedness for Borrowed Money.
"Indemnified Liabilities" - see Section 15.6.
"Interest Period" means (i) with respect to the Loan as a
Eurodollar Loan, the period commencing on the Funding Date (or on the date
the Loan was Converted to or Continued as a Eurodollar Loan) and ending 1, 2,
3 or 6 months thereafter as selected by the Company pursuant to Section 2 or
5.1, and (ii) with respect to the Loan as a Base Rate Loan, the period
commencing on the Funding Date (or on the date the Loan was Converted to or
Continued as a Base Rate Loan) and ending on the last Business Day of the next
following March, June, September or December, whichever comes first; provided,
however, that:
(A) if an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day (unless, in the case of a Eurodollar
Interest Period, such next succeeding Business Day would fall in
the next succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day);
(B) in the case of a Eurodollar Interest Period, if there
exists no day numerically corresponding to the day the Eurodollar
Interest Period commenced in the month in which the last day of
such Eurodollar Interest Period would otherwise fall, such
Eurodollar Interest Period shall end on the last Business Day of
such month; and
(C) no Interest Period shall extend beyond the Maturity
Date.
"Liabilities" means any and all of the Company's obligations to
the Bank, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due,
which arise out of or in connection with this Agreement, the Note or any
document, instrument or agreement executed in connection with any of the
foregoing.
"Lien" means any mortgage, pledge, lien, security interest or
other charge, including the retained security title of a conditional vendor or
lessor.
"Litigation" means any litigation, proceeding (including without
limitation any governmental proceeding or arbitration proceeding), claim,
lawsuit and/or investigation (including, without limitation, any environmental
litigation, proceeding, claim, lawsuit and/or investigation) pending or
threatened against or involving the Company or any Subsidiary or any of its or
their businesses or operations.
"Loan" see Section 2.1.
"Long Term Credit Agreement" means that certain Long Term Credit
Agreement dated as of September 15, 1994 among the Company, various banks, The
First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia,
as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and
Bank of America National Trust and Savings Association, as Advisory Agent, as
heretofore or hereafter amended.
"Margin Stock" has the meaning given to such term in Regulations U
and/or X.
"Material Litigation" or "Material Litigation Development" means
any Litigation or development in any Litigation which could individually or in
the aggregate impair the validity or enforceability of or the ability of the
Company to perform any of its obligations under this Agreement or the Note or
the MWCC Receivables Purchase Agreement, or materially impair the ability of
the Company to conduct business substantially as now conducted, or materially
and adversely affect the consolidated business, operations, prospects or
financial condition of the Company and its Subsidiaries, taken as a whole.
"Maturity Date" - see Section 4.1.
"MWCC" means Montgomery Ward Credit Corporation.
"MWCC Receivables Purchase Agreement" means the Account Purchase
Agreement between MWCC and the Company, together with the Guaranty made by GE
Capital of MWCC's obligations under such Account Purchase Agreement, both
dated as of June 24, 1988, as the same may be amended, modified or
supplemented from time to time in a manner which does not result in an Event
of Default under Section 13.1(i).
"Mobil" - see Section 10.14(c).
"Multiemployer Plan" means a "multiemployer plan", as such term is
defined in section 4001(a) of ERISA, which is subject to Title IV of ERISA and
to which the Company or any ERISA Affiliate contributed or otherwise may have
any liability.
"Non-Restricted Subsidiary" means each Subsidiary which is not a
Restricted Subsidiary.
"Note" - see Section 3.1.
"Parent" means Montgomery Ward Holding Corp., a Delaware
corporation, together with its successors and assigns.
"Participant(s)" - see Section 15.4(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Lien" - see Section 11.2.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Plan" means a "pension plan", as such term is defined in ERISA,
which is subject to Title IV of ERISA (other than a Multiemployer Plan),
established or maintained by the Company or any ERISA Affiliate as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the five years preceding the Effective Date, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.
"Ratio of Earnings to Fixed Charges" means for any Ratio Period,
the ratio of (i) the sum of Consolidated Net Income for such Ratio Period
before addition of any amount for interest income and before deduction of any
amount for all income taxes, interest expense, depreciation, amortization and
rental expense, to (ii) the sum of the excess of all interest expense over
interest income plus all rental expense plus capital expenditures (other than
asset additions under capital leases determined in accordance with GAAP,
except as set forth in Section 15.3) of the Company and its Subsidiaries
payable with respect to such Ratio Period, all as determined in accordance
with GAAP (except as set forth in Section 15.3).
"Ratio Period" means the eight (8) consecutive Fiscal Quarters
ending as of the date as of which the Ratio of Earnings to Fixed Charges is
being determined.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System and any successor rule or regulation of similar import
as in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System and any successor rule or regulation of similar import
as in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System and any successor rule or regulation of similar import
as in effect from time to time.
"Restricted Payment" - see Section 11.5.
"Restricted Subsidiary" means any Subsidiary designated as such by
the Company's Board of Directors or by the chief financial officer of the
Company or by an officer of the Company authorized by the Board of Directors
of the Company to make such designation and which designation shall not
thereafter have been cancelled by the Company's Board of Directors or by the
chief financial officer of the Company or by an officer of the Company
authorized by the Board of Directors to effect such cancellation; provided,
however, that a Subsidiary may be designated as a Restricted Subsidiary or
such designation may be cancelled if and only if immediately after such
designation or cancellation, and after giving effect thereto, no Event of
Default or Unmatured Event of Default shall have occurred and be continuing.
Notwithstanding anything contained in the immediately preceding sentence to
the contrary and so long as the Long Term Credit Agreement shall remain in
effect, the term "Restricted Subsidiary" shall mean any Subsidiary which is a
"Restricted Subsidiary" as defined in the Long Term Credit Agreement.
"Risk-Based Capital Guidelines" - see Section 9.1(b).
"SEC" means the Securities Exchange Commission and any successor
thereof.
"Secured Indebtedness" - see Section 11.2(xix).
"Special Restricted Subsidiary" means any Restricted Subsidiary
(i) with assets that constitute one percent (1%) or less of the total assets
of the Company and all Restricted Subsidiaries, (ii) with net income for the
most recent Fiscal Year that constitutes one percent (1%) or less of the total
net income of the Company and all Restricted Subsidiaries for the most recent
Fiscal Year, and (iii) with equity of less than $4,000,000.
"Subordinated Debt" means indebtedness of the Company which is
subordinated to the prior payment of the Liabilities on terms and conditions
acceptable to the Bank; provided that any payments of principal which are
scheduled to occur prior to the Maturity Date shall not constitute
Subordinated Debt.
"Subsidiary" means a corporation of which the Company and/or its
other Subsidiaries own, directly or indirectly, such number of outstanding
shares as have more than 50% of the ordinary voting power for the election of
such corporation's directors.
"Tax Benefit" - see Section 8.3.
"Taxes" - see Section 8.1.
"Total Capitalization" means at any time the sum of Debt of the
Company and its Restricted Subsidiaries plus Capital Base plus all Debt-Like
Preferred Stock; provided, however, that if Total Capitalization is being
determined as at any date which is not the last day of a Fiscal Quarter,
"Total Capitalization" equals (i) Debt of the Company and its Restricted
Subsidiaries, plus (ii) all Debt-Like Preferred Stock, plus (iii) Capital Base
as at the end of the most recently completed Fiscal Quarter, plus (iv) any
repayments of loans or advances to Parent received by the Company since the
end of the most recently completed Fiscal Quarter, plus (v) any capital
contributions received by the Company since the end of the most recently
completed Fiscal Quarter, plus (vi) an amount equal to the net proceeds
received by the Company from the issue or sale after the end of the most
recently completed Fiscal Quarter of any shares of its capital stock
(including treasury stock but excluding Debt-Like Preferred Stock), plus (vii)
an amount equal to the net proceeds from the issue or sale at any time of that
portion of any indebtedness (other than Subordinated Debt) of the Company or
any Restricted Subsidiary which after the end of the most recently completed
Fiscal Quarter is converted into shares of capital stock (but excluding Debt-
Like Preferred Stock) of the Company or into indebtedness or shares of capital
stock of the Parent, plus (viii) any decrease since the end of the most
recently completed Fiscal Quarter in the aggregate amount of all advances by
the Company to, and investments of the Company in, Non-Restricted Subsidiaries
other than any decrease resulting from any aggregate net loss incurred by such
Non-Restricted Subsidiaries since the end of the most recently completed
Fiscal Quarter, minus (ix) any Restricted Payments made since the end of the
most recently completed Fiscal Quarter, minus (x) any increase since the end
of the most recently completed Fiscal Quarter in the aggregate amount of all
advances by the Company to, and investments of the Company in, Non-Restricted
Subsidiaries other than any increase resulting from any aggregate net income
of such Non-Restricted Subsidiaries since the end of the most recently
completed Fiscal Quarter.
"Type" - shall mean a Eurodollar Loan with a 1, 2, 3 or 6 month
Interest Period or a Base Rate Loan.
"Unmatured Event of Default" means any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
"Welfare Plan" has the meaning assigned to such term by ERISA.
SECTION 2 THE TERM LOAN.
2.1 Amount of Term Loan. On the terms and subject to the
conditions of this Agreement, the Bank agrees to make a term loan to the
Company (herein called the "Loan") in the amount of $25,000,000 on the date
hereof.
2.2 Type of Loan Disbursement. The Loan shall be maintained as
either a Eurodollar Loan or a Base Rate Loan, as selected by the Company
pursuant to Section 5; it being understood that the Loan shall initially be a
Eurodollar Loan with an Interest Period of 3 months. The Loan shall be funded
in a single disbursement. Once repaid, no portion of the Loan may be
reborrowed.
SECTION 3 THE NOTE.
3.1 Note. The Loan shall be evidenced by the Company's
promissory note (as amended, modified or supplemented from time to time, and
together with any renewals thereof or exchanges or substitutions therefor,
called the "Note") substantially in the form set forth as Exhibit A, with
appropriate insertions, dated the Effective Date and made payable to the order
of the Bank.
3.2 Recordkeeping. The Loan and all payments of the principal
and interest thereon shall be evidenced by the Bank in its books and records
or, at the Bank's option, on the schedule attached to the Note, which books
and records or schedule shall be rebuttable presumptive evidence of the
principal and interest owing and unpaid on the Note. The failure to record
any information in the books or records or any schedule to the Note, or any
error in so recording any such information shall not limit or otherwise affect
the Company's obligations hereunder or under the Note to repay the principal
amount of the Loan together with all interest accruing thereon.
<PAGE>
SECTION 4 REPAYMENT; PREPAYMENTS.
4.1 Repayment. The Company promises to pay to the Bank on
September 30, 1999, or if such day is not a Business Day, then on the
immediately preceding Business Day, (the "Maturity Date") the principal amount
of the Loan which then remains outstanding, together with all accrued but
unpaid interest thereon and all other amounts due and owing hereunder or under
the Note.
4.2 Prepayment. The Company may voluntarily prepay the Loan from
time to time in whole or in part, provided that (a) the Company shall give the
Bank not less than 30 days prior notice thereof (provided, however; that if
the Company is at such time required to pay any taxes or funding losses
pursuant to Section 8.1 or Section 9.5, then the Company shall give the Bank
not less than 3 Business Days' prior notice thereof, or if the Loan is then a
Base Rate Loan, the Company shall give the Bank not less than 1 Business Day
prior notice thereof), specifying the date and amount of prepayment, (b) any
prepayment of the Loan shall include accrued interest on the principal amount
being paid to the date of prepayment, and (c) any prepayment of the Loan (to
the extent a Eurodollar Loan) shall be subject to the provisions of Section
9.5.
SECTION 5 CONVERSIONS AND CONTINUATIONS.
5.1 Conversion and Continuation Procedures. The Company may (i)
Convert the Loan into a different Type or (ii) Continue the Loan as the same
Type; provided, that, in any case the Company shall give an irrevocable notice
of such Conversion or Continuation (a "Conversion Notice") to the Bank by
10:00 a.m., Chicago time, on a day which in the case of a Conversion into or a
Continuation of a Base Rate Loan is at least 1 Business Day prior to the
proposed date of such Conversion or Continuation and, in the case of a
Conversion into or a Continuation of a Eurodollar Loan, is at least 3 Business
Days prior to such date. Each such Conversion Notice shall be effective upon
the Bank's receipt thereof, shall be in writing (or by telephone promptly
confirmed in writing on the same day), shall specify the date (which shall be
the last day of the then current Interest Period if a Eurodollar Loan), and
the Type of Loan to be Continued as or into which it is to be Converted.
5.2 Automatic Continuations. At any time the Loan is a
Eurodollar Loan, if the Company does not deliver a Conversion Notice on or
before the day that is 3 Business Days before the last day of the then current
Interest Period, then at the end of the then current Interest Period, unless
theretofore paid in full, the Loan automatically shall be Continued as a
Eurodollar Loan of the same Type. A Base Rate Loan shall automatically
Continue as a Base Rate Loan until a Conversion Notice is otherwise given by
the Company pursuant to Section 5.1.
SECTION 6 INTEREST.
6.1 Interest Rates. The Company hereby promises to pay interest
on the unpaid principal amount of the Loan for the period commencing on the
Funding Date of the Loan until the Loan is paid in full, as follows:
(a) if the Loan is a Base Rate Loan, at a rate per annum
equal to the Base Rate from time to time in effect; and
(b) if the Loan is a Eurodollar Loan, at a rate per annum
during each Interest Period equal to the Eurodollar Rate
applicable to such Interest Period, plus 0.20% per annum, plus any
applicable Eurodollar Margin Increment;
provided, however, that after maturity of the Loan (whether by acceleration or
otherwise), the Loan shall bear interest on the unpaid principal amount
thereof at a rate per annum equal to the Base Rate from time to time in effect
(but not less than the applicable interest rate in effect at maturity) plus 2%
per annum. The Company hereby further promises to pay any additional interest
on the unpaid principal amount of the Loan, as may be required in accordance
with Section 9.
6.2 Eurodollar Margin Increment. If at the end of any Fiscal
Quarter, the Ratio of Earnings to Fixed Charges determined as of the last day
of such Fiscal Quarter is less than 1.25:1, or if the Company has failed to
provide on a timely basis the certificate required to be furnished by it
pursuant to Section 11.1(c), then subject to Section 6.6, from and including
the first day after the end of such Fiscal Quarter to but excluding the first
day after the end of the following Fiscal Quarter, the Company shall pay
additional interest with respect to the Loan (if the Loan is then a Eurodollar
Loan) during such following Fiscal Quarter, in an amount equal to 0.125% per
annum (the "Eurodollar Margin Increment").
6.3 Interest Payment Dates. Accrued interest on the Loan shall
be payable on the last day of each Interest Period therefor; provided,
however, (i) in the event an Interest Period has a duration of more than 3
months, accrued interest shall also be payable on the three month anniversary
of the first day of such Interest Period or, if such day is not a Business
Day, on the next succeeding Business Day, (ii) accrued interest on the Loan as
a Base Rate Loan shall also be payable on the day the Loan is Converted into a
Eurodollar Loan pursuant to Section 5, and (iii) that any interest payable
with respect to an applicable Eurodollar Margin Increment shall be payable
within fifteen days of the last day of the Fiscal Quarter during which such
Eurodollar Margin Increment is applicable and on the Maturity Date to the
extent any Eurodollar Margin Increment has theretofore accrued and remains
outstanding. After maturity, accrued interest on the Loan shall be payable on
demand.
6.4 Setting and Notice of Rates. The applicable interest rate
for each Interest Period shall be determined by the Bank and, in the case of
Eurodollar Interest Periods, notice thereof shall be given by the Bank to the
Company promptly, but in any event on the same day as received (such notice to
also specify the date upon which such Interest Period ends). Each
determination of the applicable interest rate by the Bank shall be conclusive
and binding upon the Company, in the absence of manifest error. The Bank
shall, upon written request of the Company, deliver to the Company a statement
showing the computations used by the Bank in determining the interest rate
applicable to any Eurodollar Interest Period.
6.5 Computation of Interest. Interest with respect to Eurodollar
Interest Periods shall be computed for the actual number of days elapsed on
the basis of a 360-day year. Interest with respect to Base Rate Interest
Periods shall be computed for the actual number of days elapsed on the basis
of a 365- or, if applicable, 366-day year. The interest rate applicable to
each Base Rate Interest Period shall change simultaneously with each change in
the Base Rate without any notice or other action involving the Company.
6.6 Determination of Margin. For the purposes of calculating the
Eurodollar Margin Increment in Section 6.2, the Ratio of Earnings to Fixed
Charges as at the end of any Fiscal Quarter shall be determined (i) in the
case of each of the first three Fiscal Quarters of any Fiscal Year by
reference to the certificate from the Company to be delivered to the Bank
pursuant to Section 11.1(c) and (ii) in the case of the last Fiscal Quarter of
any Fiscal Year, initially by reference to a certificate from the Company to
be delivered to the Bank not later than ninety days following the end of such
Fiscal Quarter in the form of the certificate delivered pursuant to the
foregoing clause (i) (but limited to the calculation of the Ratio of Earnings
to Fixed Charges). Each such certificate shall contain the Company's
calculation of the Ratio of Earnings to Fixed Charges as at the end of the
preceding Fiscal Quarter. Until receipt by the Bank of such certificate,
failure of the Company to furnish such certificate on a timely basis shall be
deemed (for purposes of Sections 6.2) to constitute an acknowledgement by the
Company that the Ratio of Earnings to Fixed Charges is less than 1.25:1. If,
in the case of any Fiscal Quarter, the actual Ratio of Earnings to Fixed
Charges as at the end of the preceding Fiscal Quarter (as determined by
reference to the audited report delivered pursuant to Section 11.1, to any
correction with respect to any certificate previously furnished by the Company
or to any certificate furnished on an untimely basis) results in a Eurodollar
Margin Increment different from that applied in connection with the Company's
calculation, such new Eurodollar Margin Increment shall come into effect
immediately upon the Bank's receipt of such report, correction or untimely
certificate and shall be given retroactive effect to and including the first
day of the Fiscal Quarter immediately following the Fiscal Quarter to which
such report, correction or untimely certificate relates, and within fifteen
days of the Bank's receipt of such report, correction or untimely certificate,
either the Company shall pay to the Bank or the Bank shall pay to the Company
such amounts as shall be necessary to give effect to such new Eurodollar
Margin Increment.
SECTION 7 MAKING OF PAYMENTS; SETOFF.
7.1 Making of Payments. All payments of principal of, or
interest on, the Loan, shall be made by the Company to the Bank in immediately
available Dollars. All such payments shall be made (or initiated, in the case
of payments being made by Fedwire) to the Bank at its office shown below its
signature hereto (or at such other office as may be designated from time to
time by the Bank by notice to the Company), not later than 12:00 noon, Chicago
time, on the date due; and funds received after that hour shall be deemed to
have been received by the Bank on the next Business Day.
7.2 Setoff. The Company agrees that the Bank, the holder of the
Note and each holder of a participation (with the same effect as if the
Company owed the participant directly) shall have all rights of setoff and
bankers' lien provided by applicable law and, in addition thereto, the Company
agrees that at any time any amount owing by the Company under this Agreement
or the Note is then due, directly or indirectly, to the Bank or the holder,
the Bank and the holder may apply to the payment of such amount any and all
balances, credits, deposits, accounts or moneys of the Company then or
thereafter with the Bank or the holder, it being understood that the aggregate
amounts set off shall at no time exceed the Liabilities.
SECTION 8 TAXES.
8.1 Net Payments. All payments made by the Company to the Bank
under or in connection with this Agreement and the Note shall be made without
any setoff or counterclaim, and free and clear of and without deduction or
withholding for or on account of any present or future Taxes now or hereafter
imposed by any governmental or other authority, except to the extent that such
deduction or withholding is compelled by law. As used herein, the term
"Taxes" shall include all income, excise and other taxes of whatever nature
(other than taxes generally assessed on the overall net income of the Bank, as
the case may be, by the government or other authority of the country in which
the Bank is incorporated or in which the Bank's Funding Office or the office
through which the Bank is acting is located provided that taxes so assessed on
any additional amounts payable hereunder shall constitute "Taxes") as well as
all levies, imposts, duties, charges or fees of whatever nature. If the
Company is compelled by law to make any such deductions or withholdings it
will:
(i) pay to the relevant authorities the full amount
required to be so withheld or deducted;
(ii) (except to the extent that such deduction or
withholding results from the breach, by the recipient of a
payment, of its agreement, if any, contained in Section 8.2 or
would not be required if such recipient's representation or
warranty contained in Section 8.2, if any, were true) pay such
additional amounts (including, without limitation, any penalties,
interest or expenses) as may be necessary in order that the net
amount received by the Bank after such deductions or withholdings
(including any required deduction or withholding on such
additional amounts) shall equal the amount such payee would have
received had no such deductions or withholdings been made; and
(iii) promptly forward to the Bank an official receipt or
other documentation satisfactory to the Bank evidencing such
payment to such authorities.
Moreover, if any Taxes are directly asserted against the Bank,
such payee may pay such Taxes and the Company (except to the extent that such
Taxes result from the breach, by such payee, of its agreement contained in
Section 8.2, if any, or would not be asserted if such payee's representation
or warranty contained in Section 8.2, if any, were true) promptly shall
reimburse the payee for such Taxes and shall pay such additional amount
(including, without limitation, any penalties, interest or expenses in
connection therewith) as may be necessary in order that the net amount
received by such payee after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such payee would have received
had no such Taxes been asserted. The Company's agreement under this Section
8.1 shall survive repayment of the Liabilities, cancellation of the Note
and/or any termination of this Agreement.
8.2 Tax Forms. In consideration of, and as a condition to, the
Company's undertakings in Section 8.1, the Bank agrees (to the extent it is
permitted to do so under the laws and any applicable double taxation treaty of
the jurisdiction of its incorporation and the jurisdiction in which its
Funding Office is located) to execute and deliver to the Company, before the
first scheduled payment date hereunder in each calendar year, either (i) two
United States Internal Revenue Service Forms 1001 or (ii) two United States
Internal Revenue Service Forms 4224 together with two United States Internal
Revenue Service Forms W-9, or any successor forms, as appropriate, properly
completed and claiming complete or partial, as the case may be, exemption from
withholding and deduction of United States Federal Taxes. The Bank represents
and warrants to the Company that, at the Effective Date, (x) its Eurodollar
Loan and Base Rate Loan Funding Offices are entitled to receive payments of
interest hereunder without deduction or withholding for or on account of any
Taxes imposed by the United States or any political subdivision thereof and
(y) it is permitted to take the actions described in the preceding sentence
under the laws and any applicable double taxation treaties of the
jurisdictions specified in the preceding sentence.
8.3 Tax Refunds. If at any time the Bank by reason of payment by
the Company of any Taxes determines in its sole discretion that it has
obtained a net credit against, or return or reduction of, any tax (other than
the tax to which the payment by the Company relates) payable by it which it
would not have enjoyed but for such payment ("Tax Benefit"), the Bank shall
thereupon pay to the Company the amount which the Bank shall certify to be the
amount that, after payment, will leave the Bank in the same economic position
it would have been in had it received no such Tax Benefit ("Equalization
Amount"); provided, however, that (i) if the Bank shall subsequently determine
that it has lost the benefit of all or a portion of such Tax Benefit, the
Company shall promptly remit to the Bank the amount certified by the Bank to
be the amount necessary to restore the Bank to the position it would have been
in if no payment had been made pursuant to this Section 8.3, (ii) if the Bank
shall be prevented by applicable law from paying the Company all or any
portion of the Equalization Amount owing the Company, such payment need not be
made, (iii) the Bank shall be under no obligation to utilize any Taxes either
as credits or deductions, (iv) the Company shall not be entitled to require
the Bank to supply it with details of its tax position and (v) nothing
contained herein shall interfere with the right of the Bank to arrange its tax
affairs as it sees fit. A certificate submitted by the Bank pursuant to this
Section 8.3 shall be conclusive, in the absence of manifest error.
SECTION 9 CHANGE OF CIRCUMSTANCES.
9.1 Reserve and Capital Adequacy Costs.
(a) If Regulation D shall require reserves actually to be
maintained in connection with the Loan being maintained as a Eurodollar Loan
or any Eurocurrency liabilities (as defined in Regulation D) with respect
thereto of the Bank, regardless of whether the Loan is then outstanding, the
Bank may require the Company to pay (and the Company agrees to pay) additional
interest on the Loan at a rate per annum equal to the difference between the
Eurodollar Rate (Reserve Adjusted) and the Eurodollar Rate for such Interest
Period. The Bank shall give notice thereof at least three (3) Business Days
prior to the last day of the Interest Period if the Loan is then outstanding
or at least one (1) Business Day prior to the commencement of the Interest
Period if the Loan is not then outstanding. On the last day of each Interest
Period, the Company shall pay directly to the Bank such additional interest.
Once given, each such notice by the Bank shall be deemed automatically to
continue in effect and apply to the Loan until the Bank revokes such notice.
At such time, if any, as the Bank shall not be required so to maintain
reserves, the Bank agrees so to notify the Company.
(b) If the Bank reasonably determines that the amount of capital
required or expected to be maintained by the Bank, any Funding Office of the
Bank or any Person controlling the Bank attributable to this Agreement, the
Loan or its obligation to make or maintain the Loan hereunder is increased as
a result of a Change (as hereinafter defined), then, within 15 days of demand
by the Bank, the Company shall pay the Bank the amount which the Bank
determines is necessary to compensate it for any reduction in the rate of
return on capital to an amount below that which the Bank, such Funding Office
or such Person could have achieved but for such Change and is attributable to
this Agreement, the Loan or its obligation to make or maintain the Loan
hereunder. "Change" means (i) any change after the Effective Date in the
Risk-Based Capital Guidelines (as hereinafter defined) or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the Effective Date which affects the amount of
capital required or expected to be maintained by the Bank or any Funding
Office or any Person controlling the Bank or (iii) any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or (iv) compliance by the Bank (or any Funding Office
or Person controlling the Bank) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency. "Risk-Based Capital Guidelines" means (i) the risk-based capital
guidelines in effect in the United States on the Effective Date, including
transition rules, and (ii) the corresponding capital regulations promulgated
by regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory Practices
entitled "International Convergence of Capital Measurements and Capital
Standards," including transition rules, and any amendments to such regulations
adopted prior to the Effective Date.
9.2 Increased Costs. If (i) Regulation D, or (ii) after the
Effective Date, the adoption of, or any change in, any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank (or any
Funding Office of the Bank) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, whether or not having the force of law,
(a) shall subject the Bank (or any Funding Office of the
Bank) to any tax, duty or other charge with respect to the Loan as
a Eurodollar Loan, the Note, or the Bank's obligation to make or
maintain the Loan as a Eurodollar Loan, or shall change the basis
of taxation of payments to the Bank (or any Funding Office of the
Bank) of the principal of or interest on the Loan as a Eurodollar
Loan owed to it or any other amounts due under this Agreement in
respect of the Loan as a Eurodollar Loan, the Note, or the Bank's
obligation to make or maintain the Loan as a Eurodollar Loan
(except for changes in the rate of tax on the overall net income
of the Bank or its Funding Office imposed by the government or
other authority of the country in which the Bank is incorporated
or in which the Bank's Funding Office is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board
of Governors of the Federal Reserve System, but excluding any
reserve included in the determination of interest rates pursuant
to Section 6), special deposit, capital adequacy, minimum capital,
capital ratio, deposit insurance or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, the Bank (or any Funding Office of the Bank); or
(c) shall impose, modify or deem applicable any capital
adequacy or similar requirement on the Bank; or
(d) shall impose on the Bank (or any Funding Office of the
Bank) any other condition affecting the Loan as a Eurodollar Loan
or the Note or the Bank's obligation to make or maintain the Loan
as a Eurodollar Loan;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D, to impose an additional cost on) the Bank (or any
Funding Office of the Bank) of making or maintaining the Loan as a Eurodollar
Loan, or to reduce the amount of any sum received or receivable by the Bank
(or the Bank's Funding Office) under this Agreement or under the Note with
respect thereto, or to reduce the rate of return on the Bank's capital to a
level below that which the Bank could have achieved but for such adoption or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount which the Bank determines to be material, then
within 10 days after demand by the Bank (which demand shall be accompanied by
a statement setting forth the basis of such demand), the Company shall pay
directly to the Bank such additional amount or amounts as will compensate the
Bank for such increased cost or such reduction.
The Bank promptly shall notify the Company of any event of which
it has knowledge, occurring after the Effective Date, which will entitle the
Bank to compensation pursuant to this Section 9.2 and will designate a
different Funding Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the Bank's sole
judgment, be otherwise disadvantageous to the Bank.
<PAGE>
9.3 Basis for Determining Interest Rate Inadequate or Unfair. If
with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not
being offered by the Bank in the relevant market for such Interest
Period, or the Bank otherwise determines (which determination
shall be binding and conclusive on all parties) that, by reason of
circumstances affecting the London interbank eurodollar market,
adequate and reasonable means do not exist for ascertaining the
applicable Eurodollar Rate; or
(b) The Bank determines that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Bank of maintaining
or funding the Loan as a Eurodollar Loan for such Interest Period,
or that the making, maintaining or funding of the Loan as a
Eurodollar Loan has become impracticable as a result of an event
occurring after the Effective Date which in the Bank's opinion
materially affects the Loan
then the Bank promptly shall notify the Company thereof and so long as such
circumstances shall continue (i) the Bank shall not be under any obligation to
Continue the Loan as, or Convert the Loan to, a Eurodollar Loan and (ii) on
the last day of the current Interest Period, the Loan shall automatically
Convert to a Base Rate Loan.
9.4 Illegality. In the event that any change in (including the
adoption of any new) applicable laws or regulations, or in the interpretation
of applicable laws or regulations by any governmental or other regulatory body
charged with the interpretation or administration thereof, would, in the
Bank's opinion, make it unlawful for the Bank to make, maintain or fund the
Loan as a Eurodollar Loan, then (a) the Bank shall promptly notify the
Company, (b) the Bank's obligations (if any) to maintain the Loan as a
Eurodollar Loan shall, upon the effectiveness of such event, be suspended for
the duration of such unlawfulness, and (c) on the last day of the then current
Interest Period (or, in any event, if the Bank so requests, on such earlier
date as may be required by the relevant law, regulation or interpretation),
the Loan shall be Converted into a Base Rate Loan.
9.5 Funding Losses. The Company hereby agrees that upon demand
by the Bank (which demand shall be accompanied by a statement setting forth
the basis for the calculations of the amount being claimed) the Company will
indemnify the Bank against any net loss or expense which the Bank may sustain
or incur (including, without limitation, any net loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund or maintain the Loan as a Eurodollar Loan), as
reasonably determined by the Bank, as a result of (a) any payment or mandatory
or voluntary prepayment (including, without limitation, any payment resulting
from an acceleration upon the occurrence of any Event of Default) of the Loan
as a Eurodollar Loan on a date other than the last day of the Interest Period,
(b) any Conversion of the Loan as a Eurodollar Loan on a date other than the
last day of the Interest Period, or (c) any failure of the Company to borrow,
or to Continue or Convert the Loan on the originally scheduled date specified
therefor pursuant to this Agreement (including, without limitation, any
failure to borrow resulting from any failure to satisfy the conditions
precedent to such borrowing). For this purpose, all notices to the Bank
pursuant to this Agreement shall be deemed to be irrevocable.
9.6 Discretion of Bank as to Manner of Funding.
(a) Notwithstanding any other provision of this Agreement to the
contrary, the Bank shall be entitled to fund and maintain its funding of all
or any part of the Loan in any manner it sees fit; it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if the Bank had actually funded and maintained the Loan
during each Eurodollar Interest Period through the purchase of deposits
having a maturity corresponding to such Eurodollar Interest Period and bearing
interest at the Eurodollar Rate.
(b) If the Bank changes its Funding Office, the Company shall not
be obligated under this Agreement to make any greater payment to the Bank
than the Bank would have been entitled to receive if such Funding Office had
not been changed, unless such Funding Office was changed (i) with the
Company's prior written consent, (ii) at the Company's request, (iii) to
mitigate or avoid the suspension of the Bank's obligations or the requirement
of payment of increased costs in the circumstances contemplated by Section
9.1(a), 9.2, 9.3 or 9.4, or (iv) at a time when the circumstances giving rise
to such greater payment did not exist.
9.7 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of the Bank pursuant to Sections 9.1 through 9.6
shall be conclusive absent manifest error, and the provisions of Sections 9.1
through 9.6 shall survive termination of this Agreement and payment of the
Note.
SECTION 10 REPRESENTATIONS.
To induce the Bank to enter into this Agreement and to make the
Loan hereunder, the Company hereby makes the following representations and
warranties to the Bank:
10.1 Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Illinois; each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its respective
incorporation; and each of the Company and each Subsidiary is duly qualified
and in good standing as a foreign corporation authorized to do business in
each jurisdiction where, because of the nature of its activities or
properties, such qualification is required and the failure so to qualify would
have a material adverse effect on the business, credit, operation, financial
condition or prospects of the Company and its Restricted Subsidiaries taken as
a whole.
10.2 Authorization; No Conflict. The execution, delivery and
performance of this Agreement and the Note, and the borrowings hereunder, (i)
are within the Company's corporate powers, (ii) have been duly authorized by
all necessary corporate action, (iii) do not require any governmental approval
which has not been previously obtained (and each such governmental approval
that has been previously obtained remains effective), (iv) do not and will not
contravene or conflict with any provision of law, or of any judgment, decree
or order, or of the Company's charter or by-laws, and (v) do not and will not
contravene or conflict with, or cause any Lien to arise under, any provision
of any agreement binding upon the Company, any Subsidiary or any of their
respective properties.
10.3 Validity and Binding Nature. This Agreement is, and the
Note when duly executed and delivered by the Company will be, legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may be
limited by the application of bankruptcy, moratorium, reorganization or other
laws affecting the rights of creditors generally or by general principles of
equity (whether or not a proceeding is brought in a court of law or equity).
10.4 Financial Statements.
(a) The Company has furnished to the Bank true and correct copies
of the Company's audited consolidated financial statements as at January 1,
1994 and December 31, 1994, and its unaudited consolidated financial
statements as at July 1, 1995. Such financial statements have been prepared
in conformity with GAAP (subject to normal year-end audit adjustments in the
case of such unaudited consolidated financial statements, and subject to the
information set forth in the footnotes to such audited consolidated financial
statements), and fairly present the financial condition of the Company and its
Subsidiaries as at such dates and the results of their operations for the
periods then ended.
(b) Since December 3l, 1994, there has been no material adverse
change in the business, credit, operations, financial condition or prospects
of the Company and its Subsidiaries taken as a whole.
10.5 Litigation and Contingent Liabilities. No Material
Litigation is pending or, to the Company's knowledge, threatened against the
Company except as set forth in Schedule I or as set forth in the 10-K Report
of the Parent for the fiscal year ended December 31, 1994, or the 10-Q Report
of the Parent for the period ended July 1, 1995, all as filed with the SEC.
Other than any liability incident to such Material Litigation, neither the
Company nor its Subsidiaries have any material contingent liabilities not
provided for or disclosed in the financial statements referred to in Section
10.4.
10.6 Title to Property. The Company and its Subsidiaries own and
hold, with respect to material real property, good and marketable title, and
with respect to other material property, good and valid title, to their
respective assets and property reflected in the financial statements referred
to in Section 10.4 or acquired since July 1, 1995 (other than assets and
property sold or disposed of in the ordinary course of business), free and
clear of any Lien except those referred to in Section 10.7 or permitted under
Section 11.2.
10.7 Liens. None of the assets of the Company or any Subsidiary
is subject to any Lien, except Liens shown in the financial statements
referred to in Section 10.4 or in Schedule II or permitted under Section 11.2.
10.8 Subsidiaries. The Company has no Subsidiaries or Restricted
Subsidiaries, as the case may be, except those listed in Schedule III.
10.9 Plans and Welfare Plans. No steps have been instituted to
terminate any Plan, no contribution failure has occurred with respect to any
Plan sufficient to give rise to a lien under section 302(f) of ERISA, and no
Plan has incurred an "accumulated funding deficiency" within the meaning of
section 412 of the Code or Part 3 of Title I of ERISA. To the best of the
Company's knowledge, no condition exists or event or transaction has occurred
in connection with any Plan which is reasonably likely to have a material
adverse effect on the business or financial condition of the Company and its
ERISA Affiliates taken as a whole. Neither the Company nor any ERISA
Affiliate has any material contingent liability with respect to any post-
retirement benefit under a Welfare Plan, except for liability for continuation
coverage described in Part 6 of Title I of ERISA, and except as listed on
Schedule IV.
10.10 Investment Company Act. The Company is neither an
"investment company" nor a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
10.11 Public Utility Holding Company Act. Neither the Company
nor any Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
10.12 Regulations G, U and X. The Company is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock. None
of the Company, the Parent, any Affiliate of either of them or any Person
acting on their behalf has taken or will take action to cause the execution,
delivery or performance of this Agreement, the Note, the making of the Loan
or the use of proceeds of the Loan to violate Regulation G, U or X of the
Board of Governors of the Federal Reserve System.
10.13 Labor Controversies. There are no labor controversies
pending or threatened against the Company or any of its Subsidiaries which, if
adversely determined, would materially and adversely affect the business,
credit, operations, financial condition or prospects of the Company and its
Subsidiaries, taken as a whole.
10.14 Tax Status.
(a) All tax returns, reports and forms required to be filed with
any domestic or foreign taxing authority in connection with any activities or
assets of the Company or any Subsidiary have been filed, except where the
failure to file any such return, report or form would not have any material
adverse effect on the business or financial condition of the Company and its
Subsidiaries taken as a whole.
(b) All taxes required to be paid with respect to the activities
or assets of the Company and its Subsidiaries have been duly paid or
provisions deemed appropriate were made by the Parent and/or the Company and
its Subsidiaries, on the books and records therefor, except such amounts (i)
as are contested in good faith and as to which adequate reserves in accordance
with GAAP were provided by the Company in accordance with the best estimates
of ultimate liability by the entity responsible therefor or (ii) the non-
payment of which would not have a material adverse effect on the business or
financial condition of the Company and its Subsidiaries taken as a whole.
(c) It is recognized and acknowledged by the Bank that, from 1976
through June 22, 1988, for federal income tax purposes the Company and its
Subsidiaries were members of the affiliated group of which Mobil Corporation
("Mobil"), the Company's ultimate parent corporation during such period, was
the common parent, and the income of the Company and its Subsidiaries were
included in the consolidated federal income tax returns of Mobil for such
period. All filings and payments with respect to such period have been made
directly by Mobil, and all refunds with respect thereto have been paid
directly to Mobil; and the Company and its Subsidiaries have made and received
payments with respect to such taxes under tax sharing agreements with Mobil
and/or a Subsidiary thereof. Accordingly, all representations and warranties
made in Sections 10.14(a) and 10.14(b) with respect to federal income taxes as
they relate to such period are qualified to the best of the Company's general
knowledge of Mobil's practices and procedures. To the best of its knowledge,
the Company has made all payments which are now due to Mobil under such tax
sharing agreements.
10.15 No Default. No event has occurred and no condition exists
which, upon the execution and delivery of this Agreement or upon the funding
of the Loan, will constitute an Event of Default or Unmatured Event of
Default.
10.16 Compliance with Applicable Laws. To the best of the
Company's knowledge, the Company and its Subsidiaries are in compliance with
the requirements of all applicable laws, rules, regulations and orders of all
governmental authorities (Federal, state, local or foreign, and including,
without limitation, employee benefit, environmental and health and safety
laws, rules, regulations and orders), a breach of which would materially and
adversely affect the business, credit, operations, financial condition or
prospects of the Company and its Subsidiaries taken as a whole.
10.17 Licenses, etc. To the best of the Company's knowledge,
neither the Company nor any of its Subsidiaries has failed to obtain any
licenses, permits, franchises or other governmental authorizations necessary
to the ownership of its respective properties or to the conduct of its
respective business, which violation or failure to obtain might materially
and adversely affect the business, credit, operations, financial condition or
prospects of the Company and its Subsidiaries taken as a whole.
10.18 Use of Proceeds. The proceeds of the Loan shall be used to
repay existing indebtedness of the Company and for other general corporate
purposes of the Company and will not be used for a purpose that violates
Section 11.16.
SECTION 11 COVENANTS.
From the Effective Date until payment in full of all Liabilities,
the Company agrees that, unless at any time the Bank shall otherwise expressly
consent in writing, it will:
11.1 Reports, Certificates and Other Information. Furnish or
cause to be furnished to the Bank:
(a) Audit Report. Within 105 days after each Fiscal Year,
a copy of an annual audit report of the Company and its
Subsidiaries prepared on a consolidated basis and in conformity
with GAAP duly certified by independent certified public
accountants of recognized standing selected by the Company,
together with a letter from such accountants as provided in
Section 11.1(d) below.
(b) Interim Reports. Within 60 days after each Fiscal
Quarter (except the last Fiscal Quarter in a Fiscal Year), a copy
of the unaudited consolidated financial statements of the Company
and its Subsidiaries prepared in accordance with GAAP (subject to
normal year end audit adjustments) consisting of at least a
balance sheet as at the close of such Fiscal Quarter, statements
of earnings for such Fiscal Quarter and for the period from the
beginning of such Fiscal Year to the close of such Fiscal Quarter,
and a statement of changes in cash flow from the beginning of such
Fiscal Year to the close of such Fiscal Quarter.
(c) Officer's Certificate. Contemporaneously with the
furnishing of a copy of each annual audit report and of each set
of quarterly statements provided for in this Section 11.1, a
certificate in the form of Exhibit B, duly completed, dated the
date of such annual report or such quarterly statements and signed
by an Authorized Officer on behalf of the Company to the effect
that, to the best of such Authorized Officer's knowledge, no Event
of Default or Unmatured Event of Default has occurred, and is
continuing, or, if there is any such event, describing it and the
steps, if any, being taken with respect thereto, and containing
the computations and other information provided for therein.
(d) Accountant's Letter. Contemporaneously with the
furnishing of the Company's annual audit report under Section
11.1(a), a letter from the Company's certified public accountants
addressed to the Bank (i) stating that such accountants have not
become aware of any Event of Default or Unmatured Event of Default
pertaining to accounting matters (or, if there is any such event,
describing it and the steps, if any, being taken with respect
thereto), (ii) stating that such accountants have been informed
that a primary intent of the Company was for the professional
services such accountants provided to the Company in preparing the
Company's audit report to benefit or influence the Bank, and
identifying the Bank as a party that the Company has indicated
intends to rely on such professional services provided to the
Company by such accountants and (iii) containing a computation of
the financial tests in Sections 11.3, 11.4 and 11.5.
(e) Reports to SEC and to Shareholders. Promptly within 15
days of the filing or making thereof, copies of each filing and
report made by the Parent, the Company or any Subsidiary with or
to the SEC or any other securities exchange, and, if the Company
shall have registered under the Securities Exchange Act of 1934,
as amended, as to any of the Company's equity securities, copies
of each communication from the Company to shareholders generally.
(f) Notice of Default. Forthwith upon learning of the
occurrence of an Event of Default or Unmatured Event of Default,
written notice thereof describing the same and the steps (if any)
being taken by the Company and its Subsidiaries with respect
thereto.
(g) Notice of Certain Litigation. Written notice of the
institution of any Litigation or the occurrence of any development with
respect to any Litigation, together with a description thereof and the
steps being taken by the Company and its Subsidiaries with respect
thereto, all to such extent and at such time as the Company would be
required to make such disclosure if the Company were a public reporting
company under the Securities Exchange Act of 1934, as amended (it being
understood that to the extent such disclosures are contained in the
reports filed by the Company's Parent with the SEC, then the disclosure
hereunder required to be made by the Company to the Bank may be made by
furnishing to the Bank a copy of such reports of the Parent as filed
with the SEC).
(h) Notice of Change of Control. Forthwith upon learning of the
occurrence of any Change of Control, written notice thereof, describing
the same and the steps (if any) being taken by the Company and its
Subsidiaries with respect thereto.
(i) Amendments. Promptly upon any amendment or
modification, whether or not material, to the MWCC Receivables
Purchase Agreement, a copy thereof certified as true and correct
by an Authorized Officer on behalf of the Company.
(j) Other Information. From time to time such other
information concerning the Company and its Subsidiaries as the
Bank may reasonably request.
11.2 Liens. Not, and not permit any Restricted Subsidiary to,
create, incur, assume or permit to exist any Lien with respect to any assets
now owned or hereafter acquired, except the following (each, a "Permitted
Lien"):
(i) Liens arising in connection with a financing or
refinancing of every description (including, without limitation,
sale-leaseback transactions and secured borrowings) of any real
estate (including leasehold interests) or tangible fixed assets
acquired or constructed by the Company or a Restricted Subsidiary
after January 1, 1994, and attaching only to the property so
acquired or constructed and the rights and documents related
thereto,
(ii) Liens existing on the Effective Date as set forth on
Schedule II or shown in the financial statements referred to in
Section 10.4,
(iii) Liens on customer receivables and proceeds thereof,
(iv) Liens for current taxes, assessments or other charges
not delinquent or for taxes, assessments or other charges being
contested in good faith and by appropriate proceedings and with
respect to which the Company has provided for and is maintaining
adequate reserves in accordance with GAAP,
(v) any Lien in the nature of an easement, grant, license,
permit, reservation, agreement, undertaking, restriction or
condition with respect to cables, pipes, wires, telephone or
telegraph poles, sewers, railroad tracks or other public utility
purposes or roads, walks or other rights-of-way or for joint or
common use of real properties or facilities, including any
reciprocal construction, operating and easement agreement, or any
other similar encumbrance, including, but not limited to, any
lease, sublease, easement, grant or license to use or restriction
on the right to use, which in any case in the opinion of the
Company does not materially impair the usefulness of the property
or the asset in question in the conduct of the business and
operations of the Company or the Restricted Subsidiary which owns
such property or asset,
(vi) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, landlords and similar Liens incurred in the
ordinary course of business for sums not due or sums being
contested in good faith and by appropriate proceedings,
(vii) rights of lessees, sublessees or assignees of the
Company or a Restricted Subsidiary with respect to assets of the
Company or such Restricted Subsidiary so leased, sublet or
assigned,
(viii) Liens on goods acquired pursuant to the issuance of
letters of credit, provided that such Liens shall only secure the
reimbursement obligations or other amounts to be paid under the
agreement with the issuer or an Affiliate of the issuer of such
letters of credit,
(ix) Liens on assets of a Restricted Subsidiary existing at
the time such Subsidiary becomes a Restricted Subsidiary,
(x) Liens in favor of the Company or any Restricted
Subsidiary,
(xi) Liens arising in the ordinary course of business for
sums not due or sums being contested in good faith and by
appropriate proceedings, but not involving any deposits or
advances or indebtedness for borrowed money or the deferred
purchase price of property or services,
(xii) Liens where effective provision shall have been made
for securing (equally and ratably with other indebtedness of or
guaranteed by the Company then entitled thereto) the due and
punctual payment of the Liabilities,
(xiii) Liens arising under capital leases and attaching
only to the property leased thereunder,
(xiv) Liens granted to landlords or to any landlord's
mortgagee in the Company's or any Restricted Subsidiary's
sublessor's interest in a sublease to secure a consent to such
sublease or an agreement to execute a non-disturbance agreement in
favor of the sublessee thereunder from such landlord or landlord's
mortgagee,
(xv) any Lien arising out of a judgment or award against
the Company or any Restricted Subsidiary with respect to which the
Company or such Restricted Subsidiary shall in good faith be
prosecuting an appeal or proceeding for review or any Lien
incurred by the Company or any Restricted Subsidiary for the
purpose of obtaining a stay or discharge in the course of any
legal proceeding to which the Company or such Restricted
Subsidiary is a party,
(xvi) any Lien to enable the Company or any Restricted
Subsidiary to exercise any privilege or license, to secure the
performance of any bid, tender, contract or lease to which the
Company or such Restricted Subsidiary is a party, to secure any
public or statutory obligation of the Company or any Restricted
Subsidiary or to secure any safety, stay or appeal bond to which
the Company or any Restricted Subsidiary is a party, or any other
similar Lien made in the ordinary course of business,
(xvii) any Lien on the obligation of the Company or any
Restricted Subsidiary under any lease or other document related to
the operation, use or occupancy of real or personal property, or
in any guaranty by the Company or any Restricted Subsidiary of the
obligation of any person or entity under any lease or other
document related to the operation, use or occupancy of real or
personal property,
(xviii) other non-material Liens incurred in the ordinary
course of business (including those in connection with obligations
to pay workmen's compensation or unemployment insurance,
performance bonds, security deposits and the like), and
(xix) additional Liens securing Secured Indebtedness (as
defined below), if as a result of the transaction giving rise to
any such Liens (and after giving effect thereto on a pro forma
basis) the aggregate amount of the (i) Secured Indebtedness of the
Company and its Restricted Subsidiaries and (ii) (without double-
counting) Indebtedness for Borrowed Money of the Restricted
Subsidiaries (but only in each case incurred subsequent to the
Effective Date in a transaction which gave rise to Liens other
than Permitted Liens described in the preceding clauses (i)
through (xviii) inclusive) is less than or equal to 1% of the
total assets of the Company and its Restricted Subsidiaries as of
the end of the last full Fiscal Quarter preceding such
transaction. For purposes hereof, "Secured Indebtedness" means
any Indebtedness for Borrowed Money or other indebtedness incurred
in connection with the acquisition of property, which Indebtedness
for Borrowed Money or other indebtedness is secured by a Lien of
or upon any property or asset of the Company or any Restricted
Subsidiary.
provided, however, with respect to the preceding clauses (i) through (xix)
inclusive,
(a) neither the Company nor any Restricted Subsidiary shall permit
to exist any Lien securing notes or obligations payable or owing by the
Company pursuant to the MWCC Receivables Purchase Agreement except (x)
to the extent provided therein or (y) to the extent of clauses (xi) and
(xv), and
(b) none of such Liens shall encumber any inventory of the Company
or its Restricted Subsidiaries or secure trade debt of the Company or
its Restricted Subsidiaries except to the extent of clauses (ii),
(viii), (ix), (x), (xi), (xii), (xiv), (xv), (xix) and to the extent
such Lien is a possessory Lien which arises by operation of law, clause
(vi); provided that Liens on inventory or securing trade debt under
clause (xix) shall not exceed $5,000,000 or the amount permitted under
clause (xix) whichever is less.
11.3 Minimum Consolidated Shareholder's Equity. Not permit the
Consolidated Shareholder's Equity of the Company as at the end of each Fiscal
Year to be less than the lesser of (i) $441,000,000 minus the FAS 106 Minimum
Equity Factor plus 25% of Consolidated Net Income for each complete Fiscal
Year after the Company's Fiscal Year ended January 1, 1994 in which there was
such income, and (ii) $800,000,000 minus the FAS 106 Minimum Equity Factor;
provided, however, that if the Ratio of Earnings to Fixed Charges determined
as of the last day of any Fiscal Quarter shall be less than 1.10:1, then the
Company shall not permit Consolidated Shareholder's Equity at the end of the
next Fiscal Quarter to be less than the lesser of (x) $537,000,000 plus 50% of
Consolidated Net Income for each complete Fiscal Year ended after January 1,
1994 in which there was such income, plus 50% of cumulative Consolidated Net
Income for any incomplete Fiscal Year (to the extent there was such income)
through the end of the most recently completed Fiscal Quarter and (y)
$1,000,000,000.
11.4 Ratio of Debt to Total Capitalization. Not permit (i) Debt
of the Company and its Restricted Subsidiaries to exceed 60% of Total
Capitalization as of the last day of each of the first three Fiscal Quarters
of each Fiscal Year, or (ii) Debt of the Company and its Restricted
Subsidiaries to exceed 50% of Total Capitalization as of the last day of each
Fiscal Year.
11.5 Purchase or Redemption of the Company's Securities; Dividend
Restrictions; Payments to the Parent. Not (a) declare or pay any dividend or
make any distribution on any capital stock of the Company to its stockholders
(other than dividends or distributions payable in shares of capital stock of
the Company or stock splits), (b) make any loans or advances to the Parent,
(c) purchase or redeem or otherwise acquire or retire for value any shares of
capital stock of the Company, or (d) permit any Subsidiary to purchase, redeem
or otherwise acquire for value any shares of capital stock of the Company
(each such payment described in any of the foregoing clauses (a), (b), (c) and
(d) a "Restricted Payment"), if, upon giving effect thereto, the sum of such
dividends, distributions, purchases, redemptions and other acquisitions and
retirements (other than dividends, distributions, purchases, redemptions and
other acquisitions or retirements of Debt-Like Preferred Stock of the
Company), paid or made subsequent to January 1, 1994, would exceed the
aggregate of:
(i) $63,000,000; plus
(ii) 50% (or minus 100% in case of any deficit) of
Consolidated Net Income for the period, taken as one
accounting period, from and including January 2,
1994 to the end of the most recent full Fiscal
Quarter; plus
(iii) any repayment by the Parent of any loan or advance
made by the Company to the Parent which repayment is
received after January 1, 1994; plus
(iv) any capital contributions received by the Company
after January 1, 1994; plus
(v) the net proceeds to the Company (in cash or, if the
consideration is other than cash, the fair value
thereof as determined by the Board of Directors of
the Company) of the issue or sale after January 1,
1994 of capital stock, including treasury stock but
excluding Debt-Like Preferred Stock, of the Company;
plus
(vi) an amount equal to the net proceeds to the Company
(in cash or, if the consideration is other than
cash, the fair value thereof as determined by the
Board of Directors of the Company) from the issue or
sale at any time of any indebtedness of the Company
or a Subsidiary which, after January 1, 1994, is
converted into shares of capital stock (but
excluding Debt-Like Preferred Stock) of the Company
or the Parent; plus
(vii) an amount equal to the FAS 106 Restricted Payment
Factor;
provided, however, that:
(x) the Company shall not make any such Restricted Payment if
before or after giving effect thereto an Event of Default or Unmatured
Event of Default shall exist;
(y) notwithstanding the foregoing, so long as no Event of Default
or Unmatured Event of Default shall exist before or after giving effect
thereto, the Company may (i) declare or pay any dividend or make any
distribution within 60 days after the date of its declaration, if on
such date such declaration did not violate the provisions of Section
11.5(a), and (ii) pay amounts to the Parent to permit the Parent to pay
its corporate and business expenses in an aggregate amount for all such
payments not to exceed $2,000,000 per Fiscal Year (with any amounts not
so used in a given Fiscal Year carried over and added to the amount
permissible to be paid in the next Fiscal Year); and
(z) notwithstanding the foregoing, the Company may pay amounts
required to be paid pursuant to any tax sharing or tax allocation
arrangements meeting the standards specified in Schedule V.
11.6 Mergers, Consolidations, Sales. Not permit any
consolidation of the Company with or merger of the Company into any other
corporation or corporations (whether or not affiliated with the Company) or
successive consolidations in which the Company or its successor or successors
shall be a party or parties or any sale or conveyance of the property of the
Company as an entirety or substantially as an entirety, to any other
corporation (whether or not affiliated with the Company) authorized to acquire
and operate the same (any such consolidation, merger, sale or conveyance is
referred to herein as a "Corporate Transaction") unless each of the following
conditions is met:
(i) to the extent that as a result of such Corporate
Transaction, any property of the Company or a Restricted
Subsidiary immediately prior thereto would be subjected to any
Lien of any other party to such Corporate Transaction,
simultaneously with such Corporate Transaction or prior thereto,
effective provision shall be made for securing (equally and
ratably with any other indebtedness of or guaranteed by the
Company then entitled thereto) the due and punctual payment of the
Liabilities by a prior Lien upon such asset;
(ii) upon the occurrence of any such Corporate Transaction
all the obligations of the Company under this Agreement and the
Note shall be expressly assumed in writing by the corporation
formed by such consolidation, or into which the Company shall have
been merged, or by the corporation which shall have acquired such
property (in each such case, the "surviving entity"), such
assumption to be accompanied by an opinion of counsel for the
surviving entity to the effect that such assumption has been duly
authorized, executed and delivered by, and is the legal, valid and
binding obligation of, the surviving entity;
(iii) immediately after giving effect to such Corporate
Transaction and to the retirement of any Debt to be retired
substantially concurrently therewith, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing,
and the Company shall deliver a certificate signed by an
Authorized Officer to such effect;
(iv) the surviving entity shall be domiciled in the United
States;
(v) after giving effect to such Corporate Transaction and
to the retirement of any Debt to be retired substantially
concurrently therewith on a pro forma basis (calculated using
financial information for each party to such Corporate Transaction
from such party's most recently ended fiscal quarter), the ratio
(expressed as a percent) of Debt to Total Capitalization for the
surviving or successor party shall not exceed (a) 60% in the case
where the most recently ended fiscal quarter for the Company was
one of the first three Fiscal Quarters of a Fiscal Year or (b) 50%
in the case where the most recently ended fiscal quarter for the
Company was the last Fiscal Quarter of a Fiscal Year; and
(vi) the Company shall have given at least 30 days' prior
written notice of such Corporate Transaction to the Bank.
Upon consummation of the Corporate Transaction and the assumption of the
Company's obligations under this Agreement by the surviving entity, such
surviving entity shall succeed to and be substituted for the Company, with the
same effect as if it were an original party to this Agreement and, in the
event of any such sale or conveyance, the Company shall be released from its
obligations under this Agreement. Except for the merger of any Restricted
Subsidiary into the Company or another Restricted Subsidiary, the Company
shall not permit any Restricted Subsidiary to be a party to any Corporate
Transaction if before or after giving effect thereto an Event of Default or
Unmatured Event of Default shall exist.
11.7 Compliance with Applicable Laws. Not, and not permit any of
its Subsidiaries to, knowingly violate in any material respect any of the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority (Federal, state, local or foreign, and including,
without limitation, employee benefit, environmental, health and safety laws,
rules, regulations and orders); provided, however, that any material breach by
the Company or any of its Subsidiaries of any employee benefit, environmental,
health or safety order, rule or regulation shall not be deemed a breach of
this Section 11.7 so long as such violation would not be likely to prevent the
Company from performing its obligations under this Agreement and the Company
or such Subsidiary, upon notice of such violation, takes appropriate action to
cure such violation.
11.8 ERISA. (a) Forthwith upon learning of (i) the incurrence of
any material liability of the Company or any ERISA Affiliate pursuant to Title
IV of ERISA in connection with the termination of any Plan or withdrawal or
partial withdrawal from any Multiemployer Plan, (ii) a failure to satisfy the
minimum funding standards of section 412 of the Code or Part 3 of Title I of
ERISA by any Plan for which the Company or any ERISA Affiliate is plan
administrator (as defined in ERISA), (iii) the receipt of a notice by any Plan
that the PBGC intends to terminate or apply for the appointment of a trustee
to administer the Plan, (iv) the receipt of a notice of complete or partial
withdrawal liability under Title IV of ERISA from a Multiemployer Plan or a
notice that any Multiemployer Plan is in reorganization, is insolvent or has
been terminated, (v) the application for a waiver of the minimum funding
standard under section 412 of the Code, (vi) the filing of a notice of intent
to terminate a Plan under section 4041(c) of ERISA, or (vii) notice of
withdrawal from any Plan pursuant to section 4063 of ERISA, furnish or cause
to be furnished to the Bank written notice thereof.
(b) Not, and not permit any of its Subsidiaries to, permit (i)
any Plan to incur any "accumulated funding deficiency" (within the meaning of
Part 3 of Title I of ERISA or section 412 of the Code) or (ii) any Plan for
which the Company or any ERISA Affiliate is plan administrator (as defined in
ERISA) to fail to satisfy the minimum funding standards of section 412 of the
Code or Part 3 of Title I of ERISA.
11.9 Corporate Existence and Franchises. Except as otherwise
expressly permitted in Section 11.6, maintain in full force and effect its
separate existence and all material rights, licenses, leases and franchises
used in the conduct of its business.
11.10 Maintenance of Tangible Property. Maintain, and cause each
of its Subsidiaries to maintain, in all material respects all of the real
property, inventory and equipment owned, leased or used by such entity in good
condition and repair, and prevent any waste or unusual or unreasonable
depreciation thereof.
11.11 Maintenance of Intangible Property. Protect, preserve and
maintain, and cause each of its Subsidiaries to protect, preserve and
maintain, in all material respects all of its material trademarks and trade
names in full force and effect, by, without limitation, defending against
and/or prosecuting at its own expense any and all suits claiming infringement
or dilution of any thereof or injury to the goodwill associated with any
thereof and by filing any applications and doing any and all other things
which may from time to time be necessary or advisable for the renewal or
registration of each thereof.
11.12 Books, Records and Inspections. Maintain, and cause each
Subsidiary to maintain, complete and accurate books and records; permit, and
cause each Subsidiary to permit, reasonable access by the Bank to the books
and records of the Company and of each Subsidiary during regular business
hours upon two Business Days' prior written notice to the Company; and permit,
and cause each Subsidiary to permit the Bank to inspect the properties and
operations of the Company and of such Subsidiary during regular business hours
upon two Business Days' prior written notice to the Company.
11.13 Insurance. Maintain, and cause each Subsidiary to
maintain, such insurance upon its real property, inventory and equipment
(including self-insurance to the extent of, and in a manner consistent with,
the past practices of such entity) to such extent and against such hazards and
liabilities, as is required by law or customarily maintained by companies
similarly situated.
11.14 Payment of Taxes. Promptly pay, and cause each Subsidiary
to pay, when due all taxes, assessments or other charges owing by the Company
and each Subsidiary except taxes, assessments and other charges which shall be
diligently contested in good faith by appropriate proceedings and as to which
adequate reserves shall have been set aside in accordance with GAAP.
11.15 Other Agreements. Not (a) enter into any agreement
containing any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith, or (b)
permit any Restricted Subsidiary to enter into any agreement which prohibits
in any material respect such Subsidiary from declaring or paying dividends or
making advances to the Company.
11.16 Regulation U. Not use or permit any proceeds of the Loan
to be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying Margin Stock.
11.17 Subordinated Debt. With respect to any Subordinated Debt,
not make or effect or permit any Subsidiary to make or effect any payment,
prepayment, redemption, purchase or defeasance of any such Subordinated Debt
if (i) such payment, prepayment, redemption, purchase or defeasance is
prohibited by the terms of the instrument governing such Subordinated Debt,
(ii) before or after giving effect thereto an Event of Default or Unmatured
Event of Default shall exist, or (iii) immediately after giving effect thereto
and to the substantially concurrent incurrence or retirement of other Debt and
the application of the proceeds thereof the ratio (expressed as a percent) of
Debt of the Company and its Restricted Subsidiaries to Total Capitalization
exceeds (a) 60% in the case where the most recently ended Fiscal Quarter was
one of the first three Fiscal Quarters of a Fiscal Year, or (b) 50% in the
case where the most recently ended Fiscal Quarter was the last Fiscal Quarter
of a Fiscal Year.
11.18 Debt-Like Preferred Stock. With respect to any Debt-Like
Preferred Stock, not make any dividend, distribution, purchase, redemption,
acquisition or retirement of any Debt-Like Preferred Stock if (i) such
dividend, distribution, purchase, redemption, acquisition or retirement is
prohibited by the terms of the instrument governing such Debt-Like Preferred
Stock, (ii) before or after giving effect thereto an Event of Default or
Unmatured Event of Default shall exist, or (iii) immediately after giving
effect thereto and to the substantially concurrent incurrence or retirement of
other Debt and the application of the proceeds thereof the ratio (expressed as
a percent) of Debt of the Company and its Restricted Subsidiaries to Total
Capitalization exceeds (a) 60% in the case where the most recently ended
Fiscal Quarter was one of the first three Fiscal Quarters of a Fiscal Year, or
(b) 50% in the case where the most recently ended Fiscal Quarter was the last
Fiscal Quarter of a Fiscal Year.
11.19 Further Assurances. At its sole expense, upon request of
the Bank, forthwith execute and deliver, or cause to be executed and delivered
to the Bank, in due form for filing or recording (the Company hereby agreeing
to pay the cost of filing or recording the same in all public offices deemed
necessary by the Bank), such documents, and do such other acts and things, all
as the Bank may from time to time reasonably request so as to implement the
provisions of this Agreement.
SECTION 12 CONDITIONS. The Bank's obligation to make the Loan is
subject to the following conditions that:
12.1 Documents. On or before the date hereof, or such later date
as may be agreed to by the Bank, the Bank shall have received all of the
following, each duly executed and dated the Effective Date or such other date
satisfactory to the Bank, and in form and substance reasonably satisfactory to
the Bank and counsel to the Bank:
(i) Term Loan Agreement. Counterparts of this Agreement
executed by the Company and the Bank;
(ii) Note. The Note of the Company payable
to the order of the Bank;
(iii) Resolutions. Certified copies of the
resolutions of the Company's Board of Directors
authorizing or ratifying the execution, delivery,
performance of and borrowing under, respectively, this
Agreement, the Note, and any other documents provided
for herein or therein to be executed by the Company;
(iv) Opinion of Counsel for the Company. The
opinion of G. Tad Morgan, Senior Associate General
Counsel for the Company, addressed to the Bank,
substantially in the form of Exhibit C;
(v) Certificate. A certificate signed by an
Authorized Officer on behalf of the Company
substantially in the form of Exhibit D to the effect
that (i) on the Effective Date no Event of Default or
Unmatured Event of Default has occurred and is
continuing or shall result from the making of the Loan
on such date, (ii) the Company's representations and
warranties contained in Section 10 are true and
correct as of the Effective Date with the same effect
as though made on the Effective Date, and (iii) all of
the conditions set forth in this Section 12.1 have
been satisfied; and
(vi) Other. Such other documents as the Bank
may reasonably request.
12.2 No Default.
(a) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing or shall result from the making of
the Loan; and
(b) the Company's representations and warranties contained
in Section 10 shall be true and correct as of the date of the
Loan, with the same effect as though made on the date of the Loan.
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.
13.1 Events of Default. Each of the following shall constitute
an Event of Default under this Agreement:
(a) Non-Payment of Note. Default, and continuance thereof
for three Business Days after notice thereof to the Company by the
Bank or the holder of the Note, in the payment when due of (i) any
principal of or interest on the Loan or (ii) any amount payable
under Section 6.
(b) Non-Payment of Certain Other Amounts under this
Agreement. Default, and continuance thereof for ten Business Days
after notice thereof to the Company by the Bank or the holder of
the Note, in the payment when due of any material amount under
this Agreement (and not constituting an Event of Default under
clause (a) above).
(c) Non-Payment of Finance Obligations. Default in the
payment when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any Finance Obligation of the
Company or any Restricted Subsidiary or default in the performance
or observance of any obligation or condition with respect to any
such Finance Obligation if (i) the effect of such default is
to accelerate the maturity of any such Finance Obligation or cause
any such Finance Obligation to be prepaid, purchased or redeemed
or (ii) the holder or holders thereof, or any trustee or agent for
such holders, (x) causes such Finance Obligation to become due and
payable prior to its expressed maturity or to be prepaid,
purchased or redeemed or (y) receives any payment (other than any
payment which was scheduled to be made prior to the occurrence of
such default), guarantee or security or other concession from or
on behalf of Parent, the Company or any Restricted Subsidiary or
(iii) in case such default is a default in the payment when due,
such default has not been remedied within five Business Days after
notice thereof to the Company by the Bank, the holder of the Note
or the holder or holders of such Finance Obligation or any trustee
or agents for such holders; provided, however, that no such
default under this clause (c) shall constitute an Event of Default
unless the amount of Finance Obligations so affected is at least
$5,000,000.
(d) Bankruptcy, Insolvency, etc. The occurrence of any of
the following events: (i) the Company or any Restricted
Subsidiary becomes insolvent or generally fails to pay, or admits
in writing its inability or refusal to pay, debts as they become
due; or (ii) the Company or any Restricted Subsidiary applies for,
consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Restricted
Subsidiary or any property thereof, or makes a general assignment
for the benefit of creditors; or, (iii) in the absence of such
application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Company or any Restricted
Subsidiary or for a substantial part of the property of any
thereof and is not discharged within 60 days; or (iv) any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding (except the voluntary
dissolution, not under any bankruptcy or insolvency law, of a
Restricted Subsidiary), is commenced in respect of the Company or
any Restricted Subsidiary, and if such case or proceeding is not
commenced by the Company or such Restricted Subsidiary, it is
consented to or acquiesced in by the Company or such Restricted
Subsidiary or remains for 60 days undismissed; or (v) the Company
or any Restricted Subsidiary takes any corporate action to
authorize, or in furtherance of, any of the foregoing; provided
that the provisions of this Section 13.1(d) shall not apply to any
Special Restricted Subsidiary to which the foregoing provisions of
Section 13.1(d) would otherwise apply, which together with all
other Special Restricted Subsidiaries with respect to which an
event described in the foregoing provisions of Section 13.1(d)
shall have occurred, has assets which do not exceed one percent
(1%) of the total assets of the Company and its Restricted
Subsidiaries.
(e) Specified Non-Compliance with this Agreement. Failure
by the Company to comply with or to perform its obligations under
Sections 11.3 through 11.6 of this Agreement.
(f) Other Non-Compliance with this Agreement. Failure by
the Company to comply with or to perform its obligations under any
provision of this Agreement (and not constituting an Event of
Default under any of the other provisions of this Section 13.1)
and (i) continuance of such failure for 30 days after notice
thereof to the Company by the Bank or the holder of the Note
specifying such failure if such failure can be cured with
diligence within such 30-day period by the Company or can be cured
by the payment of money, or (ii) continuance of such failure for
60 days after notice thereof to the Company by the Bank or the
holder of the Note specifying such failure if such failure cannot
with diligence be cured within such 30-day period and cannot be
cured by the payment of money.
(g) Representations and Warranties. Any representation or
warranty made by the Company herein is breached or contains any
statement which is false or misleading in any material respect, or
any schedule, certificate or other writing furnished by the
Company to the Bank or the holder of the Note pursuant to this
Agreement contains any material statement which is false or
misleading in any material respect on the date as of which the
facts therein set forth are (or are deemed to be) stated or
certified.
(h) Judgments. Final judgment or judgments (after the
expiration of all times to appeal therefrom) for the payment of
money in excess of $5,000,000 in the aggregate shall be rendered
against Company or any of its Restricted Subsidiaries and the same
shall not be (i) fully covered by insurance or (ii) vacated,
stayed, bonded, paid or discharged for a period of sixty (60)
days.
(i) MWCC Receivables Purchase Agreement. (i) An amendment
which materially adversely affects the Bank shall be made to the
MWCC Receivables Purchase Agreement without the prior written
consent of the Bank, including, without limitation, any amendment
thereto which secures the Seller Notes (as defined therein) or
which provides for any of such Seller Notes to be payable on a
date earlier than the date on which such Seller Notes are payable
as at the date of this Agreement, (ii) the MWCC Receivables
Purchase Agreement shall fail to remain in full force and effect,
(iii) any default by the Company under the MWCC Receivables
Purchase Agreement (after the expiration of any applicable
grace period) shall occur and be continuing which has not been
waived by MWCC and which provides MWCC thereunder with the right
to terminate MWCC's obligation to purchase customer receivables
thereunder from the Company, or (iv) the Company or MWCC shall
give notice of termination or take any action to terminate
thereunder (other than the notice to terminate at the expiration
of a 10-year period and other than a termination by the Company
pursuant to which a wind down or transition of at least one year
is provided).
13.2 Effect of Event of Default. If any Event of Default
described in Section 13.1(d) shall occur, automatically all Liabilities shall
become immediately due and payable, all without presentment, demand, protest
or notice of any kind all of which are hereby waived; and, in the case of any
other Event of Default, unless such Event of Default shall have been cured,
the Bank may declare all Liabilities to be due and payable, whereupon all such
Liabilities shall become immediately due and payable, all without presentment,
demand, protest or notice of any kind, all of which are hereby waived. The
Bank shall promptly advise the Company of any such declaration, but failure to
do so shall not impair the effect of such declaration.
SECTION 14 [Reserved].
SECTION 15 GENERAL.
15.1 Waiver; Amendments. No delay on the part of the Bank or the
holder of the Note in the exercise of any right, power or remedy shall operate
as a waiver thereof, nor shall any single or partial exercise by any of them
of any right, power or remedy preclude any other or further exercise thereof,
or the exercise of any other right, power or remedy. The concurrence of the
Bank shall be required for any amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement, the Note or other
documents, instruments or agreements affecting the rights of the Bank. Any
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
15.2 Notices. Except as otherwise expressly provided in this
Agreement, any notice hereunder to the Company, the Bank or the holder shall
be in writing. Notices given by telegram, telex, telecopier or personal
delivery shall be deemed to have been given and received when sent (and, in
the case of telex, the appropriate answerback is received) and notices given
by mail shall be deemed to have been given and received three Business Days
after the date when sent by registered or certified mail, postage prepaid, and
addressed to the Company, the Bank (or other holder) at its address shown
below its signature hereto, or at such other address as any such Person may,
by written notice received by such other persons, have designated as its
address for such purpose. Notices to the Bank in connection with<PAGE>
borrowings,
payments, Continuations or Conversions shall not be effective
until actual receipt by the Bank. The Bank shall be entitled to rely upon all
telephonic notices without awaiting receipt of written versions of such
notices and the Company shall hold the Bank harmless from, and shall indemnify
Bank against, any loss, cost or expense ensuing from any such reliance.
15.3 Computations.
(a) Where the character or amount of any asset or liability or
item of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purpose of this
Agreement, such determination or calculation shall, at any time and to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP.
(b) Notwithstanding the preceding paragraph (a), except for the
changes required in implementing Financial Accounting Standards Board
Statements adopted prior to January 1, 1994 and which are to be implemented by
the Company after January 1, 1994 (namely, Statements 115 and 116), in the
event of any changes in GAAP as applied in preparing the audited financial
statements of the Company and its consolidated Subsidiaries as at January 1,
1994 which result in a change in the earnings of the Company, Consolidated Net
Income, Debt of the Company and its Restricted Subsidiaries, or Consolidated
Shareholder's Equity of the Company, such change (net of related tax effects,
if any) shall be added back to or subtracted from, as the case may be, any
determination of the earnings of the Company, Consolidated Net Income, Debt of
the Company and its Restricted Subsidiaries, and Consolidated Shareholder's
Equity of the Company for the purpose of applying the Consolidated
Shareholder's Equity of the Company, Ratio of Earnings to Fixed Charges and
the ratio of Debt to Total Capitalization tests and in determining applicable
limitations on distributions with respect to the Company's capital stock.
(c) While the Company and MWCC intend that the sale of
receivables to MWCC by the Company under the MWCC Receivables Purchase
Agreement be considered sales by the Company and not secured loans to the
Company by MWCC, such transaction may be classified as a loan under Financial
Accounting Standards Board Statement No. 77. Irrespective of whether such
receivables sale transactions are classified as a sale or a loan under
Financial Accounting Standards Board Statement No. 77, such transactions shall
be treated as sales without recourse for the purposes of this Agreement and
not a secured loan.
15.4 Participations.
(a) Participations. Subject to the provisions of this Section
15.4, the Bank may at any time, in the ordinary course of its commercial
banking business and in accordance with applicable law, sell to one or more
banks or other financial institutions, and to such other Persons or types of
Persons which the Company may from time to time approve in its sole discretion
(collectively, "Participants") participating interests in the Loan owing to
the Bank, or the Note held by the Bank. In the event of any such sale to a
Participant, upon request by the Company the Bank shall give written notice,
to the Company stating the Participant's name and address and the amount of
the participation purchased, but
(i) the Company shall continue to deal solely and directly
with the Bank in connection with the Bank's rights and obligations
under this Agreement,
(ii) all amounts payable by the Company shall be determined
as if the Bank had not sold such participation, and
(iii) any Participant which is not an Affiliate of the Bank
shall have no right to require the Bank to take or omit to take
any action under this Agreement or the Note other than action
directly affecting the extension of the stated maturity of the
Loan, directly affecting any scheduled installment of principal or
any scheduled reduction in the stated amount of, or interest on,
the Loan in which such participation was sold, or reducing the
principal or stated amount thereof or the rate of interest
thereon.
The Bank agrees to incorporate the requirements set forth in the preceding
sentence into each participation agreement which the Bank enters into with any
Participant. The Company agrees that if amounts outstanding under this
Agreement and the Note are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, if its participation agreement with the Bank so provides,
be deemed to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement or the Note to the same extent as if the
amount of its participating interest were owing directly to it as the Bank
under this Agreement or the Note; provided that such right of setoff shall be
subject to such Participant's obligation to share with the Bank, and the Bank
agrees to share with such Participant. No participation contemplated in this
Section 15.4 shall relieve the Bank from any of its obligations hereunder and
the Bank shall remain solely responsible for the performance thereof.
(b) Federal Reserve. Anything contained in this Agreement to the
contrary notwithstanding, and without the need to comply with any of the
formal or procedural requirements set forth in this Agreement, the Bank may at
any time and from time to time grant a participation in, assign, deposit or
pledge all or any portion of its rights under this Agreement or the Note to a
Federal Reserve Bank; provided, however, no such participation, assignment,
deposit or pledge shall relieve the Bank of any of its obligations under this
Agreement.
(c) Information. Notwithstanding the terms of any previous
confidentiality agreements with respect to the subject matter hereof between
the Company and the Bank, from and after the Effective Date the Bank may
furnish any information concerning the Parent, the Company and the
Subsidiaries which has been furnished to the Bank pursuant hereto to any
Participant, or potential Participant; provided, however, that the recipient
of such information shall, prior to being furnished with any such information,
agree to maintain the confidentiality of such information. Notwithstanding
the foregoing sentence, the Bank, Participant or potential Participant shall
be permitted to disclose information regarding the Company and its
Subsidiaries (i) to any other Agent or Bank, or to any Participant, (ii) to
any Affiliate, agent or employee that agrees to be bound by this Section
15.4(d), (iii) upon order of any court or administrative agency, (iv) upon the
request or demand of any regulatory agency or authority having jurisdiction
over such party, (v) which has been publicly disclosed, (vi) which has been
obtained from any Person that is not a party hereto or an Affiliate, agent or
employee of any such party, (vii) in connection with the exercise of any
remedy hereunder, or (viii) to such Person's certified public accountants and
its attorneys.
(d) Assignments. The Bank may at any time assign and delegate
to one or more Affiliates of the Bank all or any fraction of the Loan.
15.5 Costs, Expenses and Taxes. The Company agrees to pay on
demand all fees and out-of-pocket costs and expenses of counsel to the Bank,
in connection with the enforcement of this Agreement, the Note and all other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 15.5 shall survive repayment of the Loan, cancellation of the Note and
any termination of this Agreement.
15.6 Indemnification. In consideration of the execution and
delivery of this Agreement by the Bank, the Company hereby agrees to
indemnify, exonerate and hold harmless the Bank, and each officer, director,
employee and agent of the Bank (herein collectively called the "Bank Parties"
and individually called a "Bank Party") from and against any and all actions,
causes of action, suits, losses, costs (including, without limitation, all
documentary or other stamp taxes or duties), liabilities, damages and expenses
(other than expenses covered by Section 15.5) in connection therewith
(irrespective of whether such Bank Party is a party to the action for which
indemnification hereunder is sought), including, without limitation,
reasonable attorneys' fees (including allocated costs of staff counsel) and
disbursements (collectively herein called the "Indemnified Liabilities")
incurred by the Bank Parties or any of them as a result of, or arising out of,
or relating to this Agreement, the Note and all other instruments and
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith, the Loan or the use of the proceeds of the Loan except
for any such Indemnified Liabilities arising on account of the Bank Party's
gross negligence or willful misconduct and, if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
All obligations provided for in this Section 15.6 shall survive repayment of
the Liabilities, cancellation of the Note and any termination of this
Agreement.
15.7 Regulation U. The Bank represents that it in good faith is
not relying, either directly or indirectly, upon any Margin Stock as
collateral security for the extension or maintenance by it of any credit
provided for in this Agreement.
15.8 Captions. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
15.9 Governing Law; Severability. This Agreement and the Note
shall be a contract made under and governed by the laws of the State of
Illinois without regard to conflict of laws principles. All obligations of
the Company and the rights of the Bank and the holder of the Note expressed
herein or in the Note shall be in addition to and not in limitation of those
provided by applicable law. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement. Nothing herein shall require the Company to pay interest in
excess of the maximum rate permitted by law.
15.10 Waiver of Jury Trial. Each of the Company and the Bank
waives any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement, the Note or any amendment, instrument,
document or agreement delivered or which may in the future be delivered in
connection herewith or arising from any banking relationship existing in
connection with this Agreement, and agrees that any such action or proceeding
shall be tried before a court and not before a jury.
15.11 Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts and by the different parties on
separate counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same agreement. This Agreement shall become effective as of the Effective
Date.
15.12 Supersession. This Agreement supersedes all prior or
contemporaneous agreements with respect to the subject matter hereof.
15.13 Successors and Assigns. This Agreement shall be binding
upon the Company, the Bank and their respective successors and assigns, and
shall inure to the benefit of the Company and the Bank and the respective
successors and assigns of the Bank, it being understood that subject to
Section 11.6, the Company shall not assign its rights hereunder without the
consent of the Bank.
* * *
<PAGE>
Delivered at Chicago, Illinois as of the day, month and year first
above written.
MONTGOMERY WARD & CO., INCORPORATED
By:
Name: Douglas V. Gathany
Title: Senior Assistant Treasurer
One Montgomery Ward Plaza
844 North Larrabee
Chicago, Illinois 60671
Attention: Treasurer
Telephone: (312) 467-7238
Telecopy: (312) 467-7421
Person to whom copies of notices under Section
13.2 should also be sent:
Montgomery Ward & Co., Incorporated
One Montgomery Ward Plaza
535 West Chicago Avenue
Chicago, Illinois 60671
Attention: Secretary
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED, CHICAGO
BRANCH
By:
Name: Hiroaki Nakamura
Title: Joint General Manager
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Attention: U.S. Loan Department
(E. Bacalao/ J. Bailey/ T. Avendt)
Telephone: (312) 855-1111
Telecopy: (312) 855-8200
Wiring Instructions:
Receiving party: The Industrial Bank of Japan, Chicago Branch
Account number: 15 10614
Receiving bank: The First National Bank of Chicago, Chicago
ABA number: 071 000 013
Payment reference: Montgomery Ward
Base Rate Loan Funding Office:
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Eurodollar Loan Funding Office:
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
<PAGE>
EXHIBIT A
FORM OF NOTE
(Section 3.1)
$25,000,000.00 September 29, 1995
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the
order of THE INDUSTRIAL BANK OF JAPAN, LIMITED, CHICAGO BRANCH (the "Bank") at
the office of the Bank specified in the Loan Agreement hereinafter referred
to, the principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000.00) or,
if less, the then unpaid principal amount of the Loan made by the Bank to the
undersigned pursuant to the Loan Agreement (as shown in the records of the
Bank or, at the Bank's option, on the schedule attached hereto and any
continuation thereof). The principal amount of the Loan evidenced hereby
shall be payable on or before the Maturity Date.
The undersigned further promises to pay interest on the unpaid
principal amount of the Loan evidenced by this Note from the date of the Loan
until the Loan is paid in full, payable at such rate(s) and at such time(s) as
provided in the Loan Agreement.
This Note evidences indebtedness incurred under, and is subject to
the terms and provisions of, the Term Loan Agreement dated as of September 29,
1995 (as the same may be amended, modified or supplemented from time to time,
the "Loan Agreement"), between the undersigned and the Bank, to which Loan
Agreement reference is hereby made for a statement of said terms and
provisions. Terms used but not otherwise defined herein are used herein as
defined in the Loan Agreement.
In addition to and not in limitation of the foregoing, but subject
to the provisions of the Loan Agreement, the undersigned further agrees to pay
on demand all attorneys' fees and legal expenses (including allocated costs of
staff counsel) incurred by the holder of this Note in connection with the
enforcement of this Note, and any and all amendments, modifications,
replacements or restatements relating to this Note.
<PAGE>
This Note is made under and governed by the laws of the State of
Illinois without regard to conflict of laws principles.
MONTGOMERY WARD & CO., INCORPORATED
By
Title
<PAGE>
EXHIBIT B
FORM OF OFFICER'S CERTIFICATE
(Section 11.1(c))
To: THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Attention: U.S. Loan Department
(E. Bacalao / T. Avendt)
This Certificate is furnished pursuant to Section 11.1(c) of
the Term Loan Agreement dated as of September 29, 1995 (as the
same may be amended, modified or supplemented from time to time,
the "Loan Agreement"), between Montgomery Ward & Co.,
Incorporated, an Illinois corporation (the "Company"), and The
Industrial Bank of Japan, Limited, Chicago Branch (the "Bank").
Capitalized terms used herein but not otherwise defined herein
shall have the same meanings as those assigned to them in the
Loan Agreement.
I hereby certify to the Bank, on behalf of the Company, as
follows:
1. Since _______________, 19__, I have been the duly
qualified and acting ____________ of the Company, and I am
familiar with the financial statements and financial affairs of
the Company. I am authorized to execute this Certificate on
behalf of the Company.
2. A true and correct copy of the [annual audit report]
[quarterly unaudited consolidated financial statement] of the
Company and its Subsidiaries for the [Fiscal Year] [Fiscal
Quarter] ended on _______________, 19__, is attached hereto as
Annex A.
3. To the best of my knowledge, as of the date of this
Certificate, no Event of Default or Unmatured Event of Default
has occurred and is continuing [except as follows: [include
description of any such event and the steps being taken, if any,
with respect thereto]].
4. Attached hereto as Annex B is a true and correct
computation, to the best of my knowledge, as of the dates
referred to therein of the financial ratios and/or financial
restrictions contained in Sections 11.3, 11.4 and 11.5 of the
Loan Agreement and of the Ratio of Earnings to Fixed Charges.
5. Attached hereto as Annex C is a complete description (to
the extent such disclosure would be required to be made by the
Company if the Company were a public reporting company under the
Securities Exchange Act of 1934, as amended) to the best of my
knowledge, as of the date of this Certificate of any Material
Litigation which has been instituted or any Material Litigation
Development which has occurred since the date of the most recent
Officer's Certificate of the Company [or, in the case of the
first Officer's Certificate, since the Effective Date].
6. Attached hereto as Annex D is a true, correct and
complete list, to the best of my knowledge, as of the date of
this Certificate of any [changes in the list of Restricted
Subsidiaries (excluding Special Restricted Subsidiaries) which
have occurred since the date of the most recent Officer's
Certificate [or, in the case of the first Officer's Certificate,
since the Effective Date]] [changes in the list of the
Company's Subsidiaries or in the list of Restricted Subsidiaries
which have occurred since the date of the Officer's Certificate
of the Company dated as of the close of the Company's immediately
preceding Fiscal Year [or, in the case of the first Officer's
Certificate dated as of the close of the Fiscal Year containing
the Effective Date, since the Effective Date]].
IN WITNESS WHEREOF, I have hereunto set my hand this ____
day of _______________, 19__.
___________________________
Name:_________________________
Title:________________________
of Montgomery Ward
& Co., Incorporated
<PAGE>
ANNEX A
TO OFFICER'S CERTIFICATE DATED AS OF , 19
[Attach copy of annual audit report or quarterly unaudited
consolidated financial statement, as appropriate]
<PAGE>
ANNEX B
TO OFFICER'S CERTIFICATE DATED AS OF , 19
1. Section 11.3 - Minimum Consolidated Shareholder's Equity as
of the end of Fiscal Year ended as of the date of this Officer's
Certificate.
(a) 25% of Consolidated Net Income for each
complete Fiscal Year ended after
January 1, 1994 in which there
was income. $______
(b) FAS 106 Minimum Equity Factor $______
(c) $441,000,000 plus Item 1(a) less
Item 1(b). $______
(d) The lesser of (i) $800,000,000 less
the FAS 106 Minimum Equity Factor or
(ii) Item 1(c) is the Minimum
Consolidated Shareholder's Equity
for the Fiscal Year ended as of the
date of this Officer's Certificate. $______
(e) Actual Consolidated Shareholder's Equity
of the Company for Fiscal Year ended as
of the date of this Officer's Certificate
(such amount to be equal to or
greater than the amount shown in
Item 1(d)). $______
2. Section 11.3 - Minimum Consolidated Shareholder's Equity at
the end of Fiscal Quarter ended as of the date of this
Officer's Certificate.
(a) 50% of the Consolidated Net Income for
each complete Fiscal Year ended after
January 1, 1994 in which there was income,
and for the period commencing immediately
following the close of the last complete
Fiscal Year and ending as of the date of
this Officer's Certificate. $______
(b) $537,000,000 plus the amount in Item
2(a). $______
(c) The lesser of $1,000,000,000 and Item 2(b)
is the Minimum Consolidated Shareholder's
Equity for the Fiscal Quarter ended as of
the date of this Officer's Certificate. $______
(d) Actual Consolidated Shareholder's Equity
of the Company for Fiscal [Year] [Quarter]
ended as of the date of this Officer's
Certificate (such amount to be equal to
or greater than the amount shown in
Item 2(c)). $______
3. Section 11.4 - Debt to Total Capitalization
(a) Debt of the Company and Restricted
Subsidiaries as of the date of this
Officer's Certificate:
(i) Indebtedness for Borrowed Money. $______
(ii) Capitalized Lease Obligations. $______
(iii) Without double counting for items
covered in (i) and (ii),
Capitalized Lease Obligations of
Non-Restricted Subsidiaries for
which the Company or a Restricted
Subsidiary is liable directly or
indirectly under a Guaranty. $______
(iv) Subordinated Debt. $______
(v) Items (i) plus (ii) plus
(iii) less Item (iv) equals Debt. $______
(b) Capital Base as of the date of this
Officer's Certificate:
(i) Subordinated Debt. $______
(ii) Consolidated Shareholder's Equity. $______
(iii) FAS 106 Capital Base Factor. $______
<PAGE>
(iv) All outstanding advances by the
Company to, and investment of the
Company in, Non-Restricted Sub-
sidiaries. $______
(v) Value of all treasury stock of the
Company carried as an asset. $______
(vi) The aggregate amount of all general
intangibles of the Company and its
Restricted Subsidiaries. $______
(vii) Item 3(b)(i) plus Item 3(b)(ii) plus
Item 3(b)(iii) less Items 3(b)(iv),
3(b)(v) and 3(b)(vi) equals the
Capital Base. $______
(c) Debt-Like Preferred Stock. $______
(d) Total Capitalization as of the date of
this Officer's Certificate - the sum of
Debt (Item 3(a)(v)) plus Capital Base
(Item 3(b)(vii)) plus Debt-Like Preferred
Stock (Item 3(c)) equals Total
Capitalization. $______
(e) Debt to Total Capitalization. Divide
Debt of Company and Restricted Subsidiaries
(Item 3(a)(v)) by Total Capitalization
of the Company and Restricted Subsidiaries
(Item 3(d)), and express result as a
percentage (such percentage is not to
exceed (i) 60% as of last day of any
Fiscal Quarter or (ii) 50% as of the last
day of any Fiscal Year). ______%
4. Ratio of Earnings to Fixed Charges for the Ratio Period
ended as of the date of this Officer's Certificate
(a) Each of the following items to be for
the Company and its Subsidiaries for
the Ratio Period ended as of the date
of this Officer's Certificate:
(i) Net income. $______
(ii) Interest income. $______
(iii) Income taxes. $______
(iv) Interest expense. $______
(v) Depreciation and amortization. $______
(vi) Rental expense. $______
(b) Item 4(a)(i) less Item 4(a)(ii) and
plus Items 4(a)(iii), 4(a)(iv), 4(a)(v)
and 4(a)(vi). $______
(c) Sum of the excess of all interest expense
over interest income plus all rental
expense for the Company and its Subsidiaries
and capital expenditures (other
than asset additions under capital leases
determined in accordance with GAAP,
(except as set forth in Section 15.3)) of
the Company and its Subsidiaries payable
with respect to the Ratio Period ended
as of the date of this Officer's
Certificate. $______
(d) Ratio of Earnings to Fixed Charges
(ratio of Item 4(b) to Item 4(c)). ___:___
5. Section 11.5 - Purchase, Redemption, Dividends, etc.
(a) The sum of all of the following which have
been paid or made subsequent to January 1,
1994 on or before the date of this
Officer's Certificate (but excluding any
dividends, distributions, purchases,
redemptions and other acquisitions or
retirements of Debt-Like Preferred Stock
of the Company):
(i) dividends or distributions on
any capital stock of the
Company (other than stock
dividends or splits), $______
(ii) increase in outstanding loans and
advances to the Parent since
January 1, 1994, $______
(iii)purchases, redemptions or other
acquisitions of any shares of
capital stock of the Company
by the Company (other than for
Debt-Like Preferred Stock), and $______
(iv) purchases, redemptions or other
acquisitions of any shares of
capital stock of the Company (other
than for Debt-Like Preferred Stock)
by a Subsidiary. $______
(v) Total Restricted Payments. $______
(b) 50% (or minus 100% in the case of any
deficit) of Consolidated Net Income of
the Company and its Subsidiaries for the
period, taken as one accounting period,
from and including January 2, 1994, to
the end of the Company's Fiscal Quarter
ended as of the date of this Officer's
Certificate. $______
(c) Decrease in outstanding loans and
advances to the Parent since January 1,
1994. $______
(d) Any capital contributions received by the
Company after January 1, 1994. $______
(e) The net proceeds to the Company (in cash
or, if the consideration is other then
cash, the fair value thereof as determined
by the Board of Directors of the Company)
of the issue or sale after January 1,
1994 of capital stock, including treasury
stock but excluding Debt-Like Preferred
Stock, of the Company. $______
(f) An amount equal to the net proceeds to the
Company (in cash or, if the consideration
is other than cash, the fair value thereof
as determined by the Board of Directors)
from the issue or sale at any time of any
indebtedness of the Company or a
Subsidiary which, after January 1, 1994,
is converted into shares of capital stock
(but excluding Debt-Like Preferred Stock)
of the Company or the Parent. $______
(g) FAS 106 Restricted Payment Factor $______
(h) $63,000,000 plus the sum of Items 5(b),
5(c), 5(d), 5(e), 5(f) and 5(g). The amount
of this Item 5(h) must be greater than
the amount of Item 5(a)(v). $______
<PAGE>
ANNEX C
TO OFFICER'S CERTIFICATE DATED AS OF , 19
[Description of any Material Litigation or Material
Litigation Development to the extent such disclosure would be
required to be made by the Company if the Company were a
reporting company under the Securities Exchange Act of 1934.]
See the [Annual Report on Form 10-K] [Quarterly Report on
Form 10-Q] of the [Company] [Parent] for the period ended as of
the date of this Officer's Certificate.
<PAGE>
ANNEX D
TO OFFICER'S CERTIFICATE DATED AS OF , 19
Changes in the list of [Restricted Subsidiaries (excluding
Special Restricted Subsidiaries)] [Subsidiaries and Restricted
Subsidiaries] since the Officer's Certificate dated as of the
close of the immediately preceding Fiscal [Quarter*/] [Year**/]:
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE COMPANY
(Section 12.1(a)(iv))
[MONTGOMERY WARD & CO., INCORPORATED LETTERHEAD]
September 29, 1995
To: THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Attention: U.S. Loan Department
(E. Bacalao / T. Avendt)
As Senior Associate General Counsel to Montgomery Ward &
Co., Incorporated, an Illinois corporation (the "Company"), I
hereby render this opinion to the Bank (as hereinafter defined)
in connection with the transactions contemplated by the Term Loan
Agreement dated as of September 29, 1995 (as the same may be
amended, modified or supplemented from time to time, the "Loan
Agreement"), between Montgomery Ward & Co., Incorporated, an
Illinois corporation (the "Company"), and The Industrial Bank of
Japan Limited, Chicago Branch (the "Bank"). In connection with
this opinion, I have examined a counterpart of the Loan Agreement
executed by the Company and an executed copy of the Note. Except
as provided below, I have also investigated such questions of
law, have made such factual inquiries and have examined the
original, certified, conformed or photostatic copies of all such
records of the Company and all such documents, certificates of
public officials, certificates of officers and representatives of
the Company and others, and such other documents, all as I deem
relevant, necessary or appropriate for the opinions hereinafter
expressed. When terms are capitalized and used herein and are
not otherwise defined herein, such terms are used herein and
shall have the meanings ascribed to such terms in the Loan
Agreement.
On the basis of all the foregoing, and subject to the
additional qualifications, assumptions and limitations set forth
below, I am of the opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Illinois.
2. The execution, delivery and performance by the Company
of the Loan Agreement and the Note (a) are within the Company's
corporate powers, (b) have been duly authorized by all necessary
corporate and other action, (c) do not require any government
approval which has not been previously obtained, (d) do not
conflict with any provision of law, or of any judgment, decree or
order, or of the Company's charter or by-laws, and (e) to my
knowledge, do not and will not contravene or conflict with, or
cause any Lien to arise under, any provision of any agreement
binding upon the Company, any Subsidiary or any of their
respective properties.
3. The Loan Agreement and the Note have been duly executed
and delivered by the Company. The Loan Agreement and the Note
are the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their
respective terms except as such enforcement may be limited by the
application of bankruptcy, moratorium, reorganization or other
laws or legal principles affecting the rights of creditors
generally or by general principles of equity (whether or not a
proceeding is brought in a court of law or equity).
4. The Company is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
5. Neither the Company nor any Subsidiary is a "holding
company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
The opinions set forth above are subject to the following
additional qualifications:
(a) I have assumed, with your permission, the genuineness
of all signatures, the authenticity of all documents submitted to
me as originals, the conformity to the originals of all documents
submitted to me as copies and the authenticity of the originals
of all such latter documents. I have also assumed the accuracy
of the factual matters contained in the documents I have
examined, and as related to me by officers and representatives of
the Company.
(b) I have assumed, with your permission, the due execution
and delivery of the Loan Agreement by the Bank and all other
documents and instruments delivered in connection therewith by
each of the parties thereto, other than the Company.
(c) I am qualified to practice law in the State of Illinois
and I do not purport to be an expert in any law other than the
law of the State of Illinois and the federal law of the United
States. Accordingly, I express no opinion as to the laws of any
states, or as to any matter subject to such laws, other than the
laws of the State of Illinois. I also do not render any opinion
as to whether any state, other than the State of Illinois, would
uphold the choice of law provisions in the Loan Agreement and in
the documents related thereto.
(d) I am a shareholder of Montgomery Ward Holding Corp., a
Delaware corporation (the "Parent"), which owns all of the issued
and outstanding shares of the Company, and I am the holder of
options to purchase shares of Class A Common Stock of the Parent.
(e) My opinion is limited to the matters expressly set
forth herein and no opinion is to be implied or inferred beyond
the matters expressly so stated.
This opinion is delivered pursuant to the Loan Agreement and
is furnished only to the Bank and its counsel, and is solely for
their benefit in connection with the above transactions.
Very truly yours,
G. Tad Morgan, Esq.,
Senior Associate General Counsel
Montgomery Ward & Co., Incorporated
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE AS TO SATISFACTION OF CONDITIONS
(Section 12.1(a)(v))
To: THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
227 West Monroe Street
Suite 2600
Chicago, Illinois 60606
Attention: U.S. Loan Department
(E. Bacalao / T. Avendt)
This Certificate is furnished pursuant to Section 12.1(a)(v)
of the Term Loan Agreement dated as of September 29, 1995 (as the
same may be amended, modified or supplemented from time to time,
the "Loan Agreement"), Montgomery Ward & Co., Incorporated, an
Illinois corporation (the "Company"), and The Industrial Bank of
Japan, Limited, Chicago Branch (the "Bank"). Capitalized terms
used herein but not otherwise defined herein shall have the same
meanings as those assigned to them in the Loan Agreement.
I hereby certify to the Bank, on behalf of the Company that,
I am the duly qualified and acting __________ of the Company, and
I am authorized to execute this Certificate on behalf of the
Company and I further certify as follows:
1. As of the date hereof no Event of Default or Unmatured
Event of Default has occurred and is continuing or shall result
from the making of the Loan on the date hereof.
2. The Company's representations and warranties contained
in Section 10 of the Loan Agreement are true and correct as of
the date hereof.
3. All of the conditions precedent to the Loan Agreement
becoming effective, which conditions are set forth in Section
12.1 of the Loan Agreement, have been satisfied as of the date of
this Certificate.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this 29th
day of September, 1995.
Name:
Title:
of Montgomery Ward & Co.,
Incorporated
<PAGE>
SCHEDULE I
LITIGATION
(Section 10.5)
NONE
<PAGE>
SCHEDULE II
LIENS
(Section 10.7)
Security interests with respect to fixtures (excluding
trade or store fixtures) and documents related to real property
which were granted in connection with a financing of real
property reflected in the financial statements referred to in
Section 10.4.
Security interests with respect to leases which might
be classified for some purposes as conditional sales contracts
but which the Company on its consolidated balance sheets included
in the financial statements referred to in Section 10.4
classified as assets and obligations, respectively, under capital
leases and similar such liens which may have been incurred in
connection with the acquisition of assets after July 1, 1995.
Lien on the Dublin, California retail store property
securing certain indemnities extended by the Company, as
sublessor, and Toys 'R Us, as sublessee, under subleases at
various retail stores where the Company's lessor would not
execute a non-disturbance agreement with Toys 'R Us.
Other liens incurred in the ordinary course of business
which in the aggregate do not exceed $2,000,000.
<PAGE>
SCHEDULE III
SUBSIDIARIES AND RESTRICTED SUBSIDIARIES
(Section 10.8)
Set forth below is a list of all Subsidiaries of the Company
as of September 29, 1995:
American Delivery Service Company (Del.)
Continental Transportation, Inc. (Del.)
Brandywine DC, Inc. (Fla.)
Brettward Properties Co., Inc. (Md.)
Furniture Investors, Inc. (Del.)
*Good Investments, Inc. (Ill.)
Huga Realty Inc. (Del.)
Jefferson Stores, Inc. (Nev.)
JRI Distributing, Inc. (Del.)
*Lechmere Development Corporation (Del.)
Lechmere, Inc. (Mass.)
Marcor Housing Systems, Inc. (Del.)
Marinco Insurance U.S.A., Inc. (Vermont)
MF Nevada Investments, Inc. (Nev.)
Michaelward Properties Co., Inc. (Md.)
Montgomery Ward Development Corporation (Del.)
Barretward Properties Co., Inc. (Md.)
First Mont Corporation (Del.)
Gabeward Properties Corporation (Del.)
Garden Grove Development Corporation (Del.)
Joshward Properties Corporation (Del.)
Maryward Properties Corporation (Del.)
Montgomery Ward Land Corporation (Del.)
National Homefinding Service, Inc. (Del.)
Paulward Properties Co., Inc. (Md.)
Robertward Properties Corporation (Del.)
Second Mont Corporation (Del.)
Seventh Mont Corporation (Del.)
618 Corporation (Del.)
619 Corporation (Del.)
The 535 Corporation (Del.)
*University Avenue/Marketplace, Inc. (Del.)
Wycombe Properties, Inc. (Del.)
MPI, Inc. (Del.)
*MW Direct General, Inc. (Del.)
*MW Direct Limited, Inc. (Del.)
MW Land Corporation (Del.)
Montgomery Ward Foundation (Ill., not-for-profit)
Montgomery Ward International, Inc. (Del.)
Montgomery Ward Hong Kong, Ltd. (Hong Kong)
Montgomery Ward Commercial Ltda. (Brazil)
Montgomery Ward Properties Corporation (Del.)
Brandywine Properties, Inc. (Del.)
M-W Fairfax Properties, Inc. (Va.)
*2825 Development Corporation (Del.)
Montgomery Ward Realty Corporation (Del.)
Montgomery Ward Securities, Inc. (Del.)
MW-Export, S.A. de C.V. (Mex.)
M-W Prestress, Inc. (Col.)
R M P Development Corporation (N. Mex.)
M-W Properties Corporation (Del.)
Fourth Wycombe Properties, Inc. (Del.)
M-W Restaurants Realty Corporation (Del.)
998 Monroe Corporation (Del.)
Sacward Properties, Inc. (Del.)
7th & Carroll Corporation (Del.)
Signature Financial/Marketing, Inc. (Del.)
Credit Card Sentinel, Inc. (Cal.)
Greater California Dental Plan (Calif.)
I.S.S. Agency, Inc. (Del.)
Montgomery Ward Auto Club, Inc. (Del.)
Montgomery Ward Enterprises, Inc. (Del.)
SignatureCard, Inc. (Ind.)
Montgomery Ward Insurance Company (Ill.)
Montgomery Ward Financial Center, Inc. (Ill.)
Montgomery Ward Life Insurance Company (Ill.)
Forum Insurance Company (Ill.)
Montgomery Ward Agency, Inc. (Ill.)
Montgomery Ward Clubs, Inc. (Del.)
National Dental Service, Inc. (Del.)
Signature Dental Plan of Florida, Inc. (Fl.)
Signature Investment Advisors, Inc. (Del.)
Signature's Nationwide Auto Club, Inc. (Del.)
Signature Agency, Inc. (Del.)
Signature Agency - Wyoming, Inc. (Wyo.)
The Signature Life Insurance Company of America (Ill.)
Standard T. Chemical Company, Inc. (Del.)
Third Wycombe Properties, Inc. (Del.)
*2825 Realty Corporation (Del.)
Yard-Man Inc. (Del.)
*WFL Development Corporation (Del.)
WFL Realty, Inc. (Del.)
Except for those Subsidiaries listed above which are preceded by
an asterisk, the above-listed Subsidiaries are Restricted
Subsidiaries.
<PAGE>
SCHEDULE IV
POST-RETIREMENT WELFARE PLAN BENEFITS
(Section 10.9)
The contents of footnote 6, entitled "Retirement Plans," to the
Company's audited consolidated financial statements as at
December 31, 1994 are incorporated herein by reference which
footnote addresses the Montgomery Ward & Co., Incorporated
Comprehensive Health Care Plan and certain matters related
thereto.<PAGE>
SCHEDULE V
SCHEDULE OF TAX SHARING ARRANGEMENTS
AMONG
PARENT AND ITS SUBSIDIARIES
(Section 11.5)
The following principles shall be applied with respect
to the Parent and its Subsidiaries in allocating tax liability
and tax benefits relating to federal, state, local and foreign
taxes:
(a) Payments shall be permitted to be made between
members of an affiliated group filing a federal consolidated
return, within the meaning of the federal income tax laws
and the regulations thereunder, to effectuate an allocation
of the tax liability among members of the affiliated group
in accordance with the principles set forth in 26 C.F.R.
Section 1.1552-1 and 26 C.F.R. Section 1.1502-33(d) and related
regulations. Similar principles shall apply for state,
local and foreign income and franchise tax purposes where
tax liability is determined on a unitary basis or reportable
on a combined or consolidated return involving more than one
corporation.
(b) The principles described in (a) above may be
modified to the extent necessary to permit allocation of tax
liability to any member on the basis of what would be that
member's stand-alone tax liability, notwithstanding
technical considerations set forth in the regulations.
(c) The determinations of the allocations for tax
liability pursuant to this Schedule shall be made in the
manner determined by the Parent or the Company, without
regard to the actual manner of dealing with the taxing
authorities.
(d) The principles applied pursuant to this Schedule
shall in all material respects be consistently applied from
year to year.
Reference herein to tax liabilities include items of
negative tax liability, i.e., tax benefits.
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